Interim Results 2011 Part 2 (IFRS)

RNS Number : 8044L

Old Mutual PLC

05 August 2011

 



Index to the financial information

For the six months ended 30 June 2011

Statement of directors' responsibilities in respect of the half-yearly financial statements                                                                                   34

Interim review report for the six months ended 30 June 2011 to Old Mutual plc                                                                                                  35

Consolidated income statement                                                                                                                                                                             36

Consolidated statement of comprehensive income                                                                                                                                               38

Reconciliation of adjusted operating profit to profit after tax                                                                                                                                39

Consolidated statement of financial position                                                                                                                                                         40

Condensed consolidated statement of cash flows                                                                                                                                               41

Consolidated statement of changes in equity                                                                                                                                                        42

Notes to the consolidated financial statements                                                                                                                                                        

      A: Accounting policies                                                                                                                                                                                     48

      B: Segment information                                                                                                                                                                                    48

      C: Other key performance information                                                                                                                                                             66

      D: Other income statement notes                                                                                                                                                                     76

      E: Borrowed funds                                                                                                                                                                                          78

      F: Other notes                                                                                                                                                                                                  81

      G: Discontinued operations                                                                                                                                                                              82

Group Market Consistent Embedded Value statement of earnings                                                                                                                       84

Adjusted operating Group MCEV earnings per share                                                                                                                                           85

Components of Group MCEV and adjusted Group MCEV information                                                                                                                   86

Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information                                                                              

      A: MCEV policies                                                                                                                                                                                              88

      B: Segment information                                                                                                                                                                                    95

      C: Other key performance information                                                                                                                                                           115

      D: Other income statement notes                                                                                                                                                                   122

      E: Sensitivity tests                                                                                                                                                                                          124

Shareholder information                                                                                                                                                                                      126

Statement of directors' responsibilities in respect of the half-yearly financial statements

For the six months ended 30 June 2011

We confirm that to the best of our knowledge:

·        the consolidated financial information has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards adopted by the EU and in accordance with the requirements of IAS34 'Interim Financial Reporting'

·        the MCEV supplementary information has been prepared in accordance with 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') and the basis of preparation as set out on page 88.

·        the interim management report includes a fair review of the information required by:

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

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

Julian Roberts                                                                          Philip Broadley
Group Chief Executive                                                                Group Finance Director
5 August 2011                                                                            5 August 2011

Interim review report for the six months ended 30 June 2011 to
Old Mutual plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and the related notes which include the Reconciliation of Adjusted Operating Profit to Profit after Tax.

We have also been engaged by the company to review the Market Consistent Embedded Value (MCEV) basis supplementary information ('the supplementary information') for the six months ended 30 June 2011.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements or the supplementary information. 

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules (the DTR) of the UK's Financial Services Authority (the UK FSA) and also to provide a review conclusion to the company on the supplementary information. Our review of the condensed set of financial statements has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. Our review of the supplementary information has been undertaken so that we might state to the company those matters we have been engaged to state in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA. The directors have accepted responsibility for preparing the supplementary information contained in the half-yearly financial report on an MCEV basis in accordance with the CFO Forum MCEV Principles as issued in June 2008 and updated in October 2009 ('the MCEV Principles').

As disclosed in note A, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

The supplementary information has been prepared in accordance with the MCEV principles, using the methodology and assumptions as detailed in the basis of preparation of the supplementary information. The supplementary information should be read in conjunction with the group's condensed set of financial statements.

Our responsibility

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

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 and supplementary information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

Based on our review, nothing has come to our attention that causes us to believe that the supplementary information for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with the MCEV principles, using the methodology and assumptions as detailed in the basis of preparation of the supplementary information.

Philip Smart

for and on behalf of KPMG Audit Plc 

Chartered Accountants, 15 Canada Square, London, E14 5GL, 5 August 2011

Consolidated income statement

For the six months ended 30 June 2011

£m
	Notes	6 months ended 30 June 2011		6 months ended 30 June 2010*	Year ended 31 December  2010
Revenue
Gross earned premiums	B3	1,944	1,700		3,582
Outward reinsurance		(167)	(147)		(305)
Net earned premiums		1,777	1,553		3,277
Investment return (non-banking)		843	1,274		10,791
Banking interest and similar income		1,994	2,005		4,082
Banking trading, investment and similar income		103	82		204
Fee and commission income, and income from service activities		1,635	1,420		3,061
Other income		94	107		159
Total revenues		6,446	6,441		21,574
Expenses
Claims and benefits (including change in insurance contract provisions)		(1,701)		(1,351)	(5,039)
Reinsurance recoveries		108		118	227
Net claims and benefits incurred		(1,593)		(1,233)	(4,812)
Change in investment contract liabilities		(13)		(876)	(6,899)
Losses on loans and advances		(253)		(285)	(552)
Finance costs		(85)		(127)	(269)
Banking interest payable and similar expenses		(1,154)		(1,252)	(2,519)
Fee and commission expenses, and other acquisition costs		(496)		(406)	(963)
Other operating and administrative expenses		(1,966)		(1,736)	(3,715)
Change in third party interest in consolidated funds		(66)		28	(388)
Amortisation of PVIF and other acquired intangibles	C1(b)	(117)		(145)	(297)
Total expenses		(5,743)		(6,032)	(20,414)
Share of associated undertakings' profit after tax		4		2	7
Loss on disposal of subsidiaries, associated undertakings and strategic investments	C1(c)	-		(22)	(22)
Profit before tax		707		389	1,145
Income tax expense	D1(a)	(205)		(129)	(456)
Profit from continuing operations after tax		502		260	689
Discontinued operations
Profit/(loss) from discontinued operations after tax	G1	130		120	(713)
Profit/(loss) after tax for the financial period		632		380	(24)
Attributable to
Equity holders of the parent		489		265	(282)
Non-controlling interests
Ordinary shares		112		84	196
Preferred securities		31		31	62
Profit/(loss) after tax for the financial period		632		380	(24)

Consolidated income statement

For the six months ended 30 June 2011 continued

£m
	Notes	6 months ended 30 June 2011	6 months ended 30 June 2010*	Year ended 31 December  2010
Earnings per share
Basic earnings per share based on profit from continuing operations (pence)		7.0	2.6	8.2
Basic earnings per share based on profit/(loss) from discontinued operations (pence)		2.7	2.5	(14.7)
Basic earnings per ordinary share (pence)	C3(a)	9.7	5.1	(6.5)
Diluted earnings per share based on profit from continuing operations (pence)		6.4	2.4	7.4
Diluted earnings per share based on profit/(loss) from discontinued operations		2.4	2.3	(13.5)
Diluted earnings per ordinary share (pence)	C3(a)	8.8	4.7	(6.1)
Weighted average number of shares - millions		4,897	4,849	4,859

*     The results for the six months ended 30 June 2010 have been restated to reflect US Life as a discontinued operation (see note A1)

Consolidated statement of comprehensive income

For the six months ended 30 June 2011

£m
		6 months ended 30 June 2011	6 months ended 30 June 2010*	Year ended 31 December  2010
Profit/(loss) after tax for the financial period		632	380	(24)
Other comprehensive income for the financial period
Fair value gains/(losses)
Property revaluation		-	5	26
Net investment hedge		(25)	(34)	(87)
Available-for-sale investments
Fair value gains		5	22	32
Recycled to the income statement		(5)	1	-
Shadow accounting		-	(17)	(15)
Currency translation differences/exchange differences on translating foreign operations		(296)	254	1,039
Other movements		(40)	11	31
Income tax relating to components of other comprehensive income		6	6	13
Total other comprehensive income for the financial period from continuing operations		(355)	248	1,039
Total other comprehensive income for the financial period from discontinued operations		(130)	182	112
Total other comprehensive income for the financial period		(485)	430	1,151
Total comprehensive income for the financial period		147	810	1,127
Attributable to
Equity holders of the parent		105	640	594
Non-controlling interests
Ordinary shares		11	139	428
Preferred securities		31	31	105
Total comprehensive income for the financial period		147	810	1,127

*     The results for the six months ended 30 June 2010 have been restated to reflect US Life as a discontinued operation (see note A1)

Reconciliation of adjusted operating profit to profit after tax

For the six months ended 30 June 2011

£m
	Notes	6 months ended 30 June 2011	6 months ended 30 June 2010*	Year ended 31 December 2010
Core operations
Long Term Savings	B2	474	447	897
Nedbank	B2	359	266	601
M&F	B2	47	33	103
USAM	B2	47	40	87
		927	786	1,688
Finance costs		(60)	(68)	(128)
Long term investment return on excess assets		18	16	31
Net interest payable to non-core operations		(9)	(9)	(39)
Other shareholders' expenses		(31)	(11)	(71)
Adjusted operating profit before tax		845	714	1,481
Adjusting items	C1(a)	(212)	(260)	(482)
Non-core operations		23	(65)	(3)
Profit before tax (net of policyholder tax)		656	389	996
Income tax attributable to policyholder returns	B2	51	-	149
Profit before tax		707	389	1,145
Total income tax expense	D1(a)	(205)	(129)	(456)
Profit from continuing operations after tax		502	260	689
Profit/(loss) from discontinued operations after tax	G1	130	120	(713)
Profit/(loss) after tax for the financial period		632	380	(24)

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

£m
	Notes	6 months ended 30 June 2011	6 months ended 30 June 2010*	Year ended 31 December 2010
Adjusted operating profit before tax		845	714	1,481
Tax on adjusted operating profit	D1(c)	(191)	(155)	(347)
Adjusted operating profit after tax		654	559	1,134
Non-controlling interest - ordinary shares		(120)	(95)	(217)
Non-controlling interest - preferred securities		(31)	(31)	(62)
Adjusted operating profit after tax attributable to ordinary equity holders		503	433	855
Adjusted weighted average number of shares (millions)	C3(b)	5,397	5,342	5,359
Adjusted operating earnings per share (pence)	C3(b)	9.3	8.1	16.0

*     The results for the six months ended 30 June 2010 have been restated to reflect US Life as a discontinued operation (see note A1).

Basis of preparation

The reconciliation of adjusted operating profit has been prepared so as to reflect the directors' view of the underlying long term performance of the Group. The statement reconciles adjusted operating profit to profit after tax as reported under IFRS as adopted by the EU.

For core life assurance and general insurance businesses, adjusted operating profit is based on a long term investment return, including investment returns on life funds' investments in Group equity and debt instruments, and is stated net of income tax attributable to policyholder returns. For the US Asset Management business it includes compensation costs in respect of certain long term incentive schemes defined as non-controlling interests in accordance with IFRS. For all core businesses, adjusted operating profit excludes goodwill impairment, the impact of acquisition accounting, revaluations of put options related to long term incentive schemes, 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 instruments. Bermuda and US Life, which are non-core, are not included in adjusted operating profit.

Adjusted operating earnings per ordinary share is calculated on the same basis as adjusted operating profit. It is stated after tax attributable to adjusted operating profit and 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.

Consolidated statement of financial position

At 30 June 2011

£m
	Notes	At 30 June 2011	At 30 June 2010	At 31 December 2010
Assets
Goodwill and other intangible assets		4,833	5,003	4,965
Mandatory reserve deposits with central banks		1,073	985	1,079
Property, plant and equipment		962	871	1,015
Investment property		1,980	2,026	2,040
Deferred tax assets		396	668	416
Investments in associated undertakings and joint ventures		176	145	162
Deferred acquisition costs		1,565	3,096	1,534
Reinsurers' share of life assurance policyholder liabilities		1,114	1,325	982
Reinsurers' share of general insurance liabilities		115	125	122
Loans and advances		49,417	45,071	51,778
Investments and securities		106,428	102,270	106,153
Current tax receivable		151	166	156
Client indebtedness for acceptances		254	159	190
Trade, other receivables and other assets		4,144	3,780	3,934
Derivative financial instruments - assets		1,770	1,933	2,503
Cash and cash equivalents		4,526	3,267	4,132
Non-current assets held for sale		6	18	12,391
Total assets		178,910	170,908	193,552
Liabilities
Life assurance policyholder liabilities		97,429	96,826	98,631
General insurance liabilities		386	389	397
Third party interests in consolidated funds		4,711	2,860	3,584
Borrowed funds	E1	4,497	3,928	4,204
Provisions		230	226	260
Deferred revenue		773	661	730
Deferred tax liabilities		830	930	858
Current tax payable		244	198	238
Trade, other payables and other liabilities		5,106	4,899	5,661
Liabilities under acceptances		254	159	190
Amounts owed to bank depositors		51,564	47,116	53,236
Derivative financial instruments - liabilities		1,355	1,460	1,870
Non-current liabilities held for sale		-	-	12,219
Total liabilities		167,379	159,652	182,078
Net assets		11,531	11,256	11,474

Shareholders' equity
Equity attributable to equity holders of the parent		9,031	9,047	8,951
Non-controlling interests
Ordinary shares		1,783	1,492	1,763
Preferred securities		717	717	760
Total non-controlling interests		2,500	2,209	2,523
Total equity		11,531	11,256	11,474

Condensed consolidated statement of cash flows

For the six months ended 30 June 2011

£m
	6 months ended 30 June 2011	6 months ended 30 June 2010*	Year ended 31 December 2010
Cash flows from operating activities
Profit before tax	707	389	1,145
Non-cash movements in profit before tax	631	1,081	(7,398)
Changes in working capital	918	1,506	10,229
Taxation paid	(185)	(187)	(413)
Net cash inflow from operating activities	2,071	2,789	3,563
Cash flows from investing activities
Net acquisitions of financial investments	(2,261)	(2,560)	(2,222)
Acquisition of investment properties	(23)	(224)	(162)
Proceeds from disposal of investment properties	2	19	272
Acquisition of property, plant and equipment	(54)	(69)	(152)
Proceeds from disposal of property, plant and equipment	9	10	-
Acquisition of intangible assets	(31)	(30)	(78)
Acquisition of interests in subsidiaries	46	(124)	(75)
Net movement of interests in subsidiaries, associated undertakings and strategic investments (including cash and cash equivalents disposed of)	(353)	2	(16)
Net cash outflow from investing activities	(2,665)	(2,976)	(2,433)
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company	(53)	(62)	(102)
Non-controlling interests and preferred security interests	(107)	(99)	(196)
Interest paid (excluding banking interest paid)	(36)	(38)	(79)
Proceeds from issue of ordinary shares	4	4	5
Net purchase of treasury shares	(18)	(29)	(25)
Issue of subordinated and other debt	831	584	492
Subordinated and other debt repaid	(448)	(41)	(104)
Net cash inflow/(outflow) from financing activities	173	319	(9)
Net (decrease)/increase in cash and cash equivalents - continuing operations	(421)	132	1,121
Net increase/(decrease) in cash and cash equivalents - discontinued operations	148	(329)	(104)
Effects of exchange rate changes on cash and cash equivalents	(185)	128	376
Cash and cash equivalents at beginning of the period	6,154	4,761	4,761
Cash and cash equivalents at end of the period	5,696	4,692	6,154
Consisting of
Cash and cash equivalents in the statement of financial position	4,526	3,267	4,132
Mandatory reserve deposits with central banks	1,073	985	1,079
Short term cash balances held in policyholder funds	97	440	522
Cash and cash equivalents included in assets held for sale	-	-	421
Total	5,696	4,692	6,154

*     The results for the six months ended 30 June 2010 have been restated to reflect US Life as a discontinued operation (see note A1).

Cash flows presented in this statement include all cash flows relating to policyholders' funds for life assurance.

Except for mandatory reserve deposits with central banks, short-term cash balances held in policyholder funds and cash and cash equivalents subject to consolidation of funds, 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. Mandatory reserve deposits are, however, included in cash and cash equivalents for the purposes of the cash flow statement in line with market practice in South Africa.

Consolidated statement of changes in equity

For the six months ended 30 June 2011

		Millions			£m
Six months ended 30 June 2011	Notes	Number of shares issued and fully paid	Attributable to equity holders of the parent	Total  non-controlling interests	Total equity
Shareholders' equity at beginning of the period		5,695	8,951	2,523	11,474
Profit after tax for the financial period		-	489	143	632
Other comprehensive income
Fair value gains/(losses)
Net investment hedge		-	(25)	-	(25)
Available-for-sale investments		-
Fair value gains		-	53	-	53
Recycled to the income statement		-	(10)	-	(10)
Realised on disposal		-	(157)	-	(157)
Exchange differences realised on disposal		-	24	-	24
Shadow accounting		-	(43)	-	(43)
Currency translation differences/exchange differences on translating foreign operations		-	(210)	(86)	(296)
Other movements		-	(25)	(15)	(40)
Income tax relating to components of other comprehensive income		-	9	-	9
Total comprehensive income for the financial period		-	105	42	147
Dividends for the period	C4	-	(167)	(84)	(251)
Net acquisition of treasury shares		-	(18)	-	(18)
Change in participation in subsidiaries		-	-	50	50
Reclassification of translation differences on non-controlling interests		-	43	(43)	-
Shares issued in lieu of cash dividend		69	92	6	98
Exercise of share options		4	3	-	3
Other issues of ordinary share capital by the Company		-	1	-	1
Change in share-based payments reserve		-	21	6	27
Transactions with shareholders		73	(25)	(65)	(90)
Shareholders' equity at end of the period		5,768	9,031	2,500	11,531

 

£m
Six months ended 30 June 2011	Notes	Share capital	Share premium	Other reserves	Translation reserve	Retained earnings	Perpetual preferred callable securities	Total
Attributable to equity holders of the parent at beginning of the period		570	795	3,391	1,176	2,331	688	8,951
Profit for the financial period attributable to equity holders of the parent		-	-	-	-	473	16	489
Other comprehensive income
Fair value gains/(losses)
Net investment hedge		-	-	-	(25)	-	-	(25)
Available-for-sale investments
Fair value gains		-	-	53	-	-	-	53
Recycled to income statement		-	-	(10)	-	-	-	(10)
Realised on disposal			-	(157)	-	-	-	(157)
Exchange differences realised on disposal			-	-	24	-	-	24
Shadow accounting		-	-	(43)	-	-	-	(43)
Currency translation differences/exchange differences on translating foreign operations		-	-	-	(210)	-	-	(210)
Other movements		-	-	(42)	-	17	-	(25)
Income tax relating to components of other comprehensive income		-	-	3	-	-	6	9
Total comprehensive income for the financial period		-	-	(196)	(211)	490	22	105
Dividends for the period	C4	-	-	-	-	(145)	(22)	(167)
Net acquisition of treasury shares		-	-	-	-	(18)	-	(18)
Reclassification of translation differences on non-controlling interests		-	-	-	43	-	-	43
Shares issued in lieu of cash dividends		7	-		-	85	-	92
Exercise of share options		-	3	-	-	-	-	3
Other issues of ordinary share capital by the company		-	1	-	-	-	-	1
Change in share-based payments reserve		-	-	21	-	-	-	21
Transactions with shareholders		7	4	21	43	(78)	(22)	(25)
Attributable to equity holders of the parent at end of the period		577	799	3,216	1,008	2,743	688	9,031

£m
Other reserves attributable to equity holders of the parent		Merger reserve	Available-for-sale reserve	Property revaluation reserve	Share-based payments reserve	Other reserves	Total
At beginning of the period		2,845	225	101	215	5	3,391
Fair value gains/(losses)
Available-for-sale investments
Fair value gains		-	53	-	-	-	53
Recycled to income statement		-	(166)	-	(1)	-	(167)
Shadow accounting		-	(43)	-	-	-	(43)
Other movements		-	-	(1)	(41)	-	(42)
Income tax relating to components of other comprehensive income		-	3	-	-	-	3
Change in share-based payments reserve		-	-	-	21	-	21
At end of the period		2,845	72	100	194	5	3,216

Retained earnings were reduced by £528 million at 30 June 2011 in respect of own shares held in policyholders' funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings.

Consolidated statement of changes in equity continued

For the six months ended 30 June 2011

Six months ended 30 June 2010		Millions			£m
	Notes	Number of shares issued and fully paid	Attributable to equity holders of the parent	Total non-controlling interest	Total equity
Shareholders' equity at beginning of the period		5,518	8,464	2,247	10,711
Profit after tax for the financial period		-	265	115	380
Other comprehensive income
Fair value gains:
Property revaluation		-	5	-	5
Net investment hedge		-	(34)	-	(34)
Available-for-sale investments
Fair value gains/(losses)		-	473	(1)	472
Recycled to the income statement		-	(43)	-	(43)
Shadow accounting		-	(246)	-	(246)
Currency translation differences/exchange differences on translating foreign operations		-	259	59	318
Other movements		-	14	(3)	11
Income tax relating to components of other comprehensive income		-	(53)	-	(53)
Total comprehensive income for the financial period		-	640	170	810
Dividends for the period	C4	-	(99)	(77)	(176)
Net acquisition of treasury shares		-	(29)	-	(29)
Acquisition of non-controlling interest in Mutual & Federal	F1	147	51	(51)	-
Change in participation in subsidiaries	F1	-	-	(81)	(81)
Shares issued in lieu of cash dividend		14	15	-	15
Exercise of share options		2	3	-	3
Other issues of ordinary share capital by the Company		1	1	-	1
Change in share-based payments reserve		-	1	1	2
Transactions with shareholders		164	(57)	(208)	(265)
Shareholders' equity at end of the period		5,682	9,047	2,209	11,256

Six months ended 30 June 2010	£m
	Notes	Share capital	Share premium	Other reserves	Translation reserve	Retained earnings	Perpetual preferred callable securities	Total
Attributable to equity holders of the parent at beginning of the period		552	771	3,087	469	2,897	688	8,464
Profit for the financial period attributable to equity holders of the parent		-	-	-	-	249	16	265
Other comprehensive income
Fair value gains/(losses)
Property revaluation		-	-	5	-	-	-	5
Net investment hedge		-	-	-	(34)	-	-	(34)
Available-for-sale investments
Fair value gains		-	-	473	-	-	-	473
Recycled to income statement		-	-	(43)	-	-	-	(43)
Shadow accounting		-	-	(246)	-	-	-	(246)
Currency translation differences/exchange differences on translating foreign operations		-	-	-	259	-	-	259
Other movements		-	-	7	-	7	-	14
Income tax relating to components of other comprehensive income		-	-	(59)	-	-	6	(53)
Total comprehensive income for the financial period		-	-	137	225	256	22	640
Dividends for the period	C4	-	-	-	-	(77)	(22)	(99)
Net acquisition of treasury shares		-	-	-	-	(29)	-	(29)
Acquisition of non-controlling interest in Mutual & Federal	F1	15	-	129	-	(93)	-	51
Shares issued in lieu of cash dividend		1	3	-	-	11	-	15
Exercise of share options		-	3	-	-	-	-	3
Other issues of ordinary share capital by the Company		-	1	-	-	-	-	1
Change in share-based payments reserve		-	-	1	-	-	-	1
Transactions with shareholders		16	7	130	-	(188)	(22)	(57)
Attributable to equity holders of the parent at end of the period		568	778	3,354	694	2,965	688	9,047

							£m
Other reserves attributable to equity holders of the parent		Merger reserve	Available-for-sale reserve	Property revaluation reserve	Share-based payments reserve	Other reserves	Total
At beginning of the period		2,716	82	87	191	11	3,087
Fair value gains/(losses)
Property revaluation		-	-	5	-	-	5
Available-for-sale investments
Fair value gains		-	473	-	-	-	473
Recycled to income statement		-	(43)	-	-	-	(43)
Shadow accounting		-	(241)	(5)	-	-	(246)
Other movements		-	-	(1)	8	-	7
Income tax relating to components of other comprehensive income		-	(59)	-	-	-	(59)
Acquisition of non-controlling interest in Mutual & Federal	F1	129	-	-	-	-	129
Change in share-based payments reserve		-	-	-	1	-	1
At end of the period		2,845	212	86	200	11	3,354

Retained earnings were reduced by £381 million at 30 June 2010 in respect of own shares held in policyholders' funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings.

Consolidated statement of changes in equity continued

For the six months ended 30 June 2011

		Millions			£m
Year ended 31 December 2010	Notes	Number of shares issued and fully paid	Attributable to equity holders of the parent	Total  non-controlling interests	Total equity
Shareholders' equity at beginning of the year		5,518	8,464	2,247	10,711
(Loss)/profit after tax for the financial year		-	(282)	258	(24)
Other comprehensive income
Fair value gains/(losses)
Property revaluation		-	21	5	26
Net investment hedge		-	(87)	-	(87)
Available-for-sale investments
Fair value gains		-	562	-	562
Recycled to the income statement		-	(12)	-	(12)
Shadow accounting		-	(349)	-	(349)
Currency translation differences/exchange differences on translating foreign operations		-	794	274	1,068
Other movements		-	1	(4)	(3)
Income tax relating to components of other comprehensive income		-	(54)	-	(54)
Total comprehensive income for the financial year		-	594	533	1,127
Dividends for the year	C4	-	(175)	(152)	(327)
Net acquisition of treasury shares		-	(25)	-	(25)
Acquisition of non-controlling interest in Mutual & Federal	F1	147	51	(51)	-
Change in participation in subsidiaries	F1	-	-	(57)	(57)
Shares issued in lieu of cash dividend		24	30	-	30
Exercise of share options		6	5	-	5
Other issues of ordinary share capital by the Company		-	3	-	3
Change in share-based payments reserve		-	4	3	7
Transactions with shareholders		177	(107)	(257)	(364)
Shareholders' equity at end of the year		5,695	8,951	2,523	11,474

								£m
Year ended 31 December 2010	Notes	Share capital	Share premium	Other reserves	Translation reserve	Retained earnings	Perpetual preferred callable securities	Total
Attributable to equity holders of the parent at beginning of the year		552	771	3,087	469	2,897	688	8,464
(Loss)/profit for the financial year attributable to equity holders of the parent		-	-	-	-	(314)	32	(282)
Other comprehensive income
Fair value gains/(losses)
Property revaluation		-	-	21	-	-	-	21
Net investment hedge		-	-	-	(87)	-	-	(87)
Available-for-sale investments
Fair value gains		-	-	562	-	-	-	562
Recycled to income statement		-	-	(12)	-	-	-	(12)
Shadow accounting		-	-	(349)	-	-	-	(349)
Currency translation differences/exchange differences on translating foreign operations		-	-	-	794	-	-	794
Other movements		-	-	15	-	(14)	-	1
Income tax relating to components of other comprehensive income		-	-	(66)	-	-	12	(54)
Total comprehensive income for the financial year		-	-	171	707	(328)	44	594
Dividends for the year	C4	-	-	-	-	(131)	(44)	(175)
Net acquisition of treasury shares		-	-	-	-	(25)	-	(25)
Acquisition of non-controlling interest in Mutual & Federal	F1	15	-	129	-	(93)	-	51
Shares issued in lieu of cash dividends		2	17	-	-	11	-	30
Exercise of share options		1	4	-	-	-	-	5
Other issue of ordinary share capital by the Company		-	3	-	-	-	-	3
Change in share-based payments reserve		-	-	4	-	-	-	4
Transactions with shareholders		18	24	133	-	(238)	(44)	(107)
Attributable to equity holders of the parent at end of the year		570	795	3,391	1,176	2,331	688	8,951

£m
Other reserves attributable to equity holders of the parent		Merger reserve	Available-for-sale reserve	Property revaluation reserve	Share-based payments reserve	Other reserves	Total
At beginning of the year		2,716	82	87	191	11	3,087
Fair value gains/(losses)
Property revaluation		-	-	21	-	-	21
Available-for-sale investments
Fair value gains		-	562	-	-	-	562
Recycled to income statement		-	(12)	-	-	-	(12)
Shadow accounting		-	(343)	(6)	-	-	(349)
Other movements		-	2	(1)	20	(6)	15
Income tax relating to components of other comprehensive income		-	(66)	-	-	-	(66)
Acquisition of non-controlling interest in Mutual & Federal	F1	129	-	-	-	-	129
Change in share-based payments reserve		-	-	-	4	-	4
At end of the year		2,845	225	101	215	5	3,391

Retained earnings were reduced by £478 million at 31 December 2010 in respect of own shares held in policyholders' funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings.

Notes to the consolidated financial statements

For the six months ended 30 June 2011

A Accounting policies

A1 Basis of preparation

The Group financial information contained herein has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards adopted by the EU and in accordance with the requirements of IAS 34 'Interim Financial Reporting'. The Group's results for the six months ended 30 June 2011 and the position at that date have been prepared using accounting policies consistent with those applied in the preparation of the Group's 2010 Annual Report and Accounts.

The Group financial information has been prepared on the going concern basis which the directors believe appropriate having taken into consideration the matters discussed in the Group Finance Director's Review in the section headed Risk and Uncertainties.

The comparative figures for the financial year ended 31 December 2010 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

As previously reported the Group was in advanced stage negotiations at 31 December 2010 for the disposal of its life assurance operations in the United States, which represented almost the entirety of the US Life operating segment. Following US regulatory approval the disposal of US Life was completed on 7 April 2011. The sale represented the Group's exit from the life assurance market in the United States and therefore met the criteria of a discontinued operation. Consequently the comparative information in the income statement, statement of comprehensive income, statement of cash flows and the related notes has been restated where applicable to reflect this. For the purposes of adjusted operating profit, US Life is classified as a non-core operation for the six months ended 30 June 2011. In preparing the comparative information for the six months ended June 2011 this has required restatement of the published comparatives. The statement of financial position at 30 June 2010 has not required restatement as US Life was not considered held for sale at that point in time. Comparative information for the year ended 31 December 2010 has not required restatement as the US Life operations were already classified as non-core and discontinued at the time of reporting full year results for that period. Details of the impact are provided in notes G1 and G2.

In preparing the consolidated financial statements for the six months ended 30 June 2011 the Emerging Markets business has included its Namibian business but excluded all other African businesses on the basis of their size and political uncertainties related to the ability to access economic benefits. This is consistent with prior periods but will be reconsidered for the full year. Nedbank and Mutual & Federal consolidate the results of all African businesses under their control.

B Segment information

B1 Basis of segmentation

The Group's core operations are Emerging Markets, Nordic, Retail Europe and Wealth Management (collectively Long Term Savings), Nedbank, Mutual & Federal, US Asset Management and Other (including the Group head office functions). The Bermuda business is regarded as non-core. This is consistent with the manner in which management and the Board of Directors considers information when making operating decisions and is the basis on which resources are allocated and performance assessed by management and the Board of Directors. It is consistent with that reported in the previous financial year. This information is presented to the Board in local currency but in preparing these financial statements has been presented in pounds sterling, the presentation currency of the Group. As detailed above US Life is classified as discontinued and as a result also non-core with the comparative segment information restated accordingly, resulting in a reduction in adjusted operating profit before tax and non-controlling interests of £14 million for the six months ended 30 June 2011. The Group generates revenue from four principal business activities: life assurance, asset management, banking and general insurance. The types of products and services from which each operating segment derives its revenues are as follows:

Core operations

Long Term Savings

·     Emerging Markets - life assurance and asset management

·     Nordic - life assurance, asset management and banking

·     Retail Europe - life assurance and asset management

·     Wealth Management - life assurance and asset management

Other core operations

·     Nedbank - banking and asset management

·     Mutual & Federal - general insurance

·     US Asset Management - asset management

·     Other - other operating segments and business activities

Non-core operations

Non-core operations comprise Bermuda and, up until completion of disposal, US Life, with both businesses engaged in life assurance.

Consolidation adjustments

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 performance of the segments. The Group utilises additional measures to assess the performance of each of the segments, in particular the level of net client cash flow and funds under management. Additional performance measures considered by management and the Board of Directors in assessing the performance of the segments can be found in the Market Consistent Embedded Value supplementary information.

Performance measures

In the analysis that follows, consolidation adjustments include the elimination of inter segment revenues, expenses, assets and liabilities together with the impacts of the consolidation of the Group's interest in unit trusts, mutual funds and similar entities.

Notes to the consolidated financial statements

For the six months ended 30 June 2011

B2 Adjusted operating profit statement - segment information six months ended 30 June 2011

	Long Term Savings
	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long Term Savings
Revenue
Gross earned premiums	1,321	65	14	169	1,569
Outward reinsurance	(44)	(4)	(4)	(40)	(92)
Net earned premiums	1,277	61	10	129	1,477
Investment return (non-banking)	1,006	(366)	(55)	184	769
Banking interest and similar income	-	113	-	-	113
Banking trading, investment and similar income	-	(2)	-	-	(2)
Fee and commission income, and income from service activities	198	135	101	493	927
Other income	32	4	1	8	45
Inter-segment revenues	28	11	3	2	44
Total revenues	2,541	(44)	60	816	3,373
Expenses
Claims and benefits (including change in insurance contract provisions)	(1,327)	(51)	(11)	(136)	(1,525)
Reinsurance recoveries	47	4	1	38	90
Net claims and benefits incurred	(1,280)	(47)	(10)	(98)	(1,435)
Change in investment contract liabilities	(324)	417	61	(167)	(13)
Losses on loans and advances	-	(2)	(1)	-	(3)
Finance costs (including interest and similar expenses)	-	-	-	-	-
Banking interest payable and similar expenses	-	(61)	-	-	(61)
Fee and commission expenses, and other acquisition costs	(103)	(33)	(43)	(268)	(447)
Other operating and administrative expenses	(508)	(141)	(43)	(173)	(865)
Change in third party interest in consolidated funds	-	-	-	-	-
Amortisation of PVIF and other acquired intangibles	-	-	-	-	-
Income tax attributable to policyholder returns	(28)	(27)	-	4	(51)
Inter-segment expenses	(1)	-	(2)	(21)	(24)
Total expenses	(2,244)	106	(38)	(723)	(2,899)
Share of associated undertakings' profit/(loss) after tax	2	(2)	-	-	-
Loss on disposal of subsidiaries, associated undertakings and strategic investments	-	-	-	-	-
Adjusted operating profit/(loss) before tax and non-controlling interests	299	60	22	93	474
Income tax (expense)/credit	(65)	(2)	(7)	(13)	(87)
Non-controlling interests	-	-	-	-	-
Adjusted operating profit/(loss) after tax and non-controlling interests	234	58	15	80	387
Adjusting items net of tax and non-controlling interests	(41)	(27)	(15)	(42)	(125)
Profit/(loss) after tax from continuing operations	193	31	-	38	262
Profit from discontinued operations after tax	-	-	-	-	-
Profit/(loss) after tax attributable to equity holders of the parent	193	31	-	38	262

 

 

B2 Adjusted operating profit statement - segment information six months ended 30 June 2011 continued

								£m
Nedbank	M&F	USAM	Other	Consolidation adjustments	Adjusted operating profit	Adjusting  items (Note C1)	Non-core operations*	IFRS Income statement
-	375	-	-	-	1,944	-	-	1,944
-	(75)	-	-	-	(167)	-	-	(167)
-	300	-	-	-	1,777	-	-	1,777
-	28	8	28	89	922	(86)	7	843
1,881	-	-	-	-	1,994	-	-	1,994
105	-	-	-	-	103	-	-	103
515	16	223	-	-	1,681	(46)	-	1,635
20	-	6	-	13	84	-	10	94
13	10	3	7	(88)	(11)	-	11	-
2,534	354	240	35	14	6,550	(132)	28	6,446
-	(212)	-	-	-	(1,737)	-	36	(1,701)
-	18	-	-	-	108	-	-	108
-	(194)	-	-	-	(1,629)	-	36	(1,593)
-	-	-	-	-	(13)	-	-	(13)
(250)	-	-	-	-	(253)	-	-	(253)
-	-	-	(60)	-	(60)	(25)	-	(85)
(1,089)	-	-	-	-	(1,150)	(4)	-	(1,154)
(1)	(55)	(6)	-	(23)	(532)	65	(29)	(496)
(806)	(46)	(187)	(39)	(13)	(1,956)	1	(11)	(1,966)
-	-	-	-	(66)	(66)	-	-	(66)
-	-	-	-	-	-	(117)	-	(117)
-	-	-	-	-	(51)	51	-	-
(29)	(12)	-	(22)	88	1	-	(1)	-
(2,175)	(307)	(193)	(121)	(14)	(5,709)	(29)	(5)	(5,743)
-	-	-	4	-	4	-	-	4
-	-	-	-	-	-	-	-	-
359	47	47	(82)	-	845	(161)	23	707
(93)	(11)	(10)	10	-	(191)	(12)	(2)	(205)
(128)	(4)	-	(19)	-	(151)	8	-	(143)
138	32	37	(91)	-	503	(165)	21	359
6	(8)	(5)	(33)	-	(165)	165	-	-
144	24	32	(124)	-	338	-	21	359
-	-	-	-	-	-	-	130	130
144	24	32	(124)	-	338	-	151	489

*     Non-core operations relates to Bermuda with the exception of £(4) million of inter-segment revenue and expenses and the profit from discontinued operations after tax, with these reflecting the results of US Life which has been classified as a discontinued operation as detailed in notes A1 and B1. Bermuda profit after tax for the six months ended 30 June 2011 was £25 million. Further detail on the results of discontinued operations is provided in note G1.

Notes to the consolidated financial statements

For the six months ended 30 June 2011 continued

B2 Adjusted operating profit statement - segment information six months ended 30 June 2010 (restated)

	Long Term Savings
	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long Term Savings
Revenue
Gross earned premiums	1,111	61	13	163	1,348
Outward reinsurance	(35)	(3)	(4)	(38)	(80)
Net earned premiums	1,076	58	9	125	1,268
Investment return (non-banking)	541	190	238	358	1,327
Banking interest and similar income	-	79	(1)	-	78
Banking trading, investment and similar income	-	-	-	-	-
Fee and commission income, and income from service activities	180	114	99	433	826
Other income	20	9	-	6	35
Inter-segment revenues	32	9	2	3	46
Total revenues	1,849	459	347	925	3,580
Expenses
Claims and benefits (including change in insurance contract provisions)	(891)	(41)	(14)	(151)	(1,097)
Reinsurance recoveries	44	-	2	38	84
Net claims and benefits incurred	(847)	(41)	(12)	(113)	(1,013)
Change in investment contract liabilities	(201)	(141)	(231)	(303)	(876)
Losses on loans and advances	-	(2)	(1)	-	(3)
Finance costs (including interest and similar expenses)	-	-	-	-	-
Banking interest payable and similar expenses	-	(36)	-	-	(36)
Fee and commission expenses, and other acquisition costs	(99)	(29)	(37)	(223)	(388)
Other operating and administrative expenses	(436)	(128)	(40)	(186)	(790)
Change in third party interest in consolidated funds	-	-	-	-	-
Amortisation of PVIF and other acquired intangibles	-	-	-	-	-
Income tax attributable to policyholder returns	8	(24)	-	16	-
Inter-segment expenses	(5)	(1)	(1)	(21)	(28)
Total expenses	(1,580)	(402)	(322)	(830)	(3,134)
Share of associated undertakings' profit after tax	-	1	-	-	1
Loss on disposal of subsidiaries, associated undertakings and strategic investments	-	-	-	-	-
Adjusted operating profit/(loss) before tax and non-controlling interests	269	58	25	95	447
Income tax (expense)/credit	(61)	(13)	(7)	(11)	(92)
Non-controlling interests	-	-	-	-	-
Adjusted operating profit/(loss) after tax and non-controlling interests	208	45	18	84	355
Adjusting items net of tax and non-controlling interests	(19)	(39)	(15)	(45)	(118)
Profit/(loss) after tax from continuing operations	189	6	3	39	237
Profit from discontinued operations after tax	-	-	-	-	-
Profit/(loss) after tax attributable to equity holders of the parent	189	6	3	39	237

 

 

B2 Adjusted operating profit statement - segment information six months ended 30 June 2010 (restated) continued

								£m
Nedbank	M&F	USAM	Other	Consolidation adjustments	Adjusted operating profit	Adjusting  items (Note C1)	Non-core operations*	IFRS Income statement
-	352	-	-	-	1,700	-	-	1,700
-	(67)	-	-	-	(147)	-	-	(147)
-	285	-	-	-	1,553	-	-	1,553
-	25	(2)	35	(2)	1,383	(71)	(38)	1,274
1,927	-	-	-	-	2,005	-	-	2,005
82	-	-	-	-	82	-	-	82
408	11	231	-	(5)	1,471	(51)	-	1,420
50	1	6	-	4	96	-	11	107
10	12	2	16	(95)	(9)	(2)	11	-
2,477	334	237	51	(98)	6,581	(124)	(16)	6,441
-	(233)	-	-	-	(1,330)	-	(21)	(1,351)
-	34	-	-	-	118	-	-	118
-	(199)	-	-	-	(1,212)	-	(21)	(1,233)
-	-	-	-	-	(876)	-	-	(876)
(282)	-	-	-	-	(285)	-	-	(285)
-	-	-	(68)	-	(68)	(59)	-	(127)
(1,207)	-	-	-	-	(1,243)	(9)	-	(1,252)
(2)	(53)	(9)	-	(19)	(471)	77	(12)	(406)
(688)	(42)	(188)	(33)	(6)	(1,747)	22	(11)	(1,736)
-	-	-	-	28	28	-	-	28
-	-	-	-	-	-	(145)	-	(145)
-	-	-	-	-	-	-	-	-
(32)	(8)	-	(22)	95	5	-	(5)	-
(2,211)	(302)	(197)	(123)	98	(5,869)	(114)	(49)	(6,032)
-	1	-	-	-	2	-	-	2
-	-	-	-	-	-	(22)	-	(22)
266	33	40	(72)	-	714	(260)	(65)	389
(53)	(8)	(4)	2	-	(155)	26	-	(129)
(106)	(1)	-	(19)	-	(126)	11	-	(115)
107	24	36	(89)	-	433	(223)	(65)	145
6	(19)	(17)	(75)	-	(223)	223	-	-
113	5	19	(164)	-	210	-	(65)	145
-	-	-	-	-	-	-	120	120
113	5	19	(164)	-	210	-	55	265

*     Non-core operations relates to Bermuda with the exception of £(11) million of inter-segment revenue and expenses and the profit from discontinued operations after tax, with these reflecting the results of US Life which has been classified as a discontinued operation as detailed in notes A1 and B1. Bermuda loss after tax for the six months ended 30 June 2010 was £(54) million. Further detail on the results of discontinued operations is provided in note G1.

Notes to the consolidated financial statements

For the six months ended 30 June 2011 continued

B2 Adjusted operating profit statement - segment information year ended 31 December 2010

	Long Term Savings
	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total  Long Term Savings
Revenue
Gross earned premiums	2,353	122	28	351	2,854
Outward reinsurance	(72)	(5)	(8)	(79)	(164)
Net earned premiums	2,281	117	20	272	2,690
Investment return (non-banking)	4,072	1,144	392	4,409	10,017
Banking interest and similar income	-	169	-	-	169
Banking trading, investment and similar income	-	5	-	-	5
Fee and commission income, and income from service activities	372	238	198	912	1,720
Other income	72	8	-	11	91
Inter-segment revenues	54	20	5	12	91
Total revenues	6,851	1,701	615	5,616	14,783
Expenses
Claims and benefits (including change in insurance contract provisions)	(3,943)	(83)	(25)	(303)	(4,354)
Reinsurance recoveries	83	5	5	75	168
Net claims and benefits incurred	(3,860)	(78)	(20)	(228)	(4,186)
Change in investment contract liabilities	(1,261)	(1,066)	(382)	(4,190)	(6,899)
Losses on loans and advances	-	(4)	(1)	-	(5)
Finance costs (including interest and similar expenses)	-	-	-	-	-
Banking interest payable and similar expenses	-	(78)	-	-	(78)
Fee and commission expenses, and other acquisition costs	(219)	(62)	(75)	(500)	(856)
Other operating and administrative expenses	(941)	(255)	(84)	(390)	(1,670)
Change in third party interest in consolidated funds	-	-	-	-	-
Amortisation of PVIF and other acquired intangibles	-	-	-	-	-
Income tax attributable to policyholder returns	(32)	(48)	-	(69)	(149)
Inter-segment expenses	(2)	(2)	(2)	(43)	(49)
Total expenses	(6,315)	(1,593)	(564)	(5,420)	(13,892)
Share of associated undertakings' profit/(loss) after tax	3	2	-	1	6
Loss on disposal of subsidiaries, associated undertakings and strategic investments	-	-	-	-	-
Adjusted operating profit/(loss) before tax and non-controlling interests	539	110	51	197	897
Income tax (expense)/credit	(146)	(20)	(13)	(44)	(223)
Non-controlling interests	(1)	-	-	-	(1)
Adjusted operating profit/(loss) after tax and non-controlling interests	392	90	38	153	673
Adjusting items net of tax and non-controlling interests	(1)	(87)	(25)	(140)	(253)
Profit/(loss) after tax from continuing operations	391	3	13	13	420
Loss from discontinued operations after tax	-	-	-	-	-
Profit/(loss) after tax attributable to equity holders of the parent	391	3	13	13	420

 

 

B2 Adjusted operating profit statement - segment information year ended 31 December 2010 continued

								£m
Nedbank	M&F	USAM	Other	Consolidation adjustments	Adjusted operating profit	Adjusting  items (Note C1)	Non-core operations*	IFRS Income statement
-	728	-	-	-	3,582	-	-	3,582
-	(140)	-	-	-	(304)	-	(1)	(305)
-	588	-	-	-	3,278	-	(1)	3,277
-	56	16	61	435	10,585	(93)	299	10,791
3,913	-	-	-	-	4,082	-	-	4,082
199	-	-	-	-	204	-	-	204
946	28	465	1	-	3,160	(99)	-	3,061
35	-	9	(1)	3	137	-	22	159
20	20	4	29	(207)	(43)	-	43	-
5,113	692	494	90	231	21,403	(192)	363	21,574
-	(436)	-	-	-	(4,790)	-	(249)	(5,039)
-	58	-	-	-	226	-	1	227
-	(378)	-	-	-	(4,564)	-	(248)	(4,812)
-	-	-	-	-	(6,899)	-	-	(6,899)
(548)	-	-	1	-	(552)	-	-	(552)
-	-	-	(128)	-	(128)	(141)	-	(269)
(2,422)	-	-	-	-	(2,500)	(19)	-	(2,519)
(3)	(109)	(23)	-	(36)	(1,027)	149	(85)	(963)
(1,485)	(83)	(384)	(93)	(14)	(3,729)	40	(26)	(3,715)
-	-	-	-	(388)	(388)	-	-	(388)
-	-	-	-	-	-	(297)	-	(297)
-	-	-	-	-	(149)	149	-	-
(54)	(20)	-	(77)	207	7	-	(7)	-
(4,512)	(590)	(407)	(297)	(231)	(19,929)	(119)	(366)	(20,414)
-	1	-	-	-	7	-	-	7
-	-	-	-	-	-	(22)	-	(22)
601	103	87	(207)	-	1,481	(333)	(3)	1,145
(128)	(24)	(17)	45	-	(347)	(113)	4	(456)
(232)	(5)	-	(41)	-	(279)	21	-	(258)
241	74	70	(203)	-	855	(425)	1	431
10	(11)	(20)	(151)	-	(425)	425	-	-
251	63	50	(354)	-	430	-	1	431
-	-	-	-	-	-	-	(713)	(713)
251	63	50	(354)	-	430	-	(712)	(282)

*     Non-core operations relates to Bermuda with the exception of £(21) million of inter-segment revenue and expenses and the loss from discontinued operations after tax, with these reflecting the results of US Life which has been classified as a discontinued operation as detailed in notes A1 and B1. Bermuda profit after tax for the year ended 31 December 2010 was £22 million. Further detail on the results of discontinued operations is provided in note G1.

Notes to the consolidated financial statements

For the six months ended 30 June 2011

B3 Gross earned premiums

Six months ended 30 June 2011	Long Term Savings
	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long Term Savings
Life assurance - insurance contracts	819	65	14	169	1,067
Life assurance - investment contracts with discretionary participation features	502	-	-	-	502
General insurance	-	-	-	-	-
Gross earned premiums	1,321	65	14	169	1,569
Life assurance - other investment contracts recognised as deposits	1,030	627	318	3,000	4,975

	Long Term Savings
Six months ended 30 June 2010	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total  Long Term Savings
Life assurance - insurance contracts	726	61	13	163	963
Life assurance - investment contracts with discretionary participation features	385	-	-	-	385
General insurance	-	-	-	-	-
Gross earned premiums	1,111	61	13	163	1,348
Life assurance - other investment contracts recognised as deposits	983	561	365	3,489	5,398

	Long Term Savings
Year ended 31 December 2010	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total  Long Term Savings
Life assurance - insurance contracts	1,498	122	28	351	1,999
Life assurance - investment contracts with discretionary participation features	855	-	-	-	855
General insurance	-	-	-	-	-
Gross earned premiums	2,353	122	28	351	2,854
Life assurance - other investment contracts recognised as deposits	1,829	1,040	656	6,287	9,812

B4 Impairments of financial assets

		£m
		6 months ended 30 June 2011	6 months ended 30 June 2010	Year ended 31 December 2010
Nordic		-	3	4
Total Long Term Savings		-	3	4
Nedbank		22	282	547
Total		22	285	551

 

 

B3 Gross earned premiums continued

					£m
Nedbank	M&F	USAM	Total core operations	Non-core operations	Total - continuing operations
-	-	-	1,067	-	1,067
-	-	-	502	-	502
-	375	-	375	-	375
-	375	-	1,944	-	1,944
-	-	-	4,975	-	4,975

					£m
Nedbank	M&F	USAM	Total core operations	Non-core operations	Total - continuing operations Restated
-	-	-	963	-	963
-	-	-	385	-	385
-	352	-	352	-	352
-	352	-	1,700	-	1,700
-	-	-	5,398	-	5,398

					£m
Nedbank	M&F	USAM	Total core operations	Non-core operations	Total - continuing operations
-	-	-	1,999	-	1,999
-	-	-	855	-	855
-	728	-	728	-	728
-	728	-	3,582	-	3,582
-	-	-	9,812	-	9,812

Notes to the consolidated financial statements

For the six months ended 30 June 2011

B5 Funds under management

	Long Term Savings
As at 30 June 2011	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long Term Savings
Life assurance policyholder funds	29,570	11,923	4,529	41,062	87,084
Unit trusts and mutual funds	10,475	1,640	387	15,625	28,127
Third party client funds	10,757	-	-	-	10,757
Total client funds under management	50,802	13,563	4,916	56,687	125,968
Shareholder funds	2,764	483	255	1,023	4,525
Total funds under management	53,566	14,046	5,171	57,710	130,493

 

	Long Term Savings
As at 30 June 2010	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long Term Savings
Life assurance policyholder funds	25,636	9,509	3,731	35,636	74,512
Unit trusts and mutual funds	8,677	1,465	370	12,239	22,751
Third party client funds	9,469	-	-	-	9,469
Total client funds under management	43,782	10,974	4,101	47,875	106,732
Shareholder funds	2,370	408	199	899	3,876
Total funds under management	46,152	11,382	4,300	48,774	110,608

 

	Long Term Savings
As at 31 December 2010	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long Term Savings
Life assurance policyholder funds	31,750	11,722	4,317	40,401	88,190
Unit trusts and mutual funds	10,613	1,800	398	14,525	27,336
Third party client funds	11,732	-	-	-	11,732
Total client funds under management	54,095	13,522	4,715	54,926	127,258
Shareholder funds	2,882	431	245	958	4,516
Total funds under management	56,977	13,953	4,960	55,884	131,774

 

 

B5 Funds under management continued

					£m
Nedbank	M&F	USAM	Total core operations	Non-core operations	Total
868	-	3,444	91,396	2,459	93,855
5,697	-	4,813	38,637	-	38,637
3,977	-	153,104	167,838	-	167,838
10,542	-	161,361	297,871	2,459	300,330
-	200	228	4,953	-	4,953
10,542	200	161,589	302,824	2,459	305,283

 

					£m
Nedbank	M&F	USAM	Total core operations	Non-core operations	Total
711	-	7,667	82,890	9,935	92,825
4,341	-	3,992	31,084	-	31,084
3,973	-	150,706	164,148	-	164,148
9,025	-	162,365	278,122	9,935	288,057
-	171	192	4,239	-	4,239
9,025	171	162,557	282,361	9,935	292,296

 

					£m
Nedbank	M&F	USAM	Total core operations	Non-core operations	Total
846	-	3,846	92,882	13,489	106,371
5,713	-	4,974	38,023	-	38,023
4,164	-	157,555	173,451	-	173,451
10,723	-	166,375	304,356	13,489	317,845
-	210	226	4,952	-	4,952
10,723	210	166,601	309,308	13,489	322,797

Notes to the consolidated financial statements

For the six months ended 30 June 2011

B6 Statement of financial position - segment information at 30 June 2011

	Long Term Savings
At 30 June 2011	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long Term Savings
Assets
Goodwill and other intangible assets	125	981	530	1,412	3048
Mandatory reserve deposits with central banks	-	-	-	-	-
Property, plant and equipment	357	10	4	14	385
Investment property	1,610	-	-	-	1,610
Deferred tax assets	83	83	28	31	225
Investments in associated undertakings and joint ventures	24	4	-	-	28
Deferred acquisition costs	130	77	345	885	1,437
Reinsurers' share of life assurance policyholder liabilities	34	15	7	1,029	1,085
Reinsurers' share of general insurance liabilities	-	-	-	-	-
Loans and advances	419	5,521	1	194	6,135
Investments and securities	33,130	13,851	4,692	41,471	93,144
Current tax receivable	11	1	14	66	92
Client indebtedness for acceptances	-	-	-	-	-
Trade, other receivables and other assets	986	161	66	337	1,550
Derivative financial instruments - assets	527	11	-	-	538
Cash and cash equivalents	217	538	88	455	1,298
Non-current assets held for sale	-	-	-	5	5
Inter-segment assets	1,189	207	64	258	1,718
Total assets	38,842	21,460	5,839	46,157	112,298
Liabilities
Life assurance policyholder liabilities	33,816	12,465	4,692	42,327	93,300
General insurance liabilities	-	-	-	-	-
Third-party interests in consolidated funds	-	-	-	-	-
Borrowed funds	276	2	-	-	278
Provisions	157	(46)	5	49	165
Deferred revenue	18	2	225	518	763
Deferred tax liabilities	235	102	111	198	646
Current tax payable	104	35	19	41	199
Trade, other payables and other liabilities	1,903	237	76	593	2,809
Liabilities under acceptances	-	-	-	-	-
Amounts owed to bank depositors	-	6,769	-	4	6,773
Derivative financial instruments - liabilities	162	9	-	1	172
Inter-segment liabilities	163	-	3	468	634
Total liabilities	36,834	19,575	5,131	44,199	105,739
Net assets	2,008	1,885	708	1,958	6,559
Equity
Equity attributable to equity holders of the parent	2,007	1,885	708	1,958	6,558
Non-controlling interests	1	-	-	-	1
Non-controlling interests - ordinary shares	1	-	-	-	1
Non-controlling interests - preference shares	-	-	-	-	-
Total equity	2,008	1,885	708	1,958	6,559

 

 

B6 Statement of financial position - segment information at 30 June 2011 continued

						£m
Nedbank	M&F	USAM	Bermuda	Other	Consolidation adjustments	Total
604	28	1,140	-	13	-	4,833
1,073	-	-	-	-	-	1,073
537	24	13	1	2	-	962
19	-	-	-	-	351	1,980
21	15	135	-	-	-	396
108	2	8	-	30	-	176
1	17	12	98	-	-	1,565
29	-	-	-	-	-	1,114
-	115	-	-	-	-	115
43,221	2	-	-	59	-	49,417
7,180	452	220	2,052	54	3,326	106,428
57	-	-	-	2	-	151
254	-	-	-	-	-	254
697	90	149	959	39	660	4,144
763	-	-	-	138	331	1,770
1,081	137	142	59	781	1,028	4,526
1	-	-	-	-	-	6
227	25	2	604	982	(3,558)	-
55,873	907	1,821	3,773	2,100	2,138	178,910
848	-	-	3,281	-	-	97,429
-	386	-	-	-	-	386
-	-	-	-	-	4,711	4,711
2,511	-	10	-	1,698	-	4,497
(6)	30	2	-	39	-	230
-	10	-	-	-	-	773
155	11	-	-	18	-	830
5	2	4	1	33	-	244
1,204	125	179	19	110	660	5,106
254	-	-	-	-	-	254
44,791	-	-	-	-	-	51,564
819	-	-	1	38	325	1,355
688	2	737	-	1,497	(3,558)	-
51,269	566	932	3,302	3,433	2,138	167,379
4,604	341	889	471	(1,333)	-	11,531
2,599	322	860	471	(1,779)	-	9,031
2,005	19	29	-	446	-	2,500
1,734	19	29	-	-	-	1,783
271	-	-	-	446	-	717
4,604	341	889	471	(1,333)	-	11,531

Notes to the consolidated financial statements

For the six months ended 30 June 2011

B6 Statement of financial position - segment information at 30 June 2010

	Long Term Savings
At 30 June 2010	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long Term Savings
Assets
Goodwill and other intangible assets	109	960	510	1,536	3,115
Mandatory reserve deposits with central banks	-	-	-	-	-
Property, plant and equipment	345	11	3	14	373
Investment property	1,648	-	-	-	1,648
Deferred tax assets	66	94	70	24	254
Investments in associated undertakings and joint ventures	28	1	-	-	29
Deferred acquisition costs	126	56	261	828	1,271
Reinsurers' share of life assurance policyholder liabilities	19	8	7	744	778
Reinsurers' share of general insurance liabilities	-	-	-	-	-
Loans and advances	285	4,444	1	165	4,895
Investments and securities	28,185	11,145	3,854	36,151	79,335
Current tax receivable	6	4	18	106	134
Client indebtedness for acceptances	-	-	-	-	-
Trade, other receivables and other assets	727	164	55	243	1,189
Derivative financial instruments - assets	322	6	-	-	328
Cash and cash equivalents	384	374	73	223	1,054
Non-current assets held for sale	-	-	-	7	7
Inter-segment assets	1,078	44	31	250	1,403
Total assets	33,328	17,311	4,883	40,291	95,813
Liabilities
Life assurance business policyholder liabilities	29,364	9,704	3,852	36,531	79,451
General insurance liabilities	-	-	-	-	-
Third-party interests in consolidated funds	-	-	-	-	-
Borrowed funds	283	2	-	-	285
Provisions	143	(14)	4	33	166
Deferred revenue	22	1	148	481	652
Deferred tax liabilities	203	109	172	138	622
Current tax payable	64	25	2	38	129
Trade, other payables and other liabilities	1,456	260	76	515	2,307
Liabilities under acceptances	-	-	-	-	-
Amounts owed to bank depositors	-	5,666	-	-	5,666
Derivative financial instruments - liabilities	109	14	4	-	127
Inter-segment liabilities	87	4	1	169	261
Total liabilities	31,731	15,771	4,259	37,905	89,666
Net assets	1,597	1,540	624	2,386	6,147
Equity
Equity attributable to equity holders of the parent	1,593	1,540	624	2,386	6,143
Non-controlling interests	4	-	-	-	4
Non-controlling interests - ordinary shares	4	-	-	-	4
Non-controlling interests - preference shares	-	-	-	-	-
Total equity	1,597	1,540	624	2,386	6,147

 

 

B6 Statement of financial position - segment information at 30 June 2010 continued

							£m
Nedbank	M&F	USAM	Other	Bermuda	US Life	Consolidation adjustments	Total
568	31	1,233	13	1	42	-	5,003
985	-	-	-	-	-	-	985
454	23	18	3	-	-	-	871
18	-	-	-	-	-	360	2,026
36	10	162	9	-	197	-	668
83	1	8	24	-	-	-	145
2	16	26	-	192	1,589	-	3,096
27	-	-	-	-	520	-	1,325
-	125	-	-	-	-	-	125
40,117	2	-	-	-	57	-	45,071
6,341	464	184	39	2,870	11,264	1,773	102,270
32	-	-	-	-	-	-	166
159	-	-	-	-	-	-	159
541	93	128	58	919	276	576	3,780
1,115	-	-	89	6	57	338	1,933
704	90	160	299	55	8	897	3,267
-	-	11	-	-	-	-	18
161	29	-	1,467	614	62	(3,736)	-
51,343	884	1,930	2,001	4,657	14,072	208	170,908
712	-	-	-	4,224	12,439	-	96,826
-	389	-	-	-	-	-	389
-	-	-	-	-	-	2,860	2,860
2,237	-	-	1,406	-	-	-	3,928
(4)	25	3	36	-	-	-	226
1	8	-	-	-	-	-	661
153	7	-	22	-	126	-	930
13	1	8	39	6	2	-	198
1,164	120	171	106	8	261	762	4,899
159	-	-	-	-	-	-	159
41,450	-	-	-	-	-	-	47,116
952	-	-	50	-	9	322	1,460
496	-	1,324	1,483	-	172	(3,736)	-
47,333	550	1,506	3,142	4,238	13,009	208	159,652
4,010	334	424	(1,141)	419	1,063	-	11,256
2,296	321	392	(1,587)	419	1,063	-	9,047
1,714	13	32	446	-	-	-	2,209
1,443	13	32	-	-	-	-	1,492
271	-	-	446	-	-	-	717
4,010	334	424	(1,141)	419	1,063	-	11,256

Notes to the consolidated financial statements

For the six months ended 30 June 2011

B6 Statement of financial position - segment information at 31 December 2010

	Long Term Savings
At 31 December 2010	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long Term Savings
Assets
Goodwill and other intangible assets	120	995	522	1,463	3,100
Mandatory reserve deposits with central banks	-	-	-	-	-
Property, plant and equipment	396	12	3	16	427
Investment property	1,679	-	-	-	1,679
Deferred tax assets	96	78	27	27	228
Investments in associated undertakings and joint ventures	26	4	-	1	31
Deferred acquisition costs	139	66	316	855	1,376
Reinsurers' share of life assurance policyholder liabilities	24	12	8	907	951
Reinsurers' share of general insurance liabilities	-	-	-	-	-
Loans and advances	343	5,216	1	185	5,745
Investments and securities	34,519	13,392	4,466	40,856	93,233
Current tax receivable	4	1	9	95	109
Client indebtedness for acceptances	-	-	-	-	-
Trade, other receivables and other assets	854	191	58	274	1,377
Derivative financial instruments - assets	557	10	-	-	567
Cash and cash equivalents	1,141	198	93	336	1,768
Non-current assets held for sale	-	-	-	6	6
Inter-segment assets	947	58	56	294	1,355
Total assets	40,845	20,233	5,559	45,315	111,952
Liabilities
Life assurance policyholder liabilities	35,676	12,248	4,460	41,468	93,852
General insurance liabilities	-	-	-	-	-
Third-party interests in consolidated funds	-	-	-	-	-
Borrowed funds	291	2	-	1	294
Provisions	158	(38)	4	50	174
Deferred revenue	22	1	197	498	718
Deferred tax liabilities	225	98	124	224	671
Current tax payable	123	12	4	65	204
Trade, other payables and other liabilities	2,246	259	94	544	3,143
Liabilities under acceptances	-	-	-	-	-
Amounts owed to bank depositors	-	5,957	-	-	5,957
Derivative financial instruments - liabilities	135	10	-	-	145
Non-current liabilities held for sale	-	-	-	-	-
Inter-segment liabilities	123	1	4	99	227
Total liabilities	38,999	18,550	4,887	42,949	105,385
Net assets	1,846	1,683	672	2,366	6,567
Equity
Equity attributable to equity holders of the parent	1,847	1,683	672	2,366	6,568
Non-controlling interests	(1)	-	-	-	(1)
Non-controlling interests - ordinary shares	(1)	-	-	-	(1)
Non-controlling interests - preference shares	-	-	-	-	-
Total equity	1,846	1,683	672	2,366	6,567

 

 

B6 Statement of financial position - segment information at 31 December 2010 continued

							£m
Nedbank	M&F	USAM	Other	Bermuda	US Life	Consolidation adjustments	Total
637	33	1,181	14	-	-	-	4,965
1,079	-	-	-	-	-	-	1,079
546	25	16	1	-	-	-	1,015
19	-	-	1	-	-	341	2,040
28	12	148	-	-	-	-	416
96	2	8	25	-	-	-	162
1	19	14	-	124	-	-	1,534
31	-	-	-	-	-	-	982
-	122	-	-	-	-	-	122
46,032	1	-	-	-	-	-	51,778
6,886	553	218	109	2,567	-	2,587	106,153
47	-	-	-	-	-	-	156
190	-	-	-	-	-	-	190
943	84	138	62	1,038	-	292	3,934
1,350	-	-	109	1	-	476	2,503
841	131	171	458	74	-	689	4,132
1	-	-	-	-	12,384	-	12,391
202	23	4	975	874	47	(3,480)	-
58,929	1,005	1,898	1,754	4,678	12,431	905	193,552
846	-	-	-	3,933	-	-	98,631
-	397	-	-	-	-	-	397
-	-	-	-	-	-	3,584	3,584
2,456	-	11	1,443	-	-	-	4,204
(4)	40	3	47	-	-	-	260
1	11	-	-	-	-	-	730
158	13	-	16	-	-	-	858
12	1	7	13	1	-	-	238
1,717	114	210	120	7	-	350	5,661
190	-	-	-	-	-	-	190
47,279	-	-	-	-	-	-	53,236
1,172	-	-	102	-	-	451	1,870
-	-	-	-	-	12,219	-	12,219
431	2	803	1,860	-	157	(3,480)	-
54,258	578	1,034	3,601	3,941	12,376	905	182,078
4,671	427	864	(1,847)	737	55	-	11,474
2,643	409	832	(2,293)	737	55	-	8,951
2,028	18	32	446	-	-	-	2,523
1,714	18	32	-	-	-	-	1,763
314	-	-	446	-	-	-	760
4,671	427	864	(1,847)	737	55	-	11,474

Notes to the consolidated financial statements

For the six months ended 30 June 2011

C Other key performance information

C1 Operating profit adjusting items

(a) Summary of adjusting items

In determining the adjusted operating profit of the Group certain adjustments are made to profit before tax to reflect the directors' view of the underlying long term performance of the Group. The following table shows an analysis of those adjustments from adjusted operating profit to profit before and after tax.

Six months ended 30 June 2011	Notes	Long Term Savings
		Emerging Markets	Nordic	Retail Europe	Wealth Management	Long Term Savings
Income/(expense)
Goodwill impairment and impact of acquisition accounting	C1(b)	(1)	(29)	(20)	(43)	(93)
Short-term fluctuations in investment return	C1(d)	(23)	-	-	(14)	(37)
Investment return adjustment for Group equity and debt instruments held in life funds	C1(e)	(31)	-	-	-	(31)
Dividends declared to holders of perpetual preferred callable securities	C1(f)	-	-	-	-	-
Credit-related fair value adjustments on Group debt instruments	C1(h)	-	-	-	-	-
Total adjusting items		(55)	(29)	(20)	(57)	(161)
Tax on adjusting items		14	2	5	15	36
Non-controlling interest in adjusting items		-	-	-	-	-
Total adjusting items after tax and non-controlling interests		(41)	(27)	(15)	(42)	(125)

Six months ended 30 June 2010*	Notes	Long Term Savings
		Emerging Markets	Nordic	Retail Europe	Wealth Management	Long Term Savings
Income/(expense)
Goodwill impairment and impact of acquisition accounting	C1(b)	(1)	(40)	(21)	(38)	(100)
Loss on disposal of subsidiaries, associated undertakings and strategic investments	C1(c)	-	-	-	-	-
Short-term fluctuations in investment return	C1(d)	(39)	-	-	(19)	(58)
Investment return adjustment for Group equity and debt instruments held in life funds	C1(e)	19	-	-	-	19
Dividends declared to holders of perpetual preferred callable securities	C1(f)	-	-	-	-	-
US Asset Management equity plans and non-controlling interests	C1(g)	-	-	-	-	-
Credit-related fair value adjustments on Group debt instruments	C1(h)	-	-	-	-	-
Total adjusting items		(21)	(40)	(21)	(57)	(139)
Tax on adjusting items		2	1	6	12	21
Non-controlling interest in adjusting items		-	-	-	-	-
Total adjusting items after tax and non-controlling interests		(19)	(39)	(15)	(45)	(118)
*               The results for the six months ended 30 June 2010 have been restated to reflect US Life as a discontinued operation.

 

 

 

C1 Operating profit adjusting items continued

(a) Summary of adjusting items continued

						£m
Nedbank	M&F	USAM		Other		Total
(3)	-	(2)	-		(98)
-	(11)	-	(6)		(54)
-	-	-	-		(31)
-	-	-	22		22
(4)	-	-	(47)		(51)
(7)	(11)	(2)	(31)		(212)
2	2	1	(2)		39
11	1	(4)	-		8
6	(8)	(5)	(33)		(165)

				£m
Nedbank	M&F	USAM	Other	Total
-	-	(1)	-	(101)
(2)	-	(20)	-	(22)
-	(19)	-	(12)	(89)
-	-	-	-	19
-	-	-	22	22
-	-	1	-	1
(9)	-	-	(81)	(90)
(11)	(19)	(20)	(71)	(260)
3	-	6	(4)	26
14	-	(3)	-	11
6	(19)	(17)	(75)	(223)

Notes to the consolidated financial statements

For the six months ended 30 June 2011

C1 Operating profit adjusting items continued

(a) Summary of adjusting items continued

£m
Year ended 31 December 2010	Notes	Long Term Savings
		Emerging Markets	Nordic	Retail Europe	Wealth Management	Long Term Savings
Income/(expense)
Goodwill impairment and impact of acquisition accounting	C1(b)	(2)	(89)	(41)	(74)	(206)
Loss on disposal of subsidiaries, associated undertakings and strategic investments	C1(c)	-	-	-	-	-
Short-term fluctuations in investment return	C1(d)	1	(1)	1	(71)	(70)
Investment return adjustment for Group equity and debt instruments held in life funds	C1(e)	(10)	-	-	-	(10)
Dividends declared to holders of perpetual preferred callable securities	C1(f)	-	-	-	-	-
US Asset Management equity plans and non-controlling interests	C1(g)	-	-	-	-	-
Credit-related fair value adjustments on Group debt instruments	C1(h)	-	-	-	-	-
Total adjusting items		(11)	(90)	(40)	(145)	(286)
Tax on adjusting items		10	3	15	5	33
Non-controlling interest in adjusting items		-	-	-	-	-
Total adjusting items after tax and non-controlling interests		(1)	(87)	(25)	(140)	(253)

 

 

C1 Operating profit adjusting items continued

(a) Summary of adjusting items continued

				£m
Nedbank	M&F	USAM	Other	Total
(6)	-	(2)	-	(214)
(1)	-	(21)	-	(22)
-	(7)	-	(6)	(83)
-	-	-	-	(10)
-	-	-	44	44
-	-	6	-	6
(20)	-	-	(183)	(203)
(27)	(7)	(17)	(145)	(482)
7	(4)	6	(6)	36
30	-	(9)	-	21
10	(11)	(20)	(151)	(425)

Notes to the consolidated financial statements

For the six months ended 30 June 2011

C1 Operating profit adjusting items continued

(b) Goodwill impairment and impact of acquisition accounting

In applying acquisition accounting in accordance with IFRS deferred acquisition costs and deferred revenue are not recognised. These are reversed in the acquisition statement of financial position and replaced by goodwill, other intangible assets and the value of the acquired present value of in-force business ('acquired PVIF'). In determining its adjusted operating profit the Group recognises deferred revenue and acquisition costs in relation to policies sold by acquired businesses pre-acquisition, and excludes the impairment of goodwill and the amortisation of acquired other intangibles and acquired PVIF.

Goodwill impairment and acquisition accounting adjustments to adjusted operating profit are summarised below:

£m
Six months ended 30 June 2011	Emerging Markets	Nordic	Retail Europe	Wealth Management	Nedbank	USAM	Total
Amortisation of acquired PVIF	-	(26)	(10)	(36)	-	-	(72)
Amortisation of acquired deferred costs and revenue	-	11	(3)	11	-	-	19
Amortisation of other acquired intangible assets	(1)	(14)	(7)	(18)	(3)	(2)	(45)
	(1)	(29)	(20)	(43)	(3)	(2)	(98)

£m
Six months ended 30 June 2010*	Emerging Markets	Nordic	Retail Europe	Wealth Management	Nedbank	USAM	Total
Amortisation of acquired PVIF	-	(57)	(10)	(38)	-	-	(105)
Amortisation of acquired deferred costs and revenue	-	13	(4)	14	-	-	23
Amortisation of other acquired intangible assets	(1)	(13)	(7)	(18)	-	(1)	(40)
Change in acquisition date provisions	-	17	-	4	-	-	21
	(1)	(40)	(21)	(38)	-	(1)	(101)

£m
Year ended 31 December 2010	Emerging  Markets	Nordic	Retail Europe	Wealth Management	Nedbank	USAM	Total
Amortisation of acquired PVIF	-	(116)	(21)	(77)	-	-	(214)
Amortisation of acquired deferred costs and revenue	-	23	(7)	34	-	-	50
Amortisation of other acquired intangible assets	(1)	(26)	(13)	(35)	(6)	(2)	(83)
Change in acquisition date provisions	-	30	-	4	-	-	34
Goodwill impairment	(1)	-	-	-	-	-	(1)
	(2)	(89)	(41)	(74)	(6)	(2)	(214)
*               The results for the six months ended 30 June 2010 have been restated to reflect US Life as a discontinued operation.

 

 

 

C1 Operating profit adjusting items continued

(c) Loss on disposal of subsidiaries, associated undertakings and strategic investments

The loss on the disposal of subsidiaries, associated undertakings and strategic investments is analysed below.

			£m
	6 months ended 30 June 2011	6 months ended 30 June 2010	Year ended 31 December 2010
Nedbank	-	(2)	(1)
USAM	-	(20)	(21)
Loss on disposal of subsidiaries, associated undertakings and strategic investments	-	(22)	(22)

 (d) Long term investment return

Profit before tax includes actual investment returns earned on the shareholder assets of the Group's life assurance and general insurance businesses. Adjusted operating profit is stated after recalculating shareholder asset investment returns based on a Long term investment return rate. The difference between the actual and the Long term investment returns are short-term fluctuations in investment return.

Long term rates of return are based on achieved real rates of return appropriate to the underlying asset base, adjusted for current inflation expectations, default assumptions, costs of investment management and consensus economic investment forecasts, and are reviewed frequently, usually annually, for appropriateness. These rates of return have been selected with a view to ensuring that returns credited to adjusted operating profit are consistent with the actual returns expected to be earned over the long term.

For Emerging Markets, the return is applied to an average value of investible shareholders' assets, adjusted for net fund flows. For Nordic, Retail Europe, and Wealth Management, the return is applied to average investible assets. For M&F general insurance business, the return is an average value of investible assets supporting shareholders' funds and insurance liabilities, adjusted for net fund flows.

Notes to the consolidated financial statements

For the six months ended 30 June 2011

C1 Operating profit adjusting items continued

(d) Long term investment return continued

			%
Long term investment rates	6 months ended 30 June 2011	6 months ended 30 June 2010	Year ended 31 December 2010
Emerging Markets	9.0	9.4	9.4
Nordic	1.7	1.8	1.8
Retail Europe	2.1	2.5	2.5
Wealth Management	2.0	2.0	2.0
M&F	9.0	9.4	9.4

 

Analysis of short-term fluctuations in investment return

£m
Six months ended 30 June 2011	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long Term Savings	M&F	Other	Total
Long term investment return	52	3	1	35	91	28	18	137
Less: Actual shareholder investment return	29	3	1	21	54	17	12	83
Short-term fluctuations in investment return	23	-	-	14	37	11	6	54

								£m
Six months ended 30 June 2010**	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long Term Savings	M&F	Other	Total
Long term investment return	52	-	1	61	114	27	16	157
Less: Actual shareholder investment return	13	-	1	42	56	8	4	68
Short-term fluctuations in investment return	39	-	-	19	58	19	12	89

								£m
Year ended 31 December 2010	Emerging Markets	Nordic	Retail Europe	Wealth Management*	Total Long Term Savings	M&F	Other	Total
Long term investment return	108	2	1	132	243	56	31	330
Less: Actual shareholder investment return	109	1	2	61	173	49	25	247
Short-term fluctuations in investment return	(1)	1	(1)	71	70	7	6	83

·     *        Wealth Management long term investment return includes £28 million (six months ended 30 June 2010: £56 million; year ended 31 December 2010: £121 million) in respect of income tax attributable to policyholder returns.

**    The results for the six months ended 30 June 2010 have been restated to reflect US Life as a discontinued operation.

C1 Operating profit adjusting items continued

(e) Investment return adjustment for Group equity and debt instruments held in life funds

Adjusted operating profit includes investment returns on policyholder investments in Group equity and debt instruments held by the Group's life funds. These include investments in the Company's ordinary shares, and the subordinated liabilities and ordinary securities of Nedbank. These investment returns are eliminated within the consolidated income statement in arriving at profit before tax, but are included in adjusted operating profit. In the six months ended 30 June 2011 the investment return adjustment increased adjusted operating profit by £31 million (six months ended 30 June 2010: decrease of £19 million; year ended 31 December 2010: increase of £10 million).

 

 

 

(f) Dividends declared to holders of perpetual preferred callable securities

Dividends declared to the holders of the Group's perpetual preferred callable securities were £22 million for the six months ended 30 June 2011 (six months ended 30 June 2010: £22 million; year ended 31 December 2010: £44 million). These are recognised in finance costs on an accruals basis for the purpose of determining adjusted operating profit. In the IFRS financial statements this cost is recognised in the consolidated statement of changes in equity.

(g) US Asset Management equity plans and non-controlling interests

US Asset Management has entered into a number of long term incentive arrangements with its asset management affiliates.

In accordance with IFRS requirements the cost of these schemes is disclosed as being attributable to non-controlling interests. However, this is treated as a compensation expense in determining adjusted operating profit. The gain/loss recognised in the six months ended 30 June 2011 was £nil (six months ended 30 June 2010: £1 million loss; year ended 31 December 2010: £9 million loss).

The Group has issued put options to employees as part of some of its US affiliate incentive schemes. The impact of revaluing these instruments is recognised in accordance with IFRS, but excluded from adjusted operating profit. As at 30 June 2011 these instruments were revalued, the impact of which was £nil (six months ended 30 June 2010: £nil; year ended 31 December 2010: £3 million).

(h) Credit-related fair value gains on Group debt instruments

The narrowing of credit spread of the Group's debt instruments in the market price has resulted in losses in the six months ended 30 June 2011 of £47 million (six months ended 30 June 2010: gains of £81 million; year ended 31 December 2010: losses of £183 million) on Other operating segments and losses in the six months ended 30 June 2011 of £4 million (six months ended 30 June 2010: £9 million; year ended 31 December 2010: losses of £20 million) in Nedbank being recorded in the Group's income statement for those instruments that are recorded at fair value.

In the directors' view, such movements are not reflective of the underlying performance of the Group and will reverse over time. They have therefore been excluded from adjusted operating profit.

C2 Foreign currencies

The principal exchange rates used to translate the operating results, assets and liabilities of foreign operations to Sterling are:

	Income statement (average rate)	Statement of financial position (closing rate)
30 June 2011
Rand	11.1428	10.8616
US Dollars	1.6165	1.6067
Swedish Kronor	10.3023	10.1564
Euro	1.1513	1.1073
30 June 2010
Rand	11.4878	11.4531
US Dollars	1.5265	1.4963
Swedish Kronor	12.2744	11.6254
Euro	1.1487	1.2208
31 December 2010
Rand	11.3095	10.2796
US Dollars	1.5459	1.5530
Swedish Kronor	11.1364	10.4227
Euro	1.1650	1.1614

Notes to the consolidated financial statements

For the six months ended 30 June 2011

C3 Earnings and earnings per share

(a) Basic and diluted earnings per share

Basic earnings per share is calculated by dividing the profit for the financial period attributable to ordinary equity shareholders by the weighted average number of ordinary shares in issue during the period excluding own shares held in policyholder funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings.

£m
	6 months ended 30 June 2011	6 months ended 30 June 2010	Year ended 31 December 2010
Profit for the financial period attributable to equity holders of the parent from continuing operations	359	145	431
Profit/(loss) for the financial period attributable to equity holders of the parent from discontinued operations	130	120	(713)
Profit/(loss) for the financial period attributable to equity holders of the parent	489	265	(282)
Dividends declared to holders of perpetual preferred callable securities	(16)	(16)	(32)
Profit/(loss) attributable to ordinary equity holders	473	249	(314)

Total dividends declared to holders of perpetual preferred callable securities of £16 million for the six months ended 30 June 2011 (six months ended 30 June 2010: £22 million; year ended 31 December 2010: £44 million) are stated net of tax credits of £6 million (six months ended 30 June 2010: £6 million; year ended 31 December 2010: £12 million).

Millions
	6 months ended 30 June 2011	6 months ended 30 June 2010	Year ended 31 December 2010
Weighted average number of ordinary shares in issue	5,470	5,397	5,422
Shares held in charitable foundations	(7)	(7)	(7)
Shares held in ESOP trusts	(66)	(48)	(56)
Adjusted weighted average number of ordinary shares	5,397	5,342	5,359
Shares held in life funds	(201)	(206)	(205)
Shares held in Black Economic Empowerment trusts	(299)	(287)	(295)
Weighted average number of ordinary shares	4,897	4,849	4,859
Basic earnings per ordinary share (pence)	9.7	5.1	(6.5)

Diluted earnings per share recognises the dilutive impact of share options held in ESOP trusts and Black Economic Empowerment trusts which are currently in the money in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full period.

Millions
	6 months ended 30 June 2011	6 months ended 30 June 2010	Year ended 31 December 2010
Weighted average number of ordinary shares	4,897	4,849	4,859
Adjustments for share options held by ESOP trusts	149	173	137
Adjustments for shares held in Black Economic Empowerment trusts	299	287	295
	5,345	5,309	5,291
Diluted earnings per ordinary share (pence)	8.8	4.7	(6.1)

 

 

 

C3 Earnings and earnings per share continued

(b) Adjusted operating earnings per ordinary share

Adjusted operating earnings per ordinary share is determined based on adjusted operating profit. Adjusted operating profit represents the directors' view of the underlying performance of the Group. For long term and general insurance business adjusted operating profit is based on a long term investment return, includes investment returns on life funds' investments in Group equity and debt instruments and is stated net of income tax attributable to policyholder returns. For the US Asset Management business it includes compensation costs in respect of certain long term incentive schemes defined as non-controlling interests in accordance with IFRS. For all core businesses, adjusted operating profit excludes goodwill impairment, the impact of acquisition accounting, revaluations of put options related to long term incentive schemes, 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 instruments. Bermuda and US Life, which are non-core, are not included in adjusting operating profit.

The reconciliation of profit/(loss) for the financial period to adjusted operating profit after tax attributable to ordinary equity holders is as follows:

£m
	6 months ended 30 June 2011	6 months ended 30 June 2010 Restated	Year ended 31 December 2010
Profit/(loss) for the financial period attributable to equity holders of the parent	489	265	(282)
Adjusting items	212	260	482
Tax on adjusting items	(39)	(26)	(36)
Non-core operations	(21)	65	(1)
(Profit)/loss from discontinued operations - US Life	(130)	(120)	713
Non-controlling interest on adjusting items	(8)	(11)	(21)
Adjusted operating profit after tax attributable to ordinary equity holders	503	433	855
Adjusted weighted average number of ordinary shares (millions)	5,397	5,342	5,359
Adjusted operating earnings per ordinary share (pence)	9.3	8.1	16.0

(c) Headline earnings per share

In accordance with the JSE Limited (JSE) listing requirements, the Group is required to calculate a 'headline earnings per share' (HEPS), determined by reference to the South African Institute of Chartered Accountants' circular 8/2007 'Headline Earnings'. The table below sets out a reconciliation of basic earnings per ordinary share and HEPS in accordance with that circular. Disclosure of HEPS is not a requirement of International Financial Reporting Standards.

£m
	6 months ended 30 June 2011		6 months ended 30 June 2010 Restated		Year ended 31 December 2010
	Gross	Net	Gross	Net	Gross	Net
Profit/(loss) for the financial period attributable to equity holders of the parent	489	489	265	265	(282)	(282)
Dividends declared to holders of perpetual preferred callable securities	(16)	(16)	(16)	(16)	(32)	(32)
Profit/(loss) attributable to ordinary equity holders	473	473	249	249	(314)	(314)
Adjustments:
Impairments of goodwill and intangible assets	-	-	-	-	20	20
Impairment of discontinued operations	-	-	-	-	827	827
Loss on disposal of subsidiaries, associated undertakings and strategic investments	29	29	22	16	22	17
Realised gains (including impairments) on available-for-sale financial assets	(167)	(167)	(43)	(43)	(12)	(12)
Exchange differences realised on disposal	24	24	-	-	-	-
Headline earnings	359	359	228	222	543	543
Weighted average number of ordinary shares	4,897	4,897	4,849	4,849	4,859	4,859
Diluted weighted average number of ordinary shares	5,345	5,345	5,309	5,309	5,291	5,291
Headline earnings per share (pence)	7.3	7.3	4.7	4.6	11.2	11.1
Diluted headline earnings per share (pence)	6.7	6.7	4.3	4.2	10.1	10.0

Notes to the consolidated financial statements

For the six months ended 30 June 2011

C4 Dividends

Dividends paid were as follows:

			£m
	6 months ended 30 June 2011	6 months ended 30 June 2010	Year ended 31 December 2010
2009 Final dividend paid - 1.5p per 10p share	-	77	77
2010 Interim dividend paid - 1.1p per 10p share	-	-	54
2010 Final dividend paid - 2.9p per 10p share	145	-	-
Dividends to ordinary equity holders	145	77	131
Dividends declared to holders of perpetual preferred callable securities	22	22	44
Dividend payments for the period	167	99	175

Dividends paid to ordinary equity holders, as above, are calculated using the number of shares in issue at the record date, less treasury shares held in ESOP trusts, life funds of Group companies, Black Economic Empowerment trusts and related undertakings.

As a consequence of the exchange control arrangements in place in certain African territories, dividends to ordinary equity holders on the branch registers of those countries (or, in the case of Namibia, the Namibian section of the principal register) are settled through Dividend Access Trusts established for that purpose.

In March 2011 £22 million was declared and paid to holders of perpetual preferred callable securities (March 2010: £22 million; November 2010: £22 million).

An interim dividend of 1.5 pence per 10p share has been declared by the directors. The dividend will be paid on 30 November 2011 to shareholders on the register at the close of business on 14 October 2011. The dividend will absorb an estimated £74 million of shareholders' funds. The Company is planning to offer a scrip dividend alternative for eligible shareholders.

D Other income statement notes

D1 Income tax expense

(a) Analysis of total income tax expense

£m
	6 months ended 30 June 2011	6 months ended 30 June 2010 Restated	Year ended 31 December 2010
Current tax
United Kingdom tax	17	16	23
Overseas tax
South Africa	155	128	346
United States	2	-	(4)
Europe	41	25	61
Secondary Tax on Companies (STC)	9	(2)	4
Prior year adjustments	(26)	-	(1)
Total current tax	198	167	429
Deferred tax
Origination and reversal of temporary differences	13	(50)	(10)
Changes in tax rates/bases	(4)	-	(4)
Write down/recognition of deferred tax assets	(2)	12	41
Total deferred tax	7	(38)	27
Total income tax expense	205	129	456

 

 

D1 Income tax expense continued

(b) Reconciliation of total income tax expense

£m
	6 months ended 30 June 2011	6 months ended 30 June 2010 Restated	Year ended 31 December 2010
Profit before tax	707	389	1,145
Tax at standard rate of 26.5% (2010: 28%)	188	111	321
Different tax rate or basis on overseas operations	3	11	(22)
Untaxed and low taxed income	(43)	(66)	(171)
Disallowable expenses	13	22	124
Net movement on deferred tax assets not recognised	20	60	92
Effect on deferred tax of changes in tax rates	(3)	-	(7)
STC	14	(1)	(3)
Income tax attributable to policyholder returns	37	2	134
Other	(3)	(10)	(12)
Prior year adjustments	(21)	-	-
Total income tax expense	205	129	456

 (c) Income tax on adjusted operating profit

£m
	6 months ended 30 June 2011	6 months ended 30 June 2010 Restated	Year ended 31 December 2010
Income tax expense	205	129	456
Tax on adjusting items
Impact of acquisition accounting	18	14	35
Loss/profit on disposal of subsidiaries, associated undertakings and strategic investments	-	5	5
Short-term fluctuations in investment return	26	11	3
Income tax attributable to policyholders returns	(51)	-	(149)
Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity	(6)	(6)	(12)
Fair value gains and losses on group debt instruments	1	3	5
Tax on non-core operations	(2)	(1)	4
Income tax on adjusted operating profit	191	155	347

Notes to the consolidated financial statements

For the six months ended 30 June 2011

E Borrowed funds

E1 Borrowed funds

				£m
		Group excluding Nedbank	Nedbank	At 30 June 2011
Senior debt securities and term loans		539	1,464	2,003
Mortgage backed securities		-	97	97
Subordinated debt securities (net of Group holdings)		1,447	950	2,397
Borrowed funds		1,986	2,511	4,497
Other issues treated as equity for accounting purposes
US$750 million cumulative preference securities		458
€500 million perpetual preferred callable securities		338
£350 million perpetual preferred callable securities		350
Total: Book value		3,132
Nominal value of the above		3,277
				£m
		Group excluding Nedbank	Nedbank	At 30 June 2010
Senior debt securities and term loans		622	1,061	1,683
Mortgage backed securities		-	114	114
Subordinated debt securities (net of Group holdings)		1,069	1,062	2,131
Borrowed funds		1,691	2,237	3,928
Other issues treated as equity for accounting purposes
US$750 million cumulative preference securities		458
€500 million perpetual preferred callable securities		338
£350 million perpetual preferred callable securities		350
Total: Book value		2,837
Nominal value of the above		3,085
				£m
		Group excluding Nedbank	Nedbank	At 31 December 2010
Senior debt securities and term loans		550	1,186	1,736
Mortgage backed securities		-	112	112
Subordinated debt securities (net of Group holdings)		1,198	1,158	2,356
Borrowed funds		1,748	2,456	4,204
Other issues treated as equity for accounting purposes
US$750 million cumulative preference securities		458
€500 million perpetual preferred callable securities		338
£350 million perpetual preferred callable securities		350
Total: Book value		2,894
Nominal value of the above		3,045

 

 

E1 Borrowed funds continued

 (a) Senior debt securities and term loans

				£m
		At 30 June 2011	At 30 June 2010	At 31 December 2010
Floating rate notes1		927	737	806
Fixed rate notes2		1,043	946	928
Revolving credit facility3		-	-	-
Term loan and other loans		33	-	2
Total senior debt securities and term loan		2,003	1,683	1,736

Senior debt securities and term loans comprise:

1. Floating rate notes

Group excluding Nedbank

·     R550 million repayable August 2010 at 3 month ZAR - JIBAR-SAFEX + 4.5% - repaid.

·     R100 million repayable February 2011 at 3 month ZAR - JIBAR-SAFEX + 4.5% - repaid.

·     US$50 million repayable September 2011 at 3 month LIBOR plus 0.50%.

·     £3 million note repayable in December 2010, with holders having the option to elect for early redemption every six months with coupon referenced against six month LIBOR less 0.50% - repaid.

Nedbank

·     R1,690 million unsecured senior debt repayable September 2012 at 3 month JIBAR + 1.5%.

·     R1,044 million unsecured senior debt repayable September 2015 at JIBAR + 2.20%.

·     R1,750 million unsecured senior debt repayable March 2013 inflation linked (3.9% real yield).

·     R98 million unsecured senior debt repayable March 2013 inflation linked (3.8% real yield).

·     R1,552 million unsecured senior debt repayable April 2013 JIBAR +1.48%.

·     R1,027 million unsecured senior debt repayable April 2015 JIBAR +1.75%.

·     R80 million unsecured senior debt repayable April 2020 JIBAR +2.15%.

·     R837 million unsecured senior debt repayable March 2014 JIBAR +1.05%.

·     R677 million unsecured senior debt repayable March 2016 JIBAR + 1.25%.

·     R500 million unsecured senior debt repayable April 2014 JIBAR + 1.0%.

2. Fixed rate notes

Group excluding Nedbank

·     £500 million Euro bond repayable October 2016 at 7.125%.

·     US$16.5 million secured senior debt repayable August 2014 at 5.23%.

·     €30 million Euro bond repayable July 2010, capital and interest swapped into fixed rate US dollars at 5.28% - repaid.

·     €10 million Euro bond repayable December 2010, capital and interest swapped into floating rate US dollars at 3 month LIBOR + 0.95% - repaid.

Nedbank

·     R130 million unsecured senior debt repayable October 2024 at zero coupon.

·     R3,244 million unsecured senior debt repayable September 2015 at 10.55%.

·     R762 million unsecured senior debt repayable September 2019 at 11.39%.

·     R478 million unsecured senior debt repayable April 2015 at R157 + 1.75%.

·     R450 million unsecured senior debt repayable March 2014 at R206 + 1.28%.

·     R1,137 million unsecured senior debt repayable March 2016 at R157 + 1.5%.

The total fair value of the swap derivatives associated with the senior notes is £nil (June 2010: £5 million; December 2010: £nil). The movement from the prior year is caused by the close out of the Eurobond notes in 2010.

3. Revolving credit facilities and irrevocable letters of credit

In April 2011 the Group signed a new £1,200 million five-year multi-currency revolving credit facility, replacing the £1,232 million facility due to mature in September 2012.

At 30 June 2011 £174 million (June 2010: £517 million; December 2010: £499 million) of this facility was utilised, £nil (June 2010: £nil; December 2010: £nil) in the form of drawn debt and £174 million (June 2010: £517 million; December 2010: £499 million) in the form of irrevocable letters of credit.

The Group has a SEK 1,500 million revolving credit facility, which had a maturity date of 1 July 2011 which has subsequently been extended, at the amount of SEK 1,000 million to 1 July 2012. At 30 June 2011 this facility was undrawn (June 2010 and December 2010: undrawn).

Notes to the consolidated financial statements

For the six months ended 30 June 2011

E1 Borrowed funds continued

(b) Mortgage backed securities - Nedbank

	£m
	At 30 June 2011	At 30 June 2010	At 31 December 2010
R291 million notes (class A1) repayable 18 November 2039 (11.467%)	-	17	4
R1.4 billion notes (class A2A) repayable 18 November 2039 (11.817%)	85	87	96
R98 million notes (class B note) repayable 18 November 2039 (12.067%)	7	6	7
R76 million notes (class C note) repayable 18 November 2039 (13.317%)	5	4	5
	97	114	112

(c) Subordinated debt securities

	£m
	At 30 June 2011	At 30 June 2010	At 31 December 2010
Nedbank
R1.5 billion repayable 24 April 2016 (7.85%)1	-	132	148
R1.8 billion repayable 20 September 2018 (9.84%)2	175	160	186
R500 million repayable on 30 December 2010 (8.38%)3- repaid	-	44	-
R650 million repayable 8 February 2017 (9.03%)4	63	58	67
R1.7 billion repayable 8 February 2019 (8.9%)5	165	147	171
R2.0 billion repayable 6 July 2022 (3 month JIBAR plus 0.47%)6	187	178	198
R500 million repayable 15 August 2017 (3 month JIBAR plus 0.45%)7	46	44	49
R1.0 billion repayable 17 September 2020 (10.54%)8	98	92	105
R500 million repayable 14 December 2017 (3 month JIBAR plus 0.70%)9	46	44	49
R120 million repayable 14 December 2017 (10.38%)10	11	11	12
R487 million repayable 20 November 2018 (15.05%)11	48	45	51
R1,265 million repayable 20 November 2018 (JIBAR plus 4.75%)12	118	112	125
R300 million repayable on 4 December 2013 (JIBAR + 2.5%)13	14	13	15
US$100 million repayable on 3 March 2022 (3 month USD LIBOR)14	63	67	65
	1,034	1,147	1,241
Less: banking subordinated debt securities held by other Group companies	(84)	(85)	(83)
Banking subordinated debt securities (net of Group holdings)	950	1,062	1,158
Group excluding Nedbank
R3.0 billion repayable 27 October 2020 (8.9%)15	276	262	293
£300 million repayable 21 January 2016 (5.0%)16  - repaid	-	273	296
R250 million preference shares repayable 9 June 201117 - repaid	-	22	-
€750 million repayable 18 January 2017 (4.5%)18	671	512	609
£500 million repayable 3 June 2021 (8.0%)19	500	-	-
	1,447	1,069	1,198
Total subordinated liabilities	2,397	2,131	2,356

 

 

E1 Borrowed funds continued

(c) Subordinated debt securities

The subordinated notes rank behind the claims against the Group depositors and other unsecured, unsubordinated creditors. None of the Group's subordinated notes are secured.

1.     Unsecured secondary callable note was issued 24 April 2006 with a call date of 24 April 2011.

2.     Unsecured secondary callable note was issued 20 September 2006 at R1.5 billion with a call date of 20 September 2013. On 18 May 2007 an additional R0.3 billion was issued.

3.     Unsecured callable Bonds issued 30 March 2006 - repaid.

4.     Unsecured secondary callable note was issued 8 February 2007 with a call date of 8 February 2012.

5.     Unsecured secondary callable note was issued 8 February 2007 at R1.0 billion. On 19 March 2007 an additional R0.7 billion was issued.

6.     Unsecured secondary capital callable note issued 6 July 2007 and has a call date of 6 July 2017.

7.     This bond issued on 15 August 2007 is an unsecured secondary capital callable floating rate note with a call date 15 August 2012.

8.     This bond issued on 17 September 2007 is an unsecured fixed rate note with a term of 13 years (non-call 8 year).

9.     This bond issued on 14 December 2007 is a 10 year (non-call 5 year) floating rate note. After its call date on 14 December 2012 its terms become JIBAR plus 1.70% until maturity.

10.   This bond issued on 14 December 2007 is a 10 year (non-call 5 year) fixed rate note. After its call date its terms become floating 3 month JIBAR plus initial margin over mid swaps plus 1.0% until maturity.

11.   This bond issued on 20 May 2008 is a perpetual (non-call 10 year) fixed rate note with a call date on 20 November 2018.

12.   This bond issued on 20 May 2008 is a perpetual (non-call 10 year) floating rate note with a call date of 20 November 2018.

13.   This bond issued on 4 December 2008 is a floating rate note with a call date of 4 December 2013.

14.   Dated Tier 2 notes issued 3 March 2009 with call date 3 March 2017.

15.   These bonds have a maturity date of 27 October 2020 and pay a coupon of 8.92% to 27 October 2015 and 3 month JIBAR plus 1.59% thereafter. The Group has the option to repay the bonds at par on 27 October 2015 and at 3 monthly intervals thereafter.

16.   These bonds, issued on 20 January 2006, have a maturity date of 21 January 2016 and pay a coupon of 5.0% to 21 January 2011 and 6 month LIBOR plus 1.13% thereafter. The coupon on the bonds was swapped into floating rate of 6 month STIBOR plus 0.50%. The Group had the option to repay the bonds at par on 21 January 2011 and at 6 monthly intervals thereafter. These bonds were redeemed at the first call date of 21 January 2011.

17.   These preference shares were redeemable on 9 June 2011 and paid a variable cumulative coupon of 61.0% of the Prime Rate as quoted by Nedbank Limited. The Group had the option to redeem the shares at par at any time before the final redemption date but after giving an agreed period of notice, with the Group electing to redeem in 2010.

18.   This bond, issued on 16 January 2007, has a maturity date of 18 January 2017 and pays a coupon of 4.5% to 17 January 2012 and 6 month EURIBOR plus 0.96% thereafter. The principal and coupon on the bond were swapped equally into Sterling and US Dollars with coupons of 6 month LIBOR plus 0.34% and 6 month US LIBOR plus 0.31% respectively. The Group has the option to repay the bonds at par on 17 January 2012 and at 6 monthly intervals thereafter. The Group redeemed €550 million of the bond on 1 July 2011.

19.   This bond, issued on 3 June 2011, has a maturity date of 3 June 2021 and pays a coupon of 8%. The coupon on the bonds was swapped into floating rate of quarterly STIBOR plus 5.46%. The currency swaps have a 5 year mandatory break clause.

 

F Other notes

F1 Acquisition of non-controlling interests

Acquisition of non-controlling interest in Mutual & Federal

On 5 February 2010, the Group completed the acquisition of the remaining non-controlling shareholdings in Mutual & Federal Insurance Company Limited, following the fulfilment of all outstanding conditions precedent. On 8 February 2010, 147,313,449 new Old Mutual plc ordinary shares were issued in exchange for Mutual & Federal shares and listed on the London Stock Exchange, of which 68,378,851 were issued to Black Economic Empowerment trusts and 78,934,598 to other previous holders.

Other acquisitions

On 8 February 2010 Nedbank announced that it had obtained regulatory approval for the acquisition of the remaining 49.9% indirect interest in Imperial Bank Limited thereby satisfying all conditions precedent for the acquisition.

The purchase consideration was approximately £162 million (£155 million plus a Johannesburg Interbank Agreed Rate (JIBAR) factor applied up to 5 February 2010) which was settled in four instalments out of existing cash resources of Nedbank Limited. The total amount, which involved interest at the three-month JIBAR, amounted to £165 million.

F2 Events after the reporting date

Following a market tender, on 1 July 2011 the Group redeemed €550 million of the €750 million subordinated debt security repayable 18 January 2017.

Notes to the consolidated financial statements

For the six months ended 30 June 2011

G Discontinued operations

G1 Discontinued operations

The results of the Group's United States life business, US Life, are shown as a discontinued operation in these financial statements. At 31 December 2010 the Group had entered into an agreement to dispose of the controlling interest in US Life to Harbinger OM LLC, an affiliate of Harbinger Capital Partners, and was seeking to gain regulatory approval for the sale. Following regulatory approval the disposal was completed on 7 April 2011.

Analysis of the results is given below.

(a) Income statement from discontinued operations

£m
	Period from 1 January 2011 to 7 April 2011	6 months ended 30 June 2010	Year ended 31 December 2010
Revenue	342	758	1,608
Expenses	(330)	(704)	(1,557)
Profit before tax from discontinued operations	12	54	51
Impairment on remeasurement to fair value less costs to sell	-	-	(827)
Loss on disposal	(29)	-	-
Realised available-for-sale investment gains and exchange differences on disposal	133	-	-
Profit/(loss) before tax	116	54	(776)
Income tax credit	14	66	63
Profit/(loss) from discontinued operations after tax	130	120	(713)

(b) Statement of comprehensive income from discontinued operations

£m
	Period from 1 January 2011 to 7 April 2011	6 months ended 30 June 2010	Year ended 31 December 2010
Profit/(loss) after tax for the financial period	130	120	(713)
Other comprehensive income for the financial period	-	-
Fair value (losses)/gains	-	-
Available-for-sale investments
Fair value gains/(losses)	48	452	530
Recycled to the income statement	(5)	(43)	(12)
Realised on disposal	(157)	-	-
Exchange differences on disposal	24	-	-
Shadow accounting	(43)	(229)	(334)
Currency translation differences/exchange differences realised on translating foreign operations	-	61	29
Other movements	-	-	(34)
Aggregate tax on transfers from equity	3	(59)	(67)
Total other comprehensive (loss)/income for the financial period	(130)	182	112
Total comprehensive income/(loss) for the financial period	-	302	(601)
Attributable to
Equity holders of the parent	-	302	(601)
Total comprehensive income/(loss) for the financial period	-	302	(601)

 

 

c) Net cash flows from discontinued operations

£m
	Period from 1 January 2011 to 7 April 2011	6 months ended 30 June 2010	Year ended 31 December 2010
Operating activities	2	(25)	(167)
Investing activities	146	(304)	63
Net cash flows	148	(329)	(104)

G2: Contingent liabilities in respect of the disposal of US Life

Following completion of the disposal of US Life to the Harbinger group ('Harbinger') on 7 April 2011, the Group has retained certain residual commitments and contingent liabilities. These relate to sale warranties and indemnities that are typical in transactions of this nature including in respect of litigation (including class actions) and regulatory enforcement actions arising from events occurring before completion.  The specific conditions are in effect for varying periods of time, the longest dated of these will expire on 31 December 2015.  The main elements are summarised below:

·     Harbinger intends to establish certain internal reinsurance arrangements which are subject to regulatory approval.  In the event that regulatory approval of the full amount of reinsurance is not forthcoming there is potential for a reduction in the purchase price, up to a maximum of US$50 million.

·     US statutory regulations require reserving on a worst case scenario basis for deferred annuity policies that permit free partial withdrawals ('CARVM Reserves'). As such there is redundancy when comparing the worst case scenario and the economic scenarios. These CARVM redundant reserves are currently reinsured from US Life to Old Mutual Reassurance until no later than the end of 2015. Old Mutual plc provides a $280 million letter of credit to back these redundant reserves. In the event that this letter of credit is drawn upon Harbinger are obligated to fully reimburse Old Mutual plc.

·     US statutory regulations require reserving on a worst case scenario basis in respect of guarantees included in universal life and term assurance products ('XXX and AXXX Reserves'). As such there is redundancy when comparing the worst case scenario and the economic scenarios. These XXX and AXXX Reserves are currently reinsured from US Life to their own reinsurance vehicle. Prior to close Old Mutual arranged a $535 million third party letter of credit to back the redundant component of these reserves. In the event that this letter of credit is drawn upon Harbinger are obligated to fully reimburse the third party. Old Mutual stands behind Harbinger's commitments. In addition if redundant reserving requirements change Old Mutual must provide further letter of credit financing up to $200 million. Harbinger must replace all XXX and AXXX redundant reserve financing and take Old Mutual fully off risk no later than the end of 2012. Harbinger has announced that it has entered into an agreement with Wilton Re to reinsure this business and therefore meet its commitment to Old Mutual.

 

END

 

 

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