Interim Results - Part 1

Old Mutual PLC 5 September 2000 Part 1 OLD MUTUAL PLC Interim Results for the six months ended 30 June 2000 HIGHLIGHTS * Operating profits based on a long term investment return advance strongly by 61% to £457 million * Operating earnings per share based on a long term investment return rise 50% to 9 pence * Total funds under management increase 23% to £55.1 billion from £44.9 billion at December 1999 * Continuing life assurance operating profits based on a long term investment return rise 26% to £249 million * Banking operating profits increase 59% to £156 million * Greater international presence through proposed $1.46 billion acquisition of United Asset Management Corporation * Interim dividend of 1.6 pence per share up 20% from pro forma interim 1999 Mike Levett, Chairman and Chief Executive, comments: 'The past six months have seen Old Mutual make considerable progress in the development of its core businesses. Completion of the Gerrard take-over and the launch of our offer for United Asset Management demonstrate our determination to become a truly international financial services business.' ENQUIRIES: Old Mutual plc Tel: + 44 20 7569 0100 James Poole, Director, Investor Relations College Hill Tel: + 44 20 7457 2020 Alex Sandberg Gareth David Nicholas Williams College Hill South Africa Tel: + 27 11 447 3030 Tony Friend Kim Milnes NOTE TO EDITORS Photographs of the Old Mutual management team are available at www.newscast.co.uk OLD MUTUAL PLC Interim Results for the six months ended 30 June 2000 CHAIRMAN'S STATEMENT I am pleased to report a continued improvement in the key financial results of the Group. Operating profits based on a long term investment return ('smoothed profits') grew by 61% to £457 million from £283 million. Operating earnings per share grew by 50% to 9 pence. After adjusting last year's figure for one-off UK life assurance write downs and special provisions made by Nedcor, growth was 28%. The Board has declared an interim dividend per share of 1.6 pence, which represents a 20% increase on the pro forma 1999 interim dividend. This dividend will be paid on 30 November to shareholders on the register at close of stockmarkets on 20 October. In this half year we have moved rapidly to expand our presence on the world stage, while finding new ways to deliver growth from our core financial services businesses. In life assurance, we continued our initiatives to grow our leading life assurance and financial services operations. New life assurance premiums were up 9% from last year, while operating profits on continuing businesses were up 26%. Our range of single premium investment products continued to penetrate well in the marketplace and we expanded through new offerings during the period. In line with our strategy to seek international expansion, our recently announced joint venture with Kotak Mahindra Finance Ltd, one of India's largest financial services companies, aims to build a substantial longer term presence in this untapped market. In asset management, we have moved swiftly towards building a world- class multinational fund management business. The completion in March of our acquisition of the Gerrard Group has brought within the Group the largest UK private client stockbroker and a leading player in the high net worth market. In June we launched a $1.46 billion tender offer for United Asset Management Corporation ('UAM') in the US. Successful completion of this transaction will significantly diversify our earnings and will triple our global assets under management to approximately $275 billion, ranking Old Mutual among the top 30 fund managers in the world. Nedcor, our 53% owned banking subsidiary, maintained its outstanding track record. It reported a 27% rise in attributable income to R1,230 million (£119 million), while return on equity rose from 21% to 24%, reflecting substantially higher levels of capital and asset productivity. The cost to income ratio decreased to 52%. While Nedcor's proposed merger with Stanbic was not permitted, Nedcor is well positioned for future growth on a stand alone basis and is engaged in various major strategic initiatives. These include investments in technology through alliances and its intention to leverage its empowerment position through the acquisition of FBC Fidelity Bank. Mutual & Federal, our 51% owned general insurance subsidiary, incurred a moderate underwriting deficit in a very difficult period for the industry. It is in the process of completing its acquisition of CGU Holdings for R1,206 million (£115 million), which will extend its market reach and improve its cost structures in future. Whilst smoothed profits advanced satisfactorily as shown above, asset values were impacted by both the adverse performance of stockmarkets (with the JSE down some 10%) and a decline of the average exchange rate of the Rand to Sterling (by about 5%) during the period. In consequence, the Group's embedded value declined marginally from £5.4 billion to £5.2 billion over the six months to 30 June 2000. The JSE had recovered by approximately 9% by the end of August. Profit on ordinary activities after tax and minorities was £39 million compared to £601 million last year. We have moved both to strengthen our executive team and to focus it with specific responsibilities for managing our key businesses. In January, Jim Sutcliffe took up the position of Chief Executive, Life, covering our life assurance and related businesses worldwide. Eric Anstee has more recently been appointed as Chief Executive, Financial Services, covering our asset management, private client and other financial services businesses. It is intended that Eric will also assume responsibility for the UAM group of companies upon completion of that acquisition. I am pleased to welcome Julian Roberts, who joined us last month as Group Finance Director. In addition to strengthening executive management, we have taken steps throughout the Group to ensure that we attract and retain appropriately incentivised senior management. The past six months have seen Old Mutual make considerable progress in transforming itself into an international financial services group with exciting scope for further growth. I believe our major financial services businesses are geared to deliver, and we have the right people focusing on customer and shareholder value. The outlook for the rest of the year is positive. MIKE LEVETT Chairman & Chief Executive OLD MUTUAL PLC Interim Results for the six months ended 30 June 2000 OPERATING REVIEW Life assurance Operating profits from our continuing life businesses, including the long term investment return of £114 million, were principally generated by our South African business and at £249 million are 26% higher than in the equivalent period last year. Equivalent annual new business premiums rose 9% in Sterling terms. South Africa The key measures of performance for our life assurance operations - margins on managed assets and return on capital - continue to compare well against world-class benchmarks. Life operating profit after tax, including a 14% longer term return on capital allocated, amounted to an annualised 2.1% of life assets and 23% of allocated capital. South African equivalent annual new business premiums rose 14% in Rand, compared with the first six months of 1999. Operating profits from our group business - Employee Benefits, increased by 37% to £48 million as a result of improved fee collection, tight expense management, capital charges on higher asset balances and positive underwriting results. New recurring business premiums of £22 million were comparable with the full 1999 figure of £22 million. Single premiums of £169 million (excluding market-linked business where profits are reported under Asset Management), were 34% higher than in the same period last year and, setting aside the effect of demutualisation proceeds reinvestment, were comparable with the 1999 figure. Our Platinum, Core Growth and Genesis products contributed strongly to this growth, with the Guaranteed Fund recently declaring a highly competitive 16% bonus rate in respect of the year to June 2000. Employee Benefits continued to strengthen its position in the market through the launch of Symmetry, the multi-manager investment range, and Synergy, a new short term disability product. A new flexible risk product range will be introduced shortly. Important advances have been made in the area of group retirement fund administration, most recently through the introduction of SplitFunder, a computer application that ensures efficient transfer of member-level investment choices to the appropriate asset managers. We have also strengthened the Employee Benefits management team with the recruitment of high calibre individuals in important areas of the business. Individual business profits at £87 million were 21% up on the first half of 1999, resulting largely from capital charges on higher asset balances, repricing due to tax changes, continuing positive underwriting profits and tight expense management. Single premium sales were 19% above the equivalent period of 1999, reflecting the continued success of our Investment Frontiers product range. Individual recurring premium new business volumes were 9% below 1999 levels. While our affinity group business, Group Schemes, displayed good growth, this was offset by lower recurring premium new business in Individual Life. Following last year's agency sales force restructuring we introduced tighter entry requirements. The recruitment of new advisors on this basis is proceeding more slowly than expected and this has had a direct impact on sales volumes. Later this year we will introduce a salaried advisory service to the high-income market, offering professional advice, personalised service and the choice of a flexible range of best-of-breed products. As part of our continuing programme to develop value adding products, the Essential Savings Plan was launched in June. This easy-to-deliver product range offers an affordable recurring premium investment for individuals, and is part of the value proposition for further building our presence in the emerging middle income market. Building on our relationship with Nedcor, our Group Schemes operation has started a joint distribution venture with Peoples Bank, in which life and savings products are distributed via Peoples Bank branches nationwide. We continue to discuss with government their plans to phase out non-statutory deductions from payroll of government employees, and together with Nedcor and Peoples Bank to develop alternative payment mechanisms. Embedded value new business profits were double the corresponding figure for the first six months of 1999, due mainly to conservatism in the basis used to calculate the 30 June 1999 figure. Compared to the full year 1999 figure in South Africa, new business profits are 7% down (3% down in Rand) after adjusting for 1999 new business that arose from demutualisation and the new tax basis. New business margins reduced from 18% to 16%. The development of a fully integrated eCommerce capability is a strategic priority. Our current website is continually enhancing the service provided to registered users and we expect to deliver specific eCommerce-based value propositions within the next year. During the past six months Old Mutual has extended its partnerships in networks and systems, working with Nedcor and Dimension Data, including joint investments in Internet Solutions, a leading South African corporate internet service provider, and Miraculum, a business-to-business electronic marketplace. We have put in place some key strategic initiatives to develop the life business. We recognise that, to deliver shareholder value, we must deliver improving value to our customers. We are therefore investing significantly in improved systems in Employee Benefits and Individual Life. We are intent on developing a customer-focused business that delivers crafted value propositions to clearly defined market segments. Brand-building has also received close attention, most visibly though the successful 'green' advertising campaign. We are focusing on delivering world class products at lower cost, and on further developing value-creating initiatives between our life assurance and banking interests. Rest of the world While South Africa presents in itself significant growth opportunities, we also have the ambition to develop our business in a number of other markets. To this end, we are investigating life assurance opportunities in developed markets, currently focusing on the United States and the UK. We are starting to see the benefit of pollination across borders, in which ideas and technology in one region can be applied to meet opportunities in another. For example, internet technology will be used to provide back ofFIce servicing from South Africa for products (such as Investment Frontiers) launched in the UK and other countries. In the developing world, we have recently formed a joint venture with the Indian Financial services company Kotak Mahindra, with the intention of setting up a life assurance business following the approaching deregulation of that fast growing market. Elsewhere in southern Africa, our businesses in Zimbabwe, Namibia and Malawi continue to have leading positions in their financial services sectors. Economic conditions in Zimbabwe have, however, recently been particularly difficult. Subsequent to the sale of our UK life assurance business which was completed last year, we successfully arranged the reinsurance of our liabilities for pensions mis-selling exposures. ASSET MANAGEMENT Operating profits from our asset management businesses grew strongly during the half year to £36 million, up 50% including a contribution of £10 million from Gerrard businesses and after restructuring costs of £10 million. Total assets managed by our wholly-owned subsidiaries increased by 25% since December 1999 to £52 billion, principally due to the addition of the Gerrard Group funds of some £13 billion. In order to report the underlying developments within our asset management businesses more clearly and best reflect our newly acquired businesses, we are for the first time presenting the results of these businesses as three reportable segments: * Asset Management Worldwide, which contains the existing South African and international Old Mutual Asset Managers (OMAM) businesses and Unit Trusts in South Africa; and will include United Asset Management Corporation (UAM); * Private Client, which contains the existing UK private client business Capel Cure Sharp (CCS) and the acquired Greig Middleton business; and * Other Financial Services, which primarily consists of the existing Old Mutual Securities, the acquired Gerrard broking businesses and the South African Specialised Finance and Trust businesses. Asset Management Worldwide Operating profits grew strongly by 56%, on the back of strong performance from both OMAM businesses and Old Mutual Unit Trusts. OMAM's fees in the period benefited from a high asset base following the growth in stock markets in 1999. OMAM retained margin levels benefiting from the relaxation of exchange control regulations in South Africa and kept third party funds under management comparable with 1999 levels. The South African unit trust business made excellent progress during the period, also benefiting from the relaxation of exchange control regulations. Inflows totalled a record £435 million and the Company enjoyed a leading market share. Nevertheless, repurchases were up 33%, resulting in a net sales increase of 12%. On 19 June, we announced an agreed tender offer for the equity of UAM, a US-listed fund management group. Total cost at the tender price would be $1.46 billion plus $769 million in acquired net debt. On conclusion of this acquisition, which is expected to take place in the final quarter of the current year, the enlarged Group is expected to have total assets under management of approximately $275 billion. The acquisition of UAM will not only give existing clients access to a broader range of investment capabilities, but will also be a very significant step in the evolution of OMAM into a fully-fledged multi- national, multi-style asset manager. We are working closely with the management of UAM and with the management of a number of key affiliates to progress plans for the future of the combined businesses. Private client Our UK private client business benefited from strong revenues in the period, particularly in the first quarter, consistent with the high level of stockmarket activity. Operating profits for the period at £12 million, before restructuring costs, were up 100% on the corresponding period in the prior year. The period includes a strong initial contribution for three months from Greig Middleton, while Capel Cure Sharp achieved success in selling its excellently performing unit trust range. The acquisition of Gerrard Group plc, with effect from 31 March, represents a major step forward in the development of Old Mutual's asset management activities in the United Kingdom. Our private client businesses, Greig Middleton and Capel Cure Sharp, are currently being put together and later this year the merged companies, comprising approximately 1,800 staff in total, will move into a single new headquarters in the City of London. The enlarged firm will be the largest provider of specialised broking, investment management and asset management products and services to individuals in the UK. Priority is currently being given to uniting the businesses where the major task is to integrate the back office systems. At the same time, the front office is planning for increasing penetration of discretionary advice and unit trust products through the expanded client base. This integration process is proceeding well in line with our expectations at the time of announcing the Gerrard acquisition. As we indicated at that time, the integration will take longer than that following our acquisition of Albert E Sharp Securities, given the relative sizes of the businesses being merged and the greater complexity of the systems issues arising. We expect restructuring costs for the integration of the two businesses to total £25 million, of which £10 million has been incurred in this half year. Anticipated synergies from cost savings and revenue enhancements are expected to be £25 million per annum from 2002 onwards. The integration of these businesses will continue during the remainder of the year under the leadership of Clive Boothman, the newly appointed CEO. Clive joins us from Schroders, where he was previously Managing Director of its global Private Client Group. Other financial services GNI, our specialised broking and derivatives market subsidiary, performed well in its first three months in the Group which led to an improved contribution at £6 million from Other Financial Services, which also benefited from profits from our South African specialised financial services businesses. In May this year we merged Albert E Sharp Securities and Greig Middleton's institutional and corporate stockbroking businesses to form Old Mutual Securities. With a staff of 120 in London, Birmingham and elsewhere in the UK, Old Mutual Securities focuses on the growth sector of corporate and advisory services for smaller and medium sized UK and European companies. Since launch it has built its corporate client list to more than 100 companies, with research coverage spanning more than 300 stocks in 15 sectors and as market makers dealing in the shares of more than 200 companies. We have also transferred the European business of Greig Middleton to GNI. GNI continues to grow revenues and has expanded its client base for Contracts for Differences. GNI Touch is now used as a trading platform. GNI's screen trading in exchange futures, and its bond and equity stock lending and Financing enjoyed a strong performance during the period. We continue to be excited by the potential of leveraging this leading technology across the Group. BANKING Nedcor has contributed another set of outstanding results to the Group and in consequence has further strengthened its position as the leading corporate, technology, and retail bank in South Africa. Reported attributable income from Nedcor's banking operations grew 27% to R1,230 million, (£119 million). The five-year compound growth rate in EPS of 25% has provided an excellent return for Old Mutual over the years. In the period under review, Nedcor increased its return on equity from 21% to 24%, and dropped its cost to income ratio by a further 2% to 52%. The charge for bad and doubtful debts decreased and provisioning remains conservative. Nedcor is rapidly building a framework for the future convergence of banking with electronic delivery channels. It has recently strengthened its innovative partnership with Dimension Data Holdings plc, a global network services company, which recently listed in London. Additionally, through other partnerships in smart cards, transaction processing ventures with leading technology companies and a new software services joint venture in India, Nedcor continues to be at the forefront of banking information technology. In July Nedcor acquired FBC Fidelity Bank, which will be merged with Peoples Bank to create the biggest empowerment bank in South Africa. Joint ventures with Capital One and Old Mutual Group Schemes in Peoples Bank will broaden the products offered to the hitherto underserved segment of the market. Old Mutual Banking Services will be launched in South Africa during the fourth quarter to offer banking products to Old Mutual clients. GENERAL INSURANCE At the beginning of the year all general insurers in South Africa were hit by severe floods, which caused extensive damage to property and disruption of business, and resulted in the worst claims period for many years. Under the circumstances, our 51%-owned subsidiary, Mutual & Federal, managed the conditions well, mitigating losses through effective use of reinsurance and enforcing the higher premiums levels set at the end of the previous year. Net premium income increased 2% (8% in Rand terms) to £134 million. By the close of the first six months the underwriting deficit, as reported by Mutual & Federal, was halved in comparison to the same period of 1999. If maintained, the trend should be sufficient to produce a small underwriting profit by year end. Mutual & Federal's capital position remains very sound. It is in the process of completing its acquisition of CGU Holdings for R1,206 million (£115 million), which is expected to produce synergies and place it in a position to take advantage of further opportunities in a consolidating market. OLD MUTUAL PLC Interim Results for the six months ended 30 June 2000 Independent review report by KPMG Audit Plc to Old Mutual plc Introduction We have been instructed by the company to review the financial information set out on pages 8 to 25 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where they are to be changed in the next annual accounts in which case any changes, and the reasons for them, are to be disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4: Review of interim financial information issued by the Auditing Practices Board. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2000. KPMG Audit Plc Chartered Accountants London 5 September 2000 OLD MUTUAL PLC Consolidated profit and loss account for the six months ended 30 June 2000 £m Rm 6 6 Year 6 6 Year months months to 31 months months to 31 to to December to to December 30 June 30 June 30 June 30 June Notes 2000 1999 1999 2000 1999 1999 Operating profit Life assurance 5a, 5e Continuing 249 198 426 2,573 1,944 4,200 operations Discontinued - (54) (50) - (526) (493) operations Banking 5b 156 98 210 1,610 968 2,072 Asset Management 5c 36 24 48 372 234 473 General 5d, 23 27 59 238 265 582 insurance 5e business Other shareholders' 5e (7) (10) (32) (72) (100) (316) income/ (expenses) Operating profit based on a long term investment 457 283 661 4,721 2,785 6,518 return Goodwill 10 (10) (3) (5) (103) (25) (49) amortisation Short term fluctuations in 5e (282) 477 778 (2,911) 4,688 7,670 investment return Non-operating 7 - 16 54 - 154 532 items Profit on ordinary 165 773 1,488 1,707 7,602 14,671 activities before tax Tax on profit on ordinary 8 (84) (51) (165) (868) (499) (1,627) activities Profit on ordinary 81 722 1,323 839 7,103 13,044 activities after tax Minority (42) (121) (257) (434) (1,187) (2,534) interests Profit on ordinary activities after 39 601 1,066 405 5,916 10,510 tax and minority interests Dividend 4 (55) - (69) (569) - (680) proposed Retained (loss) / profit for the (16) 601 997 (164) 5,916 9,830 period Earnings and dividend per share attributable to p c equity shareholders Basic earnings 3 1.2 20.0 34.1 12.0 199.0 336.2 per share Diluted earnings 3 1.2 20.0 33.9 11.9 197.0 334.2 per share Operating 3 9.0 6.0 12.3 92.4 60.0 121.4 earnings per share Dividend per 4 1.6 2.0 16.9 19.7 share - - OLD MUTUAL PLC Consolidated statement of total recognised gains and losses for the six months ended 30 June 2000 £m Rm 6 6 Year 6 6 Year months months months months to to to to to To 30 30 31 30 30 31 June June December June June December 2000 1999 1999 2000 1999 1999 Profit on 39 601 1,066 405 5,916 10,510 ordinary activities Foreign exchange (136) 123 (35) (203) 408 241 movements Total recognised gains and losses (97) 724 1,031 202 6,324 10,751 for the period Reconciliation of movement in equity shareholders' funds for the six months ended 30 June 2000 £m Rm 6 6 Year 6 6 Year months months months months to to to to to to 30 30 31 30 30 31 June June December June June December 2000 1999 1999 2000 1999 1999 Total recognised gains and losses (97) 724 1,031 202 6,324 10,751 for the period Dividend proposed (55) - (69) (569) - (680) (152) 724 962 (367) 6,324 10,071 Issue of new capital on - 404 404 - 3,954 3,954 policyholder self- investment Issue of new - - 559 - - 5,355 capital on listing Net (reduction in) / addition to (152) 1,128 1,925 (367) 10,278 19,380 equity shareholders' funds Equity shareholders' 3,513 1,588 1,588 34,907 15,527 15,527 funds at the beginning of the period Equity shareholders' 3,361 2,716 3,513 34,540 25,805 34,907 funds at the end of the period OLD MUTUAL PLC Consolidated balance sheet at 30 June 2000 £m Rm At At At At At At 30 30 30 31 30 June 31December June June December June Notes 2000 1999 1999 2000 1999 1999 Intangible 10 634 164 98 6,515 1,629 931 assets Insurance and other assets Investments 16,585 18,081 16,602 170,440 179,658 157,848 Assets held to cover linked 5,779 5,916 5,771 59,385 58,784 54,872 liabilities Reinsurers' share of 146 161 183 1,497 1,600 1,736 technical provisions Debtors 3,967 524 375 40,767 5,207 3,564 Other assets 972 133 377 9,992 1,322 3,589 Cash at bank and 440 443 325 4,524 4,402 3,092 in hand Prepayments and accrued income 225 317 269 2,316 3,150 2,560 Total insurance 28,114 25,575 23,902 288,921 254,123 227,261 assets Banking assets Cash and balances at 398 760 312 4,094 7,552 2,963 central banks Treasury bills and other 7,385 744 1,338 75,894 7,393 12,717 eligible bills Loans and 3,131 613 63 32,180 6,091 598 advances to banks Loans and advances to 16,997 9,704 10,138 174,676 96,423 96,386 customers Debt securities 748 629 640 7,691 6,250 6,087 Equity 174 145 155 1,792 1,441 1,470 securities Interest in associated 219 179 63 2,249 1,779 623 undertakings Other assets 313 275 220 3,217 2,732 2,055 Prepayments and accrued income 189 168 258 1,941 1,669 2,452 Total banking 29,554 13,217 13,187 303,734 131,330 125,351 assets Total assets 58,302 38,956 37,187 599,170 387,082 353,543 OLD MUTUAL PLC Consolidated balance sheet at 30 June 2000 £m Rm At At 31 At At At 31 At 30 December 30 June 30 December 30 June June June Liabilities 2000 1999 1999 2000 1999 1999 Capital and reserves Called up share 344 344 297 3,418 3,418 2,964 capital Share premium 868 868 357 8,625 8,625 3,563 account Profit and loss 2,149 2,301 2,062 22,497 22,864 19,278 account Equity 3,361 3,513 2,716 34,540 34,907 25,805 shareholders' funds Minority interests 874 857 829 8,984 8,515 7,883 Fund for future - - 6 - - 57 appropriations Insurance and other liabilities Technical provisions Technical 14,120 15,129 14,474 145,104 150,328 137,607 provisions Technical provisions for 5,779 5,916 5,694 59,385 58,784 54,138 linked liabilities Provisions for other risks and 343 317 221 3,522 3,150 2,101 charges Creditors 5,626 1,093 915 57,853 10,860 8,698 Accruals and deferred income 89 43 120 909 427 1,144 Total insurance 25,959 22,498 21,424 266,773 223,549 203,688 liabilities Banking liabilities Deposits by banks 9,271 798 651 95,276 7,929 6,191 Customer accounts 16,487 9,343 9,405 169,420 92,836 89,422 Debt securities in 1,189 1,194 1,493 12,218 11,864 14,190 issue Other liabilities 1,046 609 57 10,750 6,048 546 Provision for liabilities and 47 76 546 487 755 5,189 charges Subordinated 70 68 60 722 679 572 liabilities 28,110 12,088 12,212 288,873 120,111 116,110 Total liabilities 58,302 38,956 37,187 599,170 387,082 353,543 OLD MUTUAL PLC Consolidated cash flow statement for the six months ended 30 June 2000 £m Rm Notes 6 6 Year to 6 6 Year to months months 31 December months months 31 December to to 1999 to 30 to 30 1999 30 30 June June June June 2000 1999 2000 1999 Operating activities Net cash flow 12 205 (4) 752 2,113 (42) 7,414 from operating activities Net cash 8 2 (124) 84 20 (1,223) inflow/(outflow) from returns on investments and servicing of finance Total taxation (42) (37) (70) (436) (360) (690) paid Net cash outflow (65) (32) (84) (674) (313) (828) from capital expenditure and financial investment Net cash (555) 16 66 (5,727) 154 650 (outflow)/inflow from acquisitions and disposals Equity dividends (67) - - (694) - - paid Net cash (516) (55) 540 (5,334) (541) 5,323 (outflow)/inflow before financing activities Net cash inflow 83 56 547 856 550 5,391 from financing activities Net cash (433) 1 1,087 (4,478) 9 10,714 (outflow)/inflow of the Group excluding long term business Shareholder cash flows relating to insurance and other activities were invested as follows: Increase in cash 64 44 122 660 428 1,202 holdings (Decrease)/increa (162) 171 732 (1,674) 1,687 7,215 se in net portfolio investments (98) 215 854 (1,014) 2,115 8,417 Shareholders cash flows relating to banking and other activities were invested as follows: (Decrease)/increa (335) (214) 233 (3,464) (2,106) 2,297 se in cash and balances at central banks Net cash (433) 1 1,087 (4,478) 9 10,714 (outflow)/inflow of the Group excluding long term business The cash flows presented in this statement exclude cash flows arising within life assurance policyholder funds. 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