Interim Results - Part 3
Old Mutual PLC
12 August 2002
PART 3
Notes to the financial statements
for the six months ended 30 June 2002
1 BASIS OF PREPARATION AND EFFECT OF RESTATEMENT
The results for the six months to 30 June 2002 and the position at that date
have been prepared using accounting policies consistent with those used in the
Group 2001 Annual Report, except for the adoption of Financial Reporting
Standard 19 'Deferred Tax', the effects of which are described below. These
accounting policies are in accordance with the Statement of Recommended Practice
on 'Accounting for Insurance Business' issued by the Association of British
Insurers in December 1998 ('ABI SORP').
Comparative figures have been restated to reflect the adoption of Financial
Reporting Standard 19 'Deferred Tax'. This requires full provision to be made
for deferred tax assets and liabilities arising from timing differences between
the recognition of gains and losses in the financial statements and their
recognition for tax. Previously deferred tax was recognised on a partial
provision approach. In addition to restating the comparative figures, the
cumulative cost of the deferred tax relating to previous years has been
recognised as a prior year adjustment.
The change in accounting policy has had no effect on the operating profit after
tax or shareholders' funds for the current period. The effect for the year ended
31 December 2001 is an increase in the tax charge of £41 million (R503 million)
and no change in shareholders' funds. The effect for the six months ended 30
June 2001 is an increase in the tax charge of £21 million (R240 million) and
increase in shareholders' funds of £23 million (R263 million).
The results for the six months ended 30 June 2002 and 2001 are unaudited, but
have been reviewed by the auditors whose report is presented on page 22. The
auditors have reported on the statutory accounts for the year ended 31 December
2001 and the accounts have been delivered to the Registrar of Companies. The
auditors' report in respect of the year ended 31 December 2001 was unqualified
and did not contain a statement under section 237 (2) or (3) of the UK Companies
Act 1985.
These financial statements do not constitute statutory accounts as described in
section 240 of the UK Companies Act 1985.
Notes to the financial statements continued
for the six months ended 30 June 2002
2 FOREIGN CURRENCIES
The information contained in these financial statements is expressed in both
Sterling and South African Rand. This is in order both to meet the legal
requirements of Schedule 9A of the UK Companies Act 1985 and to provide the
users of the accounts in South Africa with illustrative information.
The principal exchange rates used to translate the operating results, assets and
liabilities of key foreign business segments to sterling are presented below.
Rand US$
6 months to 6 months to Year to 6 months to 6 months to Year to
30 June 2002 30 June 2001 31 December 30 June 2002 30 June 2001 31 December
2001 2001
Profit and 15.8800 11.4211 12.3923 1.4445 1.4405 1.4405
loss account
(average rate)
Balance sheet 15.8451 11.3634 17.4286 1.5279 1.4116 1.4542
(closing rate)
Notes to the financial statements continued
for the six months ended 30 June 2002
3 EARNINGS AND EARNINGS PER SHARE
Basic earnings per share is calculated based upon the profit or loss
attributable to equity shareholders after the amortisation and impairment of
goodwill arising on acquisitions, write-down of investment in Dimension Data
Holdings plc and short term fluctuations in investment return.
The directors' view is that operating earnings per share derived from operating
profit or loss based on a long term investment return and before the
amortisation and impairment of goodwill, the write-down of investment in
Dimension Data Holdings plc and short term fluctuations in investment return
provides a better indication of the underlying performance of the Group. A table
reconciling operating profit on ordinary activities after tax and minority
interests to this underlying measure of earnings is included below.
£m Rm
6 months to 6 months to Year to 6 months to 6 months to Year to
30 June 2002 30 June 2001 31 December 30 June 30 June 31 December
(restated) 2001 2002 2001 2001
(restated) (restated) (restated)
Profit / (loss) on 121 116 (264) 1,931 1,328 (3,274)
ordinary
activities after
tax and minority
interests
Goodwill 51 65 120 810 746 1,487
amortisation net
of minority
interests
Goodwill - - 500 - - 6,196
impairment
Short term 39 (87) (73) 619 (997) (905)
fluctuations in
investment return
net of tax and
minority interests
Non-operating (20) - - (318) - -
items net of tax
Write-down of 22 155 144 350 1,765 1,788
investment in
Dimension Data
Holdings plc net
of tax and
minority interests
Operating earnings 213 249 427 3,392 2,842 5,292
after tax and
minority interests
based on a long
term investment
return before
goodwill
amortisation and
impairment,
write-down of
investment in
Dimension Data
Holdings plc and
short term
fluctuations in
investment return
p c
Basic earnings per 3.3 3.4 (7.4) 52.9 38.4 (92.2)
share
Goodwill 1.3 1.9 3.4 22.2 21.6 41.9
amortisation net
of minority
interests
Goodwill - - 14.1 - - 174.5
impairment
Short term 1.1 (2.5) (2.1) 16.9 (28.8) (25.4)
fluctuations in
investment return
net of tax and
minority interests
Non-operating (0.5) - - (8.7) - -
items net of tax
Write down of 0.6 4.4 4.1 9.6 51.2 50.3
investment in
Dimension Data
Holdings plc net
of tax and
minority interests
Operating earnings 5.8 7.2 12.1 92.9 82.4 149.1
per share after
tax and minority
interests based on
a long term
investment return
before goodwill
amortisation and
impairment,
write-down of
investment in
Dimension Data
Holdings plc and
short term
fluctuations in
investment return
Notes to the financial statements continued
for the six months ended 30 June 2002
3 EARNINGS AND EARNINGS PER SHARE continued
Basic earnings per share is calculated by reference to the profit on ordinary
activities after tax and minorities of £121 million (R1,931 million) for the six
months ended 30 June 2002 (June 2001: £116 million (R1,328 million); December
2001: loss £264 million (R3,274 million)) and a weighted average number of
shares in issue of 3,652 million (June 2001: 3,457 million; December 2001: 3,550
million). This is calculated after taking into account shares held by Employee
Share Ownership Plans (ESOPs), which have waived their rights to dividends.
The diluted earnings per share calculation reflects the impact of the shares in
the ESOP Trusts, the US Dollar Guaranteed Convertible Bond, and potential issue
of shares to satisfy the purchase of the Pilgrim Baxter revenue share.
Notes to the financial statements continued
for the six months ended 30 June 2002
4 DIVIDEND
£m Rm
6 months to 6 months to Year to 6 months to 6 months to Year to
30 June 2002 30 June 2001 31 December 30 June 2002 30 June 2001 31 December
2001 2001
2002 interim 63 - - 998 - -
dividend
proposed: 1.7p
(26.9c*)
2001 final - - 113 - - 1,839
dividend paid:
3.1p (50.1c)
2001 interim - 59 59 - 674 767
dividend paid:
1.7p (22.2c)
63 59 172 998 674 2,606
Provision has been made in the Group financial statements for an interim
dividend of 1.7p (26.9c*) per share calculated using the number shares in issue
at 30 June 2002 of 3,782 million less 96 million shares in Employee Share
Ownership Plans, which have waived their rights to dividends. The dividend will
be paid on 29 November 2002 to all shareholders on the register at the close of
business on 18 October 2002, being the record date for the dividend.
As a consequence of the exchange control arrangements in place in South Africa
and other relevant African territories, dividends to shareholders on the branch
registers in 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.
* Indicative only - the actual amount of the dividend per share in Rand will be
determined by reference to the exchange rate prevailing on 3 October 2002 and
announced by the Company on 4 October 2002.
Notes to the financial statements continued
for the six months ended 30 June 2002
5 SEGMENTAL ANALYSIS
£m Rm
5(a) Summary Notes South United UK & Total South United UK & Total
of operating Africa States Rest of Africa States Rest of
profit World World
6 months to 30
June 2002
Life assurance 5(b)(iii) 160 33 (3) 190 2,541 524 (47) 3,018
Asset 5(c)(i) 13 60 5 78 207 951 80 1,238
management
Banking 5(d) 99 - 29 128 1,579 - 456 2,035
General 5(e) 19 - - 19 308 - - 308
insurance
business
Other 5(f) 1 - (10) (9) 16 - (159) (143)
shareholders'
income /
(expenses)
Debt service - - (25) (25) - - (397) (397)
costs
Smoothed 292 93 (4) 381 4,651 1,475 (67) 6,059
operating
profit based
on a long term
investment
return
Goodwill (55) (873)
amortisation
Write-down of (52) (830)
investment in
Dimension Data
Holdings plc
Short term (62) (980)
fluctuations
in investment
return
Operating 212 3,376
profit on
ordinary
activities
before tax
6 months to 30
June 2001
(restated)
Life assurance 5(b)(iii) 215 - 3 218 2,456 - 34 2,490
Asset 5(c)(i) 18 64 8 90 206 730 91 1,027
management
Banking 5(d) 135 - 33 168 1,525 - 393 1,918
General 5(e) 24 - - 24 274 - - 274
insurance
business
Other 5(f) 9 - (19) (10) 103 - (217) (114)
shareholders'
income /
(expenses)
Debt service - - (35) (35) - - (400) (400)
costs
Smoothed 401 64 (10) 455 4,564 730 (99) 5,195
operating
profit based
on a long term
investment
return
Goodwill (69) (788)
amortisation
Write-down of (304) (3,467)
investment in
Dimension Data
Holdings plc
Short term 94 1,073
fluctuations
in investment
return
Operating 176 2,013
profit on
ordinary
activities
before tax
Year to 31
December 2001
Life assurance 5(b)(iii) 397 13 (2) 408 4,915 161 (25) 5,051
Asset 5(c)(i) 37 116 (3) 150 458 1,437 (38) 1,857
management
Banking 5(d) 290 - 79 369 3,593 - 979 4,572
General 5(e) 46 - - 46 570 - - 570
insurance
business
Other 5(f) 12 - (41) (29) 149 - (508) (359)
shareholders'
income /
(expenses)
Debt service - (3) (64) (67) - (37) (793) (830)
costs
Write-down of 5(f) - - (21) (21) - - (260) (260)
strategic
investments
Smoothed 782 126 (52) 856 9,685 1,561 (645) 10,601
operating
profit based
on a long term
investment
return
Goodwill (132) (1,636)
amortisation
Goodwill (500) (6,196)
impairment
Write-down of (269) (3,334)
investment in
Dimension Data
Holdings plc
Short term 126 1,561
fluctuations
in investment
return
Operating 81 996
profit on
ordinary
activities
before tax
United States life assurance activities were acquired with effect from 1 July
2001.
Notes to the financial statements continued
for the six months ended 30 June 2002
5 SEGMENTAL ANALYSIS continued
£m Rm
5(b) Life South United UK & Rest Total South United UK & Total
assurance Africa States of World Africa States Rest of
World
(i) Gross
premiums
written
6 months to 30
June 2002
Individual
business
Single 316 1,534 76 1,926 5,018 24,360 1,207 30,585
Recurring 301 74 23 398 4,780 1,175 365 6,320
617 1,608 99 2,324 9,798 25,535 1,572 36,905
Group business
Single 232 - 6 238 3,684 - 95 3,779
Recurring 116 - 8 124 1,842 - 127 1,969
348 - 14 362 5,526 - 222 5,748
965 1,608 113 2,686 15,324 25,535 1,794 42,653
6 months to 30
June 2001
Individual
business
Single 451 - 58 509 5,150 - 663 5,813
(restated)
Recurring 409 - 47 456 4,672 - 537 5,209
860 - 105 965 9,822 - 1,200 11,022
Group business
Single 300 - 8 308 3,426 - 91 3,517
Recurring 141 - 19 160 1,610 - 217 1,827
441 - 27 468 5,036 - 308 5,344
1,301 - 132 1,433 14,858 - 1,508 16,366
Year to 31
December 2001
Individual
business
Single 854 578 97 1,529 10,583 7,163 1,202 18,948
Recurring 757 78 87 922 9,381 967 1,078 11,426
1,611 656 184 2,451 19,964 8,130 2,280 30,374
Group business
Single 598 - 13 611 7,411 - 161 7,572
Recurring 280 - 29 309 3,470 - 359 3,829
878 - 42 920 10,881 - 520 11,401
2,489 656 226 3,371 30,845 8,130 2,800 41,775
South African individual gross single premiums include flexi and conventional
maturity transfers of £52 million (R827 million) (June 2001: £55 million (R628
million); December 2001: £155 million (R1,923 million)) and guaranteed capital
fund transfers of £23 million (R361 million) (June 2001: £35 million (R399
million); December 2001: £61 million (R761 million) to Investment Frontiers not
previously reported in gross premiums written in June 2001.
Business transacted with SA residents in terms of their personal offshore
allowances is conducted by the Group's offshore companies and is therefore
disclosed under the Rest of World segment.
Notes to the financial statements continued
for the six months ended 30 June 2002
5 SEGMENTAL ANALYSIS continued
£m Rm
5(b) Life South United UK & Rest Total South United UK & Total
assurance Africa States of World Africa States Rest of
continued World
(ii) New
business
premiums
6 months to 30
June 2002
Individual
business
Single 316 1,534 76 1,926 5,018 24,360 1,207 30,585
Recurring 67 21 5 93 1,064 333 79 1,476
383 1,555 81 2,019 6,082 24,693 1,286 32,061
Group business
Single 232 - 6 238 3,684 - 95 3,779
Recurring 10 - 1 11 159 - 16 175
242 - 7 249 3,843 - 111 3,954
625 1,555 88 2,268 9,925 24,693 1,397 36,015
Annual premium 132 174 14 320 2,093 2,769 225 5,087
equivalent
6 months to 30
June 2001
New business
premiums on a
statutory
basis
Individual
business
Single 451 - 58 509 5,150 - 663 5,813
(restated)
Recurring 78 - 8 86 891 - 91 982
529 - 66 595 6,041 - 754 6,795
Group business
Single 300 - 8 308 3,426 - 91 3,517
Recurring 4 - - 4 46 - - 46
304 - 8 312 3,472 - 91 3,563
833 - 74 907 9,513 - 845 10,358
Annual premium 157 - 15 172 1,795 - 166 1,961
equivalent
Notes to the financial statements continued
for the six months ended 30 June 2002
5 SEGMENTAL ANALYSIS continued
£m Rm
5(b) Life South United UK & Rest Total South United UK & Total
assurance Africa States of World Africa States Rest of
continued World
(ii) New
business
premiums
continued
Year to 31
December 2001
New business
premiums on a
statutory
basis
Individual
business
Single 854 578 97 1,529 10,583 7,163 1,202 18,948
Recurring 159 26 11 196 1,970 322 136 2,428
1,013 604 108 1,725 12,553 7,485 1,338 21,376
Group business
Single 598 - 13 611 7,411 - 161 7,572
Recurring 20 - 1 21 248 - 12 260
618 - 14 632 7,659 - 173 7,832
1,631 604 122 2,357 20,212 7,485 1,511 29,208
Annual premium 324 84 23 431 4,017 1,038 284 5,339
equivalent
Annual premium equivalent is defined as one tenth of single premiums plus
recurring premiums.
South African individual new business premiums include flexi and conventional
maturity transfers of £52 million (R827 million) (June 2001: £55 million (R628
million); December 2001: £155 million (R1,923 million)) and guaranteed capital
fund transfers of £23 million (R361 million) (June 2001: £35 million (R399
million); December 2001: £61 million (R761 million)) to Investment Frontiers not
previously reported in new business premiums in June 2001.
Notes to the financial statements continued
for the six months ended 30 June 2002
5 SEGMENTAL ANALYSIS continued
£m Rm
5(b) Life South United UK & Rest Total South United UK & Total
assurance Africa States of World Africa States Rest of
continued World
(iii) Life
assurance
operating
profit
6 months to 30
June 2002
Individual 69 33 (5) 97 1,096 524 (79) 1,541
business
Group business 28 - - 28 445 - - 445
Life assurance 97 33 (5) 125 1,541 524 (79) 1,986
technical
result
Long term 63 - 2 65 1,000 - 32 1,032
investment
return
Life assurance 160 33 (3) 190 2,541 524 (47) 3,018
operating
profit before
short term
fluctuations in
investment
return
6 months to 30
June 2001
Individual 95 - (2) 93 1,085 - (23) 1,062
business
Group business 42 - 1 43 480 - 11 491
Life assurance 137 - (1) 136 1,565 - (12) 1,553
technical
result
Long term 78 - 4 82 891 - 46 937
investment
return
Life assurance 215 - 3 218 2,456 - 34 2,490
operating
profit before
short term
fluctuations in
investment
return
Year to 31
December 2001
Individual 174 13 (8) 179 2,152 161 (99) 2,214
business
Group business 75 - 1 76 933 - 12 945
Life assurance 249 13 (7) 255 3,085 161 (87) 3,159
technical
result
Long term 148 - 5 153 1,830 - 62 1,892
investment
return
Life assurance 397 13 (2) 408 4,915 161 (25) 5,051
operating
profit before
short term
fluctuations in
investment
return
The United States operations, Fidelity & Guaranty Life and Americom, were both
acquired during 2001. The results of Fidelity & Guaranty Life are included in
the profit and loss account from 1 July 2001, and are disclosed net of
restructuring costs of £9 million (R113 million) incurred in 2001. The operating
profit of the US life business includes the investment return earned by the
whole of the portfolio on a smoothed basis.
Start-up costs of £6 million (R95 million) (June 2001: £9 million (R103
million); December 2001: £19 million (R231 million)) associated with the Group's
new UK life assurance business, Selestia, were included in the life assurance
technical result. Excluding these costs, the UK and Rest of World life assurance
operating profit would have been positive £1 million (R16 million) (June 2001:
£12 million (R137 million); December 2001: £17 million (R206 million)).
Notes to the financial statements continued
for the six months ended 30 June 2002
5 SEGMENTAL ANALYSIS continued
£m Rm
5(c) Asset 6 months to 6 months to Year to 6 months to 6 months to Year to
management 30 June 2002 30 June 2001 31 December 30 June 2002 30 June 31 December
2001 2001 2001
(i) Analysis of operating profit
Fund management worldwide
South Africa
Old Mutual Asset Managers 7 11 16 111 126 198
Old Mutual Unit Trusts - 3 11 - 34 136
Other 2 (1) 1 32 (11) 12
9 13 28 143 149 346
United States
Old Mutual Asset Managers 21 22 38 333 251 471
Pilgrim Baxter 11 20 29 174 228 359
Old Mutual Strategic Affiliates 17 10 22 269 114 272
Old Mutual Financial Affiliates 11 12 27 175 137 335
60 64 116 951 730 1,437
UK & Rest of World 3 1 6 48 12 74
72 78 150 1,142 891 1,857
Private client UK - Gerrard
Gross profit 3 10 2 48 114 25
Integration costs - (6) (12) - (69) (149)
3 4 (10) 48 45 (124)
Other financial services
South Africa 4 5 9 64 57 112
UK & Rest of World (1) 3 1 (16) 34 12
3 8 10 48 91 124
Asset management operating profit
before goodwill
amortisation and impairment 78 90 150 1,238 1,027 1,857
Analysed as
South Africa 13 18 37 207 206 458
United States 60 64 116 951 730 1,437
UK & Rest of World 5 8 (3) 80 91 (38)
Asset management operating profit
before goodwill
amortisation and impairment 78 90 150 1,238 1,027 1,857
Notes to the financial statements continued
for the six months ended 30 June 2002
5 SEGMENTAL ANALYSIS continued
£m Rm
5(c) Asset OMAM(US) Pilgrim Other Old Total OMAM(US) Pilgrim Other Old Total
management Baxter Mutual Baxter Mutual (US)
(US) Affiliates
Affiliates
(ii) Old
Mutual (US)
Holdings
6 months to 30
June 2002
Revenue 72 30 106 208 1,143 476 1,683 3,302
Expenses (51) (19) (78) (148) (810) (302) (1,239) (2,351)
Operating 21 11 28 60 333 174 444 951
profit before
goodwill
amortisation
6 months to 30
June 2001
Revenue 76 48 114 238 868 548 1,302 2,718
Expenses (54) (28) (92) (174) (617) (320) (1,051) (1,988)
Operating 22 20 22 64 251 228 251 730
profit before
goodwill
amortisation
Year to
December 2001
Revenue 147 85 219 451 1,822 1,053 2,713 5,588
Expenses (109) (56) (170) (335) (1,351) (694) (2,106) (4,151)
Operating 38 29 49 116 471 359 607 1,437
profit before
goodwill
amortisation
and impairment
Notes to the financial statements continued
for the six months ended 30 June 2002
5 SEGMENTAL ANALYSIS continued
£m Rm
5(d) Banking South Africa UK & Rest of Total South Africa UK & Rest of Total
operating profit World World
6 months to 30 June 2002
Net interest income 164 17 181 2,597 283 2,880
Non-interest revenue 115 26 141 1,833 411 2,244
Total operating 279 43 322 4,430 694 5,124
income
Specific and general (10) - (10) (160) (4) (164)
provisions charge
(including release of
exceptional provision
of £25 million (R400
million))
Net income 269 43 312 4,270 690 4,960
Operating expenses (173) (17) (190) (2,741) (276) (3,017)
Banking operating 96 26 122 1,529 414 1,943
profit before
goodwill
amortisation, share
of associated
undertakings' profit
and write-down of
investment in
Dimension Data
Holdings plc
Share of associated 3 3 6 50 42 92
undertakings' profit
Banking operating 99 29 128 1,579 456 2,035
profit before
goodwill amortisation
and write-down of
investment in
Dimension Data
Holdings plc
6 months to 30 June
2001 (restated)
Net interest income 212 18 230 2,417 210 2,627
Non-interest revenue 161 22 183 1,827 263 2,090
Total operating 373 40 413 4,244 473 4,717
income
Specific and general (43) - (43) (491) - (491)
provisions
Net income 330 40 370 3,753 473 4,226
Operating expenses (200) (11) (211) (2,285) (126) (2,411)
Banking operating 130 29 159 1,468 347 1,815
profit before
goodwill
amortisation, share
of associated
undertakings' profit
and write-down of
investment in
Dimension Data
Holdings plc
Share of associated 5 4 9 57 46 103
undertakings' profit
Banking operating 135 33 168 1,525 393 1,918
profit before
goodwill amortisation
and write-down of
investment in
Dimension Data
Holdings plc
Year to December 2001
Net interest income 386 43 429 4,783 533 5,316
Non-interest revenue 413 55 468 5,118 681 5,799
(including
exceptional revenue
of £36 million (R441
million))
Total operating 799 98 897 9,901 1,214 11,115
income
Specific and general (118) - (118) (1,462) - (1,462)
provisions charge
(including
exceptional provision
of £32 million (R400
million))
Net income 681 98 779 8,439 1,214 9,653
Operating expenses (399) (26) (425) (4,945) (322) (5,267)
Banking operating 282 72 354 3,494 892 4,386
profit before
goodwill
amortisation, share
of associated
undertakings' profit
and write-down of
investment in
Dimension Data
Holdings plc
Share of associated 8 7 15 99 87 186
undertakings' profit
Banking operating 290 79 369 3,593 979 4,572
profit before
goodwill amortisation
and write-down of
investment in
Dimension Data
Holdings plc
Following the refocus of the Group's performance onto a geographic rather than
line of business basis with effect from the 2001 year end, the June 2001
segmentation of Nedcor has been restated on a consistent basis. There are no
banking operations in the United States.
Notes to the financial statements continued
for the six months ended 30 June 2002
5 SEGMENTAL ANALYSIS continued
£m Rm
5(e) Premiums Claims Smoothed Premiums Claims Smoothed operating result
Analysis of written incurred operating written net incurred based on a long term
general net of net of result of net of investment return
insurance reinsurance reinsurance based on reinsurance reinsurance
result by a long
class of term
business investment
return
6 months to
30 June
2002
Motor 68 51 - 1,079 813 7
Fire 27 15 1 436 246 9
Accident 50 34 1 796 538 23
Other 2 2 - 27 34 (7)
147 102 2 2,338 1,631 32
Long term 17 276
investment
return
19 308
6 months to
30 June
2001
Motor 86 73 (4) 986 834 (46)
Fire 32 18 2 365 206 23
Accident 66 46 2 754 525 23
Other 4 3 1 46 34 11
188 140 1 2,151 1,599 11
Long term 23 263
investment
return
24 274
Year to
December
2001
Motor 164 131 - 2,032 1,623 2
Fire 56 36 - 694 446 1
Accident 126 88 2 1,561 1,091 24
Other 5 2 3 62 25 35
351 257 5 4,349 3,185 62
Long term 41 508
investment
return
46 570
£m Rm
5(f) Other 6 months 6 months Year to 6 months to 6 months to 30 June 2001 Year to
shareholders' to 30 June to 30 June 31 30 June 31
income / 2002 2001 December 2002 December
(expenses) 2001 2001
and
write-down
of
strategic
investments
Long term 1 9 12 16 103 149
investment
return
credited to
operating
result
Net (10) (19) (41) (159) (217) (508)
corporate
expenses
Other (9) (10) (29) (143) (114) (359)
shareholders'
income /
(expenses)
Write-down - - (21) - - (260)
of
strategic
investments
The write-down of £21 million (R260 million) shown above was made following a
review of the Group's portfolio of strategic investments in 2001. Included
within net corporate expenses for the current year are exchange gains realised
on Rand deposits that were held at the start of the year.
Notes to the financial statements continued
for the six months ended 30 June 2002
5 SEGMENTAL ANALYSIS continued
£m Rm
5(g) Funds South United UK & Total South United UK & Total
under Africa States Rest of Africa States Rest of
management World World
At 30 June
2002
Investments 12,483 6,058 3,525 22,066 197,794 95,990 55,854 349,638
including
assets held to
cover linked
liabilities
Unit trusts
Old Mutual 701 - 1,566 2,267 11,107 - 24,813 35,920
Asset Managers
Nedcor Unit 124 - 575 699 1,965 - 9,111 11,076
Trusts
Other - - 172 172 - - 2,725 2,725
financial
services
825 - 2,313 3,138 13,072 - 36,649 49,721
Third party
Old Mutual 3,608 - 110 3,718 57,169 - 1,743 58,912
Asset Managers
Old Mutual - 46,169 - 46,169 - 731,552 - 731,552
Asset Managers
(US)
Pilgrim Baxter - 5,826 - 5,826 - 92,314 - 92,314
Old Mutual - 19,118 4,860 23,978 - 302,927 77,007 379,934
Strategic
Affiliates
3,608 71,113 4,970 79,691 57,169 1,126,793 78,750 1,262,712
Private client - - 14,583 14,583 - - 231,069 231,069
UK
Nedcor 840 254 549 1,643 13,310 4,025 8,699 26,034
portfolio
management
Other 14 - 331 345 222 - 5,245 5,467
financial
services
4,462 71,367 20,433 96,262 70,701 1,130,818 323,763 1,525,282
Fund
management
worldwide
Old Mutual - 9,298 2,213 11,511 - 147,328 35,065 182,393
Financial
Affiliates
4,462 80,665 22,646 107,773 70,701 1,278,146 358,828 1,707,675
Total funds 17,770 86,723 28,484 132,977 281,567 1,374,136 451,331 2,107,034
under
management
Nedcor managed funds have now been included as a result of recent growth in this
business. Unit trust private client UK business was transferred to Old Mutual
Asset Managers in January 2001.
Notes to the financial statements continued
for the six months ended 30 June 2002
5 SEGMENTAL ANALYSIS continued
£m Rm
5(g) Funds under South United UK & Total South United UK & Total
management Africa States Rest of Africa States Rest of
continued World World
At 31 December
2001
Investments 11,519 4,497 5,699 21,715 200,760 78,376 99,325 378,461
including
assets held to
cover linked
liabilities
Unit trusts
Old Mutual 670 - 360 1,030 11,677 - 6,274 17,951
Asset Managers
Private client - - 1,051 1,051 - - 18,317 18,317
UK
Other - - 159 159 - - 2,771 2,771
financial
services
670 - 1,570 2,240 11,677 - 27,362 39,039
Third party
Old Mutual 2,783 - 401 3,184 48,504 - 6,989 55,493
Asset Managers
Old Mutual - 48,884 - 48,884 - 851,979 - 851,979
Asset Managers
(US)
Pilgrim Baxter - 8,675 - 8,675 - 151,193 - 151,193
Old Mutual - 20,110 5,336 25,446 - 350,489 92,999 443,488
Strategic
Affiliates
2,783 77,669 5,737 86,189 48,504 1,353,661 99,988 1,502,153
Private client - - 16,347 16,347 - - 284,905 284,905
UK
Other 12 - 363 375 209 - 6,327 6,536
financial
services
2,795 77,669 22,447 102,911 48,713 1,353,661 391,220 1,793,594
Fund
management
worldwide
Old Mutual - 13,485 2,745 16,230 - 235,025 47,841 282,866
Financial
Affiliates
2,795 91,154 25,192 119,141 48,713 1,588,686 439,061 2,076,460
Total funds 14,984 95,651 32,461 143,096 261,150 1,667,062 565,748 2,493,960
under
management
Notes to the financial statements continued
for the six months ended 30 June 2002
5 SEGMENTAL ANALYSIS continued
£m Rm
5(g) Funds under South United UK & Total South United UK & Total
management Africa States Rest of Africa States Rest of
continued World World
At 30 June
2001
Investments 15,763 - 7,229 22,992 179,121 - 82,146 261,267
including
assets held to
cover linked
liabilities
Unit trusts
Old Mutual 1,237 - 646 1,883 14,057 - 7,341 21,398
Asset Managers
Private client - - 1,174 1,174 - - 13,341 13,341
UK
Other - - 182 182 - - 2,068 2,068
financial
services
1,237 - 2,002 3,239 14,057 - 22,750 36,807
Third party
Old Mutual 4,470 - 469 4,939 50,794 - 5,329 56,123
Asset Managers
Old Mutual - 53,091 - 53,091 - 603,294 - 603,294
Asset Managers
(US)
Pilgrim Baxter - 10,684 - 10,684 - 121,407 - 121,407
Old Mutual - 19,766 6,481 26,247 - 224,609 73,646 298,255
Strategic
Affiliates
4,470 83,541 6,950 94,961 50,794 949,310 78,975 1,079,079
Private client - - 18,104 18,104 - - 205,723 205,723
UK
Other 10 - 401 411 114 - 4,557 4,671
financial
services
4,480 83,541 25,455 113,476 50,908 949,310 289,255 1,289,473
Fund
management
worldwide
Old Mutual - 23,072 2,817 25,889 - 262,177 32,010 294,187
Financial
Affiliates
4,480 106,613 28,272 139,365 50,908 1,211,487 321,265 1,583,660
Total funds 21,480 106,613 37,503 165,596 244,086 1,211,487 426,161 1,881,734
under
management
Notes to the financial statements continued
for the six months ended 30 June 2002
6 INSURANCE LONG TERM INVESTMENT RETURN
As permitted by the ABI SORP, balances on the long term business and general
business technical accounts are stated after allocating an investment return
earned by the insurance businesses, based on a long term investment return, to /
from the non-technical account.
For the South African and Namibian life assurance businesses, the return is
applied to an average value of investible shareholders' assets, adjusted for net
fund flows. For general insurance liabilities, the return is an average value of
investible assets supporting shareholders' funds and insurance liabilities,
adjusted for net fund flows. Short term fluctuations in investment return
represent the difference between actual return and long term investment return.
For the US long term business, the return earned by assets, mainly bonds, has
been smoothed with reference to the actual yield earned by the portfolio.
The long term rates of investment return for equities and other investible
assets are as follows:
6 months to 30 June 2002 6 months to 30 June 2001 Year to
31 December
2001
South Africa and Namibia 14.0% 14.0% 14.0%
United States 6.79% N/a 7.04%
The long term rates of return are based on achieved real rates of return
adjusted for current inflation expectations and consensus economic investment
forecasts, and are reviewed annually for appropriateness. The directors are of
the opinion that these rates of return are appropriate and have been selected
with a view to ensuring that returns credited to operating earnings are not
inconsistent with the actual returns expected to be earned over the long term.
Notes to the financial statements continued
for the six months ended 30 June 2002
6 INSURANCE LONG TERM INVESTMENT RETURN continued
£m Rm
Analysis of short term 6 months to 6 months to Year to 6 months to 6 months to Year to
fluctuations in 30 June 2002 30 June 2001 31 December 30 June 30 June 31 December
investment return 2001 2002 2001 2001
Life assurance
Actual investment 3 114 257 52 1,302 3,181
return attributable
to shareholders
Long term 65 82 153 1,032 937 1,892
investment return
credited to
operating result
(62) 32 104 (980) 365 1,289
General insurance
Actual investment 4 49 85 64 560 1,053
return attributable
to shareholders
Long term 17 23 41 270 263 508
investment return
credited to
operating result
(13) 26 44 (206) 297 545
Other shareholders'
income / (expenses)
Actual investment 14 45 (10) 222 514 (124)
return attributable
to shareholders
Long term 1 9 12 16 103 149
investment return
credited to
operating result
13 36 (22) 206 411 (273)
Short term (62) 94 126 (980) 1,073 1,561
fluctuations in
investment return
Notes to the financial statements continued
for the six months ended 30 June 2002
7 INVESTMENT IN DIMENSION DATA HOLDINGS PLC
Profit attributable to shareholders is stated after charging the following:
£m Rm
6 months to 6 months to Year to 6 months to 6 months to Year to
30 June 2002 30 June 2001 31 December 30 June 30 June 2001 31 December
2001 2002 2001
Loss on holding (52) (304) (269) (830) (3,467) (3,334)
in Dimension
Data Holdings
plc before tax
and minority
interests
Tax 9 - (14) 140 - (171)
Loss on holding (43) (304) (283) (690) (3,467) (3,505)
in Dimension
Data Holdings
plc before
minority
interests
Minority 21 149 139 340 1,702 1,717
interests
Loss on holding (22) (155) (144) (350) (1,765) (1,788)
in Dimension
Data Holdings
plc after tax
and minority
interests
In light of market movements during 2001, an impairment in the carrying value of
the Group's investment in Dimension Data Holdings plc was recognised, reflecting
a market value of R14.50 per share at 31 December 2001. A further impairment has
been recognised for the six months to 30 June 2002, reflecting a market value of
R6.45 per share at 30 June 2002. Although this event is exceptional in the
context of its significance to the Group, this loss will form part of banking
operating profit in the statutory financial statements for the year ending 31
December 2002 in accordance with Financial Reporting Standard 3.
Notes to the financial statements continued
for the six months ended 30 June 2002
8 TAX ON PROFIT ON ORDINARY ACTIVITIES
£m Rm
6 months to 6 months to Year to 6 months to 6 months to Year to
30 June 2002 30 June 2001 31 December 30 June 30 June 31 December
(restated) 2001 2002 2001 2001
(restated) (restated) (restated)
United Kingdom tax
UK corporation tax 22 3 64 349 34 793
Double tax relief (10) - (49) (159) - (607)
12 3 15 190 34 186
Overseas tax
South African tax 35 43 124 556 491 1,536
United States tax 38 - 31 603 - 384
Rest of World tax (2) 12 4 (32) 137 50
Secondary taxation 3 18 23 48 206 285
on companies (STC)
74 73 182 1,175 834 2,255
Deferred tax 4 31 88 64 354 1,091
Adjustment for - 21 41 - 240 503
adoption of FRS19
Prior period 7 - (7) 111 - (87)
adjustment
Reported tax 97 128 319 1,540 1,462 3,948
charge
The tax charge is
analysed as
follows:
Operating profit 106 128 250 1,683 1,462 3,094
Short term (18) - 55 (289) - 683
fluctuations
Investment in (9) - 14 (140) - 171
Dimension Data
Holdings plc
Non-operating 18 - - 286 - -
items
Reported tax 97 128 319 1,540 1,462 3,948
charge
£m Rm
8(a) Reconciliation 6 months to 6 months to Year to 6 months to 6 months to Year to
of tax charge 30 June 2002 30 June 2001 31 December 30 June 30 June 31 December
(restated) 2001 2002 2001 2001
(restated) (restated) (restated)
Tax at UK rate of 75 53 24 1,194 604 299
30.0 per cent.
(2001: 30.0 per
cent.) on profit on
ordinary activities
before tax
Untaxed and low (9) (65) (118) (143) (742) (1,462)
taxed income
(including tax
exempt investment
return)
Disallowable 33 136 418 524 1,553 5,175
expenditure
STC 3 18 23 48 206 285
Other (5) (14) (28) (83) (159) (349)
Reported tax charge 97 128 319 1,540 1,462 3,948
Notes to the financial statements continued
for the six months ended 30 June 2002
9 DISPOSALS
In accordance with the requirements of Financial Reporting Standard 3, these
gains have been disclosed as non-operating.
Old Mutual International (Isle of Man) Limited
On 14 January 2002, Old Mutual International (Isle of Man) Limited, an offshore
life assurance business and a 100% subsidiary of the Group, was sold for a cash
consideration of £36 million (R574 million). The profit realised on disposal was
£20 million (R317 million) and no tax was payable.
US affiliates
During the period the Group completed the sales of C.S. McKee & Company Inc and
Suffolk Capital Management for consideration of £6 million (R95 million) and £46
million (R730 million) respectively. The total profit before tax on disposal was
£18 million (R286 million) and the associated tax charge was £18 million (R286
million).
Notes to the financial statements continued
for the six months ended 30 June 2002
10 GOODWILL
£m Rm
At At At At At At
30 June 2002 31 December 30 June 30 June 2002 31 December 30 June
2001 2001 2001 2001
At beginning of period 1,580 2,279 2,279 27,537 25,786 25,786
Additions arising on 2 174 50 32 2,122 571
acquisitions in period
Adjustment in respect of - 2 12 - 25 137
prior year acquisitions
Disposals (18) (10) (4) (286) (174) (46)
Impairment loss - (500) - - (6,196) -
Pilgrim Baxter and 101 (241) - 1,604 (4,200) -
Associates revenue share
adjustment
Amortisation for period (50) (113) (63) (794) (1,400) (720)
Foreign exchange and other (54) (11) 105 (3,359) 11,574 1,306
movements
At end of period 1,561 1,580 2,379 24,734 27,537 27,034
Adjustments in respect of prior year acquisitions reflect the latest estimates
of the consideration paid for the purchase of revenue shares of certain
affiliates combined with the effect of disposing of affiliates held for resale
at values in excess of the original estimated carrying amount. The ultimate
costs of purchasing these revenue shares will remain uncertain as they are
dependent upon future events and hence are subject to adjustment in future
years.
The impairment loss arose from a review, in accordance with Financial Reporting
Standard 11, of the carrying value of the Group's recently acquired UK private
client and US asset management businesses. As a result of this exercise, the
carrying value of unamortised goodwill as at 31 December 2001 was reduced by
£500 million (R6,196 million).
During 2001, a reduction to goodwill of £241 million (R4,200 million), net of
tax, reflected the expiry on 31 December 2001 of the Group's option to purchase
the remaining revenue share from Pilgrim Baxter. On 14 March 2002, the Group
renegotiated terms for the purchase of the remaining revenue share which
comprised a combination of fixed instalments and a variable earn-out depending
upon profit growth. In accordance with Financial Reporting Standard 7,
adjustments have been made to goodwill of £101 million (R1,604) million, which
represents the best estimate of the total obligation.
The goodwill amortisation charge for the period of £55m (R873 million) (June
2001: £69 million (R788 million); December 2001: £132 million (R1,636 million))
comprises £50 million (R794 million) (June 2001: £63 million (R720 million);
December 2001: £113 million (R1,400 million)) disclosed in note 10 above, and £5
million (R79 million) (June 2001: £6 million (R68 million); December 2001: £19
million (R236 million)) disclosed under interests in associated undertakings.
Notes to the financial statements continued
for the six months ended 30 June 2002
11 AMOUNTS OWED TO CREDIT INSTITUTIONS
£m Rm
At At At At At At
30 June 2002 31 December 30 June 30 June 2002 31 December 30 June
2001 2001 2001 2001
Bank overdrafts repayable - 1 3 - 17 34
on demand
Bank and other loans
Repayable within one year
Syndicated revolving credit 164 294 268 2,599 5,124 3,045
facility
Floating rate notes 62 74 79 982 1,289 899
Commercial paper 193 112 - 3,058 1,952 -
Term loans 30 - - 475 - -
Other 3 4 1 48 70 11
452 484 348 7,162 8,435 3,955
Repayable between one and
two years
Term loans - 30 30 - 523 341
Repayable between two and
five years
Syndicated revolving credit 162 376 354 2,567 6,553 4,023
facility
Euro note 228 - - 3,613 - -
Term loans 6 6 6 95 105 68
Other 9 - - 143 - -
405 382 360 6,418 6,658 4,091
857 897 741 13,580 15,633 8,421
All amounts owed to credit institutions bear interest at variable rates
determined in accordance with prevailing market rates at the time of drawing or
rollover, except for a euro400 million note, which is described below.
The Revolving Credit Facility of £300 million (amount drawn down at 30 June
2002: £164 million) was repaid on 15 July 2002. The Revolving Credit Facility of
£900 million (amount drawn down at 30 June 2002: £162 million) is repayable on
13 July 2006.
The floating rate notes consist of a $20 million note repayable on 18 September
2002, and a £49 million note repayable on 31 December 2010 with the holders
having the option to elect for early redemption every six months.
The term loans of £30 million and £6 million are repayable on 30 April 2003 and
30 May 2005 respectively.
Commercial paper is issued under a £300 million commercial paper programme for
periods of up to 12 months.
Notes to the financial statements continued
for the six months ended 30 June 2002
11 AMOUNTS OWED TO CREDIT INSTITUTIONS continued
Old Mutual plc €400 million 6% Notes due 2007 were issued on 10 April 2002. The
interest payable on these bonds is fixed at 6% per annum.
11(a) Convertible loan stock
On 2 May 2001 Old Mutual Finance (Cayman Islands) Limited, a 100% owned
subsidiary of the Group, issued US$650 million 3.625 per cent. Convertible
Bonds, which are guaranteed by and convertible into the ordinary shares of Old
Mutual plc at a conversion price of 190p per share at an exchange rate of one US
dollar to 69.52p sterling. The bonds are repayable on 2 May 2005 with the bond
holders having the option to elect for redemption on 2 May 2003. The amount
payable includes £5 million (R79 million) (December 2001: £8 million (R139
million); June 2001 £12 million (R136 million)) of unamortised issue costs.
12 POST BALANCE SHEET EVENTS
Acquisition of BoE Limited
On 2 July 2002, Nedcor Limited, the Group's 53% owned banking subsidiary,
received approval for the acquisition of the entire issued share capital of BoE
Limited, a South African bank. The estimated total consideration was £472
million (R7,500 million), consisting of cash of £390 million (R6,186 million)
and 10 million Nedcor shares.
Sale of NWQ Investment Management Company, Inc.
The sale of NWQ Investment Management Company Inc., a US asset management
affiliate, was completed on 1 August 2002 for an estimated consideration of $120
million.
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