Old Mutual 2014 Preliminary Results - Part 2
Part 4 - Financial information
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Index to the financial information For the year ended 31 December 2014 |
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Statement of directors' responsibilities in respect of the preliminary announcement of the Annual Report and the financial statements
|
50 |
|
|
Consolidated income statement
|
51 |
|
|
Consolidated statement of comprehensive income
|
52 |
|
|
Reconciliation of adjusted operating profit to profit after tax
|
53 |
|
|
Consolidated statement of financial position
|
54 |
|
|
Consolidated statement of cash flows
|
55 |
|
|
Consolidated statement of changes in equity
|
56 |
|
|
Notes to the consolidated financial statements
|
|
|
|
|
A: Significant accounting policies
|
60 |
|
|
B: Segment information
|
64 |
|
|
C: Other key performance information
|
74 |
|
|
D: Other income statement notes
|
80 |
|
|
E: Financial assets and liabilities
|
81 |
|
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F: Other statement of financial position notes
|
84 |
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G: Other notes
|
86 |
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H: Discontinued operations and disposal groups held for sale
|
88 |
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Statement of directors' responsibilities
in respect of the preliminary announcement of the Annual Report and the financial statements
The directors confirm that to the best of their knowledge:
n The results in this preliminary announcement have been taken from the Group's 2014 Annual Report and Accounts, which will be available on the Company's website on 31 March 2015
n The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole, and
n The Annual Report includes a fair review of the development and performance of the business and the position of Old Mutual plc and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Julian Roberts Ingrid Johnson
Group Chief Executive Group Finance Director
27 February 2015
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Consolidated income statement |
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For the year ended 31 December 2014 |
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£m |
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Notes |
Year ended 31 December 2014 |
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||
|
Revenue |
|
|
|
||
|
Gross earned premiums |
B2 |
3,209 |
|
||
|
Outward reinsurance |
|
(308) |
|
||
|
Net earned premiums |
|
2,901 |
|
||
|
Investment return (non-banking) |
|
6,304 |
|
||
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Banking interest and similar income |
|
3,057 |
|
||
|
Banking trading, investment and similar income |
|
197 |
|
||
|
Fee and commission income, and income from service activities |
|
2,894 |
|
||
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Other income |
|
125 |
|
||
|
Total revenue |
|
15,478 |
|
||
|
Expenses |
|
|
|
||
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Claims and benefits (including change in insurance contract provisions) |
|
(4,098) |
|
||
|
Reinsurance recoveries |
|
215 |
|
||
|
Net claims and benefits incurred |
|
(3,883) |
|
||
|
Change in investment contract liabilities |
|
(3,544) |
|
||
|
Losses on loans and advances |
|
(252) |
|
||
|
Finance costs |
|
(54) |
|
||
|
Banking interest payable and similar expenses |
|
(1,672) |
|
||
|
Fee and commission expenses, and other acquisition costs |
|
(863) |
|
||
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Change in third-party interest in consolidated funds |
|
(322) |
|
||
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Other operating and administrative expenses |
|
(3,548) |
|
||
|
Total expenses |
|
(14,138) |
|
||
|
Share of associated undertakings' and joint ventures' profit after tax |
|
26 |
|
||
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Loss on disposal of subsidiaries, associated undertakings and strategic investments |
C1(c) |
(2) |
|
||
|
Profit before tax |
|
1,364 |
|
||
|
Income tax expense |
D1 |
(462) |
|
||
|
Profit from continuing operations after tax |
|
902 |
|
||
|
Discontinued operations |
|
|
|
||
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(Loss)/profit from discontinued operations after tax |
H1 |
(50) |
|
||
|
Profit after tax for the financial year |
|
852 |
|
||
|
|
|
|
|
||
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Attributable to |
|
|
|
||
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Equity holders of the parent |
|
582 |
|
||
|
Non-controlling interests |
|
|
|
||
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Ordinary shares |
F1(a)(i) |
252 |
|
||
|
Preferred securities |
F1(a)(ii) |
18 |
|
||
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Profit after tax for the financial year |
|
852 |
|
||
|
|
|
|
|
||
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Earnings per share |
|
|
|
||
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Basic earnings per share based on profit from continuing operations (pence) |
|
13.5 |
|
||
|
Basic earnings per share based on profit from discontinued operations (pence) |
|
(1.1) |
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||
|
Basic earnings per ordinary share (pence) |
C2(a) |
12.4 |
|
||
|
Diluted basic earnings per share based on profit from continuing operations (pence) |
|
12.5 |
|
||
|
Diluted basic earnings per share based on profit from discontinued operations (pence) |
|
(1.0) |
|
||
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Diluted basic earnings per ordinary share (pence) |
C2(b) |
11.5 |
|
||
|
|
|
|
|
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Weighted average number of ordinary shares (millions) |
C2(a) |
4,485 |
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||
|
Consolidated statement of comprehensive income |
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||||
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For the year ended 31 December 2014 |
|
|
|
|
|
|
|
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|
£m |
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|
|
|
Notes |
Year ended 31 December 2014 |
|
|
|
|
Profit after tax for the financial year |
|
852 |
|
|
|
|
Other comprehensive income for the financial year |
|
|
|
|
|
|
Items that will not be reclassified subsequently to profit or loss |
|
|
|
|
|
|
Fair value movements |
|
|
|
|
|
|
Property revaluation |
|
22 |
|
|
|
|
Measurement movements on defined benefit plans |
|
2 |
|
|
|
|
Income tax on items that will not be reclassified subsequently to profit or loss |
D1(c) |
6 |
|
|
|
|
|
|
30 |
|
|
|
|
Items that may be reclassified subsequently to profit or loss |
|
|
|
|
|
|
Fair value movements |
|
|
|
|
|
|
Net investment hedge |
|
(9) |
|
|
|
|
Available-for-sale investments |
|
|
|
|
|
|
Fair value gains/(losses) |
|
21 |
|
|
|
|
Recycled to profit or loss |
|
(20) |
|
|
|
|
Exchange difference recycled to profit or loss on disposal of business |
|
(85) |
|
|
|
|
Shadow accounting |
|
(5) |
|
|
|
|
Currency translation differences on translating foreign operations |
|
(68) |
|
|
|
|
Other movements |
|
(18) |
|
|
|
|
Income tax on items that may be reclassified subsequently to profit or loss |
D1(c) |
(5) |
|
|
|
|
|
|
(189) |
|
|
|
|
Total other comprehensive income for the financial year |
|
(159) |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the financial year |
|
693 |
|
|
|
|
|
|
|
|
|
|
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Attributable to |
|
|
|
|
|
|
Equity holders of the parent |
|
441 |
|
|
|
|
Non-controlling interests |
|
|
|
|
|
|
Ordinary shares |
|
234 |
|
|
|
|
Preferred securities |
|
18 |
|
|
|
|
Total comprehensive income for the financial year |
|
693 |
|
|
|
|
Reconciliation of adjusted operating profit to profit after tax |
|
||||
|
For the year ended 31 December 2014 |
|
|
|
|
|
|
|
|
|
£m |
|
|
|
|
Notes |
Year ended 31 December 2014 |
|
|
|
|
Core operations |
|
|
|
|
|
|
Emerging Markets |
B3 |
617 |
|
|
|
|
Nedbank |
B3 |
770 |
|
|
|
|
Old Mutual Wealth |
B3 |
227 |
|
|
|
|
Institutional Asset Management |
B3 |
131 |
|
|
|
|
|
|
1,745 |
|
|
|
|
Finance costs |
B3 |
(78) |
|
|
|
|
Long-term investment return on excess assets |
|
24 |
|
|
|
|
Net interest payable to non-core operations |
|
(5) |
|
|
|
|
Corporate costs |
|
(55) |
|
|
|
|
Other net (costs)/income |
|
(26) |
|
|
|
|
Adjusted operating profit before tax |
B3 |
1,605 |
|
|
|
|
Adjusting items |
C1(a) |
(301) |
|
|
|
|
Non-core operations |
B3 |
1 |
|
|
|
|
Profit before tax (net of policyholder tax) |
|
1,305 |
|
|
|
|
Income tax attributable to policyholder returns |
D1(d) |
59 |
|
|
|
|
Profit before tax |
|
1,364 |
|
|
|
|
Total tax expense |
D1(a) |
(462) |
|
|
|
|
Profit from continuing operations after tax |
|
902 |
|
|
|
|
(Loss)/profit from discontinued operations after tax |
H1 |
(50) |
|
|
|
|
Profit after tax for the financial period |
|
852 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit after tax attributable to ordinary equity holders of the parent |
|
||||
|
|
|
|
£m |
|
|
|
|
Notes |
Year ended 31 December 2014 |
|
|
|
|
Adjusted operating profit before tax |
B3 |
1,605 |
|
|
|
|
Tax on adjusted operating profit |
D1(d) |
(439) |
|
|
|
|
Adjusted operating profit after tax |
|
1,166 |
|
|
|
|
Non-controlling interests - ordinary shares |
F1(a)(iii) |
(280) |
|
|
|
|
Non-controlling interests - preferred securities |
F1(a)(ii) |
(18) |
|
|
|
|
Adjusted operating profit after tax attributable to ordinary equity holders of the parent |
B3 |
868 |
|
|
|
|
Adjusted weighted average number of shares (millions) |
C2(c) |
4,845 |
|
|
|
|
Adjusted operating earnings per share (pence) |
C2(c) |
17.9 |
|
|
|
Basis of preparation of adjusted operating profit
Adjusted operating profit (AOP) reflects the directors' view of the underlying long-term performance of the Group. AOP is a measure of profitability which adjusts the IFRS profit measures for the specific items detailed in note C1 and, as such, it is a non-GAAP measure. The reconciliation set out above explains the differences between AOP and profit after tax as reported under IFRS.
For core life assurance and property & casualty businesses, AOP is based on a long-term investment return, including returns on investments held by life funds in Group equity and debt instruments, and is stated net of income tax attributable to policyholder returns. For all core businesses, AOP excludes goodwill impairment, the impact of accounting for intangibles acquired in a business combination and costs related to completed acquisitions, revaluations of put options related to long-term incentive schemes, profit/(loss) on acquisition/disposal of subsidiaries, associated undertakings and strategic investments, fair value profits/(losses) on certain Group debt instruments and costs related to the fundamental restructuring of continuing businesses. AOP includes dividends declared to holders of perpetual preferred callable securities. Old Mutual Bermuda and Nordic are treated as non-core and discontinued operations in the AOP disclosure. As such they are not included in AOP. Refer to note B1 for further information on the basis of segmentation.
Adjusted operating earnings per share is calculated on the same basis as AOP. It is stated after tax attributable to AOP 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 31 December 2014 |
|
|
|
|
|
|
|
£m |
|
|
Notes |
At 31 December 2014 |
|
|
Assets |
|
|
|
|
Goodwill and other intangible assets |
|
2,763 |
|
|
Mandatory reserve deposits with central banks |
|
829 |
|
|
Property, plant and equipment |
|
765 |
|
|
Investment property |
|
1,678 |
|
|
Deferred tax assets |
|
283 |
|
|
Investments in associated undertakings and joint ventures |
|
518 |
|
|
Deferred acquisition costs |
|
862 |
|
|
Reinsurers' share of policyholder liabilities |
|
2,314 |
|
|
Loans and advances |
|
34,857 |
|
|
Investments and securities |
|
87,547 |
|
|
Current tax receivable |
|
92 |
|
|
Trade, other receivables and other assets |
|
2,362 |
|
|
Derivative financial instruments |
|
1,227 |
|
|
Cash and cash equivalents |
|
4,944 |
|
|
Non-current assets held for sale |
H2 |
1,475 |
|
|
Total assets |
|
142,516 |
|
|
Liabilities |
|
|
|
|
Long-term business insurance policyholder liabilities |
|
10,519 |
|
|
Investment contract liabilities |
|
68,841 |
|
|
Property & casualty liabilities |
|
319 |
|
|
Third-party interests in consolidated funds |
|
5,986 |
|
|
Borrowed funds |
E1 |
3,044 |
|
|
Provisions and accruals |
|
284 |
|
|
Deferred revenue |
|
330 |
|
|
Deferred tax liabilities |
|
454 |
|
|
Current tax payable |
|
189 |
|
|
Trade, other payables and other liabilities |
|
4,276 |
|
|
Amounts owed to bank depositors |
|
36,243 |
|
|
Derivative financial instruments |
|
1,201 |
|
|
Non-current liabilities held for sale |
H2 |
1,285 |
|
|
Total liabilities |
|
132,971 |
|
|
Net assets |
|
9,545 |
|
|
Shareholders' equity |
|
|
|
|
Equity attributable to equity holders of the parent |
|
7,406 |
|
|
Non-controlling interests |
|
|
|
|
Ordinary shares |
F1(b)(i) |
1,867 |
|
|
Preferred securities |
F1(b)(ii) |
272 |
|
|
Total non-controlling interests |
|
2,139 |
|
|
Total equity |
|
9,545 |
|
|
Consolidated statement of cash flows |
|
||
|
For the year ended 31 December 2014 |
|
|
|
|
|
|
|
£m |
|
|
|
Year ended 31 December 2014 |
|
|
Cash flows from operating activities |
|
|
|
|
Profit before tax |
|
1,364 |
|
|
Non-cash movements in profit before tax |
|
2,058 |
|
|
Net changes in working capital |
|
739 |
|
|
Taxation paid |
|
(402) |
|
|
Net cash inflow from operating activities |
|
3,759 |
|
|
Cash flows from investing activities |
|
|
|
|
Net acquisitions of financial investments |
|
(2,873) |
|
|
Acquisition of investment properties |
|
(48) |
|
|
Proceeds from disposal of investment properties |
|
115 |
|
|
Acquisition of property, plant and equipment |
|
(154) |
|
|
Proceeds from disposal of property, plant and equipment |
|
14 |
|
|
Acquisition of intangible assets |
|
(76) |
|
|
Acquisition of interests in subsidiaries, associated undertakings joint ventures and strategic investments |
|
(429) |
|
|
Disposal of interests in subsidiaries, associated undertakings joint ventures and strategic investments1 |
|
95 |
|
|
Net cash outflow from investing activities |
|
(3,356) |
|
|
Cash flows from financing activities |
|
|
|
|
Dividends paid to |
|
|
|
|
Ordinary equity holders of the Company |
|
(394) |
|
|
Non-controlling interests and preferred security interests |
|
(177) |
|
|
Dividends received from associated undertakings |
|
5 |
|
|
Interest paid (excluding banking interest paid) |
|
(48) |
|
|
Proceeds from issue of ordinary shares (including by subsidiaries to non-controlling interests) |
|
12 |
|
|
Net disposal of treasury shares |
|
72 |
|
|
Disposal of non-controlling interests in OM Asset Management plc |
|
184 |
|
|
Issue of subordinated and other debt |
|
584 |
|
|
Subordinated and other debt repaid |
|
(290) |
|
|
Net cash outflow from financing activities |
|
(52) |
|
|
Net increase in cash and cash equivalents |
|
351 |
|
|
Effects of exchange rate changes on cash and cash equivalents |
|
(193) |
|
|
Cash and cash equivalents at beginning of the year |
|
5,628 |
|
|
Cash and cash equivalents at end of the period |
|
5,786 |
|
|
|
|
|
|
|
Consisting of |
|
|
|
|
Cash and cash equivalents |
|
4,944 |
|
|
Mandatory reserve deposits with central banks |
|
829 |
|
|
Cash and cash equivalents included in assets held for sale |
|
13 |
|
|
Total |
|
5,786 |
|
1 Included in disposal of interests in subsidiaries, associated undertakings, joint ventures and strategic investments is £76 million relating to disposal of subsidiaries.
Except for mandatory reserve deposits with central banks of £829 million (2013: £759 million) and cash and cash equivalents subject to consolidation of funds of £1,639 million (2013: £1,667 million), management do not consider that there are any material amounts of cash and cash equivalents which are not available for use in the Group's day-to-day operations. Mandatory reserve deposits are, however, included in cash and cash equivalents for the purposes of the statement of cash flows in line with market practice in South Africa.
|
Consolidated statement of changes in equity |
|||||||
|
For the year ended 31 December 2014 |
|
|
|
|
|
|
|
|
|
|
Millions |
|
|
|||
|
Year ended 31 December 2014 |
Notes |
Number of shares issued and fully paid |
|
Share capital |
Share premium |
Merger reserve |
Available-for-sale reserve |
|
Shareholders' equity at beginning of the period |
|
4,897 |
|
560 |
845 |
1,717 |
52 |
|
Profit after tax for the financial period |
|
- |
|
- |
- |
- |
- |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
Items that will not be reclassified subsequently to profit or loss |
|
|
|
|
|
|
|
|
Fair value gains |
|
|
|
|
|
|
|
|
Property revaluation |
|
- |
|
- |
- |
- |
- |
|
Measurement gains on defined benefit plans |
|
- |
|
- |
- |
- |
- |
|
Income tax on items that will not be reclassified subsequently to profit or loss |
D1(c) |
- |
|
- |
- |
- |
- |
|
|
|
- |
|
- |
- |
- |
- |
|
Items that may be reclassified subsequently to profit or loss |
|
|
|
|
|
|
|
|
Fair value gains/(losses) |
|
|
|
|
|
|
|
|
Net investment hedge |
|
- |
|
- |
- |
- |
- |
|
Available-for-sale investments |
|
|
|
|
|
|
|
|
Fair value gains |
|
- |
|
- |
- |
- |
21 |
|
Recycled to profit or loss1 |
|
- |
|
- |
- |
- |
(20) |
|
Exchange differences recycled to profit or loss on disposal of business1,2 |
|
- |
|
- |
- |
- |
- |
|
Shadow accounting |
|
- |
|
- |
- |
- |
- |
|
Currency translation differences on translating foreign operations |
|
- |
|
- |
- |
- |
- |
|
Other movements |
|
- |
|
- |
- |
- |
- |
|
Income tax on items that may be reclassified subsequently to profit or loss |
D1(c) |
- |
|
- |
- |
- |
(5) |
|
Total comprehensive income for the financial period |
|
- |
|
- |
- |
- |
(4) |
|
Dividends for the period |
C3 |
- |
|
- |
- |
- |
- |
|
Equity share-based payment transactions |
|
- |
|
- |
- |
- |
- |
|
Other movements in share capital |
|
10 |
|
1 |
11 |
- |
- |
|
Expiry of Skandia AB shareholder claims |
|
- |
|
- |
- |
- |
- |
|
Merger reserve released1 |
|
- |
|
- |
- |
(375) |
- |
|
Disposal of non-controlling interests in OM Asset Management plc |
A2 |
- |
|
- |
- |
- |
- |
|
Non-controlling interests in subsidiaries acquired |
A2 |
- |
|
- |
- |
- |
- |
|
Change in participation in subsidiaries |
|
- |
|
- |
- |
- |
- |
|
Transactions with shareholders |
|
10 |
|
1 |
11 |
(375) |
- |
|
Shareholders' equity at end of the period |
|
4,907 |
|
561 |
856 |
1,342 |
48 |
1 Following the disposal of Old Mutual Wealth's European businesses, as discussed in note A2, available-for-sale reserves of £20 million and foreign currency translation reserves of £46 million have been recycled to profit or loss. In addition, merger reserves of £375 million relating to these businesses have been released directly to retained earnings.
2 In addition to the above, foreign currency translation reserves of £39 million have been recycled directly to retained earnings following the OM Asset Management plc initial public offering.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
Property revaluation reserve |
Share-based payments reserve |
Other reserves |
Foreign currency translation reserve |
Retained earnings |
Perpetual preferred callable securities |
Attributable to equity holders of the parent |
Total non-controlling interests |
Total equity |
|
161 |
316 |
37 |
(1,234) |
4,290 |
526 |
7,270 |
1,767 |
9,037 |
|
- |
- |
- |
- |
557 |
25 |
582 |
270 |
852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 |
- |
- |
- |
(5) |
- |
17 |
5 |
22 |
|
- |
- |
- |
- |
2 |
- |
2 |
- |
2 |
|
- |
- |
- |
- |
(1) |
7 |
6 |
- |
6 |
|
22 |
- |
- |
- |
(4) |
7 |
25 |
5 |
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
- |
- |
(9) |
- |
- |
(9) |
- |
(9) |
|
|
|
|
|
|
|
|
|
|
|
- |
- |
- |
- |
- |
- |
21 |
- |
21 |
|
- |
- |
- |
- |
- |
- |
(20) |
- |
(20) |
|
- |
- |
- |
(85) |
- |
- |
(85) |
- |
(85) |
|
(5) |
- |
- |
- |
- |
- |
(5) |
- |
(5) |
|
- |
- |
- |
(45) |
- |
- |
(45) |
(23) |
(68) |
|
- |
- |
- |
3 |
(21) |
- |
(18) |
- |
(18) |
|
- |
- |
- |
- |
- |
- |
(5) |
- |
(5) |
|
17 |
- |
- |
(136) |
532 |
32 |
441 |
252 |
693 |
|
- |
- |
- |
- |
(394) |
(32) |
(426) |
(145) |
(571) |
|
- |
21 |
- |
- |
(3) |
- |
18 |
4 |
22 |
|
- |
- |
- |
- |
72 |
- |
84 |
1 |
85 |
|
- |
- |
- |
- |
11 |
- |
11 |
- |
11 |
|
- |
- |
- |
- |
375 |
- |
- |
- |
- |
|
- |
- |
- |
- |
52 |
- |
52 |
163 |
215 |
|
- |
- |
- |
- |
- |
- |
- |
53 |
53 |
|
- |
- |
- |
- |
(44) |
- |
(44) |
44 |
- |
|
- |
21 |
- |
- |
69 |
(32) |
(305) |
120 |
(185) |
|
178 |
337 |
37 |
(1,370) |
4,891 |
526 |
7,406 |
2,139 |
9,545 |
Retained earnings were reduced in respect of own shares held in policyholder's funds, ESOP trusts, Black Economic Empowerment trusts and other undertakings at 31 December 2014 by £338 million. (2013: £428 million).
|
Consolidated statement of changes in equity |
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For the year ended 31 December 2014 |
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Millions |
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Year ended 31 December 2013 |
Notes |
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Shareholders' equity at beginning of the year |
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Profit after tax for the financial year |
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Other comprehensive income |
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Items that will not be reclassified subsequently to profit or loss |
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Fair value movements |
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Property revaluation |
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Measurement movements on defined benefit plans |
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Income tax on items that will not be reclassified subsequently to profit or loss |
D1(c) |
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Items that may be reclassified subsequently to profit or loss |
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Fair value movements |
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Net investment hedge |
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Available-for-sale investments |
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Fair value gains |
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Recycled to profit or loss |
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Currency translation differences on translating foreign operations |
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Other movements |
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Income tax on items that may be reclassified subsequently to profit or loss |
D1(c) |
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Total comprehensive income for the financial year |
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Dividends for the year |
C3 |
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Equity share-based payment transactions |
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Other movements in share capital |
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Preferred securities purchased |
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Change in participation in subsidiaries |
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Transactions with shareholders |
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Shareholders' equity at end of the year |
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A: Significant accounting policies
A1: Basis of preparation
The Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and as endorsed by the European Union (EU), and those parts of the Companies Act 2006 applicable to those reporting under IFRS. The accounting policies adopted by the Group, unless otherwise stated, have been applied consistently with those applied in the preparation of the Group's 2014 Annual Report and Accounts.
The Group financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments, financial assets and liabilities designated as fair value through profit or loss, or as available-for-sale, owner-occupied property and investment property. Non-current assets and disposal groups held for sale are stated at the lower of the previous carrying amount and the fair value less costs to sell.
The Group financial statements have been prepared on the going concern basis which the directors believe to be appropriate.
The financial statements contained herein do not constitute the Company's statutory accounts for the financial years ended 31 December 2014 and 31 December 2013 within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the financial year ended 31 December 2013 have been reported on by the Company's auditor and delivered to the Registrar of Companies. The statutory accounts for the financial year ended 31 December 2014 will be delivered in due course. The report of the auditor for the financial year ended 31 December 2013 was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
Translation of foreign operations
The assets and liabilities of foreign operations are translated from their respective functional currencies into the Group's presentation currency using the year end exchange rates, and their income and expenses using the average exchange rates. Other than in respect of cumulative translation gains and losses up to 1 January 2004, cumulative unrealised gains or losses resulting from translation of functional currencies to the presentation currency are included as a separate component of shareholders' equity. To the extent that these gains and losses are effectively hedged, the cumulative effect of such gains and losses arising on the hedging instruments are also included in that component of shareholders' equity. Upon the disposal of subsidiaries the cumulative amount of exchange differences deferred in shareholders' equity, net of attributable amounts in relation to net investments, is recognised in profit or loss. Cumulative translation gains and losses up to 1 January 2004 were reset to zero.
|
|
Year ended 31 December 2014 |
|
||
|
|
Income statement (average rate) |
Statement of financial position (closing rate) |
|
|
|
Rand |
17.8712 |
17.9976 |
|
|
|
US dollars |
1.6474 |
1.5581 |
|
|
|
Euro |
1.2399 |
1.2877 |
|
|
A2: Significant corporate activity and business changes during the period
Acquisitions completed during the year
Acquisition of Faulu Kenya DTM LTD
On 1 April 2014, the Group completed the acquisition of a controlling stake in the micro-lender Faulu Kenya DTM LTD for £20 million. Goodwill of £3 million has been recognised on this transaction. No other intangible assets have been recognised. In addition, non-controlling interests of £9 million have been recognised on this transaction.
Acquisition of a significant interest in Banco Unico
On 12 June 2014, the Group announced that it had completed the acquisition of a 36.4% stake in Banco Unico for $24 million. Banco Unico is equity accounted as a joint venture in these financial statements.
Acquisition of Intrinsic Financial Services Limited
On 1 July 2014, the Group announced that it had completed the acquisition of 100% of Intrinsic Financial Services Limited (Intrinsic), a financial advisors group of companies for total consideration of £98m.The financial results and position of Intrinsic have been consolidated with effect from 1 July 2014.
The purchase price allocation has been finalised and allocated to goodwill (£59 million) and other intangible assets (£41 million).
Acquisition of Old Mutual Finance (Pty) Ltd
On 1 September 2014, the Group completed the acquisition of an additional 25% stake in Old Mutual Finance (Pty) Ltd (OMF) for R1,115 million (£63 million). As the Group now has a controlling shareholding of 75%, the financial results and position of OMF have been consolidated with effect from 1 September 2014.
The accounting related to the step up in ownership from 50% to 75% effectively involved a simultaneous sale of 50% of the business, followed by an acquisition of the fair value of 75% of the business. Consequently a profit of approximately R1,112 million (£62 million) was realised on the transaction. Consistent with usual Group practice, this profit was recognised in the IFRS profit or loss, but excluded from AOP. Goodwill of £93 million, intangible assets of £27 million, and non-controlling interest of £44 million have been recognised on this transaction.
Acquisition of 20.7% shareholding in Ecobank Transnational Incorporated (ETI)
On 7 October 2014, Nedbank Group Limited, the majority-owned South African banking subsidiary of the Group, announced that it has exercised its rights to subscribe for a 20.7% shareholding in ETI for a cash consideration of $494 million (£305 million). The acquisition of the 20.7% stake has resulted in ETI being an associate for Group reporting purposes. ETI has been equity accounted from 1 October 2014.
Disposals completed during the year
Disposal of Skandia Poland
On 30 May 2014, the Group completed the disposal of Skandia Poland, part of Old Mutual Wealth. A loss on disposal of £21 million has been recognised in profit or loss.
Disposal of Skandia Austria and Skandia Germany
On 1 October 2014, the Group announced that it had completed the sale of two of its Old Mutual Wealth businesses, Skandia Austria and Skandia Germany. A loss on disposal of £43 million has been recognised in profit or loss.
OM Asset Management plc initial public offering
On 15 October 2015, the Group announced the closing of the initial public offering of 20.4% of OM Asset Management at a price to the public of $14.00 per share. As a result of the IPO, the Group has recognised a profit on disposal of £13 million directly in equity. At 31 December 2014, non-controlling interests of £163 million have been recognised in the statement of financial position. In addition to the above, £39m of the foreign currency translation reserve has been transferred to retained earnings.
Disposal of Skandia Liechtenstein
On 6 November 2014, the Group completed the sale of Skandia Liechtenstein, part of Old Mutual Wealth. A total loss on disposal of £6 million has been recognised in profit or loss.
Financing activities during the year
Nedbank Group Limited
On 10 July 2014, Nedbank Group Limited announced its intention to issue new preference shares which will be utilised to raise funding for Nedbank's business activities in general. No new preference shares were issued during the year.
Emerging Markets
On 27 November 2014, Old Mutual Life Assurance Company (South Africa) Limited (OMLAC(SA)) issued R300 million Unsecured Subordinated Callable Fixed Rate Notes under its R10 billion Unsecured Callable Notes Programme. Interest is payable in arrears at a fixed rate of 9.255 per cent on 27 May and 27 November each year up to the first call date of 27 November 2019 or until the maturity date of 27 November 2024.
On 27 November 2014, OMLAC(SA) also issued R700 million Unsecured Subordinated Callable Floating Rate Notes under the same programme. Interest is payable at a floating rate of 3 month ZAR-JIBAR + 2.2 per cent on 27 November, 27 February, 27 May and 27 August each year until 27 November 2019. From this date the floating rate increases to 3 month ZAR-JIBAR + 3.3 per cent until the maturity date of 27 November 2024. The notes have an optional redemption date of 27 November 2019 and each subsequent floating interest payment date until maturity.
Transactions announced during the year that will complete after 31 December 2014
Disposal of Skandia Luxembourg and Skandia France
On 3 September 2014, the Group announced that terms have been agreed to sell Skandia Luxembourg and Skandia France, part of Old Mutual Wealth.
For the year ended 31 December 2014, the net asset value of goodwill and intangible assets of these businesses has been written down to the fair value (less costs to sell) given expected losses on disposal. As a result, an impairment loss of £14 million has been recognised in profit or loss.
The disposal of these businesses completed on 2 February 2015.
Acquisition of Quilter Cheviot
On 17 October 2014, the Group announced that Old Mutual Wealth had agreed the acquisition of Quilter Cheviot, a leading UK-based discretionary investment manager, for a total consideration of up to £585 million. The transaction completed on 25 February 2015. The Group awaits the transaction completion financial statements of Quilter Cheviot in order to finalise its purchase price accounting.
Acquisition of UAP Holdings Limited
On 9 January 2015, the Group announced that it acquired a 23.3% stake in UAP Holdings Limited (UAP), an investment, retirement and insurance group that operates in East Africa, for a consideration of KES 9 billion (£64 million). UAP will be treated as an associated undertaking from 9 January 2015.
Subsequently, on 26 January 2015, the Group announced it acquired an additional 37.3% (second tranche) of UAP for a consideration of KES 14 billion (£103 million), subject to regulatory approval. The transaction will increase the Group's total holding to 60.7% and will result in the Group consolidating UAP. The acquisition of the second tranche is expected to be completed in the first half of 2015.
A: Significant accounting policies continued
A3: Critical accounting estimates and judgements
In the preparation of these financial statements, the Group is required to make estimates and judgements that affect items reported in the consolidated income statement, statement of financial position, other primary statements and related supporting notes.
Critical accounting estimates and judgements are those which involve the most complex or subjective judgements or assessments. Where applicable the Group applies estimation and assumption setting techniques that are aligned with relevant actuarial and accounting guidance based on knowledge of the current situation. This requires assumptions and predictions of future events and actions. There have been no significant methodology changes to the critical accounting estimates and judgements that the Group applied at 31 December 2014. The significant accounting policies are described in the relevant notes.
(a) Loans and advances
Provisions for impairment of loans and advances
The majority of loans and advances are in respect of Nedbank, which assesses its loan portfolios for impairment at each financial reporting date. Nedbank actively manages its exposure to loans and advances through robust credit approval processes. The credit loss ratio at year ended 31 December 2014 was 0.79% (2013: 1.06%). The impairment for performing loans is calculated on a portfolio basis, based on historical loss experience, adjusted for national and sector specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These include early arrears, such as changes in macro-economic conditions and legislation affecting credit recovery. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period.
For portfolios of loans and advances which comprise large numbers of small homogeneous assets with similar risk characteristics where credit scoring techniques are generally used, statistical techniques are used to calculate impairment allowances on the portfolio, based on historical recovery rates and assumed emergence periods. There are a number of models in use, each tailored to a product, line of business or client category. Judgement and knowledge are needed in selecting the statistical methods to use when the models are developed or revised. Additional impairment provisions may be raised for issues which the Group believes is not specifically covered by statistical models.
For wholesale (larger) exposures impairment allowances are calculated on an individual basis and all relevant considerations that have a bearing on the expected future cash flows are taken into account. The level of impairment allowance is the difference between the value of the discounted expected future cash flows and its carrying amount. Subjective judgements are made in the calculations of future cash flows and change with time as new information becomes available or as strategies evolve, resulting in frequent revisions to the impairment provision as individual decisions are taken.
Emerging Markets has lending exposure in South Africa, Kenya and Zimbabwe through non-wholly owned subsidiaries of £909 million (2013: £255 million). Credit loss ratios are monitored on each individual business unit and have generally improved in the current year.
Further detail is provided in note E3 in the Annual Report and Accounts.
(b) Policyholder liabilities
Emerging Markets discretionary reserves
Technical provisions in South Africa are determined as the aggregate of:
§ Best estimate liabilities, with assumptions allowing for the best estimate of future experience and a market-consistent valuation of financial options and guarantees
§ Compulsory margins, prescribed in terms of the Long Term Insurance Act, 1988 and South African professional actuarial guidance note (SAP 104) as explicit changes to actuarial assumptions that increase the level of technical provisions held, and
§ Discretionary margins, permitted by the Long Term Insurance Act, 1988 and SAP 104, to allow for the uncertainty inherent in estimates of future experience after considering available options of managing that experience over time, or to defer the release of profits consistent with policy design or company practice.
Discretionary margins are held as either implicit or explicit margins. Explicit discretionary margins are derived as conscious changes to assumptions used to project future experience to increase technical provisions. Implicit discretionary margins arise where the method used to calculate overall technical provisions results in liabilities that are greater than the sum of best estimate liabilities and compulsory margins.
Explicit discretionary margins of £459 million (1.7% of total technical provisions) were held at 31 December 2014 (2013: £489 million, 1.9% of total technical provisions). This consisted largely of:
§ Margins held for Mass Foundation Cluster protection business, which allow for the uncertainty related to mortality experience in South Africa, as well as future lapse experience and future investment returns, and to ensure that profit is released appropriately over the term of the policies
§ Margins to allow for the uncertainty inherent in the assumptions used to value financial options and guarantees, implied volatility assumptions in particular, which are difficult to hedge due to the short term nature of the equity option market in South Africa
§ Margins on non-profit annuities, due to the inability to fully match assets to liabilities as a result of the limited availability of long-dated bonds, and to provide for longevity risk, and
§ A margin set up in 2013 to allow for the uncertainty inherent in future economic assumptions used to calculate, mainly protection product liabilities, in the Retail Affluent business. Although interest rate hedging is used to manage interest rate risk on these products, the volatility of bond yields in South Africa means that it is difficult to maintain appropriate hedging positions without incurring significant trading costs. The discretionary margin therefore caters for the residual uncertainty present after allowing for the hedge programme that is in place. A similar margin was set up for the Mass Foundation Cluster savings book in 2014.
Emerging Markets Financial Soundness Valuation discount rate
The calculation of the Group's South African life assurance contract liabilities is sensitive to the discount rate used to value the liabilities. The methodology applied by the Group requires discount rates to be set according to the South African professional guidance note (SAP 104). In line with these principles, the reference rate is selected as the Bond Exchange of South Africa (BESA) par bond 10-year yield.
The reference rate was relatively volatile over 2014, ranging from 7.6% to 9.0% during the year ended 31 December 2014 (2013: 6.2% to 8.5%). At 31 December 2014 the reference discount rate was 8.0% (2013: 8.1%). The volatile interest rate environment continued to have a negligible impact on the operating profit for the South African life assurance businesses in 2014, given the continuance of the hedging program and discretionary margins put in place to mitigate these impacts.
The Group estimates that a 1% reduction in the reference discount rate will result in an increase in policyholder liabilities of £2 million (2013: £6 million), allowing for the impact of the hedging program.
Further disclosure of the policyholder sensitivity to interest rates is provided in note E8(g) of the Annual Report and Accounts.
Old Mutual Bermuda guarantees
Since the closure of Old Mutual Bermuda to new business in March 2009, management's key priorities have been to de-risk the business, manage the risk and solvency position and preserve shareholder value. The run-off of the book and hedging of the guarantees has significantly reduced the Group's risk exposure. The active contracts for which reserves are recognised are deferred and fixed index annuity investments and variable annuity products, which include guaranteed minimum accumulation benefits (GMAB) and guaranteed minimum death benefits (GMDB).
The key risk to the Group relates to the GMAB policies which were sold with Universal Guarantee Options (UGOs).
UGOs guarantee policyholders the return of 120% of invested premiums and, subject to policyholder election, they may include a Highest Anniversary Value (HAV) guarantee. These guarantees are effective on the 10 year anniversary of policies, 10 year anniversaries will be reached in 2017 and 2018. The risk attaching to the guarantee of 120% of invested premium, and relating to equity and foreign exchange downside risks, is managed by a dynamic tail hedging strategy, which progressively increases hedge coverage if the value of underlying policyholder investments decreases.
The Old Mutual Bermuda business has also implemented a series of structured 'look back' options for the HAV risk of markets rising above the 120% guarantee and then subsequently falling below 120%, having reset the guarantees amount above 120%.
GMAB reserves have reduced from $84 million at 31 December 2013 to $82 million at 31 December 2014.
There are no significant risks to the Group associated with GMDB and management continues to operate strong oversight over the business.
(c) Tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in other comprehensive income, in which case it is recognised in other comprehensive income.
The Group is subject to income taxes in numerous jurisdictions and the calculation of the Group's tax charge and worldwide provisions for income tax necessarily involves a degree of estimation and judgement. At any given time the Group typically has a number of open tax returns with various tax authorities and engages in active dialogue to resolve this. Provisions relating to these open items are recognised based on the Group's estimate of the mostly likely outcome, after taking into account external advice where appropriate. Where the final tax outcome of these matters is different from the amounts that were initially recorded such differences will impact profit or loss, current and deferred income tax assets and liabilities in the period such determination is made.
(d) Consolidation set of standards
The Group has applied the following key judgements in the application of the requirements of the consolidation set of standards (IFRS 10 'Consolidated Financial Statements' and IFRS 11 'Joint Arrangements'):
Consolidation of investment funds and securitisation vehicles
The Group acts as a fund manager to a number of investment funds. In determining whether the Group controls such a fund, it will focus on an assessment of the aggregate economic interests of the Group (comprising any carried interests and expected management fees) and the investor's rights to remove the fund manager. The Group assesses, on an annual basis, such interests to determine if the fund will be consolidated. See note G3(b) in the Annual Report and Accounts for disclosures in respect of the investment funds in which the Group has an interest.
The Group has sponsored certain asset backed financing (securitisation) vehicles under its securitisation programme which are run according to pre-determined criteria that are part of the initial design of the vehicles. The Group is exposed to variability of returns from the vehicles through its holding of junior debt securities in the vehicles. It has concluded that it controls these vehicles and therefore has consolidated these asset backed financing vehicles.
Structured entities
The Group is required to make judgements on what constitutes a structured entity. Accounting standards define a structured entity as an entity designed so that its activities are not governed by way of voting rights. In assessing whether the Group has power over such investees in which it has an interest, the Group considers factors such as the purpose and design of the investee, its practical ability to direct the relevant activities of the investee, the nature of its relationship with the investee and the size of its exposure to the variability of returns of the investee. The Group has evaluated all exposures and has concluded that all investments in investment funds as well as certain securitisation vehicles and other funding vehicles represent investments in structured entities.
B: Segment information
B1: Basis of segmentation
The Group's segmental results are analysed and reported on a basis consistent with the way that management and the Board of directors of Old Mutual plc assesses performance of the underlying businesses and allocates resources. Information is presented to the Board on a consolidated basis in pounds sterling (the presentation currency) and in the functional currency of each business.
Adjusted operating profit (AOP) 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. As appropriate to the business line, the Board reviews additional measures to assess the performance of each of the segments. These typically include sales, net client cash flows, funds under management, gross earned premiums, underwriting results, net interest income and non-interest revenue and credit losses.
A reconciliation between segment revenues and expenses and the Group's revenues and expenses is shown in note B3. Consistent with internal reporting, assets, liabilities, revenues and expenses that are not directly attributable to a particular segment are allocated between segments where appropriate and where there is a reasonable basis for doing so. The Group accounts for inter-segment revenues and transfers as if the transactions were with third parties at current market prices. Given the nature of the operations, there are no major trading activities between the segments.
The revenues generated in each reported segment can be seen in the analysis of profits and losses in note B3. The segmental information in notes B3 and B4, reflects the adjusted and IFRS measures of profit or loss and the assets and liabilities for each operating segment as provided to management and the Board of directors. There are no differences between the measurement of the assets and liabilities reflected in the primary statements and that reported for the segments.
There are four primary business activities from which the Group generates revenue. These are life assurance (premium income), asset management business (fee and commission income), banking (banking interest receivable and investment banking income) and property & casualty (premium income). Other revenue includes gains and losses on investment securities.
The principal lines of business from which each operating segment derives its revenues are as follows:
Core operations
Emerging Markets - life assurance, property & casualty, asset management and banking
Nedbank - banking, asset management and life assurance
Old Mutual Wealth - life assurance and asset management
Institutional Asset Management - asset management
Non-core operations
Old Mutual Bermuda - life assurance
Segment presentation
The results of the property & casualty business were previously disclosed separately. However, following changes in management oversight, these have been included in the Emerging Markets segment with effect from 1 January 2014. This change has been applied to all periods presented and comparative information has been re-presented accordingly.
The USAM segment has been renamed to Institutional Asset Management and consists of OM Asset Management plc, a listed subsidiary of the Group and Rogge Global Partners plc, a fixed income asset management affiliate of the Group.
There have been no other changes to the presentation of segment information.
The Group's reported segments are now Emerging Markets, Nedbank, Old Mutual Wealth and Institutional Asset Management. The Other segment includes Group Head Office. For all reporting periods, Old Mutual Bermuda is classified as a continuing operation in the IFRS income statement, but as non-core in determining the Group's adjusted operating profit.
As set out in the 2013 Annual Report and Accounts, the Group continues to incur costs related to the sale of its Nordic business in 2012. These costs largely relate to the transition of IT information and support services that were previously provided by the Nordic business to the wider Group, back to the Group. These costs are included in the expenses related to the discontinued operations in the IFRS consolidated income statement for the year ended 31 December 2014 and as non-core for determining the Group's AOP for the year ended 31 December 2014. Further information on the results of discontinued operations is provided in note H1.
All other businesses have been classified as continuing operations for all reporting periods.
B2: Gross earned premiums and deposits to investment contracts
|
|
|
|
£m |
|
Year ended 31 December 2014 |
Emerging Markets |
Old Mutual Wealth |
Total |
|
Life assurance - insurance contracts |
1,299 |
280 |
1,579 |
|
Life assurance - investment contracts with discretionary participation features |
961 |
- |
961 |
|
General insurance |
669 |
- |
669 |
|
Gross earned premiums |
2,929 |
280 |
3,209 |
|
Life assurance - other investment contracts recognised as deposits |
1,981 |
6,442 |
8,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
Year ended 31 December 2013 |
|
|
|
|
Life assurance - insurance contracts |
|
|
|
|
Life assurance - investment contracts with discretionary participation features |
|
|
|
|
General insurance |
|
|
|
|
Gross earned premiums |
|
|
|
|
Life assurance - other investment contracts recognised as deposits |
|
|
|
B: Segment information continued
B3: Adjusted operating profit statement - segment information for the year ended 31 December 2014
|
|
||||
|
|
Notes |
|
Emerging Markets |
Nedbank |
|
Revenue |
|
|
|
|
|
Gross earned premiums |
B2 |
|
2,929 |
- |
|
Outward reinsurance |
|
|
(223) |
- |
|
Net earned premiums |
|
|
2,706 |
- |
|
Investment return (non-banking) |
|
|
3,422 |
- |
|
Banking interest and similar income |
|
|
116 |
2,941 |
|
Banking trading, investment and similar income |
|
|
7 |
190 |
|
Fee and commission income, and income from service activities |
|
|
506 |
919 |
|
Other income |
|
|
80 |
22 |
|
Inter-segment revenues |
|
|
86 |
11 |
|
Total revenue |
|
|
6,923 |
4,083 |
|
Expenses |
|
|
|
|
|
Claims and benefits (including change in insurance contract provisions) |
|
|
(3,707) |
- |
|
Reinsurance recoveries |
|
|
79 |
- |
|
Net claims and benefits incurred |
|
|
(3,628) |
- |
|
Change in investment contract liabilities |
|
|
(1,208) |
- |
|
Losses on loans and advances |
|
|
- |
(252) |
|
Finance costs (including interest and similar expenses) |
|
|
- |
- |
|
Banking interest payable and similar expenses |
|
|
(42) |
(1,628) |
|
Fee and commission expenses, and other acquisition costs |
|
|
(318) |
(8) |
|
Change in third-party interest in consolidated funds |
|
|
- |
- |
|
Other operating and administrative expenses |
|
|
(1,074) |
(1,387) |
|
Income tax attributable to policyholder returns |
|
|
(36) |
- |
|
Inter-segment expenses |
|
|
(11) |
(47) |
|
Total expenses |
|
|
(6,317) |
(3,322) |
|
Share of associated undertakings' and joint ventures' profit after tax |
|
|
11 |
9 |
|
Loss on disposal of subsidiaries, associated undertakings and strategic investments |
C1(c) |
|
- |
- |
|
Adjusted operating profit/(loss) before tax and non-controlling interests |
|
|
617 |
770 |
|
Income tax expense |
D1 |
|
(189) |
(195) |
|
Non-controlling interests |
|
|
(18) |
(274) |
|
Adjusted operating profit/(loss) after tax and non-controlling interests |
|
|
410 |
301 |
|
Adjusting items after tax and non-controlling interests |
C1(a) |
|
(15) |
14 |
|
Profit/(loss) after tax from continuing operations |
|
|
395 |
315 |
|
Loss from discontinued operations after tax |
H1 |
|
- |
- |
|
Profit/(loss) after tax attributable to equity holders of the parent |
|
|
395 |
315 |
1 Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the year ended 31 December 2014 was £1 million. Non-core operations also include £31 million relating to the disposal of Nordic in 2012 and £19 million relating to the disposal of US Life in 2011. Further information on discontinued operations is provided in note H1.
Of the total revenues, £2,997 million was generated in the UK (2013: £4,947), £1,029 million in the rest of Europe (2013: £864 million), £10,977 million in Southern Africa (2013: £13,446 million), £377 million in the United States (2013: £439 million) and £98 million relates to other operating segments (2013: £114 million).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
Old Mutual Wealth |
Institutional Asset Management |
Other |
Consolidation adjustments |
Adjusted operating profit |
Adjusting items (note C1) |
Discontinued and non-core operations¹ |
IFRS Income statement |
|
|
|
|
|
|
|
|
|
|
280 |
- |
- |
- |
3,209 |
- |
- |
3,209 |
|
(85) |
- |
- |
- |
(308) |
- |
- |
(308) |
|
195 |
- |
- |
- |
2,901 |
- |
- |
2,901 |
|
2,493 |
- |
28 |
438 |
6,381 |
(91) |
14 |
6,304 |
|
- |
- |
- |
- |
3,057 |
- |
- |
3,057 |
|
- |
- |
- |
- |
197 |
- |
- |
197 |
|
1,085 |
422 |
- |
9 |
2,941 |
(47) |
- |
2,894 |
|
8 |
11 |
- |
1 |
122 |
- |
3 |
125 |
|
2 |
- |
2 |
(105) |
(4) |
- |
4 |
- |
|
3,783 |
433 |
30 |
343 |
15,595 |
(138) |
21 |
15,478 |
|
|
|
|
|
|
|
|
|
|
(385) |
- |
- |
- |
(4,092) |
- |
(6) |
(4,098) |
|
136 |
- |
- |
- |
215 |
- |
- |
215 |
|
(249) |
- |
- |
- |
(3,877) |
- |
(6) |
(3,883) |
|
(2,336) |
- |
- |
- |
(3,544) |
- |
- |
(3,544) |
|
- |
- |
- |
- |
(252) |
- |
- |
(252) |
|
- |
- |
(78) |
- |
(78) |
24 |
- |
(54) |
|
- |
- |
- |
- |
(1,670) |
(2) |
- |
(1,672) |
|
(479) |
(4) |
- |
(108) |
(917) |
58 |
(4) |
(863) |
|
- |
- |
- |
(322) |
(322) |
- |
- |
(322) |
|
(429) |
(303) |
(86) |
(18) |
(3,297) |
(241) |
(10) |
(3,548) |
|
(23) |
- |
- |
- |
(59) |
59 |
- |
- |
|
(40) |
(1) |
(6) |
105 |
- |
- |
- |
- |
|
(3,556) |
(308) |
(170) |
(343) |
(14,016) |
(102) |
(20) |
(14,138) |
|
- |
6 |
- |
- |
26 |
- |
- |
26 |
|
- |
- |
- |
- |
- |
(2) |
- |
(2) |
|
227 |
131 |
(140) |
- |
1,605 |
(242) |
1 |
1,364 |
|
(48) |
(29) |
22 |
- |
(439) |
(23) |
- |
(462) |
|
- |
(6) |
- |
- |
(298) |
28 |
- |
(270) |
|
179 |
96 |
(118) |
- |
868 |
(237) |
1 |
632 |
|
(216) |
(19) |
(1) |
- |
(237) |
237 |
- |
- |
|
(37) |
77 |
(119) |
- |
631 |
- |
1 |
632 |
|
- |
- |
- |
- |
- |
- |
(50) |
(50) |
|
(37) |
77 |
(119) |
- |
631 |
- |
(49) |
582 |
B: Segment information continued
B3: Adjusted operating profit statement - segment information for the year ended 31 December 2013
|
|
|
|
|
|
|
|
Notes |
|
Emerging Markets |
|
|
Revenue |
|
|
|
|
|
Gross earned premiums |
B2 |
|
|
|
|
Outward reinsurance |
|
|
|
|
|
Net earned premiums |
|
|
|
|
|
Investment return (non-banking) |
|
|
|
|
|
Banking interest and similar income |
|
|
|
|
|
Banking trading, investment and similar income |
|
|
|
|
|
Fee and commission income, and income from service activities |
|
|
|
|
|
Other income |
|
|
|
|
|
Inter-segment revenues |
|
|
|
|
|
Total revenue |
|
|
|
|
|
Expenses |
|
|
|
|
|
Claims and benefits (including change in insurance contract provisions) |
|
|
|
|
|
Reinsurance recoveries |
|
|
|
|
|
Net claims and benefits incurred |
|
|
|
|
|
Change in investment contract liabilities |
|
|
|
|
|
Losses on loans and advances |
|
|
|
|
|
Finance costs (including interest and similar expenses) |
|
|
|
|
|
Banking interest payable and similar expenses |
|
|
|
|
|
Fee and commission expenses, and other acquisition costs |
|
|
|
|
|
Change in third-party interest in consolidated funds |
|
|
|
|
|
Other operating and administrative expenses |
|
|
|
|
|
Income tax attributable to policyholder returns |
|
|
|
|
|
Inter-segment expenses |
|
|
|
|
|
Total expenses |
|
|
|
|
|
Share of associated undertakings' and joint ventures' profit after tax |
|
|
|
|
|
Loss on disposal of subsidiaries, associated undertakings and strategic investments |
C1(c) |
|
|
|
|
Adjusted operating profit/(loss) before tax and non-controlling interests |
|
|
|
|
|
Income tax expense |
D1 |
|
|
|
|
Non-controlling interests |
|
|
|
|
|
Adjusted operating profit/(loss) after tax and non-controlling interests |
|
|
|
|
|
Adjusting items after tax and non-controlling interests |
C1(a) |
|
|
|
|
Profit/(loss) after tax from continuing operations |
|
|
|
|
|
Profit from discontinued operations after tax |
H1 |
|
|
|
|
Profit/(loss) after tax attributable to equity holders of the parent |
|
|
|
|
1 Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the year ended 31 December 2013 was £32 million. Non-core operations also include a net gain of £3 million divestment cost and additional proceeds received in relation to the Nordic business sold in 2012. Further information on discontinued operations is provided in note H1.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
Old Mutual Wealth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B: Segment information continued
B4: Statement of financial position - segment information at 31 December 2014
|
|
|
|
|
|
|
|
Notes |
|
Emerging Markets |
Nedbank |
|
Assets |
|
|
|
|
|
Goodwill and other intangible assets |
|
|
275 |
452 |
|
Mandatory reserve deposits with central banks |
|
|
- |
829 |
|
Property, plant and equipment |
|
|
304 |
432 |
|
Investment property |
|
|
1,290 |
7 |
|
Deferred tax assets |
|
|
87 |
17 |
|
Investments in associated undertakings and joint ventures |
|
|
61 |
426 |
|
Deferred acquisition costs |
|
|
100 |
- |
|
Reinsurers' share of policyholder liabilities |
|
|
132 |
7 |
|
Loans and advances |
|
|
909 |
33,773 |
|
Investments and securities |
|
|
29,584 |
6,359 |
|
Current tax receivable |
|
|
11 |
16 |
|
Trade, other receivables and other assets |
|
|
622 |
585 |
|
Derivative financial instruments |
|
|
239 |
849 |
|
Cash and cash equivalents |
|
|
1,024 |
741 |
|
Non-current assets held for sale |
H2 |
|
155 |
1 |
|
Inter-segment assets |
|
|
644 |
305 |
|
Total assets |
|
|
35,437 |
44,799 |
|
Liabilities |
|
|
|
|
|
Long-term business insurance policyholder liabilities |
|
|
9,276 |
232 |
|
Investment contract liabilities |
|
|
19,956 |
653 |
|
Property & casualty liabilities |
|
|
319 |
- |
|
Third-party interests in consolidated funds |
|
|
- |
- |
|
Borrowed funds |
E1 |
|
420 |
1,833 |
|
Provisions and accruals |
|
|
198 |
1 |
|
Deferred revenue |
|
|
22 |
- |
|
Deferred tax liabilities |
|
|
203 |
42 |
|
Current tax payable |
|
|
107 |
7 |
|
Trade, other payables and other liabilities |
|
|
1,845 |
790 |
|
Amounts owed to bank depositors |
|
|
385 |
35,858 |
|
Derivative financial instruments |
|
|
286 |
843 |
|
Non-current liabilities held for sale |
H2 |
|
- |
- |
|
Inter-segment liabilities |
|
|
384 |
615 |
|
Total liabilities |
|
|
33,401 |
40,874 |
|
Net assets |
|
|
2,036 |
3,925 |
|
Equity |
|
|
|
|
|
Equity attributable to equity holders of the parent |
|
|
1,929 |
2,067 |
|
Non-controlling interests |
|
|
107 |
1,858 |
|
Ordinary shares |
F1(b)(i) |
|
107 |
1,586 |
|
Preferred securities |
F1(b)(ii) |
|
- |
272 |
|
|
|
|
|
|
|
Total equity |
|
|
2,036 |
3,925 |
The net assets of Emerging Markets are stated after eliminating investments in Group equity and debt instruments of £227 million (2013: £302 million) held in policyholder funds. These include investments in the Company's ordinary shares, subordinated liabilities and preferred securities issued by the Group's banking subsidiary Nedbank Limited.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
Old Mutual Wealth |
Institutional Asset Management |
Other |
Consolidation adjustments |
Non-core operations |
Total |
|
|
|
|
|
|
|
|
1,197 |
839 |
- |
- |
- |
2,763 |
|
- |
- |
- |
- |
- |
829 |
|
13 |
16 |
- |
- |
- |
765 |
|
- |
- |
- |
381 |
- |
1,678 |
|
6 |
172 |
- |
- |
1 |
283 |
|
- |
21 |
10 |
- |
- |
518 |
|
746 |
16 |
- |
- |
- |
862 |
|
2,175 |
- |
- |
- |
- |
2,314 |
|
175 |
- |
- |
- |
- |
34,857 |
|
46,631 |
40 |
554 |
4,038 |
341 |
87,547 |
|
64 |
1 |
- |
- |
- |
92 |
|
385 |
134 |
36 |
302 |
298 |
2,362 |
|
- |
- |
71 |
60 |
8 |
1,227 |
|
689 |
130 |
696 |
1,639 |
25 |
4,944 |
|
1,319 |
- |
- |
- |
- |
1,475 |
|
154 |
- |
321 |
(1,615) |
191 |
- |
|
53,554 |
1,369 |
1,688 |
4,805 |
864 |
142,516 |
|
|
|
|
|
|
|
|
291 |
- |
- |
- |
720 |
10,519 |
|
48,188 |
- |
- |
- |
44 |
68,841 |
|
- |
- |
- |
- |
- |
319 |
|
- |
- |
- |
5,986 |
- |
5,986 |
|
- |
114 |
677 |
- |
- |
3,044 |
|
40 |
3 |
42 |
- |
- |
284 |
|
308 |
- |
- |
- |
- |
330 |
|
190 |
- |
19 |
- |
- |
454 |
|
35 |
3 |
37 |
- |
- |
189 |
|
913 |
278 |
76 |
364 |
10 |
4,276 |
|
- |
- |
- |
- |
- |
36,243 |
|
- |
- |
1 |
70 |
1 |
1,201 |
|
1,285 |
- |
- |
- |
- |
1,285 |
|
179 |
144 |
293 |
(1,615) |
- |
- |
|
51,429 |
542 |
1,145 |
4,805 |
775 |
132,971 |
|
2,125 |
827 |
543 |
- |
89 |
9,545 |
|
|
|
|
|
|
|
|
2,125 |
653 |
543 |
- |
89 |
7,406 |
|
- |
174 |
- |
- |
- |
2,139 |
|
- |
174 |
- |
- |
- |
1,867 |
|
- |
- |
- |
- |
- |
272 |
|
|
|
|
|
|
|
|
2,125 |
827 |
543 |
- |
89 |
9,545 |
B: Segment information continued
B4: Statement of financial position - segment information at 31 December 2013
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
|
Assets |
|
|
|
|
||||||
|
Goodwill and other intangible assets |
|
|
|
|
||||||
|
Mandatory reserve deposits with central banks |
|
|
|
|
||||||
|
Property, plant and equipment |
|
|
|
|
||||||
|
Investment property |
|
|
|
|
||||||
|
Deferred tax assets |
|
|
|
|
||||||
|
Investments in associated undertakings and joint ventures |
|
|
|
|
||||||
|
Deferred acquisition costs |
|
|
|
|
||||||
|
Reinsurers' share of policyholder liabilities |
|
|
|
|
||||||
|
Loans and advances |
|
|
|
|
||||||
|
Investments and securities |
|
|
|
|
||||||
|
Current tax receivable |
|
|
|
|
||||||
|
Trade, other receivables and other assets |
|
|
|
|
||||||
|
Derivative financial instruments |
|
|
|
|
||||||
|
Cash and cash equivalents |
|
|
|
|
||||||
|
Non-current assets held for sale |
H2 |
|
|
|
||||||
|
Inter-segment assets |
|
|
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|
||||||
|
Total assets |
|
|
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|
||||||
|
Liabilities |
|
|
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|
||||||
|
Long-term business insurance policyholder liabilities |
|
|
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|
||||||
|
Investment contract liabilities |
|
|
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|
||||||
|
Property & casualty liabilities |
|
|
|
|
||||||
|
Third-party interests in consolidated funds |
|
|
|
|
||||||
|
Borrowed funds |
E1 |
|
|
|
||||||
|
Provisions and accruals |
|
|
|
|
||||||
|
Deferred revenue |
|
|
|
|
||||||
|
Deferred tax liabilities |
|
|
|
|
||||||
|
Current tax payable |
|
|
|
|
||||||
|
Trade, other payables and other liabilities |
|
|
|
|
||||||
|
Amounts owed to bank depositors |
|
|
|
|
||||||
|
Derivative financial instruments |
|
|
|
|
||||||
|
Non-current liabilities held for sale |
H2 |
|
|
|
||||||
|
Inter-segment liabilities |
|
|
|
|
||||||
|
Total liabilities |
|
|
|
|
||||||
|
Net assets |
|
|
|
|
||||||
|
Equity |
|
|
|
|
||||||
|
Equity attributable to equity holders of the parent |
|
|
|
|
||||||
|
Non-controlling interests |
|
|
|
|
||||||
|
Ordinary shares |
F1(b)(i) |
|
|
|
||||||
|
Preferred securities |
F1(b)(ii) |
|
|
|
||||||
|
|
|
|
|
|
||||||
|
Total equity |
|
|
|
|
||||||
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
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|
||||
|
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|
|
|
£m |
|
||||
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|
||||
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||||
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||||
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||||
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|
||||
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||||
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|
||||
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|
||||
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||||
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||||
|
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||||
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|
||||
C: Other key performance information
C1: Operating profit adjusting items
(a) Summary of adjusting items for determination of adjusted operating profit (AOP)
In determining the AOP of the Group for core operations, 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 AOP to profit before and after tax.
|
|
|
£m |
|
|
|
Notes |
Year ended 31 December 2014 |
|
|
(Expense)/income |
|
|
|
|
Goodwill impairment and impact of acquisition accounting |
C1(b) |
(128) |
|
|
Loss on disposal of subsidiaries, associated undertakings and strategic investments |
C1(c) |
(2) |
|
|
Short-term fluctuations in investment return |
C1(d) |
(49) |
|
|
Investment return adjustment for Group equity and debt instruments held in life funds |
C1(e) |
(42) |
|
|
Dividends declared to holders of perpetual preferred callable securities |
C1(f) |
32 |
|
|
Institutional Asset Management equity plans |
C1(g) |
(42) |
|
|
Credit-related fair value losses on Group debt instruments |
C1(h) |
(10) |
|
|
Restructuring costs |
C1(i) |
(60) |
|
|
Total adjusting items |
|
(301) |
|
|
Tax on adjusting items |
D1(d) |
36 |
|
|
Non-controlling interest in adjusting items |
|
28 |
|
|
Total adjusting items after tax and non-controlling interests |
|
(237) |
|
(b) Goodwill impairment and impact of acquisition accounting
When applying acquisition accounting, deferred acquisition costs and deferred revenues existing at the point of acquisition are not recognised under IFRS. These are reversed on acquisition in the 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 AOP, the Group recognises deferred revenue and acquisition costs and deferred revenue in relation to policies sold by acquired businesses pre-acquisition. The Group excludes the impairment of goodwill, the amortisation and impairment of acquired other intangibles and acquired PVIF as well as the movements in certain acquisition date provisions. Costs incurred on completed acquisitions are also excluded from AOP. If the intangible assets recognised as a result of a business combination are subsequently impaired, this is excluded from AOP. The effect of these adjustments to determine AOP are summarised below:
|
|
|
|
|
£m |
|
Year ended 31 December 2014 |
|
Emerging Markets |
Old Mutual Wealth |
Total |
|
Amortisation of acquired PVIF |
|
(3) |
(67) |
(70) |
|
Amortisation of acquired deferred costs and revenue |
|
- |
11 |
11 |
|
Amortisation of other acquired intangible assets |
|
(7) |
(47) |
(54) |
|
Change in acquisition date provisions |
|
- |
(1) |
(1) |
|
Impairment of goodwill and other intangible assets |
|
- |
(14) |
(14) |
|
|
|
(10) |
(118) |
(128) |
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
£m |
|
Year ended 31 December 2013 |
|
|
|
|
|
Amortisation of acquired PVIF |
|
|
|
|
|
Amortisation of acquired deferred costs and revenue |
|
|
|
|
|
Amortisation of other acquired intangible assets |
|
|
|
|
|
Impairment of goodwill and other intangible assets |
|
|
|
|
|
|
|
|
|
|
(c) Loss on disposal of subsidiaries, associated undertakings and strategic investments
Loss on disposal of subsidiaries, associated undertakings and strategic investments is analysed below:
|
|
|
£m |
|
|
Year ended 31 December 2014 |
|
|
Emerging Markets |
66 |
|
|
Old Mutual Wealth |
(70) |
|
|
Institutional Asset Management |
2 |
|
|
Loss on disposal of subsidiaries, associated undertakings and strategic investments |
(2) |
|
Emerging Markets
On 30 April 2014, following the termination of the management agreement with SA Corporate Real Estate Fund, a JSE listed real estate trust, the Group agreed to sell and transfer the business to the new manager once the transaction became unconditional. A profit of £4 million has been recognised in profit or loss.
On 1 September 2014, the Group completed the acquisition of an additional 25% stake in Old Mutual Finance (Pty) Ltd. The accounting related to the step up in ownership from 50% to 75% effectively involved a simultaneous sale of 50% of the business, followed by an acquisition of the fair value of 75% of the business. Consequently a profit of £62 million has been realised on the transaction, calculated as the difference between the fair value of the initial 50% and the carrying amount of the investment in Old Mutual Finance (Pty) Ltd at 1 September 2014.
Old Mutual Wealth
On 30 May 2014, the Group completed the disposal of Skandia Poland, part of Old Mutual Wealth. A loss on disposal of £21 million has been recognised in profit or loss.
On 1 October 2014, the Group announced that it had completed the sale of Skandia Austria and Skandia Germany. A loss on disposal of £43 million has been recognised in profit or loss.
On 6 November 2014, the Group completed the sale Skandia Liechtenstein. A loss on disposal of £6 million has been recognised in profit of loss.
Institutional Asset Management
During the year ended 31 December 2014, the Group received additional earn-out income of £2 million from affiliates disposed of in the prior year.
On 2 January 2013, the Group completed the sale of five of its affiliates and recognised a loss of £1 million.
On 11 October 2013, Institutional Asset Management committed to a plan to cease the operations of Echo Point. The incremental cost of £3 million associated with discontinuing the entity was recognised in full during October 2013.
(d) Short-term fluctuations in investment return
Profit before tax, as disclosed in the consolidated IFRS income statement, includes actual investment returns earned on the shareholder assets of the Group's life assurance and property & casualty businesses. AOP 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 is referred to as the short-term fluctuation in investment return.
Long-term rates of return are based on achieved 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. The underlying rates are principally derived with reference to 10-year government bond rates, cash and money market rates and an explicit equity risk premium for South African businesses. The rates set out below reflect the apportionment of underlying investments in cash deposits, money market instruments and equity assets. Long-term rates of return are reviewed frequently by the Board, usually annually, for appropriateness. The review of the long-term rates of return seeks to ensure that the returns credited to AOP 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 Old Mutual Wealth, the return is applied to average investible assets.
|
|
|
% |
|
Long-term investment rates |
Year ended 31 December 2014 |
|
|
Emerging Markets |
7.4 - 8.0 |
|
|
Old Mutual Wealth |
1.0 |
|
C: Other key performance information continued
C1: Operating profit adjusting items continued
(d) Short-term fluctuations in investment return continued
Analysis of short-term fluctuations in investment return
|
|
||||
|
|
£m |
|||
|
Year ended 31 December 2014 |
Emerging Markets |
Old Mutual Wealth |
Other |
Total |
|
Actual shareholder investment return |
64 |
23 |
16 |
103 |
|
Less: Long-term investment return |
123 |
5 |
24 |
152 |
|
Short-term fluctuations in investment return |
(59) |
18 |
(8) |
(49) |
|
|
|
|
|
|
|
|
£m |
|||
|
Year ended 31 December 2013 |
|
|
|
|
|
Actual shareholder investment return |
|
|
|
|
|
Less: Long-term investment return |
|
|
|
|
|
Short-term fluctuations in investment return |
|
|
|
|
(e) Investment return adjustment for Group equity and debt instruments held in policyholder funds
AOP 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 shares issued by the Group. These investment returns are eliminated within the consolidated income statement in arriving at profit before tax in the IFRS income statement, but are included in AOP. This ensures consistency of treatment with the measures in the related policyholder liability. During the year ended 31 December 2014, the investment return adjustment increased AOP by £42 million (year ended 31 December 2013: increase of £100 million).
(f) Dividends declared to holders of perpetual preferred callable securities
Dividends declared to the holders of the Group's perpetual preferred callable securities on an AOP basis were £32 million for the year ended 31 December 2014 (year ended 31 December 2013: £42 million). For the purpose of determining AOP, these are recognised in finance costs on an accrual basis. In accordance with IFRS, the total cash distribution is recognised directly in equity.
(g) Institutional Asset Management equity plans
Institutional Asset Management has a number of long-term incentive arrangements with senior employees in its asset management affiliates.
The Group has issued put options over the equity of certain affiliates to senior affiliate employees, as part of its Institutional Asset Management incentive schemes. The impact of revaluing these instruments is recognised in accordance with IFRS, but excluded from AOP. At 31 December 2014, these instruments were revalued, the impact of which was a loss of £42 million (year ended 31 December 2013: loss of £38 million).
(h) Credit-related fair value losses on Group debt instruments
The widening of the credit spread on the Group's debt instruments causes the market value of these instruments to decrease, resulting in gains being recognised in profit or loss. Conversely, if the credit spread narrows the market value of debt instruments increases causing losses to be recognised in the consolidated income statement. In the directors' view, such movements are not reflective of the underlying performance of the Group and will reverse over time. Therefore they have been excluded from AOP. For the year ended 31 December 2014, due to narrowing of credit spreads, a net loss of £10 million was recognised (year ended 31 December 2013: net loss of £31 million).
(i) Old Mutual Wealth restructuring expenditure
The Old Mutual Wealth business embarked on a significant programme of operational change in 2013. This will fundamentally restructure the way in which its UK platform business operates. Over the next two years, it will migrate certain elements of service provision to International Financial Data Services (IFDS). Costs related to decommissioning of existing technology and service provision and the migration of service to IFDS are excluded from AOP. These costs comprise payments to IFDS and directly attributable internal project costs and totalled £60 million for the year ended 31 December 2014 (year ended 31 December 2013: £20 million).
C2: Earnings and earnings per share
The Group calculates earnings per share (EPS) on a number of different bases as appropriate to prevailing international, UK and South African practices and guidance. IFRS requires the calculation of basic and diluted EPS. Adjusted operating EPS reflects earnings per share that is consistent with the Group's alternative profit measure. JSE Limited (JSE) listing requirements also require the Group to calculate headline EPS. The Group's EPS on these different bases are summarised below:
|
|
|
|
|
Pence |
|
|
Source of guidance |
Notes |
Year ended 31 December 2014 |
|
|
Basic earnings per share |
IFRS |
C2(a) |
12.4 |
|
|
Diluted basic earnings per share |
IFRS |
C2(b) |
11.5 |
|
|
Adjusted operating earnings per share |
Group policy |
C2(c) |
17.9 |
|
|
|
|
|
|
|
|
Headline earnings per share (Gross of tax) |
JSE Listing Requirements |
C2(d) |
12.3 |
|
|
Headline earnings per share (Net of tax) |
JSE Listing Requirements |
C2(d) |
12.6 |
|
|
|
|
|
|
|
|
Diluted headline earnings per share (Gross of tax) |
JSE Listing Requirements |
C2(d) |
11.4 |
|
|
Diluted headline earnings per share (Net of tax) |
JSE Listing Requirements |
C2(d) |
11.6 |
|
(a) Basic 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 year excluding own shares held in policyholder funds, Employee Share Ownership Plan Trusts (ESOP), Black Economic Empowerment trusts and other related undertakings.
The table below reconciles the profit attributable to equity holders of the parent to profit attributable to ordinary equity holders:
|
|
|
|
£m |
|
|
|
Year ended 31 December 2014 |
|
|
Profit for the financial period attributable to equity holders of the parent from continuing operations |
|
632 |
|
|
(Loss)/profit for the financial period attributable to equity holders of the parent from discontinued operations |
|
(50) |
|
|
Profit for the financial period attributable to equity holders of the parent |
|
582 |
|
|
Dividends paid to holders of perpetual preferred callable securities, net of tax credits |
|
(25) |
|
|
Profit attributable to ordinary equity holders |
|
557 |
|
Total dividends paid to holders of perpetual preferred callable securities of £25 million for the year ended 31 December 2014 (year ended 31 December 2013: £37 million) are stated net of tax credits of £7 million (year ended 31 December 2013: £10 million).
The table below summarises the calculation of the weighted average number of ordinary shares for the purposes of calculating basic earnings per share:
|
|
|
|
Millions |
|
|
Notes |
Year ended 31 December 2014 |
|
|
Weighted average number of ordinary shares in issue |
|
4,901 |
|
|
Shares held in charitable foundations |
|
(6) |
|
|
Shares held in ESOP trusts |
|
(50) |
|
|
Adjusted weighted average number of ordinary shares |
C2(c) |
4,845 |
|
|
Shares held in life funds |
|
(127) |
|
|
Shares held in Black Economic Empowerment trusts |
|
(233) |
|
|
Weighted average number of ordinary shares used to calculate basic earnings per share |
|
4,485 |
|
|
|
|
|
|
|
Basic earnings per ordinary share (pence) |
|
12.4 |
|
C: Other key performance information continued
C2: Earnings per share continued
(b) Diluted basic earnings per share
Diluted basic EPS recognises the dilutive impact of shares and options held in ESOP trusts and Black Economic Empowerment trusts, to the extent they have value, in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full period.
The tables below reconcile the profit attributable to ordinary equity holders to diluted profit attributable to ordinary equity holders and summarises the calculation of weighted average number of shares for the purpose of calculating diluted basic earnings per share:
|
|
|
|
|
|
|
Notes |
Year ended 31 December 2014 |
|
|
Profit attributable to ordinary equity holders (£m) |
|
557 |
|
|
Dilution effect on profit relating to share options issued by subsidiaries (£m) |
|
(10) |
|
|
Diluted profit attributable to ordinary equity holders (£m) |
|
547 |
|
|
Weighted average number of ordinary shares (millions) |
C2(a) |
4,485 |
|
|
Adjustments for share options held by ESOP trusts (millions) |
|
48 |
|
|
Adjustments for shares held in Black Economic Empowerment trusts (millions) |
|
233 |
|
|
Weighted average number of ordinary shares used to calculate diluted basic earnings per share (millions) |
|
4,766 |
|
|
|
|
|
|
|
Diluted basic earnings per ordinary share (pence) |
|
11.5 |
|
(c) Adjusted operating earnings per share
The following table presents a reconciliation of profit for the financial year to adjusted operating profit after tax attributable to ordinary equity holders and summarises the calculation of adjusted operating earnings per share:
|
|
|
|
|
|
|
Notes |
Year ended 31 December 2014 |
|
|
Profit for the financial period attributable to equity holders of the parent |
|
582 |
|
|
Adjusting items |
C1(a) |
301 |
|
|
Tax on adjusting items |
|
(36) |
|
|
Non-core operations |
B3 |
(1) |
|
|
Loss/(profit) from discontinued operations |
H1 |
50 |
|
|
Non-controlling interest on adjusting items |
|
(28) |
|
|
Adjusted operating profit after tax attributable to ordinary equity holders (£m) |
|
868 |
|
|
Adjusted weighted average number of ordinary shares used to calculate adjusted operating earnings per share (millions) |
C2(a) |
4,845 |
|
|
|
|
|
|
|
Adjusted operating earnings per share (pence) |
|
17.9 |
|
(d) Headline earnings per share
The Group is required to calculate headline earnings per share (HEPS) in accordance with the JSE Limited (JSE) Listing Requirements, determined by reference to the South African Institute of Chartered Accountants' circular 02/2013 (Revised) 'Headline Earnings'. The table below sets out a reconciliation of basic EPS and HEPS in accordance with that circular. Disclosure of HEPS is not a requirement of IFRS, but it is a commonly used measure of earnings in South Africa. The table below reconciles the profit for the financial year attributable to equity holders of the parent to headline earnings and summarises the calculation of basic HEPS:
|
|
|
|
|
|
£m |
|
|
|
Year ended 31 December 2014 |
|
||
|
|
Notes |
Gross |
Net |
|
|
|
Profit for the financial period attributable to equity holders of the parent |
|
582 |
582 |
|
|
|
Dividends paid to holders of perpetual preferred callable securities |
|
(25) |
(25) |
|
|
|
Profit attributable to ordinary equity holders |
|
557 |
557 |
|
|
|
Adjustments: |
|
|
|
|
|
|
Impairments of goodwill and intangible assets |
|
14 |
14 |
|
|
|
Loss/(profit) on disposal of subsidiaries, associated undertakings and strategic investments |
|
2 |
14 |
|
|
|
Realised gains (net of impairments) on available-for-sale financial assets |
|
(20) |
(20) |
|
|
|
Headline earnings |
|
553 |
565 |
|
|
|
Dilution effect on earnings relating to share options issued by subsidiaries (£m) |
|
(10) |
(10) |
|
|
|
Diluted headline earnings |
|
543 |
555 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares (millions) |
C2(a) |
4,485 |
4,485 |
|
|
|
Diluted weighted average number of ordinary shares (millions) |
C2(b) |
4,766 |
4,766 |
|
|
|
|
|
|
|
|
|
|
Headline earnings per share (pence) |
|
12.3 |
12.6 |
|
|
|
Diluted headline earnings per share (pence) |
|
11.4 |
11.6 |
|
|
C3: Dividends
|
|
|
£m |
|
|
Year ended 31 December 2014 |
|
|
2012 Final dividend paid - 5.25p per 11 3/7p share |
- |
|
|
2013 Interim dividend paid - 2.10p per 11 3/7p share |
- |
|
|
2013 Final dividend paid - 6.00p per 11 3/7p share |
279 |
|
|
2014 Interim dividend paid - 2.45p per 11 3/7p share |
115 |
|
|
Dividends to ordinary equity holders |
394 |
|
|
Dividends paid to holders of perpetual preferred callable securities |
32 |
|
|
Dividend payments for the period |
426 |
|
Final and interim dividends paid to ordinary equity holders are calculated using the number of shares in issue at the record date less own shares held in ESOP trusts, life funds of Group entities, 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.
A final dividend of 6.25 pence (or its equivalent in other applicable currencies) per ordinary share in the Company has been recommended by the directors. The final dividend will be paid on 29 May 2015 to shareholders on the register at the close of business on 17 April 2015 for the South Africa, Zimbabwe, Namibia and Malawi registers and 22 April 2015 for the UK register. The dividend will absorb an estimated £293 million of shareholders' funds. The Company is not planning to offer a scrip dividend alternative.
In March and November 2014, £17 million and £15 million respectively, were declared and paid to holders of perpetual preferred callable securities (March 2013: £22 million, November 2013: £25 million).
D: Other income statement notes
D1: Income tax expense
(a) Analysis of total income tax expense
|
|
|
£m |
|
|
Year ended 31 December 2014 |
|
|
Current tax |
|
|
|
United Kingdom |
19 |
|
|
Overseas tax |
|
|
|
- Africa |
336 |
|
|
- Europe |
32 |
|
|
- Rest of the world |
5 |
|
|
Withholding taxes |
16 |
|
|
Adjustments to current tax in respect of prior years |
31 |
|
|
Total current tax |
439 |
|
|
Deferred tax |
|
|
|
Origination and reversal of temporary differences |
43 |
|
|
Effect on deferred tax of changes in tax rates |
- |
|
|
Recognition of previously unrecognised deferred tax assets |
- |
|
|
Adjustments to deferred tax in respect of prior years |
(20) |
|
|
Total deferred tax |
23 |
|
|
Total income tax expense |
462 |
|
(b) Reconciliation of total income tax expense
|
|
|
£m |
|
|
Year ended 31 December 2014 |
|
|
Profit before tax |
1,364 |
|
|
Tax at UK standard rate of 21.5% (2013: 23.25%) |
293 |
|
|
Different tax rate or basis on overseas operations |
95 |
|
|
Untaxed and low taxed income |
(56) |
|
|
Disallowable expenses |
67 |
|
|
Net movement on deferred tax assets not recognised |
7 |
|
|
Effect on deferred tax of changes in tax rates |
- |
|
|
Withholding taxes |
8 |
|
|
Income tax attributable to policyholder returns |
46 |
|
|
Tax on Group equity held in life funds |
- |
|
|
Other |
2 |
|
|
Total income tax expense |
462 |
|
(c) Income tax relating to components of other comprehensive income
|
|
|
£m |
|
|
Year ended 31 December 2014 |
|
|
Preferred perpetual callable securities |
(7) |
|
|
Measurement gains on defined benefit plans |
1 |
|
|
Income tax on items that will not be reclassified subsequently to profit or loss |
(6) |
|
|
Income tax on items that may be reclassified subsequently to profit or loss |
5 |
|
|
Income tax (credit)/expense relating to components of other comprehensive income |
(1) |
|
(d) Reconciliation of income tax expense in the IFRS income statement to income tax on adjusted operating profit
|
|
|
£m |
|
|
Year ended 31 December 2014 |
|
|
Income tax expense |
462 |
|
|
Tax on adjusting items |
|
|
|
Goodwill impairment and impact of acquisition accounting |
15 |
|
|
(Loss)/profit on disposal of subsidiaries, associates and strategic investments |
(11) |
|
|
Short-term fluctuations in investment return |
6 |
|
|
Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity |
(7) |
|
|
Institutional Asset Management equity plans |
20 |
|
|
Restructuring costs |
13 |
|
|
Total tax on adjusting items |
36 |
|
|
Income tax attributable to policyholders returns |
(59) |
|
|
Income tax on adjusted operating profit |
439 |
|
E: Financial assets and liabilities
E1: Borrowed funds
|
|
|
|
|
|
|
|
|
|
£m |
|
|
Notes |
|
Non-banking |
Banking |
At 31 December 2014 |
|
|
|
|
|
Senior debt securities and term loans |
|
|
112 |
1,264 |
1,376 |
|
|
|
|
|
Floating rate notes |
E1(a)(i) |
|
- |
563 |
563 |
|
|
|
|
|
Fixed rate notes |
E1(a)(ii) |
|
112 |
576 |
688 |
|
|
|
|
|
Term loans |
E1(a)(iii) |
|
- |
125 |
125 |
|
|
|
|
|
Revolving credit facilities |
E1(b) |
|
114 |
72 |
186 |
|
|
|
|
|
Mortgage-backed securities |
E1(c) |
|
- |
52 |
52 |
|
|
|
|
|
Subordinated debt securities |
E1(d) |
|
788 |
642 |
1,430 |
|
|
|
|
|
Borrowed funds |
|
|
1,014 |
2,030 |
3,044 |
|
|
|
|
|
Other instruments treated as equity for accounting purposes |
|
|
|
|
|
|
|
|
|
|
€374 million perpetual preferred callable securities at 5.00% |
|
|
253 |
|
|
|
|
|
|
|
£273 million perpetual preferred callable securities as 6.40% |
|
|
273 |
|
|
|
|
|
|
|
Total: Book value |
|
|
1,540 |
|
|
|
|
|
|
|
Nominal value of the above |
|
|
1,512 |
|
|
|
|
|
|
The table below is a maturity analysis of the liability cash flows based on contractual maturity dates for borrowed funds. Maturity analysis is undiscounted and based on year-end exchange rates.
|
|
|
|
|
|
|
£m |
|
|
Non-banking |
Banking |
At 31 December 2014 |
|
|
|
|
Less than 1 year |
392 |
633 |
1,025 |
|
|
|
|
Greater than 1 year and less than 5 years |
555 |
1,738 |
2,293 |
|
|
|
|
Greater than 5 years |
1,116 |
302 |
1,418 |
|
|
|
|
Total |
2,063 |
2,673 |
4,736 |
|
|
|
E1: Borrowed funds continued
(a) Senior debt securities and term loans
(i) Floating rate notes (net of group holdings)
|
|
|
|
£m |
|
|
Maturity date |
At 31 December 2014 |
|
|
Banking - Floating rate unsecured senior debt |
|
|
|
|
R2,563 million at JIBAR + between 0.94% to 1.05% |
|
- |
|
|
R1,297 million at JIBAR + 1.00% |
|
72 |
|
|
R1,027 million at JIBAR + 1.75% |
|
57 |
|
|
R250 million at JIBAR + 1.00% |
|
14 |
|
|
R1,044 million at JIBAR + 2.20% |
|
59 |
|
|
R677 million at JIBAR + 1.25% |
|
38 |
|
|
R3,056 million at JIBAR + 0.8% |
|
169 |
|
|
R694 million at JIBAR + 0.75% |
|
39 |
|
|
R405 million at JIBAR + 1.30% |
|
23 |
|
|
R1,035 million at JIBAR + 0.85% |
|
58 |
|
|
R786 million at JIBAR + 1.30% |
|
39 |
|
|
R806 million at JIBAR + 0.9% |
|
45 |
|
|
R241 million at JIBAR + 1.12% |
|
14 |
|
|
R80 million at JIBAR + 2.15% |
|
5 |
|
|
R650 million at JIBAR + 1.3% |
|
36 |
|
|
|
|
668 |
|
|
Less: floating rate notes held by other Group companies |
|
(105) |
|
|
Total floating rate notes |
|
563 |
|
All floating rate notes are non-qualifying for the purposes of regulatory tiers of capital.
(ii) Fixed rate notes (net of Group holdings)
|
|
|
|
£m |
|
|
Maturity date |
At 31 December 2014 |
|
|
Banking - Fixed rate unsecured senior debt |
|
|
|
|
R450 million at 8.39% |
|
- |
|
|
R478 million at 9.68% |
|
27 |
|
|
R3,244 million at 10.55% |
|
186 |
|
|
R1,137 million at 9.36% |
|
65 |
|
|
R151 million at 6.91% |
|
9 |
|
|
R1,273 million at 11.39% |
|
77 |
|
|
R1,888 million at 8.92% |
|
106 |
|
|
R855 million at 9.38% |
|
49 |
|
|
R500 million at 9.29% |
|
28 |
|
|
R391 million at 9.73% |
|
22 |
|
|
R660 million at zero coupon |
|
15 |
|
|
|
|
584 |
|
|
Less: Fixed rate notes held by other Group companies |
|
(8) |
|
|
Banking fixed rate unsecured senior debt (net of Group holdings) |
|
576 |
|
|
|
|
|
|
|
Non-banking |
|
|
|
|
$2 million secured senior debt at 5.23% |
|
- |
|
|
£112 million eurobond at 7.125% |
|
112 |
|
|
|
|
112 |
|
|
Total fixed rate notes |
|
688 |
|
All fixed rate notes are non-qualifying for the purpose of regulatory tiers of capital.
(iii) Term loans
|
|
|
|
£m |
|
|
Maturity date |
At 31 December 2014 |
|
|
Banking - Floating rate loans |
|
|
|
|
R1,500 million at JIBAR + 2.95% |
|
84 |
|
|
|
|
|
|
|
Banking - Fixed rate loans |
|
|
|
|
$4 million at 9.5% |
|
- |
|
|
$6 million at 8% |
|
4 |
|
|
$19 million at 8% |
|
12 |
|
|
$10 million at 8% |
|
7 |
|
|
$5 million at 11% |
|
3 |
|
|
$10 million at 10% |
|
6 |
|
|
KES720 million at 14.00% to 14.75% |
|
5 |
|
|
KES175 million at 11.70% |
|
1 |
|
|
KES225 million at 11.70% |
|
2 |
|
|
KES200 million at 5.00% |
|
1 |
|
|
Total term loans and other loans |
|
125 |
|
These term loans are used to fund the lending operations of the Emerging Markets banking businesses.
(b) Revolving credit facilities
|
|
|
|
£m |
|
|
Maturity date |
At 31 December 2014 |
|
|
Banking |
|
|
|
|
R1,000 million drawn of a R1,200 million facility at 3 month JIBAR + 2.95% |
|
44 |
|
|
R500 million fully drawn at 3 month JIBAR + 3.1% |
|
28 |
|
|
|
|
72 |
|
|
Non-banking |
|
|
|
|
$177 million drawn of a $350 million facility at USD LIBOR + 1.5% |
|
114 |
|
|
Total revolving credit facilities |
|
186 |
|
The Group also has access to a £800 million (2013: £800 million) five-year multi-currency revolving credit facility which matures in August 2019, with an optional further one year extension at both the first and second year anniversary. At 31 December 2014 and 31 December 2013, none of this facility was drawn and there were no irrevocable letters of credit in issue against this facility.
(c) Mortgage-backed securities (net of Group holdings)
|
|
|
|
|
£m |
|
|
Tier |
Maturity date |
At 31 December 2014 |
|
|
Banking |
|
|
|
|
|
R480 million (class A1) at JIBAR + 1.10% |
|
|
2 |
|
|
R336 million (class A2) at JIBAR + 1.25% |
|
|
19 |
|
|
R900 million (class A3) at JIBAR + 1.54% |
|
|
51 |
|
|
R110 million (class B) at JIBAR + 1.90% |
|
|
6 |
|
|
|
|
|
78 |
|
|
Less: Mortgage backed securities held by other Group companies |
(26) |
|
||
|
Total mortgage-backed securities |
|
|
52 |
|
E1: Borrowed funds continued
(d) Subordinated debt securities (net of Group holdings)
|
|
|
|
|
£m |
|
|
Tier |
Maturity date |
At 31 December 2014 |
|
|
Banking |
|
|
|
|
|
R1,700 million at 8.90% |
Tier 2 |
Repaid |
- |
101 |
|
R1,265 million at JIBAR + 4.75% |
Non-core Tier 1 |
November 2018 |
74 |
74 |
|
R487 million at 15.05% |
Non-core Tier 1 |
November 2018 |
32 |
32 |
|
R1,000 million at 10.54% |
Tier 2 |
September 2020 |
58 |
62 |
|
$100 million at 3 month USD LIBOR |
Tier 2 Secondary |
March 2022 |
64 |
60 |
|
R2,000 million at JIBAR + 0.47% |
Tier 2 |
July 2022 |
113 |
116 |
|
R1,800 million at JIBAR + 2.75% |
Tier 2 |
July 2023 |
102 |
105 |
|
R1,200 million at JIBAR + 2.55% |
Tier 2 |
November 2023 |
67 |
69 |
|
R450 million at JIBAR plus 10.49% |
Tier 2 |
April 2024 |
26 |
- |
|
R1,737 million at 3 month JIBAR + 2.55% |
Tier 2 |
April 2024 |
98 |
- |
|
R300 million at JIBAR + 2.75% |
Tier 2 |
April 2024 |
17 |
- |
|
|
|
|
651 |
619 |
|
Less: Banking subordinated debt securities held by other Group companies |
(9) |
(22) |
||
|
Banking subordinated securities1 |
|
642 |
597 |
|
|
|
|
|
|
|
|
Non-banking |
|
|
|
|
|
R3,000 million at 8.92% |
Lower Tier 2 |
October 2020 |
167 |
172 |
|
£500 million at 8.00% |
Lower Tier 2 |
June 2021 |
565 |
531 |
|
R300 million at 9.26%2 |
Lower Tier 2 |
November 2024 |
17 |
- |
|
R700 million at 3 month JIBAR + 2.2%3 |
Lower Tier 2 |
November 2024 |
39 |
- |
|
|
|
|
788 |
703 |
|
Total subordinated debt securities |
|
1,430 |
1,300 |
|
1 The first call date of the R1,265 million and R487 million subordinated debt securities is November 2018. All other subordinated debt securities have a first call date five years before the maturity date.
2 On 27 November 2014, Old Mutual Life Assurance Company (South Africa) Limited (OMLAC(SA)) issued R300 million Unsecured Subordinated Callable Fixed Rate Notes under its R10 billion Unsecured Callable Notes Programme. Interest is payable in arrears at a fixed rate of 9.255 per cent on 27 May and 27 November each year up to the first call date of 27 November 2019. If not called on the first call date, the rate increases to 3.3 per cent plus the relevant Government of South Africa benchmark rate, until the maturity date of 27 November 2024.
3 On 27 November 2014, OMLAC(SA) also issued R700 million Unsecured Subordinated Callable Floating Rate Notes under its R10 billion Unsecured Callable Notes Programme. Interest is payable at a floating rate of 3 month ZAR-JIBAR + 2.2 per cent on 27 November, 27 February, 27 May and 27 August each year until 27 November 2019. If not called on the first call date, the floating rate increases to 3 month ZAR-JIBAR + 3.3 per cent resettable quarterly, until the maturity date of 27 November 2024.
F: Other statement of financial position notes
F1: Non-controlling interests
(a) Profit or loss
(i) Ordinary shares
The non-controlling interests share of profit for the financial year has been calculated on the basis of the Group's effective ownership of the subsidiaries in which it does not own 100% of the ordinary equity. The principal subsidiaries where a non-controlling interest exists is Nedbank, the Group's banking business in South Africa and OM Asset Management plc, the Group's asset management business. For the year ended 31 December 2014 the non-controlling interests attributable to ordinary shares was £252 million (2013: £259 million).
(ii) Preferred securities
|
|
|
£m |
|
|
At 31 December 2014 |
|
|
Nedbank |
|
|
|
R3,560 million non-cumulative preference shares |
18 |
|
(iii) Non-controlling interests - adjusted operating profit
The following table reconciles non-controlling interests' share of profit for the financial year to non-controlling interests' share of adjusted operating profit:
|
|
|
£m |
|
Reconciliation of non-controlling interests' share of profit for the financial year |
Year ended 31 December 2014 |
|
|
The non-controlling interests share is analysed as follows: |
|
|
|
Non-controlling interests - ordinary shares |
252 |
|
|
Income attributable to Black Economic Empowerment trusts of listed subsidiaries |
24 |
|
|
Attributable to Institutional Asset Management equity plans |
2 |
|
|
Other items |
2 |
|
|
Non-controlling interests share of adjusted operating profit |
280 |
|
The Group uses an adjusted weighted average effective ownership interests when calculating the non-controllable interest applicable to the adjusted operating profit of its Southern African banking businesses. These reflect the legal ownership of this business following the implementation for Black Economic Empowerment (BEE) schemes in 2005. In accordance with IFRS accounting rules the shares issued for BEE purposes are deemed to be, in substance, options. Therefore the effective ownership interest of the minorities reflected in arriving at profit after tax in the consolidated income statement is lower than that applied in arriving at adjusted operating profit after tax. In 2014 the increase in adjusted operating profit attributable to non-controlling interests as a result of this was £24 million (2013: £20 million).
(b) Statement of financial position
(i) Ordinary shares
|
|
|
|
£m |
|
Reconciliation of movements in non-controlling interests |
Notes |
At 31 December 2014 |
|
|
Balance at beginning of the year |
|
1,502 |
|
|
Non-controlling interests' share of profit |
|
252 |
|
|
Non-controlling interests' share of dividends paid |
|
(127) |
|
|
Disposal of non-controlling interests in OM Asset Management plc |
A2 |
163 |
|
|
Acquisition of businesses |
G2 |
53 |
|
|
Net disposal of interests |
|
39 |
|
|
Foreign exchange and other movements |
|
(15) |
|
|
Balance at end of the year |
|
1,867 |
|
(ii) Preferred securities
|
|
|
£m |
|
|
At 31 December 2014 |
|
|
Nedbank |
|
|
|
R3,560 million non-cumulative preference shares |
272 |
|
R3,560 million R10 preference shares issued by Nedbank Limited (Nedbank), the Group's banking subsidiary. These shares are non-redeemable and non-cumulative and pay a cash dividend equivalent to 75% of the prime overdraft interest rate of Nedbank. Preference shareholders are only entitled to vote during periods when a dividend or any part of it remains unpaid after the due date for payment or when resolutions are proposed that directly affect any rights attaching to the shares or the rights of the holders. Preference shareholders will be entitled to receive their dividends in priority to any payment of dividends made in respect of any other class of Nedbank's shares.
Preferred securities at 31 December 2014 are held at the value of consideration received less unamortised issue costs and are stated net of securities held by Group companies.
G: Other notes
G1: Contingent liabilities
|
|
|
£m |
|
|
At 31 December 2014 |
|
|
Guarantees and assets pledged as collateral security |
1,325 |
|
|
Irrevocable letters of credit |
181 |
|
|
Secured lending |
455 |
|
|
Other contingent liabilities |
6 |
|
The Group, through its South African banking business, has pledged debt securities amounting to £767 million (2013: £703 million) as collateral for deposits received under re-purchase agreements. These amounts represent assets that have been transferred but do not qualify for derecognition under IAS 39. These transactions are entered into under terms and conditions that are standard industry practice to securities borrowing and lending activities.
Contingent liabilities - tax
The Revenue authorities in the principal jurisdictions in which the Group operates (South Africa, the United Kingdom and the United States) routinely review historic transactions undertaken and tax law interpretations made by the Group The Group is committed to conducting its tax affairs in accordance with the tax legislation of the jurisdictions in which they operate. All interpretations made by management are made with reference to the specific facts and circumstances of the transaction and the relevant legislation.
There are occasions where the Group's interpretation of tax law may be challenged by the Revenue authorities. The financial statements include provisions that reflect the Group's assessment of liabilities which might reasonably be expected to materialise as part of their review. The Board is satisfied that adequate provisions have been made to cater for the resolution of tax uncertainties and that the resources required to fund such potential settlements are sufficient.
Due to the level of estimation required in determining tax provisions amounts eventually payable may differ from the provision recognised.
South Africa
During the course of 2014 discussions have been ongoing with the South African Revenue Services (SARS) in relation to the tax treatment of investments supporting Fixed Bond products sold by OMLAC(SA) between 2004 and 2013. SARS has submitted an assessment for amounts due. OMLAC(SA) has appealed the assessments and discussions regarding the merits of the OMLAC(SA) treatment of these items are continuing with SARS.
Nedbank litigation
There are a number of legal or potential claims against Nedbank Group Ltd and its subsidiary companies, the outcome of which cannot be foreseen at present.
As previously disclosed, the largest of these potential actions are claims in the High Court against Nedbank by certain shareholders in Pinnacle Point Group Ltd, alleging that Nedbank had a legal duty of care to them arising from a share swap transaction. In 2013 two of these claims of R147 million and of R802 million were dismissed by the North Gauteng High Court. The only claim remaining is for R355 million.
Originally these shareholders and others lodged proceedings with the Securities Regulation Panel (SRP) for an order declaring that an affected transaction took place. The SRP ruled that no affected transaction took place. The last remaining claimant brought an application to the South Gauteng High Court for the review of the SRP ruling. This application was dismissed with costs on 15 November 2013. The applicant filed a notice to apply for leave to appeal this judgment, and on 16 July 2014 the Supreme Court of Appeal ruled in Nedbank's favour by refusing the application.
During 2011 further actions were instituted against Nedbank by other stakeholders for R210 million and by Absa Bank Limited for R773 million. In both these actions Nedbank have filed exceptions against the claims. On 25 August 2014, the R210 million claim was withdrawn.
Nedbank and its legal advisers remain of the opinion that the remaining claims are ambitious, and that the remaining claimants will have great difficulty succeeding.
Consumer protection
Old Mutual is committed to treating customers fairly and supporting its customers in meeting their lifetime goals and treating customers fairly is central to how our businesses operate. We routinely engage with customers and regulators to ensure that we meet this commitment, but there is the risk of regulatory intervention across various jurisdictions, giving rise to the potential for customer redress which can result in retrospective changes to policyholder benefits, penalties or fines. The Group monitors the exposure to these actions and makes provision for the related costs as appropriate.
G2: Businesses acquired during the year
The Group continued to expand operations in Africa and the United Kingdom through the following completed acquisitions:
|
Acquiree |
Country |
Nature of business |
Consideration (£m) |
Shares acquired |
Effective date |
|
Faulu Kenya DTM LTD |
Kenya |
Banking |
|
|
|
|
Intrinsic Financial Services |
United Kingdom |
Financial adviser network |
|
|
|
|
Old Mutual Finance (Pty) Ltd |
South Africa |
Lending |
|
|
|
The results from the above acquisitions have been consolidated for the 31 December 2014 financial year.
The table below sets out the consolidated assets and liabilities acquired as a result of these acquisitions:
|
|
|
£m |
|
|
Acquirees' carrying amount |
Fair value |
|
Assets |
|
|
|
Intangible assets |
|
|
|
Property, plant and equipment |
|
|
|
Loans and advances |
|
|
|
Cash and cash equivalents |
|
|
|
Trade, other receivables and other assets |
|
|
|
Total assets |
613 |
708 |
|
Liabilities |
|
|
|
Borrowed funds |
|
|
|
Amounts owed to bank depositors |
|
|
|
Deferred tax liabilities |
|
|
|
Trade, other payables and other liabilities |
|
|
|
Total liabilities |
(534) |
(541) |
|
Total net assets acquired |
79 |
167 |
|
|
|
|
|
Total value of the business |
|
322 |
|
Consideration |
|
|
|
Fair value of stake in investment already held |
|
|
|
Non-controlling interests recognised |
|
|
|
|
|
|
|
Goodwill recognised |
|
155 |
£171 million of the £181 million consideration was paid in cash.
Goodwill of £155 million has been recognised on these acquisitions. Goodwill arose on the acquisition of these businesses due to their ability to add to the distribution footprint of the Group. These acquisitions are expected to facilitate the cross selling of Group markets into the client base of the acquirees. A control premium of £19 million was paid on the acquisition of Old Mutual Finance (Pty) Ltd as it allows the full integration of the business into the Group. The goodwill is not expected to be deductible for tax purposes. Refer to note F1 in the Annual Report and Accounts for further analysis of the goodwill recognised.
The carrying value of assets and liabilities in the entities' statement of financial position on acquisition date approximates the fair value of these items determined by the Group, with the exception of loans and advances and intangible assets.
The loans and advances recognised by the Group have been fair valued by £28 million, based on forecasted cash flows and a risk adjusted interest rate curve, taking into account the nature of the loans and advances.
Additional intangible assets of £67 million have been recognised and relate to customer distribution channels (£41 million) and other intangible assets (£26 million). The value of the intangible assets was determined by applying cash flows to standard industry valuation models. An indemnification asset of £9 million has been recognised due to warranties granted by the sellers for future claims based on previous business conducted.
Non-controlling interests of £53 million have been recognised as a result of the acquisition based on the full fair value of all the business acquired. The Group has included £13 million in net profit attributable to equity holders of the parent since the effective date of the acquisitions of the subsidiaries.
(b) Disposals of subsidiaries during the year
As discussed in note A2, Old Mutual Wealth disposed of a number of its European businesses during the year. The principal assets and liabilities that were disposed of were goodwill (£86 million), intangible assets (£130 million), investments and securities (£4,469 million) and long-term business policyholder liabilities (£4,438 million). In addition, the businesses disposed held cash of £76 million at the date of disposal.
G: Other notes continued
G3: Events after the reporting date
Acquisition of UAP Holdings Limited
On 9 January 2015, the Group announced that it acquired a 23.3% stake in UAP Holdings Limited (UAP), an investment, retirement and insurance group that operates in East Africa, for a consideration of KES 9 billion (£64 million). UAP will be treated an associated undertaking from 9 January 2015.
Subsequently, on 26 January 2015, the Group announced it acquired an additional 37.3% (second tranche) of UAP for a consideration of KES 14 billion (£103 million), subject to regulatory approval. The transaction will increase the Group's total holding to 60.7% and will result in the Group consolidating UAP. The acquisition of the second tranche is expected to be completed in the first half of 2015.
Disposal of Skandia France and Luxembourg
On 2 February 2015, the Group announced that it had completed the disposal of Skandia France and Luxembourg. These businesses have been treated as held for sale for year-end reporting purposes. Refer to note A2 for further information.
Acquisition of Quilter Cheviot
On 25 February 2015, the Group announced that it had completed the acquisition of Quilter Cheviot. The transaction was initially announced on 17 October 2014. There have been no significant changes to the terms initially announced and the Group awaits the transaction completion financial statements of Quilter Cheviot in order to finalise its purchase price accounting.
Maturity of the Nedbank BEE schemes
The various BEE schemes that reached their maturity dates on 1 January 2015 will be rationalised through a specific repurchase of Nedbank Group shares. The repurchased shares will not have a significant impact on the consolidated financial position of the Group and will be delisted, cancelled and reinstated as authorised but unissued shares. Following this, the Community Trust, which matures in 2030, will subscribe for Nedbank Group shares to maintain its shareholding in the Group.
Maturity of the Old Mutual South Africa (including Mutual & Federal) BEE schemes
The various BEE schemes that reached their maturity dates on 1 January 2015 will be concluded through the settlement of the notional loan accounts. Furthermore, certain other schemes will reach their maturity dates on 1 May 2015 and will be concluded in a similar way. The treatment of the shares will not have a significant impact on the consolidated financial position of the Group, however the Group expects to receive cash on the settlement of these loans.
H: Discontinued operations and disposal groups held for sale
H1: Discontinued operations
Amounts disclosed in relation to discontinued operations relate to the sale, in 2012, of the Group's Swedish, Danish and Norwegian life businesses (Nordic) and in 2011 of US Life. The Nordic disposal was completed on 21 March 2012 and the US Life disposal was completed on 7 April 2011. The Group continued to incur costs directly related to the sale of these businesses relating to the transition of IT and other services, legal costs and intellectual property.
|
Income statement from discontinued operations |
||
|
|
|
£m |
|
|
Year ended 31 December 2014 |
|
|
Loss before tax from discontinued operations - trading activities (expenses) |
(35) |
(26) |
|
(Loss)/profit on disposal |
(19) |
27 |
|
(Loss)/profit before tax from discontinued operations |
(54) |
1 |
|
Income tax credit |
4 |
2 |
|
(Loss)/profit after tax from discontinued operations |
(50) |
3 |
H2: Non-current assets and liabilities
On 2 February 2015, the Group announced that it had completed the sale of Skandia France and Luxembourg, part of the Old Mutual Wealth business. These businesses have been classified as held for sale at reporting date due to the imminence of the disposal. Total assets to the value of £1,319 million (including £1,259 million of investments and securities), and total liabilities to the value of £1,285 million, (including £1,263 million of long-term business policyholder liabilities) have been classified as held for sale.
A further loss of approximately £6 million will be reported on the disposal of the business as the proceeds received will be insufficient to recover the net asset values of the businesses.
On 12 January 2015, the Group agreed to dispose of the remaining portion of the Menlyn Shopping Centre in South Africa for £156 million (R2,800 million). This transaction is subject to Competition Commission approval and transfer by the South African Deeds Office. As part of the transaction the Group agreed to acquire the remaining share of the Cavendish Shopping Centre for £61 million (R1,100 million). These assets form part of the policyholder assets and therefore this transaction has no impact on profit or loss of the Group.
This information is provided by RNS
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