Old Mutual PLC Interim Results 2014 - Part 2

RNS Number : 4765O

Old Mutual PLC

07 August 2014

 



Index to the financial information For the six months ended 30 June 2014
Statement of directors' responsibilities in respect of the interim financial statements for the six months ended 30 June 2014		40
Independent review report to the members of Old Mutual plc for the six months ended 30 June 2014		41
Consolidated income statement		42
Consolidated statement of comprehensive income		43
Reconciliation of adjusted operating profit to profit after tax		44
Consolidated statement of financial position		46
Consolidated statement of cash flows		47
Consolidated statement of changes in equity		48
Notes to the consolidated financial statements
	A: Significant accounting policies	54
	B: Segment information	56
	C: Other key performance information	70
	D: Other income statement notes	76
	E: Financial assets and liabilities	78
	F: Other notes	90
	G: Discontinued operations and disposal groups held for sale	91
MCEV information		92

Statement of directors' responsibilities in respect of the interim financial statements

For the six months ended 30 June 2014

We confirm that to the best of our knowledge:

§  The Group interim financial statements contained herein are presented in accordance with the requirements of IAS 34 'Interim Financial Reporting' as adopted by the EU.

§  The interim management statement includes a fair review of the information required by:

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

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

Julian Roberts                                                                          Ingrid Johnson
Group Chief Executive                                                                Group Finance Director
7 August 2014                                                                            7 August 2014

Independent review report to the members of Old Mutual plc

For the six months ended 30 June 2014

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the six months ended 30 June 2014 which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Cash Flows and the related explanatory notes, which include the reconciliation of adjusted operating profit to profit after tax. 

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

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

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the interim financial report in accordance with the DTR of the UK FCA. 

The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU.  The condensed set of financial statements included in this interim financial report has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU. 

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim financial report based on our review. 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion. 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.  

Philip Smart (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
7 August 2014

Consolidated income statement
For the six months ended 30 June 2014
				£m
	Notes	Six months ended 30 June 2014	Six months ended 30 June  2013	Year ended 31 December 2013
Revenue
Gross earned premiums	B2	1,618	1,995	3,701
Outward reinsurance		(154)	(162)	(317)
Net earned premiums		1,464	1,833	3,384
Investment return (non-banking)		3,529	4,489	9,986
Banking interest and similar income		1,415	1,573	3,050
Banking trading, investment and similar income		83	110	195
Fee and commission income, and income from service activities		1,413	1,576	3,095
Other income		54	60	100
Total revenue		7,958	9,641	19,810
Expenses
Claims and benefits (including change in insurance contract provisions)		(2,260)	(2,295)	(5,410)
Reinsurance recoveries		66	118	246
Net claims and benefits incurred		(2,194)	(2,177)	(5,164)
Change in investment contract liabilities		(1,845)	(3,000)	(5,873)
Losses on loans and advances		(130)	(234)	(368)
Finance costs		(64)	(23)	(81)
Banking interest payable and similar expenses		(770)	(832)	(1,616)
Fee and commission expenses, and other acquisition costs		(437)	(538)	(976)
Change in third-party interest in consolidated funds		(194)	(271)	(564)
Other operating and administrative expenses		(1,760)	(1,770)	(3,653)
Total expenses		(7,394)	(8,845)	(18,295)
Share of associated undertakings' and joint ventures' profit after tax		10	10	21
Loss on disposal of subsidiaries, associated undertakings and strategic    investments	C1(c)	(10)	(1)	(4)
Profit before tax		564	805	1,532
Income tax expense	D1	(218)	(250)	(552)
Profit from continuing operations after tax		346	555	980
Discontinued operations
(Loss)/profit from discontinued operations after tax	G1	(10)	(8)	3
Profit after tax for the financial period		336	547	983
Attributable to
Equity holders of the parent		213	414	705
Non-controlling interests
Ordinary shares		114	124	259
Preferred securities		9	9	19
Profit after tax for the financial period		336	547	983
Earnings per share
Basic earnings per share based on profit from continuing    operations (pence)		4.7	9.1	14.9
Basic earnings per share based on profit from discontinued    operations (pence)		(0.2)	(0.2)	0.1
Basic earnings per ordinary share (pence)	C2(a)	4.5	8.9	15.0
Diluted basic earnings per share based on profit from continuing    operations (pence)		4.3	8.5	13.8
Diluted basic earnings per share based on profit from discontinued    operations (pence)		(0.2)	(0.2)	0.1
Diluted basic earnings per ordinary share (pence)	C2(b)	4.1	8.3	13.9
Weighted average number of ordinary shares (millions)	C2(a)	4,462	4,436	4,442

Consolidated statement of comprehensive income
For the six months ended 30 June 2014
				£m
	Notes	Six months ended  30 June  2014	Six months ended 30 June  2013	Year ended  31 December  2013
Profit after tax for the financial period		336	547	983
Other comprehensive income for the financial period
Items that will not be reclassified subsequently to profit or loss
Fair value gains/(losses)
Property revaluation		6	(3)	23
Measurement gains on defined benefit plans		1	2	70
Income tax on items that will not be reclassified subsequently to profit or loss	D1(c)	3	4	(12)
		10	3	81
Items that may be reclassified subsequently to profit or loss
Fair value gains/(losses)
Net investment hedge		14	9	43
Available-for-sale investments
Fair value gains/(losses)		15	(7)	(5)
Recycled to profit or loss		-	(8)	(9)
Exchange difference recycled to profit or loss on disposal of business		(1)	-	-
Currency translation differences on translating foreign operations		(269)	(346)	(1,257)
Other movements		2	4	9
Income tax on items that may be reclassified subsequently to profit or loss	D1(c)	(3)	1	2
		(242)	(347)	(1,217)
Total other comprehensive income for the financial period from    continuing operations		(232)	(344)	(1,136)
Total other comprehensive income for the financial period		(232)	(344)	(1,136)
Total comprehensive income for the financial period		104	203	(153)
Attributable to
Equity holders of the parent		39	202	(96)
Non-controlling interests
Ordinary shares		56	(8)	(76)
Preferred securities		9	9	19
Total comprehensive income for the financial period		104	203	(153)

Reconciliation of adjusted operating profit to profit after tax
For the six months ended 30 June 2014
				£m
	Notes	Six months ended 30 June 2014	Six months ended  30 June  2013	Year ended 31 December 2013
Core operations
Emerging Markets	B3	291	300	594
Nedbank	B3	361	387	797
Old Mutual Wealth	B3	120	108	217
Institutional Asset Management	B3	54	54	111
		826	849	1,719
Finance costs	B3	(41)	(46)	(92)
Long-term investment return on excess assets		13	25	43
Net interest payable to non-core operations		(2)	(6)	(11)
Corporate costs		(25)	(21)	(54)
Other net (costs)/income		(10)	-	7
Adjusted operating profit before tax	B3	761	801	1,612
Adjusting items	C1(a)	(255)	(69)	(286)
Non-core operations	B3	14	2	32
Profit before tax (net of policyholder tax)		520	734	1,358
Income tax attributable to policyholder returns	D1(d)	44	71	174
Profit before tax		564	805	1,532
Total tax expense	D1(a)	(218)	(250)	(552)
Profit from continuing operations after tax		346	555	980
(Loss)/profit from discontinued operations after tax	G1	(10)	(8)	3
Profit after tax for the financial period		336	547	983
Adjusted operating profit after tax attributable to ordinary equity holders of the parent
				£m
	Notes	Six months ended 30 June 2014	Six months ended  30 June  2013	Year ended 31 December 2013
Adjusted operating profit before tax	B3	761	801	1,612
Tax on adjusted operating profit	D1(d)	(202)	(207)	(424)
Adjusted operating profit after tax		559	594	1,188
Non-controlling interests - ordinary shares	B3	(126)	(137)	(279)
Non-controlling interests - preferred securities	B3	(9)	(9)	(19)
Adjusted operating profit after tax attributable to ordinary equity    holders of the parent	B3	424	448	890
Adjusted weighted average number of shares (millions)	C2(c)	4,840	4,835	4,836
Adjusted operating earnings per share (pence)	C2(c)	8.8	9.3	18.4

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 standard 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 and 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 successful 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 respectively 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 30 June 2014
				£m
	Notes	30 June 2014	30 June 2013	31 December 2013
Assets
Goodwill and other intangible assets		2,500	3,056	2,835
Mandatory reserve deposits with central banks		767	760	759
Property, plant and equipment		730	794	722
Investment property		1,778	1,911	1,811
Deferred tax assets		247	334	303
Investments in associated undertakings and joint ventures		201	130	168
Deferred acquisition costs		909	1,264	1,211
Reinsurers' share of policyholder liabilities		1,987	1,629	1,875
Loans and advances		33,727	37,418	33,583
Investments and securities		86,198	88,915	88,220
Current tax receivable		101	109	128
Trade, other receivables and other assets		2,780	2,955	2,583
Derivative financial instruments		1,104	1,417	1,259
Cash and cash equivalents		4,289	5,035	4,869
Non-current assets held for sale	G2	4,473	5	5
Total assets		141,791	145,732	140,331
Liabilities
Long-term business policyholder liabilities		78,092	81,443	81,141
General insurance liabilities		319	350	332
Third-party interests in consolidated funds		6,456	5,479	5,478
Borrowed funds	E2	2,752	2,563	2,629
Provisions		198	207	195
Deferred revenue		367	664	628
Deferred tax liabilities		424	435	491
Current tax payable		205	250	237
Trade, other payables and other liabilities		4,099	5,076	4,315
Amounts owed to bank depositors		34,540	38,009	34,370
Derivative financial instruments		1,174	1,623	1,478
Non-current liabilities held for sale	G2	4,294	-	-
Total liabilities		132,920	136,099	131,294
Net assets		8,871	9,633	9,037
Shareholders' equity
Equity attributable to equity holders of the parent		7,062	7,729	7,270
Non-controlling interests
Ordinary shares		1,536	1,632	1,502
Preferred securities		273	272	265
Total non-controlling interests		1,809	1,904	1,767
Total equity		8,871	9,633	9,037

Consolidated statement of cash flows
For the six months ended 30 June 2014
				£m
		Six months ended 30 June 2014	Six months ended 30 June 2013	Year ended 31 December 2013
Cash flows from operating activities
Profit before tax		564	805	1,532
Non-cash movements in profit before tax		806	620	1,423
Net changes in working capital		(370)	228	447
Taxation paid		(175)	(225)	(458)
Net cash inflow from operating activities		825	1,428	2,944
Cash flows from investing activities
Net acquisitions of financial investments		(824)	(590)	(1,658)
Acquisition of investment properties		(31)	(7)	(47)
Proceeds from disposal of investment properties		39	9	22
Acquisition of property, plant and equipment		(65)	(50)	(113)
Proceeds from disposal of property, plant and equipment		5	6	6
Acquisition of intangible assets		(29)	(31)	(86)
Acquisition of interests in subsidiaries, associated undertakings    joint ventures and strategic investments		(58)	(31)	(119)
Disposal of interests in subsidiaries, associated undertakings    joint ventures and strategic investments		48	12	8
Net cash outflow from investing activities		(915)	(682)	(1,987)
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company		(279)	(238)	(336)
Non-controlling interests and preferred security interests		(90)	(95)	(183)
Dividends received from associated undertakings		4	12	13
Interest paid (excluding banking interest paid)		(24)	(26)	(51)
Proceeds from issue of ordinary shares (including by subsidiaries    to non-controlling interests)		9	9	11
Net disposal/(acquisition) of treasury shares		38	(29)	55
Issue of subordinated and other debt		357	-	586
Subordinated and other debt repaid		(196)	(262)	(578)
Net cash outflow from financing activities		(181)	(629)	(483)
Net (decrease)/increase in cash and cash equivalents		(271)	117	474
Effects of exchange rate changes on cash and cash equivalents		(234)	(304)	(828)
Cash and cash equivalents at beginning of the year		5,628	5,982	5,982
Cash and cash equivalents at end of the period		5,123	5,795	5,628
Consisting of
Cash and cash equivalents		4,289	5,035	4,869
Mandatory reserve deposits with central banks		767	760	759
Cash and cash equivalents included in assets held for sale		67	-	-
Total		5,123	5,795	5,628

Cash and cash equivalents in the cash flow statement above include Mandatory reserve deposits, in line with market practice in South Africa. Except for mandatory reserve deposits with central banks of £767 million (30 June 2013: £760 million; 31 December 2013: £759 million) and cash and cash equivalents subject to consolidation of funds of £1,733 million (30 June 2013: £1,757 million; 31 December 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.

Consolidated statement of changes in equity
For the six months ended 30 June 2014
		Millions
Six months ended 30 June 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		-		-	-	-	14
Exchange differences recycled to profit or loss    on disposal of business		-		-	-	-	-
Currency translation differences on translating foreign   operations		-		-	-	-	-
Other movements		-		-	-	-	-
Income tax on items that may be reclassified   subsequently to profit or loss	D1(c)	-		-	-	-	(3)
Total comprehensive income for the financial period		-		-	-	-	11
Dividends for the period	C3	-		-	-	-	-
Equity share-based payment transactions		-		-	-	-	-
Other movements in share capital		8		1	8	-	-
Expiry of Skandia AB shareholder claims		-		-	-	-	-
Merger reserve released		-		-	-	(116)	-
Change in participation in subsidiaries		-		-	-	-	-
Transactions with shareholders		8		1	8	(116)	-
Shareholders' equity at end of the period		4,905		561	853	1,601	63

								£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
-	-	-	-	199	14	213	123	336
6	-	-	-	-	-	6	-	6
-	-	-	-	1	-	1	-	1
-	-	-	-	-	3	3	-	3
6	-	-	-	1	3	10	-	10
-	-	-	14	-	-	14	-	14
-	-	-	-	-	-	14	1	15
-	-	-	(1)	-	-	(1)	-	(1)
-	-	-	(211)	-	-	(211)	(58)	(269)
-	-	3	-	-	-	3	(1)	2
-	-	-	-	-	-	(3)	-	(3)
6	-	3	(198)	200	17	39	65	104
-	-	-	-	(279)	(17)	(296)	(73)	(369)
-	5	-	-	1	-	6	(3)	3
-	-	-	-	38	-	47	(1)	46
-	-	-	-	12	-	12	-	12
-	-	-	-	116	-	-	-	-
-	-	-	-	(16)	-	(16)	54	38
-	5	-	-	(128)	(17)	(247)	(23)	(270)
167	321	40	(1,432)	4,362	526	7,062	1,809	8,871

Consolidated statement of changes in equity
For the six months ended 30 June 2014
		Millions
Six months ended 30 June 2013	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		4,892		559	835	1,717	65
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 losses		-		-	-	-	(7)
Recycled to profit or loss		-		-	-	-	(8)
Currency translation differences on translating foreign   operations		-		-	-	-	-
Other movements		-		-	-	-	-
Income tax on items that may be reclassified   subsequently to profit or loss	D1(c)	-		-	-	-	1
Total comprehensive income for the financial period		-		-	-	-	(14)
Dividends for the period	C3	-		-	-	-	-
Equity share-based payment transactions		-		-	-	-	-
Other movements in share capital		4		-	8	-	-
Change in participation in subsidiaries		-		-	-	-	-
Transactions with shareholders		4		-	8	-	-
Shareholders' equity at end of the period		4,896		559	843	1,717	51

								£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
144	268	33	(378)	3,891	682	7,816	1,957	9,773
-	-	-	-	397	17	414	133	547
(3)	-	-	-	-	-	(3)	-	(3)
-	-	-	-	2	-	2	-	2
-	-	-	-	(1)	5	4	-	4
(3)	-	-	-	1	5	3	-	3
-	-	-	9	-	-	9	-	9
-	-	-	-	-	-	(7)	-	(7)
-	-	-	-	-	-	(8)	-	(8)
-	-	-	(221)	-	-	(221)	(125)	(346)
-	-	1	-	10	-	11	(7)	4
-	-	-	-	-	-	1	-	1
(3)	-	1	(212)	408	22	202	1	203
-	-	-	-	(238)	(22)	(260)	(73)	(333)
-	(8)	-	-	-	-	(8)	(2)	(10)
-	-	-	-	(29)	-	(21)	(3)	(24)
-	-	-	-	-	-	-	24	24
-	(8)	-	-	(267)	(22)	(289)	(54)	(343)
141	260	34	(590)	4,032	682	7,729	1,904	9,633

Consolidated statement of changes in equity
For the six months ended 30 June 2014
		Millions
Year ended 31 December 2013	Notes	Number of shares issued and fully paid		Share capital	Share premium	Merger reserve	Available-for-sale reserve
Shareholders' equity at beginning of the year		4,892		559	835	1,717	65
Profit after tax for the financial year		-		-	-	-	-
Other comprehensive income
Items that will not be reclassified subsequently   to profit or loss
Fair value gains
Property revaluation		-		-	-	-	-
Measurement gain 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		-		-	-	-	(6)
Recycled to profit or loss		-		-	-	-	(9)
Currency translation differences on translating foreign     operations		-		-	-	-	-
Other movements		-		-	-	-	-
Income tax on items that may be reclassified     subsequently to profit or loss	D1(c)	-		-	-	-	2
Total comprehensive income for the financial year		-		-	-	-	(13)
Dividends for the year	C3	-		-	-	-	-
Equity share-based payment transactions		-		-	-	-	-
Other movements in share capital		5		1	10	-	-
Preferred securities purchased		-		-	-	-	-
Change in participation in subsidiaries		-		-	-	-	-
Transactions with shareholders		5		1	10	-	-
Shareholders' equity at end of the year		4,897		560	845	1,717	52

								£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
144	268	33	(378)	3,891	682	7,816	1,957	9,773
-	-	-	-	668	37	705	278	983
17	-	-	-	-	-	17	6	23
-	-	-	-	52	-	52	18	70
-	-	-	-	(14)	10	(4)	(8)	(12)
17	-	-	-	38	10	65	16	81
-	-	-	43	-	-	43	-	43
-	-	-	-	-	-	(6)	1	(5)
-	-	-	-	-	-	(9)	-	(9)
-	-	-	(899)	-	-	(899)	(358)	(1,257)
-	-	4	-	(1)	-	3	6	9
-	-	-	-	-	-	2	-	2
17	-	4	(856)	705	47	(96)	(57)	(153)
-	-	-	-	(336)	(47)	(383)	(136)	(519)
-	48	-	-	13	-	61	(17)	44
-	-	-	-	55	-	66	3	69
-	-	-	-	(21)	(156)	(177)	-	(177)
-	-	-	-	(17)	-	(17)	17	-
-	48	-	-	(306)	(203)	(450)	(133)	(583)
161	316	37	(1,234)	4,290	526	7,270	1,767	9,037

Notes to the consolidated financial statements

For the six months ended 30 June 2014

A: Significant accounting policies

A1: Basis of preparation

The Group interim financial statements contained herein are presented in accordance with the requirements of IAS 34 'Interim Financial Reporting' and are in compliance with International Financial Reporting Standards (IFRS) adopted by the EU. The Group's results for the six months ended 30 June 2014 and the financial position at that date have been prepared using accounting policies consistent with those applied in the preparation of the Group's 2013 Annual Report and Accounts.

The Group interim financial statements have been prepared on the going concern basis, which the directors believe is appropriate. Part 2 of the Interim Management Statement provides further details on the performance of the Group and the principal risks and uncertainties.

The comparative figures for the financial year ended 31 December 2013 represent the consolidated performance of the Group. They are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

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 period 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 the income statement.

The exchange rates used to translate the operating results, assets and liabilities of key foreign business segments to pounds sterling are:
	Six months ended 30 June 2014		Six months ended 30 June 2013		Year ended 31 December 2013
	Income statement (average rate)	Statement of financial position (closing rate)	Income Statement (average rate)	Statement of financial position (closing rate)	Income statement (average rate)	Statement of financial position  (closing rate)
Rand	17.8499	18.1755	14.2269	15.0827	15.0959	17.4284
US dollars	1.6690	1.7102	1.5448	1.5185	1.5650	1.6566
Euro	1.2174	1.2492	1.1763	1.1676	1.1782	1.2014

New standards, interpretations and amendments adopted by the Group affecting the financial statements for the six months ended 30 June 2014

The new standards that were adopted in the current period were the amendments to IAS 32 'Financial Instruments: Presentation (Offsetting)' and IFRIC 21 'Levies'. Neither standard had a material effect on the financial statements of the Group.

A2: Significant corporate activity and business changes during the period

Transactions completed during the interim reporting period

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 £17 million, with goodwill of £3 million being recognised.

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 £15 million has been recognised in profit of loss.

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 Bank Unico for US$24 million. Bank Unico is equity accounted as a joint venture in these financial statements.

Transactions agreed but not yet completed

Disposal of Skandia Austria and Skandia Germany

On 27 March 2014, the Group announced that terms had been agreed to sell two of its Old Mutual Wealth businesses, Skandia Austria and Skandia Germany. This transaction is subject to regulatory approvals and consequently the assets and liabilities of these businesses have been classified as held for sale in the statement of financial position. Refer to note G2 for further information.

Terms have been agreed to sell Skandia Liechtenstein, also part of Old Mutual Wealth. The transaction is subject to regulatory approval and the fulfilment of certain closing conditions.

The net asset value of goodwill and intangible assets of these businesses has been written down to the net realisable value given expected losses on disposal. As a result, an impairment loss of £125 million has been recognised in profit or loss.

The disposal of these businesses is expected to be completed during the second half of the year.

Acquisition of Intrinsic Financial Services Limited

On 1 July 2014, the Group announced the completion of the acquisition of Intrinsic Financial Services, one of the largest networks of financial advisers in the UK. Additionally, the Group announced that it intends to acquire the remaining 50% stake of Cirilium, the core investment proposition for Intrinsic's restricted financial advisers.

Acquisition of Old Mutual Finance (Pty) Ltd

Subject to regulatory approval, the Group is expected to complete the acquisition of a further stake in Old Mutual Finance (Pty) Ltd from Business Doctors in the second half of the year. Old Mutual Finance (Pty) Ltd is currently accounted for as joint venture and will be consolidated when the additional stake is acquired.

Financing activities

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.

A3: Critical accounting estimates and judgements

In the preparation of these interim financial statements, the Group is required to make estimates and judgements that affect items reported in the consolidated income statement, statement of financial position, and 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 and require assumptions and predictions of future events and actions. The principal areas where estimates and judgement is typically required were set out in the Annual Report and Accounts on page 144 and were described in further detail in the Report of the Chairman of the Group Audit Committee on page 97.  During the period, there have been no significant changes to the areas of critical accounting estimates and judgements that the Group applied at 31 December 2013.

The Annual Report and Accounts is available in the Investor Relations section of the Group's website at www.oldmutual.com.

Notes to the consolidated financial statements

For the six months ended 30 June 2014

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 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 and 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 property and casualty (premium income). The principal lines of business from which each operating segment derives its revenues are as follows:

Core operations

Emerging Markets - life assurance, property and casualty, asset management and banking

Nedbank - banking and asset management

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 and 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.

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 six months ended 30 June 2014 and as non-core for determining the Group's AOP for the six months ended 30 June 2014. Further information on the results of discontinued operations is provided in note G1.

All other businesses have been classified as continuing operations for all reporting periods.

B2: Gross earned premiums and deposits to investment contracts
			£m
Six months ended 30 June 2014	Emerging Markets	Old Mutual Wealth	Total
Life assurance - insurance contracts	678	155	833
Life assurance - investment contracts with discretionary    participation features	454	-	454
General insurance	331	-	331
Gross earned premiums	1,463	155	1,618
			£m
Six months ended 30 June 2013	Emerging Markets	Old Mutual Wealth	Total
Life assurance - insurance contracts	967	175	1,142
Life assurance - investment contracts with discretionary participation features	476	-	476
General insurance	377	-	377
Gross earned premiums	1,820	175	1,995
			£m
Year ended 31 December 2013	Emerging Markets	Old Mutual Wealth	Total
Life assurance - insurance contracts	1,616	336	1,952
Life assurance - investment contracts with discretionary    participation features	1,025	-	1,025
General insurance	724	-	724
Gross earned premiums	3,365	336	3,701

Notes to the consolidated financial statements
For the six months ended 30 June 2014
B: Segment information continued
B3: Adjusted operating profit statement - segment information for the six months ended 30 June 2014
	Notes		Emerging Markets	Nedbank
Revenue
Gross earned premiums	B2		1,463	-
Outward reinsurance			(111)	-
Net earned premiums			1,352	-
Investment return (non-banking)			2,101	-
Banking interest and similar income			-	1,415
Banking trading, investment and similar income			-	83
Fee and commission income, and income from service activities			243	438
Other income			41	6
Inter-segment revenues			41	5
Total revenue			3,778	1,947
Expenses
Claims and benefits (including change in insurance contract provisions)			(2,056)	-
Reinsurance recoveries			21	-
Net claims and benefits incurred			(2,035)	-
Change in investment contract liabilities			(766)	-
Losses on loans and advances			-	(130)
Finance costs (including interest and similar expenses)			-	-
Banking interest payable and similar expenses			-	(770)
Fee and commission expenses, and other acquisition costs			(150)	(4)
Change in third-party interest in consolidated funds			-	-
Other operating and administrative expenses			(501)	(660)
Income tax attributable to policyholder returns			(38)	-
Inter-segment expenses			(4)	(23)
Total expenses			(3,494)	(1,587)
Share of associated undertakings' and joint ventures' profit after tax			7	1
Loss on disposal of subsidiaries, associated undertakings   and strategic investments	C1(c)		-	-
Adjusted operating profit/(loss) before tax and non-controlling   interests			291	361
Income tax expense	D1		(83)	(92)
Non-controlling interests			(6)	(129)
Adjusted operating profit/(loss) after tax and non-controlling   interests			202	140
Adjusting items net of tax and non-controlling interests	C1(a)		2	8
Profit/(loss) after tax from continuing operations			204	148
Loss from discontinued operations after tax	G1		-	-
Profit/(loss) after tax attributable to equity holders of the parent			204	148

¹ Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the six months ended 30 June 2014 was £14 million. Non-core operations also include £10 million divestment costs incurred relation to the Nordic business sold in 2012. Further information on discontinued operations is provided in note G1. 

							£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
155	-	-	-	1,618	-	-	1,618
(43)	-	-	-	(154)	-	-	(154)
112	-	-	-	1,464	-	-	1,464
1,160	-	17	240	3,518	(13)	24	3,529
-	-	-	-	1,415	-	-	1,415
-	-	-	-	83	-	-	83
563	193	-	4	1,441	(28)	-	1,413
4	1	-	1	53	-	1	54
1	-	-	(49)	(2)	-	2	-
1,840	194	17	196	7,972	(41)	27	7,958
(198)	-	-	-	(2,254)	-	(6)	(2,260)
45	-	-	-	66	-	-	66
(153)	-	-	-	(2,188)	-	(6)	(2,194)
(1,079)	-	-	-	(1,845)	-	-	(1,845)
-	-	-	-	(130)	-	-	(130)
-	-	(41)	-	(41)	(23)	-	(64)
-	-	-	-	(770)	-	-	(770)
(270)	(2)	-	(42)	(468)	33	(2)	(437)
-	-	-	(194)	(194)	-	-	(194)
(192)	(140)	(39)	(9)	(1,541)	(214)	(5)	(1,760)
(6)	-	-	-	(44)	44	-	-
(20)	-	(2)	49	-	-	-	-
(1,720)	(142)	(82)	(196)	(7,221)	(160)	(13)	(7,394)
-	2	-	-	10	-	-	10
-	-	-	-	-	(10)	-	(10)
120	54	(65)	-	761	(211)	14	564
(19)	(12)	4	-	(202)	(16)	-	(218)
-	-	-	-	(135)	12	-	(123)
101	42	(61)	-	424	(215)	14	223
(182)	(7)	(36)	-	(215)	215	-	-
(81)	35	(97)	-	209	-	14	223
-	-	-	-	-	-	(10)	(10)
(81)	35	(97)	-	209	-	4	213

Notes to the consolidated financial statements
For the six months ended 30 June 2014
B: Segment information continued
B3: Adjusted operating profit statement - segment information for the six months ended 30 June 2013
	Notes		Emerging Markets	Nedbank
Revenue
Gross earned premiums	B2		1,820	-
Outward reinsurance			(119)	-
Net earned premiums			1,701	-
Investment return (non-banking)			1,991	-
Banking interest and similar income			-	1,573
Banking trading, investment and similar income			-	110
Fee and commission income, and income from service activities			276	537
Other income			23	18
Inter-segment revenues			38	7
Total revenue			4,029	2,245
Expenses
Claims and benefits (including change in insurance contract provisions)			(2,168)	-
Reinsurance recoveries			93	-
Net claims and benefits incurred			(2,075)	-
Change in investment contract liabilities			(888)	-
Losses on loans and advances			-	(234)
Finance costs (including interest and similar expenses)			-	-
Banking interest payable and similar expenses			-	(832)
Fee and commission expenses, and other acquisition costs			(176)	(25)
Change in third-party interest in consolidated funds			-	-
Other operating and administrative expenses			(563)	(740)
Income tax attributable to policyholder returns			(22)	-
Inter-segment expenses			(12)	(27)
Total expenses			(3,736)	(1,858)
Share of associated undertakings' and joint ventures' profit after tax			7	-
Loss on disposal of subsidiaries, associated undertakings   and strategic investments	C1(c)		-	-
Adjusted operating profit/(loss) before tax and non-controlling interests			300	387
Income tax expense	D1		(78)	(100)
Non-controlling interests			(12)	(134)
Adjusted operating profit/(loss) after tax and non-controlling interests			210	153
Adjusting items net of tax and non-controlling interests	C1(a)		(4)	4
Profit/(loss) after tax from continuing operations			206	157
Loss from discontinued operations after tax	G1		-	-
Profit/(loss) after tax attributable to equity holders of the parent			206	157

1 Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the six months ended 30 June 2013 was £2 million. Non-core operations also include £8 million divestment costs incurred relation to the Nordic business sold in 2012. Further information on discontinued operations is provided in note G1.

							£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
175	-	-	-	1,995	-	-	1,995
(43)	-	-	-	(162)	-	-	(162)
132	-	-	-	1,833	-	-	1,833
2,195	-	34	304	4,524	(17)	(18)	4,489
-	-	-	-	1,573	-	-	1,573
-	-	-	-	110	-	-	110
608	185	-	4	1,610	(34)	-	1,576
13	2	-	-	56	-	4	60
-	-	5	(56)	(6)	-	6	-
2,948	187	39	252	9,700	(51)	(8)	9,641
(148)	-	-	-	(2,316)	-	21	(2,295)
25	-	-	-	118	-	-	118
(123)	-	-	-	(2,198)	-	21	(2,177)
(2,112)	-	-	-	(3,000)	-	-	(3,000)
-	-	-	-	(234)	-	-	(234)
-	-	(46)	-	(46)	23	-	(23)
-	-	-	-	(832)	-	-	(832)
(340)	(2)	-	(32)	(575)	40	(3)	(538)
-	-	-	(271)	(271)	-	-	(271)
(205)	(134)	(35)	(5)	(1,682)	(80)	(8)	(1,770)
(49)	-	-	-	(71)	71	-	-
(11)	-	(6)	56	-	-	-	-
(2,840)	(136)	(87)	(252)	(8,909)	54	10	(8,845)
-	3	-	-	10	-	-	10
-	-	-	-	-	(1)	-	(1)
108	54	(48)	-	801	2	2	805
(20)	(13)	4	-	(207)	(43)	-	(250)
-	-	-	-	(146)	13	-	(133)
88	41	(44)	-	448	(28)	2	422
(54)	(9)	35	-	(28)	28	-	-
34	32	(9)	-	420	-	2	422
-	-	-	-	-	-	(8)	(8)
34	32	(9)	-	420	-	(6)	414

Notes to the consolidated financial statements
For the six months ended 30 June 2014
B: Segment information continued
B3: Adjusted operating profit statement - segment information for the year ended 31 December 2013
	Notes		Emerging Markets	Nedbank
Revenue
Gross earned premiums	B2		3,365	-
Outward reinsurance			(230)	-
Net earned premiums			3,135	-
Investment return (non-banking)			5,184	-
Banking interest and similar income			-	3,050
Banking trading, investment and similar income			-	195
Fee and commission income, and income from service activities			552	1,048
Other income			39	31
Inter-segment revenues			61	11
Total revenue			8,971	4,335
Expenses
Claims and benefits (including change in insurance contract provisions)			(5,061)	-
Reinsurance recoveries			201	-
Net claims and benefits incurred			(4,860)	-
Change in investment contract liabilities			(1,952)	-
Losses on loans and advances			-	(368)
Finance costs (including interest and similar expenses)			-	-
Banking interest payable and similar expenses			-	(1,616)
Fee and commission expenses, and other acquisition costs			(341)	(12)
Change in third-party interest in consolidated funds			-	-
Other operating and administrative expenses			(1,165)	(1,495)
Income tax attributable to policyholder returns			(62)	-
Inter-segment expenses			(11)	(49)
Total expenses			(8,391)	(3,540)
Share of associated undertakings' and joint ventures' profit after tax			14	2
Loss on disposal of subsidiaries, associated undertakings   and strategic investments	C1(c)		-	-
Adjusted operating profit/(loss) before tax and non-controlling interests			594	797
Income tax expense	D1		(155)	(200)
Non-controlling interests			(16)	(282)
Adjusted operating profit/(loss) after tax and non-controlling interests			423	315
Adjusting items net of tax and non-controlling interests	C1(a)		(84)	12
Profit/(loss) after tax from continuing operations			339	327
Profit from discontinued operations after tax	G1		-	-
Profit/(loss) after tax attributable to equity holders of the parent			339	327

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 G1.

							£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
336	-	-	-	3,701	-	-	3,701
(87)	-	-	-	(317)	-	-	(317)
249	-	-	-	3,384	-	-	3,384
4,159	-	68	634	10,045	(94)	35	9,986
-	-	-	-	3,050	-	-	3,050
-	-	-	-	195	-	-	195
1,173	381	-	8	3,162	(67)	-	3,095
21	3	(2)	2	94	-	6	100
1	-	8	(92)	(11)	-	11	-
5,603	384	74	552	19,919	(161)	52	19,810
(347)	-	-	-	(5,408)	-	(2)	(5,410)
45	-	-	-	246	-	-	246
(302)	-	-	-	(5,162)	-	(2)	(5,164)
(3,921)	-	-	-	(5,873)	-	-	(5,873)
-	-	-	-	(368)	-	-	(368)
-	-	(92)	-	(92)	11	-	(81)
-	-	-	-	(1,616)	-	-	(1,616)
(622)	(4)	-	(70)	(1,049)	78	(5)	(976)
-	-	-	(564)	(564)	-	-	(564)
(408)	(274)	(78)	(10)	(3,430)	(210)	(13)	(3,653)
(112)	-	-	-	(174)	174	-	-
(21)	-	(11)	92	-	-	-	-
(5,386)	(278)	(181)	(552)	(18,328)	53	(20)	(18,295)
-	5	-	-	21	-	-	21
-	-	-	-	-	(4)	-	(4)
217	111	(107)	-	1,612	(112)	32	1,532
(40)	(27)	(2)	-	(424)	(128)	-	(552)
-	-	-	-	(298)	20	-	(278)
177	84	(109)	-	890	(220)	32	702
(139)	(30)	21	-	(220)	220	-	-
38	54	(88)	-	670	-	32	702
-	-	-	-	-	-	3	3
38	54	(88)	-	670	-	35	705

Notes to the consolidated financial statements
For the six months ended 30 June 2014
B: Segment information continued
B4: Statement of financial position - segment information at 30 June 2014
	Notes		Emerging Markets	Nedbank
Assets
Goodwill and other intangible assets			134	434
Mandatory reserve deposits with central banks			-	767
Property, plant and equipment			313	388
Investment property			1,409	7
Deferred tax assets			73	12
Investments in associated undertakings and joint ventures			92	79
Deferred acquisition costs			107	-
Reinsurers' share of policyholder liabilities			128	11
Loans and advances			339	33,212
Investments and securities			28,856	5,588
Current tax receivable			17	13
Trade, other receivables and other assets			729	709
Derivative financial instruments			266	719
Cash and cash equivalents			928	753
Non-current assets held for sale	G2		-	1
Inter-segment assets			628	269
Total assets			34,019	42,962
Liabilities
Life assurance policyholder liabilities			28,438	889
General insurance liabilities			319	-
Third-party interests in consolidated funds			-	-
Borrowed funds	E2		165	1,899
Provisions			145	1
Deferred revenue			15	-
Deferred tax liabilities			184	35
Current tax payable			125	6
Trade, other payables and other liabilities			1,834	798
Amounts owed to bank depositors			310	34,230
Derivative financial instruments			338	798
Non-current liabilities held for sale	G2		-	-
Inter-segment liabilities			347	613
Total liabilities			32,220	39,269
Net assets			1,799	3,693
Equity
Equity attributable to equity holders of the parent			1,747	1,934
Non-controlling interests			52	1,759
Ordinary shares			52	1,486
Preferred securities			-	273
Total equity			1,799	3,693

					£m
Old Mutual Wealth	Institutional Asset Management	Other	Consolidation adjustments	Non-core operations	Total
1,168	764	-	-	-	2,500
-	-	-	-	-	767
15	14	-	-	-	730
-	-	-	362	-	1,778
4	157	-	-	1	247
-	20	10	-	-	201
791	11	-	-	-	909
1,848	-	-	-	-	1,987
176	-	-	-	-	33,727
46,367	37	554	4,399	397	86,198
71	-	-	-	-	101
503	114	24	387	314	2,780
-	-	72	40	7	1,104
621	79	146	1,733	29	4,289
4,472	-	-	-	-	4,473
129	19	901	(2,212)	266	-
56,165	1,215	1,707	4,709	1,014	141,791
47,981	-	-	-	784	78,092
-	-	-	-	-	319
-	-	-	6,456	-	6,456
-	1	687	-	-	2,752
24	2	26	-	-	198
352	-	-	-	-	367
184	-	21	-	-	424
23	3	48	-	-	205
774	212	46	427	8	4,099
-	-	-	-	-	34,540
-	-	-	38	-	1,174
4,294	-	-	-	-	4,294
314	581	357	(2,212)	-	-
53,946	799	1,185	4,709	792	132,920
2,219	416	522	-	222	8,871
2,219	418	522	-	222	7,062
-	(2)	-	-	-	1,809
-	(2)	-	-	-	1,536
-	-	-	-	-	273
2,219	416	522	-	222	8,871

Notes to the consolidated financial statements
For the six months ended 30 June 2014
B: Segment information continued
B4: Statement of financial position - segment information at 30 June 2013
	Notes		Emerging Markets	Nedbank
Assets
Goodwill and other intangible assets			134	494
Mandatory reserve deposits with central banks			-	760
Property, plant and equipment			344	424
Investment property			1,555	14
Deferred tax assets			96	21
Investments in associated undertakings and joint ventures			65	35
Deferred acquisition costs			110	-
Reinsurers' share of policyholder liabilities			158	12
Loans and advances			418	36,812
Investments and securities			30,412	5,839
Current tax receivable			15	30
Trade, other receivables and other assets			794	623
Derivative financial instruments			358	862
Cash and cash equivalents			1,038	1,113
Non-current assets held for sale			-	1
Inter-segment assets			466	142
Total assets			35,963	47,182
Liabilities
Life assurance policyholder liabilities			29,826	906
General insurance liabilities			350	-
Third-party interests in consolidated funds			-	-
Borrowed funds	E2		199	1,726
Provisions			125	(6)
Deferred revenue			17	1
Deferred tax liabilities			157	28
Current tax payable			161	8
Trade, other payables and other liabilities			2,469	1,061
Amounts owed to bank depositors			83	37,926
Derivative financial instruments			401	1,112
Non-current liabilities held for sale			-	-
Inter-segment liabilities			231	451
Total liabilities			34,019	43,213
Net assets			1,944	3,969
Equity
Equity attributable to equity holders of the parent			1,892	2,140
Non-controlling interests			52	1,829
Ordinary shares			52	1,557
Preferred securities			-	272
Total equity			1,944	3,969

					£m
Old Mutual Wealth	Institutional Asset Management	Other	Consolidation adjustments	Non-core operations	Total
1,556	872	-	-	-	3,056
-	-	-	-	-	760
13	12	1	-	-	794
-	-	-	342	-	1,911
32	181	2	-	2	334
-	13	17	-	-	130
1,145	9	-	-	-	1,264
1,459	-	-	-	-	1,629
188	-	-	-	-	37,418
48,306	36	426	3,323	573	88,915
64	-	-	-	-	109
480	103	37	501	417	2,955
-	-	56	133	8	1,417
633	104	259	1,757	131	5,035
4	-	-	-	-	5
75	22	1,390	(2,759)	664	-
53,955	1,352	2,188	3,297	1,795	145,732
49,520	-	-	-	1,191	81,443
-	-	-	-	-	350
-	-	-	5,479	-	5,479
-	11	627	-	-	2,563
51	3	34	-	-	207
646	-	-	-	-	664
234	-	16	-	-	435
40	2	39	-	-	250
764	203	71	472	36	5,076
-	-	-	-	-	38,009
-	-	4	105	1	1,623
-	-	-	-	-	-
631	548	898	(2,759)	-	-
51,886	767	1,689	3,297	1,228	136,099
2,069	585	499	-	567	9,633
2,069	562	499	-	567	7,729
-	23	-	-	-	1,904
-	23	-	-	-	1,632
-	-	-	-	-	272
2,069	585	499	-	567	9,633

Notes to the consolidated financial statements
For the six months ended 30 June 2014
B: Segment information continued
B4: Statement of financial position - segment information at 31 December 2013
	Notes		Emerging Markets	Nedbank
Assets
Goodwill and other intangible assets			134	446
Mandatory reserve deposits with central banks			-	759
Property, plant and equipment			303	391
Investment property			1,443	11
Deferred tax assets			104	11
Investments in associated undertakings and joint ventures			76	63
Deferred acquisition costs			107	-
Reinsurers' share of policyholder liabilities			174	11
Loans and advances			255	33,145
Investments and securities			28,592	5,387
Current tax receivable			12	32
Trade, other receivables and other assets			713	585
Derivative financial instruments			349	791
Cash and cash equivalents			702	1,196
Non-current assets held for sale			-	-
Inter-segment assets			635	77
Total assets			33,599	42,905
Liabilities
Life assurance policyholder liabilities			28,043	852
General insurance liabilities			332	-
Third-party interests in consolidated funds			-	-
Borrowed funds	E2		172	1,813
Provisions			133	(1)
Deferred revenue			18	-
Deferred tax liabilities			182	34
Current tax payable			125	17
Trade, other payables and other liabilities			1,947	873
Amounts owed to bank depositors			280	34,083
Derivative financial instruments			466	974
Non-current liabilities held for sale			-	-
Inter-segment liabilities			197	567
Total liabilities			31,895	39,212
Net assets			1,704	3,693
Equity
Equity attributable to equity holders of the parent			1,654	1,976
Non-controlling interests			50	1,717
Ordinary shares			50	1,452
Preferred securities			-	265
Total equity			1,704	3,693

					£m
Old Mutual Wealth	Institutional Asset Management	Other	Consolidation adjustments	Non-core operations	Total
1,461	794	-	-	-	2,835
-	-	-	-	-	759
12	15	1	-	-	722
-	-	-	357	-	1,811
20	167	-	-	1	303
-	19	10	-	-	168
1,094	10	-	-	-	1,211
1,690	-	-	-	-	1,875
183	-	-	-	-	33,583
49,868	33	378	3,502	460	88,220
84	-	-	-	-	128
426	113	43	351	352	2,583
-	-	62	49	8	1,259
687	117	457	1,667	43	4,869
5	-	-	-	-	5
93	21	976	(2,083)	281	-
55,623	1,289	1,927	3,843	1,145	140,331
51,327	-	-	-	919	81,141
-	-	-	-	-	332
-	-	-	5,478	-	5,478
-	2	642	-	-	2,629
32	2	29	-	-	195
610	-	-	-	-	628
254	-	21	-	-	491
52	3	40	-	-	237
786	248	40	412	9	4,315
7	-	-	-	-	34,370
-	-	-	36	2	1,478
-	-	-	-	-	-
312	487	520	(2,083)	-	-
53,380	742	1,292	3,843	930	131,294
2,243	547	635	-	215	9,037
2,243	547	635	-	215	7,270
-	-	-	-	-	1,767
-	-	-	-	-	1,502
-	-	-	-	-	265
2,243	547	635	-	215	9,037

Notes to the consolidated financial statements

For the six months ended 30 June 2014

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		Six months ended 30 June 2014	Six months ended 30 June 2013	Year ended 31 December 2013
(Expense)/income
Goodwill impairment and impact of acquisition accounting	C1(b)		(181)	(57)	(141)
Loss on disposal of subsidiaries, associated undertakings and    strategic investments	C1(c)		(10)	(1)	(4)
Short-term fluctuations in investment return	C1(d)		(15)	16	6
Investment return adjustment for Group equity and debt instruments held in    life funds	C1(e)		2	(33)	(100)
Dividends declared to holders of perpetual preferred callable securities	C1(f)		16	22	42
Institutional Asset Management equity plans	C1(g)		(9)	(17)	(38)
Credit-related fair value (losses)/gains on Group debt instruments	C1(h)		(39)	1	(31)
Restructuring costs	C1(i)		(19)	-	(20)
Total adjusting items			(255)	(69)	(286)
Tax on adjusting items	D1(d)		28	28	46
Non-controlling interest in adjusting items			12	13	20
Total adjusting items after tax and non-controlling interests			(215)	(28)	(220)

(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 and the amortisation and impairment of acquired other intangibles and acquired PVIF and the movements in certain acquisition date provisions. Costs incurred on successful 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
Six months ended 30 June 2014		Emerging Markets	Old Mutual Wealth	Total
Amortisation of acquired PVIF		-	(37)	(37)
Amortisation of acquired deferred costs and revenue		-	5	5
Amortisation of other acquired intangible assets		(1)	(22)	(23)
Change in acquisition date provisions		-	(1)	(1)
Impairment of goodwill and other intangible assets		-	(125)	(125)
		(1)	(180)	(181)
Impairment of goodwill and other intangible assets of £125 million relates to the write down of goodwill and intangible assets as a result of the prospective sales of Skandia Germany, Skandia Austria and Skandia Liechtenstein.
				£m
Six months ended 30 June 2013		Emerging Markets	Old Mutual Wealth	Total
Amortisation of acquired PVIF		-	(38)	(38)
Amortisation of acquired deferred costs and revenue		-	6	6
Amortisation of other acquired intangible assets		(1)	(23)	(24)
Impairment of goodwill and other intangible assets		(1)	-	(1)
		(2)	(55)	(57)
				£m
Year ended 31 December 2013		Emerging Markets	Old Mutual Wealth	Total
Amortisation of acquired PVIF		-	(76)	(76)
Amortisation of acquired deferred costs and revenue		-	11	11
Amortisation of other acquired intangible assets		(2)	(46)	(48)
Impairment of goodwill and other intangible assets		(8)	(20)	(28)
		(10)	(131)	(141)

(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
	Six months ended 30 June 2014	Six months ended  30 June     2013	Year ended 31 December 2013
Emerging Markets	4	-	-
Old Mutual Wealth	(15)	-	-
Institutional Asset Management	1	(1)	(4)
Loss on disposal of subsidiaries, associated undertakings    and strategic investments	(10)	(1)	(4)

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 becomes unconditional. A profit of £4 million has been recognised on this transaction.

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 £15 million has been recognised in the income statement.

Institutional Asset Management

The Group released a £1 million accrual relating to the disposal of Echo Point which was effective during the year ended 31 December 2013. The Group had previously recognised a loss on disposal of £3 million.

On 2 January 2013, the Group completed the sale of five of its affiliates and recognised a loss of £1 million.

(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 general insurance 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	Six months ended 30 June 2014	Six months ended  30 June 2013	Year  ended 31 December 2013
Emerging Markets	7.4 - 8.0	7.4 - 8.0	7.4 - 8.0
Old Mutual Wealth	1.0	1.0	1.0

Notes to the consolidated financial statements

For the six months ended 30 June 2014

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
Six months ended 30 June 2014	Emerging Markets	Old Mutual Wealth	Other	Total
Actual shareholder investment return	44	8	10	62
Less: Long-term investment return	61	3	13	77
Short-term fluctuations in investment return	(17)	5	(3)	(15)
	£m
Six months ended 30 June 2013	Emerging Markets	Old Mutual Wealth	Other	Total
Actual shareholder investment return	100	24	18	142
Less: Long-term investment return	72	29	25	126
Short-term fluctuations in investment return	28	(5)	(7)	16
	£m
Year ended 31 December 2013	Emerging Markets	Old Mutual Wealth	Other	Total
Actual shareholder investment return	160	22	34	216
Less: Long-term investment return	137	30	43	210
Short-term fluctuations in investment return	23	(8)	(9)	6

 

(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 Nedbank. 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 six months ended 30 June 2014, the investment return adjustment decreased AOP by £2 million (six months ended 30 June 2013: increase of £33 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 £16 million for the six months ended 30 June 2014 (six months ended 30 June 2013: £22 million; year ended 31 December 2013: £42 million). For the purpose of determining AOP, these are recognised in finance costs on an accruals 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 US affiliate incentive schemes. The impact of revaluing these instruments is recognised in accordance with IFRS, but excluded from AOP. At 30 June 2014, these instruments were revalued, the impact of which was a loss of £9 million (six months ended 30 June 2013: loss of £17 million; year ended 31 December 2013: loss of £38 million).

(h) Credit-related fair value (losses)/gains 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 the consolidated income statement. 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 six months ended 30 June 2014, due to narrowing of credit spreads, a net loss of £39 million was recognised (six months ended 30 June 2013: net gain of £1 million; 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 £19 million for the six months ended 30 June 2014 (six months ended 30 June 2013: £nil; 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	Six months ended 30 June 2014	Six months ended 30 June 2013	Year ended 31 December 2013
Basic earnings per share	IFRS	C2(a)	4.5	8.9	15.0
Diluted basic earnings per share	IFRS	C2(b)	4.1	8.3	13.9
Adjusted operating earnings per share	Group policy	C2(c)	8.8	9.3	18.4
Headline earnings per share (Gross of tax)	JSE Listing Requirements	C2(d)	7.5	8.8	15.6
Headline earnings per share (Net of tax)	JSE Listing Requirements	C2(d)	7.6	8.5	15.2
Diluted headline earnings per share (Gross of tax)	JSE Listing Requirements	C2(d)	6.9	8.2	14.4
Diluted headline earnings per share (Net of tax)	JSE Listing Requirements	C2(d)	7.0	7.9	14.1

(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
		Six months ended 30 June 2014	Six months ended 30 June 2013	Year ended 31 December 2013
Profit for the financial period attributable to equity holders of the parent    from continuing operations		223	422	702
(Loss)/profit for the financial period attributable to equity holders of the parent    from discontinued operations		(10)	(8)	3
Profit for the financial period attributable to equity holders of the parent		213	414	705
Dividends paid to holders of perpetual preferred callable securities,    net of tax credits		(14)	(17)	(37)
Profit attributable to ordinary equity holders		199	397	668

Total dividends paid to holders of perpetual preferred callable securities of £14 million for the six months ended 30 June 2014 (six months ended 30 June 2013: £17 million; year ended 31 December 2013: £37 million) are stated net of tax credits of £3 million (six months ended 30 June 2013: £5 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	Six months ended 30 June 2014	Six months ended  30 June 2013	Year ended 31 December 2013
Weighted average number of ordinary shares in issue		4,897	4,894	4,897
Shares held in charitable foundations		(6)	(6)	(6)
Shares held in ESOP trusts		(51)	(53)	(55)
Adjusted weighted average number of ordinary shares	C2(c)	4,840	4,835	4,836
Shares held in life funds		(141)	(160)	(155)
Shares held in Black Economic Empowerment trusts		(237)	(239)	(239)
Weighted average number of ordinary shares used to calculate basic    earnings per share		4,462	4,436	4,442
Basic earnings per ordinary share (pence)		4.5	8.9	15.0

Notes to the consolidated financial statements

For the six months ended 30 June 2014

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 share 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	Six months ended 30 June 2014	Six months ended 30 June 2013	Year ended 31 December 2013
Profit attributable to ordinary equity holders (£m)		199	397	668
Dilution effect on profit relating to share options issued by subsidiaries (£m)		(4)	(4)	(10)
Diluted profit attributable to ordinary equity holders (£m)		195	393	658
Weighted average number of ordinary shares (millions)	C2(a)	4,462	4,436	4,442
Adjustments for share options held by ESOP trusts (millions)		59	46	45
Adjustments for shares held in Black Economic Empowerment trusts (millions)		237	239	239
Weighted average number of ordinary shares used to calculate    diluted basic earnings per share (millions)		4,758	4,721	4,726
Diluted basic earnings per ordinary share (pence)		4.1	8.3	13.9

(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	Six months ended 30 June 2014	Six months ended 30 June 2013	Year ended 31 December 2013
Profit for the financial period attributable to equity holders of the parent		213	414	705
Adjusting items		255	69	286
Tax on adjusting items		(28)	(28)	(46)
Non-core operations		(14)	(2)	(32)
Profit from discontinued operations		10	8	(3)
Non-controlling interest on adjusting items		(12)	(13)	(20)
Adjusted operating profit after tax attributable to ordinary equity    holders (£m)		424	448	890
Adjusted weighted average number of ordinary shares used to    calculate adjusted operating earnings per share (millions)	C2(a)	4,840	4,835	4,836
Adjusted operating earnings per share (pence)		8.8	9.3	18.4

(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
		Six months ended 30 June 2014		Six months ended 30 June 2013		Year ended 31 December 2013
	Notes	Gross	Net	Gross	Net	Gross	Net
Profit for the financial period attributable to equity    holders of the parent		213	213	414	414	705	705
Dividends paid to holders of perpetual preferred callable    securities		(14)	(14)	(17)	(17)	(37)	(37)
Profit attributable to ordinary equity holders		199	199	397	397	668	668
Adjustments:
Impairments of goodwill and intangible assets		125	125	1	1	28	28
Loss/(profit) on disposal of subsidiaries, associated    undertakings and strategic investments		10	15	1	(14)	4	(12)
Realised gains (net of impairments) on available-for-sale    financial assets		-	-	(8)	(8)	(8)	(8)
Headline earnings		334	339	391	376	692	676
Dilution effect on earnings relating to share options    issued by subsidiaries (£m)		(4)	(4)	(4)	(4)	(10)	(10)
Diluted headline earnings		330	335	387	372	682	666
Weighted average number of ordinary    shares (millions)	C2(a)	4,462	4,462	4,436	4,436	4,442	4,442
Diluted weighted average number of ordinary    shares (millions)	C2(b)	4,758	4,758	4,721	4,721	4,726	4,726
Headline earnings per share (pence)		7.5	7.6	8.8	8.5	15.6	15.2
Diluted headline earnings per share (pence)		6.9	7.0	8.2	7.9	14.4	14.1

C3: Dividends
			£m
	Six months ended 30 June 2014	Six months ended 30 June 2013	Year ended 31 December 2013
2012 Final dividend paid - 5.25p per 11 3/7p share	-	238	238
2013 Interim dividend paid - 2.10p per 11 3/7p share	-	-	98
2013 Final dividend paid - 6.00p per 11 3/7p share	279	-	-
Dividends to ordinary equity holders	279	238	336
Dividends paid to holders of perpetual preferred callable securities	17	22	47
Dividend payments for the period	296	260	383

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.

An interim dividend of 2.45 pence (or its equivalent in other applicable currencies) per ordinary share in the Company has been recommended by the directors in relation to the year ending 31 December 2014. The interim dividend will be paid on 31 October 2014 to shareholders on the register at the close of business on 17 September 2014 for the Malawi register, 18 September 2014 for the South African register, 19 September for the Zimbabwe and Namibian registers and 23 September 2014 for the UK register. The Company is not offering a scrip dividend alternative.

In March 2014, £17 million was declared and paid to holders of perpetual preferred callable securities (March 2013: £22 million, November 2013: £25 million).

Notes to the consolidated financial statements

For the six months ended 30 June 2014

D: Other income statement notes 

D1: Income tax expense

(a) Analysis of total income tax expense
			£m
	Six months ended 30 June  2014	Six months ended 30 June  2013	Year ended 31 December 2013
Current tax
United Kingdom	7	9	(3)
Overseas tax
- Africa	180	198	407
- Europe	4	10	19
- Rest of the world	-	-	7
Withholding taxes	4	-	16
Adjustments to current tax in respect of prior years	4	(19)	(25)
Total current tax	199	198	421
Deferred tax
Origination and reversal of temporary differences	17	40	142
Effect on deferred tax of changes in tax rates	-	-	(15)
Recognition of deferred tax assets	-	-	1
Adjustments to deferred tax in respect of prior years	2	12	3
Total deferred tax	19	52	131
Total income tax expense	218	250	552

(b) Reconciliation of total income tax expense
			£m
	Six months ended 30 June 2014	Six months ended 30 June 2013	Year ended 31 December 2013
Profit before tax	564	805	1,532
Tax at UK standard rate of 21.5% (2013: 23.25%)	121	187	356
Different tax rate or basis on overseas operations	41	33	57
Untaxed and low taxed income	(29)	(31)	(76)
Disallowable expenses	38	(4)	35
Net movement on deferred tax assets not recognised	13	13	31
Effect on deferred tax of changes in tax rates	-	-	(15)
Withholding taxes	2	-	10
Income tax attributable to policyholder returns	35	49	133
Tax on Group equity held in life funds	-	-	21
Other	(3)	3	-
Total income tax expense	218	250	552

(c) Income tax relating to components of other comprehensive income
			£m
	Six months ended 30 June 2014	Six months ended 30 June 2013	Year ended 31 December 2013
Preferred perpetual callable securities	(3)	(5)	(10)
Measurement gains on defined benefit plans	-	1	22
Income tax on items that will not be reclassified subsequently to profit or loss	(3)	(4)	12
Income tax on items that may be reclassified subsequently to profit or loss	3	(1)	(2)
Income tax (credit)/expense - continuing operations	-	(5)	10
Income tax (credit)/expense relating to components of other comprehensive    income	-	(5)	10

(d) Reconciliation of income tax expense in the IFRS income statement to income tax on adjusted operating profit
			£m
	Six months ended 30 June 2014	Six months ended 30 June 2013	Year ended 31 December 2013
Income tax expense	218	250	552
Tax on adjusting items
Goodwill impairment and impact of acquisition accounting	26	6	26
(Loss)/profit on disposal of subsidiaries, associates and strategic investments	(5)	15	16
Short-term fluctuations in investment return	2	3	(2)
Tax on dividends declared to holders of perpetual preferred callable securities    recognised in equity	(3)	(5)	(10)
Institutional Asset Management equity plans	3	9	11
Restructuring costs	5	-	5
Total tax on adjusting items	28	28	46
Income tax attributable to policyholders returns	(44)	(71)	(174)
Income tax on adjusted operating profit	202	207	424

Notes to the consolidated financial statements

For the six months ended 30 June 2014

E: Financial assets and liabilities

E1: Group statement of financial position

The Group is exposed to financial risk through its financial assets (investments and loans), financial liabilities (investment contracts, customer deposits and borrowings), reinsurance assets and insurance liabilities. The key focus of financial risk management for the Group is ensuring that the proceeds from its financial assets are sufficient to fund the obligations arising from its insurance and banking operations. The most important components of financial risk are credit risk, market risk (arising from changes in equity, and bond prices, interest and foreign exchange rates), and liquidity risk.

(a) Categories of financial instruments

The analysis of assets and liabilities into their categories as defined in IAS 39 'Financial Instruments: Recognition and Measurement' is set out in the following table. Assets and liabilities of a non-financial nature, or financial assets and liabilities that are specifically excluded from the scope of IAS 39, are reflected in the non-financial assets and liabilities category.

30 June 2014								£m
Measurement basis		Fair value			Amortised cost
	Total	Held-for-trading	Designated	Available-for-sale financial assets	Held-to-maturity investments	Loans and receivables	Financial liabilities amortised cost	Non-financial assets and liabilities
Assets
Mandatory reserve deposits with    central banks	767	-	-	-	-	767	-	-
Reinsurers' share of policyholder   liabilities	1,987	-	1,765	-	-	17	-	205
Loans and advances	33,727	2,476	3,377	3	-	27,871	-	-
Investments and securities	86,198	996	83,318	678	1,116	90	-	-
Trade, other receivables and    other assets	2,780	129	325	-	-	1,753	-	573
Derivative financial instruments	1,104	1,104	-	-	-	-	-	-
Cash and cash equivalents	4,289	-	-	-	-	4,289	-	-
Total assets that include financial    instruments	130,852	4,705	88,785	681	1,116	34,787	-	778
Total non-financial assets	10,939	-	-	-	-	-	-	10,939
Total assets	141,791	4,705	88,785	681	1,116	34,787	-	11,717
Liabilities
Life assurance policyholder    liabilities	78,092	-	60,412	-	-	-	-	17,680
Third-party interest in    consolidation of funds	6,456	-	6,456	-	-	-	-	-
Borrowed funds	2,752	-	686	-	-	-	2,066	-
Trade, other payables and    other liabilities	4,099	199	272	-	-	-	2,566	1,062
Amounts owed to bank depositors	34,540	3,724	3,463	-	-	-	27,353	-
Derivative financial instruments	1,174	1,174	-	-	-	-	-	-
Total liabilities that include    financial instruments	127,113	5,097	71,289	-	-	-	31,985	18,742
Total non-financial liabilities	5,807	-	-	-	-	-	-	5,807
Total liabilities	132,920	5,097	71,289	-	-	-	31,985	24,549

30 June 2013								£m
Measurement basis		Fair value			Amortised cost
	Total	Held-for-trading	Designated	Available-for-sale financial assets	Held-to-maturity investments	Loans and receivables	Financial liabilities amortised cost	Non-financial assets and liabilities
Assets
Mandatory reserve deposits with    central banks	760	-	-	-	-	760	-	-
Reinsurers' share of policyholder   liabilities	1,629	-	1,386	-	-	19	-	224
Loans and advances	37,418	2,467	3,778	2	-	31,171	-	-
Investments and securities	88,915	1,237	84,937	811	1,550	380	-	-
Trade, other receivables and    other assets	2,955	176	393	-	-	1,882	-	504
Derivative financial instruments	1,417	1,417	-	-	-	-	-	-
Cash and cash equivalents	5,035	-	-	-	-	5,035	-	-
Total assets that include financial    instruments	138,129	5,297	90,494	813	1,550	39,247	-	728
Total non-financial assets	7,603	-	-	-	-	-	-	7,603
Total assets	145,732	5,297	90,494	813	1,550	39,247	-	8,331
Liabilities
Life assurance policyholder    liabilities	81,443	-	61,876	-	-	209	-	19,358
Third-party interest in    consolidation of funds	5,479	-	5,479	-	-	-	-	-
Borrowed funds	2,563	-	880	-	-	-	1,683	-
Trade, other payables and    other liabilities	5,076	416	472	-	-	211	2,778	1,199
Amounts owed to bank depositors	38,009	3,661	5,032	-	-	-	29,316	-
Derivative financial instruments	1,623	1,623	-	-	-	-	-	-
Total liabilities that include    financial instruments	134,193	5,700	73,739	-	-	420	33,777	20,557
Total non-financial liabilities	1,906	-	-	-	-	-	-	1,906
Total liabilities	136,099	5,700	73,739	-	-	420	33,777	22,463

Notes to the consolidated financial statements

For the six months ended 30 June 2014

E: Financial assets and liabilities continued

E1: Group statement of financial position continued

(a) Categories of financial instruments continued

31 December 2013								£m
Measurement basis		Fair value			Amortised cost
	Total	Held-for-trading	Designated	Available-for-sale financial assets	Held-to-maturity investments	Loans and receivables	Financial liabilities amortised cost	Non-financial assets and liabilities
Assets
Mandatory reserve deposits with    central banks	759	-	-	-	-	759	-	-
Reinsurers' share of policyholder   liabilities	1,875	-	1,624	-	-	16	-	235
Loans and advances	33,583	2,147	3,668	4	-	27,764	-	-
Investments and securities	88,220	971	84,873	807	1,461	108	-	-
Trade, other receivables and    other assets	2,583	193	347	-	-	1,447	-	596
Derivative financial instruments	1,259	1,259	-	-	-	-	-	-
Cash and cash equivalents	4,869	-	-	-	-	4,869	-	-
Total assets that include financial    instruments	133,148	4,570	90,512	811	1,461	34,963	-	831
Total non-financial assets	7,183	-	-	-	-	-	-	7,183
Total assets	140,331	4,570	90,512	811	1,461	34,963	-	8,014
Liabilities
Life assurance policyholder    liabilities	81,141	-	63,187	-	-	-	-	17,954
Third-party interest in    consolidation of funds	5,478	-	5,478	-	-	-	-	-
Borrowed funds	2,629	-	747	-	-	-	1,882	-
Trade, other payables and    other liabilities	4,315	263	294	-	-	-	2,413	1,345
Amounts owed to bank depositors	34,370	3,303	5,179	-	-	-	25,888	-
Derivative financial instruments	1,478	1,478	-	-	-	-	-	-
Total liabilities that include    financial instruments	129,411	5,044	74,885	-	-	-	30,183	19,299
Total non-financial liabilities	1,883	-	-	-	-	-	-	1,883
Total liabilities	131,294	5,044	74,885	-	-	-	30,183	21,182

(b) Fair value hierarchy

The table below presents the Group's financial assets and liabilities that are measured at fair value in the consolidated statement of financial position according to their IAS 39 classification, as set out in note E1(a), and in terms of the fair value hierarchy as required by IFRS 7 'Financial Instruments: Disclosures'.

The table below analyses the financial assets and liabilities according to fair value hierarchy:
				£m
30 June 2014	Total	Level 1	Level 2	Level 3
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss)	4,705	329	4,368	8
Loans and advances	2,476	-	2,476	-
Investments and securities	996	196	799	1
Other financial assets	129	129	-	-
Derivative financial instruments - assets	1,104	4	1,093	7
Designated (fair value through profit or loss)	88,785	74,992	12,174	1,619
Reinsurers' share of policyholder liabilities	1,765	1,765	-	-
Loans and advances	3,377	1	3,374	2
Investments and securities	83,318	72,901	8,800	1,617
Other financial assets	325	325	-	-
Available-for-sale financial assets (fair value through equity)	681	195	485	1
Loans and advances	3	3	-	-
Investments and securities	678	192	485	1
Total assets measured at fair value	94,171	75,516	17,027	1,628
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss)	5,097	196	4,901	-
Other liabilities	199	190	9	-
Amounts owed to bank depositors	3,724	-	3,724	-
Derivative financial instruments - liabilities	1,174	6	1,168	-
Designated (fair value through profit or loss)	71,289	46,733	23,752	804
Life assurance policyholder liabilities	60,412	46,079	13,529	804
Third-party interests in consolidated funds	6,456	-	6,456	-
Borrowed funds	686	606	80	-
Other liabilities	272	48	224	-
Amounts owed to bank depositors	3,463	-	3,463	-
Total liabilities measured at fair value	76,386	46,929	28,653	804

Notes to the consolidated financial statements

For the six months ended 30 June 2014

E: Financial assets and liabilities continued

E1: Group statement of financial position continued

(b) Fair value hierarchy continued

				£m
30 June 2013	Total	Level 1	Level 2	Level 3
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss)	5,297	474	4,811	12
Loans and advances	2,467	-	2,467	-
Investments and securities	1,237	294	936	7
Other financial assets	176	176	-	-
Derivative financial instruments - assets	1,417	4	1,408	5
Designated (fair value through profit or loss)	90,494	72,482	16,788	1,224
Reinsurers' share of policyholder liabilities	1,386	1,386	-	-
Loans and advances	3,778	2	3,772	4
Investments and securities	84,937	70,703	13,014	1,220
Other financial assets	393	391	2	-
Available-for-sale financial assets (fair value through equity)	813	371	439	3
Loans and advances	2	2	-	-
Investments and securities	811	369	439	3
Total assets measured at fair value	96,604	73,327	22,038	1,239
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss)	5,700	412	5,288	-
Other liabilities	416	408	8	-
Amounts owed to bank depositors	3,661	-	3,661	-
Derivative financial instruments - liabilities	1,623	4	1,619	-
Designated (fair value through profit or loss)	73,739	44,675	28,529	535
Life assurance policyholder liabilities	61,876	43,806	17,535	535
Third-party interests in consolidated funds	5,479	-	5,479	-
Borrowed funds	880	865	15	-
Other liabilities	472	4	468	-
Amounts owed to bank depositors	5,032	-	5,032	-
Total liabilities measured at fair value	79,439	45,087	33,817	535

				£m
31 December 2013	Total	Level 1	Level 2	Level 3
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss)	4,570	493	4,066	11
Loans and advances	2,147	-	2,147	-
Investments and securities	971	295	673	3
Other financial assets	193	193	-	-
Derivative financial instruments - assets	1,259	5	1,246	8
Designated (fair value through profit or loss)	90,512	76,822	11,980	1,710
Reinsurers' share of policyholder liabilities	1,624	1,624	-	-
Loans and advances	3,668	1	3,665	2
Investments and securities	84,873	74,850	8,315	1,708
Other financial assets	347	347	-	-
Available-for-sale financial assets (fair value through equity)	811	348	461	2
Loans and advances	4	4	-	-
Investments and securities	807	344	461	2
Total assets measured at fair value	95,893	77,663	16,507	1,723
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss)	5,044	265	4,779	-
Other liabilities	263	256	7	-
Amounts owed to bank depositors	3,303	-	3,303	-
Derivative financial instruments - liabilities	1,478	9	1,469	-
Designated (fair value through profit or loss)	74,885	48,237	25,716	932
Life assurance policyholder liabilities	63,187	47,538	14,717	932
Third-party interests in consolidated funds	5,478	-	5,478	-
Borrowed funds	747	663	84	-
Other liabilities	294	36	258	-
Amounts owed to bank depositors	5,179	-	5,179	-
Total liabilities measured at fair value	79,929	48,502	30,495	932

(c) Determination of fair value

The best evidence of fair value is a quoted price in an active market. In the event that the market for a financial asset or liability is not active, or quoted prices cannot be obtained without undue effort, another valuation technique is used.

The judgement as to whether a market is active may include, for example, consideration of factors such as the magnitude and frequency of trading activity, the availability of prices and the size of bid/offer spreads. In inactive markets, obtaining assurance that the transaction price provides evidence of fair value or determining the adjustments to transaction prices that are necessary to measure the fair value of the asset or liability requires additional work during the valuation process.

The majority of valuation techniques employ only observable data and so the reliability of the fair value measurement is high. However, certain financial assets and liabilities are valued on the basis of valuation techniques that feature one or more significant inputs that are unobservable and, for them, the derivation of fair value is more judgemental. A financial asset or liability in its entirety is classified as valued using significant unobservable inputs if a significant proportion of that asset or liability's carrying amount is driven by unobservable inputs.

In this context, 'unobservable' means that there is little or no current market data available for which to determine the price at which an arm's length transaction would be likely to occur. It generally does not mean that there is no market data available at all upon which to base a determination of fair value. Furthermore, in some cases the majority of the fair value derived from a valuation technique with significant unobservable data may be attributable to observable inputs. Consequently, the effect of uncertainty in determining unobservable inputs will generally be restricted to uncertainty about the overall fair value of the asset or liability being measured. Details of the Group's valuation techniques can be found in note E1(q) (iii) of the 2013 Annual Report. There have been no significant changes to the valuation techniques applied.

Notes to the consolidated financial statements

For the six months ended 30 June 2014

E: Financial assets and liabilities continued

E1: Group statement of financial position continued

(d) Movements in financial instruments measured at Level 3 in terms of the hierarchy

The fair values of Level 3 financial instruments are based on valuation techniques that rely largely on unobservable market inputs and require a significant level of judgement. As such, the fair values of Level 3 financial instruments are often less reliable than Level 1 and Level 2 financial instruments. Movements in the fair values of Level 3 instruments are generally due to movements in key assumptions and macroeconomic factors.

The tables below reconcile the opening balances of financial assets and liabilities measured in terms of Level 3 fair value to closing balances at the end of the period:

								£m
Six months ended 30 June 2014	Held-for-trading - Investments and securities	Held- for-trading -  Derivatives	Designated fair value through profit or loss  - Loans and advances	Designated fair value through profit or loss  - Investments and securities		Available-for- sale - Investments and securities		Total
Level 3 financial assets
At beginning of the year	3	8	2	1,708		2		1,723
Total net (losses)/gains recognised in   the profit or loss for the period	(1)	(1)	-	20		-		18
Purchases and issues	-	-	-	73		-		73
Sales and settlements	-	-	-	(188)		(1)		(189)
Transfers in	-	-	-	57		-		57
Transfers out	-	-	-	(16)		-		(16)
Foreign exchange and other	(1)	-	-	(37)		-		(38)
Total level 3 financial assets	1	7	2	1,617		1		1,628
Gains relating to assets held at    30 June 2014 recognised in:
- profit or loss	-	-	-	9		-		9
							£m
Six months ended 30 June 2014					Designated fair value through profit  or loss - Life assurance policyholder liabilities (investment contracts)		Total
Level 3 financial liabilities
At beginning of the year					932		932
Total net gains recognised in profit or loss for the period					(49)		(49)
Purchases and issues					1		1
Sales and settlements					(126)		(126)
Transfers in					50		50
Transfers out					-		-
Foreign exchange and other					(4)		(4)
Total level 3 financial liabilities					804		804
Gains relating to liabilities held at    30 June 2014 recognised in:
- profit or loss					(49)		(49)

						£m
Six months ended 30 June 2013	Held-for-trading - Investments and securities	Held- for-trading -  Derivatives	Designated fair value through profit or loss  - Loans and advances	Designated fair value through profit or loss  - Investments and securities	Available-for- sale - Investments and securities	Total
Level 3 financial assets
At beginning of the year	4	-	9	1,051	2	1,066
Total net gains/(losses) recognised in   the profit or loss for the period	4	-	(5)	54	-	53
Total gains recognised in other   comprehensive income	-	-	-	1	-	1
Purchases and issues	-	5	-	24	-	29
Sales and settlements	(1)	-	-	(21)	-	(22)
Transfers in	-	-	-	151	1	152
Transfers out	-	-	-	-	-	-
Foreign exchange and other	-	-	-	(40)	-	(40)
Total level 3 financial assets	7	5	4	1,220	3	1,239
Gains relating to assets held at    30 June 2013 recognised in:
- profit or loss	-	-	-	52	-	52

		£m
Six months ended 30 June 2013	Designated fair value through profit  or loss - Life assurance policyholder liabilities (investment contracts)	Total
Level 3 financial liabilities
At beginning of the year	480	480
Total net losses recognised in profit or loss for the period	72	72
Purchases and issues	1	1
Sales and settlements	(104)	(104)
Transfers in	77	77
Foreign exchange and other	9	9
Total level 3 financial liabilities	535	535
Losses relating to liabilities held at    30 June 2013 recognised in:
- profit or loss	74	74

Notes to the consolidated financial statements

For the six months ended 30 June 2014

E: Financial assets and liabilities continued

E1: Group statement of financial position continued

(d) Movements in financial instruments measured at Level 3 in terms of the hierarchy continued

						£m
Year ended 31 December 2013	Held-for-trading - Investments and securities	Held- for-trading -  Derivatives	Designated fair value through profit or loss  - Loans and advances	Designated fair value through profit or loss  - Investments and securities	Available-for- sale - Investments and securities	Total
Level 3 financial assets
At beginning of the year	4	-	9	1,122	2	1,137
Total net gains/(losses) recognised in   the profit or loss for the period	1	-	-	65	-	66
Purchases and issues	-	9	-	290	-	299
Sales and settlements	(1)	-	(6)	(77)	-	(84)
Transfers in	-	-	-	464	-	464
Transfers out	-	-	-	(21)	-	(21)
Foreign exchange and other	(1)	(1)	(1)	(135)	-	(138)
Total level 3 financial assets	3	8	2	1,708	2	1,723
Gains relating to assets held at    31 December 2013 recognised in:
- profit or loss	-	-	-	55	-	55

		£m
Year ended 31 December 2013	Designated fair value through profit  or loss - Life assurance policyholder liabilities (investment contracts)	Total
Level 3 financial liabilities
At beginning of the year	480	480
Total net gains recognised in profit or loss for the period	(8)	(8)
Purchases and issues	106	106
Sales and settlements	(114)	(114)
Transfers in	464	464
Transfers out	-	-
Foreign exchange and other	4	4
Total level 3 financial liabilities	932	932
Losses relating to liabilities held at    30 June 2013 recognised in:
- profit or loss	(12)	(12)

(e) Effect of changes in significant unobservable assumptions to reasonable possible alternatives

Favourable and unfavourable changes are determined on the basis of changes in the value of the financial asset or liability as a result of varying the levels of the unobservable parameter using statistical techniques. When parameters are not amenable to statistical analysis, quantification of uncertainty is judgemental.

When the fair value of a financial asset or liability is affected by more than one unobservable assumption, the figures shown reflect the most favourable or most unfavourable change from varying the assumptions individually.

In respect of private equity investments which are included as investment securities, the valuations are assessed on an asset-by-asset basis using a valuation methodology appropriate to the specific investment, in line with industry guidelines. In many of the methodologies, the principal assumption is the valuation multiple to be applied to the main financial indicators including, for example, multiples for comparable listed companies and discounts for marketability.

For asset-backed securities whose prices are unobservable, models are used to generate the expected value of the asset, incorporating benchmark information on factors such as prepayment patterns, default rates, loss severities and the historical performance of the underlying assets. The models used are calibrated by using securities for which external market information is available.

For structured notes and other derivatives, principal assumptions concern the future volatility of asset values and the future correlation between asset values. These principle assumptions include credit volatilities and correlations used in the valuation of the structured credit derivatives. For such unobservable assumptions, estimates are based on available market data, which may include the use of a proxy method to derive a volatility or correlation from comparable assets for which market data is more readily available, and examination of historical levels.

(f) Alternative assumptions

Accounting standards require consideration of the effect of reasonable possible alternative assumptions on the fair value of Level 3 financial assets and liabilities.

Alternative assumptions are assessed in terms of possible favourable and unfavourable changes in the key market inputs for the major types of Level 3 financial assets and liabilities, ranging from, for example, a 10% change in the price earnings multiple for equity securities, to a 25% change in the discount rates applied to debt securities and volatility assumptions in derivative contracts. Changes in business risk inputs such as lapses and non-performance risk were also considered.

The table below shows the income statement effect of reasonable possible alternative assumptions on the fair value of Level 3 financial assets and liabilities:

						£m
	30 June 2014		30 June 2013		31 December 2013
Reflected in profit or loss	Favourable changes	Unfavourable changes	Favourable changes	Unfavourable changes	Favourable changes	Unfavourable changes
Level 3 financial assets
Designated (fair value through profit or loss)	210	199	123	120	218	198
Loans and advances	-	-	1	1	-	-
Investments and securities	203	199	122	119	212	198
Derivative financial instruments	7	-	-	-	6	-
Total Level 3 financial assets	210	199	123	120	218	198
Level 3 financial liabilities
Designated (fair value through profit or loss)	70	84	20	48	85	74
Life assurance policyholder liabilities       (investment contracts)	70	84	20	48	85	74
Total Level 3 financial liabilities	70	84	20	48	85	74

The impact of reasonable possible alternative assumptions on other comprehensive income was £nil in all periods.

Notes to the consolidated financial statements

For the six months ended 30 June 2014

E: Financial assets and liabilities continued

E2: Borrowed funds

									£m
	Notes		Group excluding Nedbank	Nedbank	30 June 2014 Group		Group excluding Nedbank	Nedbank	30 June 2013 Group
Senior debt securities and term loans			113	1,240	1,353		123	994	1,117
Floating rate notes	E2(a)		-	708	708		-	525	525
Fixed rate notes	E2(b)		113	532	645		123	469	592
Mortgage-backed securities	E2(d)		-	57	57		-	114	114
Subordinated debt securities	E2(e)		740	602	1,342		714	618	1,332
Borrowed funds			853	1,899	2,752		837	1,726	2,563
Other instruments treated as equity    for accounting purposes
€374 million perpetual preferred    callable securities at 5.00%			253				334
£273 million perpetual preferred    callable securities as 6.40%			273				348
Total: Book value			1,379				1,519
Nominal value of the above			1,350				1,594
									£m
							Group excluding Nedbank	Nedbank	31 December 2013 Group
Senior debt securities and term loans							113	1,151	1,264
Floating rate notes	E2(a)						-	673	673
Fixed rate notes	E2(b)						113	478	591
Mortgage-backed securities	E2(d)						-	65	65
Subordinated debt securities	E2(e)						703	597	1,300
Borrowed funds							816	1,813	2,629
Other Group 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							1,342
Nominal value of the above							1,370

Senior debt securities and term loans
(a) Floating rate notes
				£m
	Maturity date	30 June 2014	30 June 2013	31 December 2013
Nedbank - Floating rate unsecured senior debt
R988 million at JIBAR + 1.05%	Repaid	-	64	50
R500 million at JIBAR + 1.00%	Repaid	-	30	26
R1,075 million at JIBAR + 0.94%	October 2014	60	72	62
R1,297 million at JIBAR + 1.00%	February 2015	73	87	75
R1,027 million at JIBAR + 1.75%	April 2015	57	69	60
R250 million at JIBAR + 1.00%	August 2015	14	17	14
R1,044 million at JIBAR + 2.20%	September 2015	58	70	61
R677 million at JIBAR + 1.25%	March 2016	37	45	39
R3,056 million at JIBAR + 0.8%	July 2016	170	-	176
R694 million at JIBAR + 0.75%	November 2016	38	-	40
R405 million at JIBAR + 1.30%	February 2017	22	27	23
R1,035 million at JIBAR + 0.85%	March 2017	57	-	-
R786 million at JIBAR + 1.30%	August 2017	38	39	42
R806 million at JIBAR + 0.9%	June 2017	44	-	-
R80 million at JIBAR + 2.15%	April 2020	4	5	5
R650 million at JIBAR + 1.3%	June 2021	36	-	-
Total floating rate notes		708	525	673

All floating rate notes are non-qualifying for the purposes of regulatory tiers of capital.

(b) Fixed rate notes (net of Group holdings)
				£m
	Maturity date	30 June 2014	30 June 2013	31 December 2013
Nedbank - Fixed rate unsecured senior debt
R450 million at 8.39%	Repaid	-	30	26
R478 million at 9.68%	April 2015	27	32	28
R3,244 million at 10.55%	September 2015	184	222	192
R1,137 million at 9.36%	March 2016	64	77	67
R151 million at 6.91%	July 2016	9	-	9
R1,273 million at 11.39%	September 2019	77	93	80
R1,888 million at 8.92%	November 2020	105	-	109
R855 million at 9.38%	March 2021	48	-	-
R500 million at 9.29%	June 2021	28	-	-
R391 million at 9.73%	March 2024	22	-	-
R660 million at zero coupon	October 2024	13	15	14
		577	469	525
Less: Fixed rate notes held by other Group companies		(45)	-	(47)
Banking fixed rate unsecured senior debt (net of Group holdings)		532	469	478
Group excluding Nedbank
$2 million secured senior debt at 5.23%	July 2014	1	11	1
£112 million eurobond at 7.125%	October 2016	112	112	112
		113	123	113
Total fixed rate notes		645	592	591

All fixed rate notes are non-qualifying for the purpose of regulatory tiers of capital.

(c) Revolving credit facilities and irrevocable letters of credit

The Group has access to a £800 million (June 2013: £1,200 million, December 2013: £800 million) five-year multi-currency revolving credit facility which matures in April 2016. At 30 June 2014, 31 December 2013 and 30 June 2013, none of this facility was drawn and there were no irrevocable letters of credit in issue against this facility.

Notes to the consolidated financial statements

For the six months ended 30 June 2014

E: Financial assets and liabilities continued

E2: Borrowed funds continued

(d) Mortgage-backed securities (net of Group holdings)
					£m
	Tier	Maturity date	30 June 2014	30 June 2013	31 December 2013
Nedbank
R480 million (class A1) at JIBAR + 1.10%	Tier 2	25 October 2039	7	24	13
R336 million (class A2) at JIBAR + 1.25%	Tier 2	25 October 2039	19	23	20
R900 million (class A3) at JIBAR + 1.54%	Tier 2	25 October 2039	50	60	52
R110 million (class B) at JIBAR + 1.90%	Tier 2	25 October 2039	6	7	6
			82	114	91
Less: Mortgage backed securities held by other Group companies			(25)	-	(26)
Total mortgage-backed securities			57	114	65

(e) Subordinated debt securities (net of Group holdings)
						£m
	Tier	First call date	Maturity date	30 June 2014	30 June 2013	31 December 2013
Nedbank
R300 million at JIBAR + 2.50%	Tier 2	Repaid	Repaid	-	10	-
R1,800 million at 9.84%	Tier 2	Repaid	Repaid	-	124	-
R1,700 million at 8.90%	Tier 2	Repaid	Repaid	-	118	101
R1,265 million at JIBAR + 4.75%	Non-core Tier 1	November 2018	November 2018	70	85	74
R487 million at 15.05%	Non-core Tier 1	November 2018	November 2018	32	37	32
R1,000 million at 10.54%	Tier 2	September 2015	September 2020	58	72	62
$100 million at 3 month USD LIBOR	Tier 2 Secondary	March 2017	March 2022	59	66	60
R2,000 million at JIBAR + 0.47%	Tier 2	July 2017	July 2022	112	134	116
R1,800 million at JIBAR + 2.75%	Tier 2	July 2018	July 2023	101	-	105
R1,200 million at JIBAR + 2.55%	Tier 2	November 2018	November 2023	67	-	69
R450 million at 10.49%	Tier 2	April 2019	April 2024	25	-	-
R1,737 million at 3 month JIBAR + 2.55%	Tier 2	April 2019	April 2024	97	-	-
				621	646	619
Less: Banking subordinated debt securities held by other Group companies				(19)	(28)	(22)
Banking subordinated securities (net of Group holdings)				602	618	597
Group excluding Nedbank
R3,000 million at 8.92% until October    2015 and 3 month JIBAR + 1.59%    thereafter	Lower Tier 2	October 2015	October 2020	165	199	172
£500 million at 8.00%	Lower Tier 2	-	June 2021	575	515	531
				740	714	703
Total subordinated debt securities				1,342	1,332	1,300

F: Other notes

F1: Related parties

The nature of the related party transactions of the Group has not changed from those referred to in the 2013 Annual Report and Accounts.

There were no transactions with related parties during the six months ended 30 June 2014, that had a material effect on the results or the financial position of the Group.

F2: Events after the reporting date

On 1 July 2014, the Group announced the completion of the acquisition of Intrinsic Financial Services, one of the largest networks of financial advisers in the UK. The acquisition was announced on 28 February 2014 and is part of Old Mutual Wealth's strategy of building an integrated customer proposition comprising financial advice, asset management and tax efficient products. Additionally, the Group announced that it intends to acquire the remaining 50% stake of Cirilium, the core investment proposition for Intrinsic's restricted financial advisers.

On 4 July 2014, Old Mutual Bermuda received formal written approval from the Bermuda Monitory Authority (BMA) to repatriate $160 million via cancellation of OM Group (UK) Limited loan notes.

On 10 July 2014, Nedbank Group Limited announced its intention to issue new preference shares. These preference shares will be utilised to raise funding for Nedbank's' business activities in general.

Terms have been agreed to sell Skandia Liechtenstein, part of Old Mutual Wealth. The transaction is subject to regulatory approval and the fulfilment of certain closing conditions and is expected to complete during the second half of the year.

F3: Contingent liabilities

Contingent liabilities - tax

The Group is regularly in discussion with the respective tax authorities in each of the jurisdictions where the Group is active. The Group applies its judgement to determine if a provision for future tax uncertainties should be recognised based on detailed reviews of any potential exposure to tax authorities and the assessment of the most probable outcome of the tax uncertainty.  As these provisions are based on estimates and rely on judgements made by the Group, the actual amount of future taxes paid by the Group could be different to the amounts provided.

G: Discontinued operations and disposal groups held for sale

G1: 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, collectively Nordic. The disposal of Nordic was completed on 21 March 2012 following shareholder and regulatory approval, and the Nordic business was consolidated and reported up until that date. The Group continues to incur costs that are directly related to the sale of Nordic. These costs relate to the transition of IT and other services, previously provided by Nordic to the wider Group, back to the Group.

Income statement from discontinued operations (Nordic)
			£m
	Six months ended 30 June  2014	Six months  ended 30 June 2013	Year ended 31 December 2013
Revenue	-	-	-
Expenses	(11)	(9)	(26)
Loss before tax from discontinued operations - trading activities	(11)	(9)	(26)
Profit on disposal	-	-	27
(Loss)/profit before tax from discontinued operations	(11)	(9)	1
Income tax credit	1	1	2
(Loss)/profit after tax from discontinued operations	(10)	(8)	3

G2: Disposal groups held for sale

On 27 March 2014, the Group announced that terms had been agreed to sell two of its Old Mutual Wealth businesses, Skandia Austria and Skandia Germany. This transaction is subject to regulatory approvals and consequently the assets and liabilities of these businesses have been classified as held for sale in the statement of financial position. At 30 June 2014, the total value of the assets and liabilities reclassified as held for sale in the statement of financial position were £4,468 million and £4,294 million respectively. The disposal of these businesses is expected to be completed during the second half of the year.

The Group had additional non-current assets held for sale of £5 million (30 June 2013: £5 million; 31 December 2013: £5 million).

G3: Contingent liabilities in respect of the disposal of US Life

Following its disposal in April 2011 of US Life to the Harbinger Group (Harbinger), the Group has retained certain residual commitments and contingent liabilities relating to that business. These arise from sale warranties and indemnities that are typical in transactions of this nature, including in respect of certain litigation (including class actions) and regulatory enforcement actions arising from events that occurred before completion of the sale.  The residual commitments are in effect for varying periods of time.

The sale agreement contemplated that Harbinger would establish certain internal reinsurance arrangements after completion, which were subject to regulatory approval. If such regulatory approval was not forthcoming, there was potential for a reduction in the purchase price of US Life of up to a maximum of $50 million. In July 2012, Harbinger filed a lawsuit against the Group, claiming payment of a purchase price adjustment of $50 million.  The Group has filed its defence and is vigorously defending this claim.  In view of the ongoing uncertainty and the Group's current assessment of this claim, the Group has not raised a provision against this exposure.

 

END

 

 

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