Preliminary Results - Part 2 IFRS

RNS Number : 4957C

Old Mutual PLC

08 March 2011

 



Statement of directors' responsibilities in respect of the preliminary announcement

of the Annual Report and the financial statements

We confirm that to the best of our knowledge:

·      The financial statements, prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit of the Group and the undertakings included in the consolidation taken as a whole;

·      The Group Finance Director's review and the Business review include a fair view of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the important events, principal risks and uncertainties that they face.

Julian Roberts                                                                                                                       Philip Broadley
Group Chief Executive                                                                                                          Group Finance Director

08 March 2011                                                                                                                      08 March 2011

Consolidated income statement

For the year ended 31 December 2010

£m
	Notes	Year ended 31 December 2010	Year ended 31 December 2009*
Revenue
Gross earned premiums	B3	3,582	3,020
Outward reinsurance		(305)	(267)
Net earned premiums		3,277	2,753
Investment return (non-banking)		10,791	11,112
Banking interest and similar income		4,082	3,989
Banking trading, investment and similar income		204	168
Fee and commission income, and income from service activities		3,061	2,422
Other income		159	196
Total revenues		21,574	20,640
Expenses
Claims and benefits (including change in insurance contract provisions)		(5,039)	(3,786)
Reinsurance recoveries		227	200
Net claims and benefits incurred		(4,812)	(3,586)
Change in investment contract liabilities		(6,899)	(8,345)
Losses on loans and advances		(552)	(511)
Finance costs		(269)	(322)
Banking interest payable and similar expenses		(2,519)	(2,627)
Fee and commission expenses, and other acquisition costs		(963)	(728)
Other operating and administrative expenses		(3,714)	(3,072)
Goodwill impairment	C1(b)	(1)	(266)
Change in third-party interest in consolidated funds		(388)	(470)
Amortisation of PVIF and other acquired intangibles	C1(b)	(297)	(312)
Total expenses		(20,414)	(20,239)
Share of associated undertakings' and joint ventures' profit/(loss) after tax		7	2
Loss on disposal of subsidiaries, associated undertakings and strategic investments	C1(c)	(22)	(50)
Profit before tax		1,145	353
Income tax (expense)/credit	D1(a)	(456)	(400)
Profit/(loss) from continuing operations after tax		689	(47)
Discontinued operations
Loss from discontinued operations after tax	H1	(713)	(71)
Loss after tax for the financial year		(24)	(118)
Attributable to
Equity holders of the parent		(282)	(340)
Non-controlling interests
Ordinary shares	F2(a)	196	158
Preferred securities	F2(a)	62	64
Loss after tax for the financial year		(24)	(118)
Earnings per share
Basic earnings per share based on profit from continuing operations (pence)		8.2	(6.3)
Basic earnings per share based on loss from discontinued operations		(14.7)	(1.5)
Basic earnings per ordinary share (pence)	C3(a)	(6.5)	(7.8)
Diluted earnings per share based on profit from continuing operations (pence)		7.4	(6.3)
Diluted earnings per share based on loss from discontinued operations		(13.5)	(1.5)
Diluted earnings per ordinary share (pence)	C3(a)	(6.1)	(7.8)
Weighted average number of shares - millions	C3(a)	4,859	4,758

*The year ended 31 December 2009 has been restated to reflect US Life as discontinued (see note A1).

Consolidated statement of comprehensive income

For the year ended 31 December 2010

			£m
	Notes	Year ended 31 December 2010	Year ended 31 December 2009*
Profit/(loss) after tax for the financial year		(24)	(118)
Other comprehensive income for the financial year
Fair value (losses)/gains
Property revaluation		26	(10)
Net investment hedge		(87)	(41)
Available-for-sale investments
Fair value gains/(losses)		32	112
Recycled to the income statement		-	13
Shadow accounting		(15)	36
Currency translation differences/exchange differences on translating foreign operations		1,039	334
Other movements		31	21
Income tax relating to components of other comprehensive income	D1(c)	13	13
Total other comprehensive income for the financial year from continuing operations		1,039	478
Total other comprehensive income for the financial year from discontinued operations		112	750
Total other comprehensive income for the financial year		1,151	1,228
Total comprehensive income for the financial year		1,127	1,110
Attributable to
Equity holders of the parent		594	709
Non-controlling interests
Ordinary shares		428	334
Preferred securities		105	67
Total comprehensive income for the financial year		1,127	1,110

*       The year ended 31 December 2009 has been restated to reflect US Life as discontinued (see note A1).

Reconciliation of adjusted operating profit to profit after tax

For the year ended 31 December 2010

£m
	Notes	Year ended 31 December 2010	Year ended 31 December 2009*
Core operations
Long-Term Savings	B2	897	636
Nedbank	B2	601	470
M&F	B2	103	70
USAM	B2	87	83
		1,688	1,259
Finance costs		(128)	(104)
Long term investment return on excess assets		31	91
Interest payable to non-core operations - Bermuda		(55)	(40)
Interest receivable from non-core operations - US Life		16	12
Other shareholders' expenses		(71)	(85)
Adjusted operating profit		1,481	1,133
Adjusting items	C1(a)	(482)	(973)
Non-core operations	B2	(3)	1
Profit before tax (net of policyholder tax)		996	161
Income tax attributable to policyholder returns	B2	149	192
Profit before tax		1,145	353
Total income tax (expense)/credit	D1(a)	(456)	(400)
Profit/(loss) from continuing operations after tax		689	(47)
Loss from discontinued operations after tax	H1	(713)	(71)
Loss after tax for the financial year		(24)	(118)

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

£m
	Notes	Year ended 31 December 2010	Year ended 31 December 2009*
Adjusted operating profit		1,481	1,133
Tax on adjusted operating profit	D1(d)	(347)	(283)
Adjusted operating profit after tax		1,134	850
Non-controlling interests - ordinary shares	F2(a)	(217)	(181)
Non-controlling interests - preferred securities	F2(a)	(62)	(64)
Adjusted operating profit after tax attributable to ordinary equity holders of the parent		855	605
Adjusted weighted average number of shares - (millions)	C3(b)	5,359	5,229
Adjusted operating earnings per share - (pence)	C3(b)	16.0	11.6

*The year ended 31 December 2009 has been restated to reflect US Life as discontinued (see note A1).

Basis of preparation

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

For core life assurance and general insurance businesses, adjusted operating profit is based on a long-term investment return, including investment returns on life funds' investments in Group equity and debt instruments, and is stated net of income tax attributable to policyholder returns. For the US Asset Management business it includes compensation costs in respect of certain long-term incentive schemes defined as non-controlling interests in accordance with IFRS. For all core businesses, adjusted operating profit excludes goodwill impairment, the impact of acquisition accounting, revaluations of put options related to long-term incentive schemes, profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments, dividends declared to holders of perpetual preferred callable securities, and fair value profits/(losses) on certain Group debt movements. Bermuda and US Life, which are non-core, are not included in adjusted operating profit.

Adjusted operating earnings per ordinary share is calculated on the same basis as adjusted operating profit. It is stated after tax attributable to adjusted operating profit and non-controlling interests. It excludes income attributable to Black Economic Empowerment trusts of listed subsidiaries. The calculation of the adjusted weighted average number of shares includes own shares held in policyholders' funds and Black Economic Empowerment trusts.

Consolidated statement of financial position

At 31 December 2010

£m
	Notes	At 31 December 2010	At 31 December 2009
Assets
Goodwill and other intangible assets		4,965	5,159
Mandatory reserve deposits with central banks		1,079	882
Property, plant and equipment		1,015	828
Investment property		2,040	1,759
Deferred tax assets		416	570
Investments in associated undertakings and joint ventures		162	135
Deferred acquisition costs		1,534	3,138
Reinsurers' share of life assurance policyholder liabilities		982	1,296
Reinsurers' share of general insurance liabilities		122	120
Deposits held with reinsurers		2	146
Loans and advances		51,778	42,393
Investments and securities		106,153	98,461
Current tax receivable		156	169
Client indebtedness for acceptances		190	170
Trade, other receivables and other assets		3,932	3,051
Derivative financial instruments - assets		2,503	2,546
Cash and cash equivalents		4,132	2,982
Non-current assets held for sale	H2	12,391	1
Total assets		193,552	163,806
Liabilities
Life assurance policyholder liabilities		98,631	93,876
General insurance liabilities		397	372
Third-party interests in consolidated funds		3,584	2,906
Borrowed funds	E1	4,204	3,309
Provisions	F1	260	263
Deferred revenue		730	654
Deferred tax liabilities		858	905
Current tax payable		238	210
Trade, other payables and other liabilities		5,661	4,305
Liabilities under acceptances		190	170
Amounts owed to bank depositors		53,236	44,135
Derivative financial instruments - liabilities		1,870	1,990
Non-current liabilities held for sale	H2	12,219	-
Total liabilities		182,078	153,095
Net assets		11,474	10,711
Shareholders' equity
Equity attributable to equity holders of the parent		8,951	8,464
Non-controlling interests
Ordinary shares	F2(b)	1,763	1,537
Preferred securities	F2(b)	760	710
Total non-controlling interests		2,523	2,247
Total equity		11,474	10,711

Consolidated statement of cash flows

For the year ended 31 December 2010

£m
		Year ended 31 December 2010	Year ended 31 December 2009*
Cash flows from operating activities - continuing operations
Profit before tax		1,145	353
Capital (gains)/losses included in investment income		(8,837)	(9,988)
Profit/(loss) on disposal of property, plant and equipment		(2)	1
Depreciation of property, plant and equipment		103	85
Amortisation and impairment of goodwill and other intangible assets		378	628
Impairment of loans and receivables		552	770
Share-based payment expense		13	21
Share of associated undertakings' (profit)/loss after tax		(7)	(2)
Loss/(profit) arising on disposal of subsidiaries, associated undertakings and strategic investments		22	50
Other non-cash amounts in profit		380	(408)
Non-cash movements in profit before tax		(7,398)	(8,843)
Reinsurers' share of life assurance policyholder liabilities		(155)	(129)
Reinsurers' share of general insurance liabilities		17	(5)
Deferred acquisition costs		(11)	31
Loans and advances		(3,484)	(6,590)
Insurance liabilities		374	(277)
Investment contracts		10,326	13,200
Amounts owed to bank depositors		2,345	5,964
Other operating assets and liabilities		817	(2,069)
Changes in working capital		10,229	10,125
Taxation paid		(413)	(367)
Net cash inflow from operating activities - continuing operations		3,563	1,268
Cash flows from investing activities
Net acquisitions of financial investments	(2,222)		(2,821)
Acquisition of investment properties	(162)		(82)
Proceeds from disposal of investment properties	272		57
Acquisition of property, plant and equipment	(152)		(138)
Proceeds from disposal of property, plant and equipment	-		29
Acquisition of intangible assets	(78)		(43)
Acquisition of interests in subsidiaries	(75)		(5)
Capital funding of discontinued operations	-		(136)
Disposal of interests in subsidiaries, associated undertakings and strategic investments	(16)		40
Net cash outflow from investing activities - continuing operations	(2,433)		(3,099)
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company	(102)		-
Non-controlling interests and preferred security interests	(196)		(190)
Interest paid (excluding banking interest paid)	(79)		(57)
Proceeds from issue of ordinary shares (including by subsidiaries to non-controlling interests)	5		100
Net acquisition/sale of treasury shares	(25)		38
Shares repurchased in buyback programme	-		-
Issue of subordinated and other debt	492		1,049
Subordinated and other debt repaid	(104)		(441)
Net cash inflow/(outflow) from financing activities - continuing operations	(9)		499

£m
	Year ended 31 December 2010	Year ended 31 December 2009*
Net increase/(decrease) in cash and cash equivalents - continuing operations	1,121	(1,332)
Net increase / (decrease) in cash and cash equivalents - discontinued operations	(104)	(47)
Effects of exchange rate changes on cash and cash equivalents	376	160
Cash and cash equivalents at beginning of the year	4,761	5,980
Cash and cash equivalents at end of the year	6,154	4,761
Consisting of
Coins and bank notes	328	263
Money at call and short notice	3,526	2,412
Balances with central banks (other than mandatory reserve deposits)	278	307
Cash and cash equivalents in the statement of financial position	4,132	2,982
Mandatory reserve deposits with central banks	1,079	882
Short-term cash balances held in policyholder funds	522	897
Cash and cash equivalents included in assets held for sale	421	-
Total	6,154	4,761
Other supplementary cash flow disclosures
Interest income received (including banking interest)	5,391	5,394
Dividend income received	383	335
Interest paid (including banking interest)	2,262	2,544

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

Except for mandatory reserve deposits with central banks of £1,079 million (2009: £882 million), short-term cash balances held in policyholder funds of £522 million (2009: £897 million) and cash and cash equivalents subject to consolidation of funds of £689 million (2009: £717 million), management do not consider that there are any material amounts of cash and cash equivalents which are not available for use in the Group's day-to-day operations. Mandatory reserve deposits are, however, included in cash and cash equivalents for the purposes of the cash flow statement in line with market practice in South Africa.

*       The year ended 31 December 2009 has been restated to reflect US Life as discontinued (see note A1).

Consolidated statement of changes in equity

For the year ended 31 December 2010

		Millions			£m
For the year ended 31 December 2010	Notes	Number of shares issued and fully paid	Attributable to equity holders  of the parent	Total  non-controlling interests	Total equity
Shareholders' equity at beginning of the year		5,518	8,464	2,247	10,711
(Loss)/profit after tax for the financial year		-	(282)	258	(24)
Other comprehensive income
Fair value gains/(losses)
Property revaluation		-	21	5	26
Net investment hedge		-	(87)	-	(87)
Available-for-sale investments
Fair value gains		-	562	-	562
Recycled to the income statement		-	(12)	-	(12)
Shadow accounting		-	(349)	-	(349)
Currency translation differences/exchange differences on translating foreign operations		-	794	274	1,068
Other movements		-	1	(4)	(3)
Income tax relating to components of other comprehensive income	D1(c)	-	(54)	-	(54)
Total comprehensive income for the financial year		-	594	533	1,127
Dividends for the year	C4	-	(175)	(152)	(327)
Net acquisition of treasury shares		-	(25)	-	(25)
Acquisition of non-controlling interest in Mutual & Federal	F2	147	51	(51)	-
Change in participation in other subsidiaries	F2	-	-	(57)	(57)
Shares issued in lieu of cash dividend		24	30	-	30
Exercise of share options		6	5	-	5
Other issues of ordinary share capital by the Company		-	3	-	3
Change in share-based payments reserve		-	4	3	7
Transactions with shareholders		177	(107)	(257)	(364)
Shareholders' equity at end of the year		5,695	8,951	2,523	11,474

 

 

								£m
For the year ended 31 December 2010	Notes	Share capital	Share premium	Other reserves	Translation reserve	Retained earnings	Perpetual preferred callable securities	Total
Attributable to equity holders of the parent at beginning of the year		552	771	3,087	469	2,897	688	8,464
Profit/(loss) for the financial year attributable to equity holders of the parent		-	-	-	-	(314)	32	(282)
Other comprehensive income
Fair value gains/(losses)
Property revaluation		-	-	21	-	-	-	21
Net investment hedge		-	-	-	(87)	-	-	(87)
Available-for-sale investments
Fair value gains		-	-	562	-	-	-	562
Recycled to income statement		-	-	(12)	-	-	-	(12)
Shadow accounting		-	-	(349)	-	-	-	(349)
Currency translation differences/exchange differences on translating foreign operations		-	-	-	794	-	-	794
Other movements		-	-	15	-	(14)	-	1
Income tax relating to components of other comprehensive income		-	-	(66)	-	-	12	(54)
Total comprehensive income for the financial year		-	-	171	707	(328)	44	594
Dividends for the year	C4	-	-	-	-	(131)	(44)	(175)
Net acquisition of treasury shares		-	-	-	-	(25)	-	(25)
Acquisition of non-controlling interest in Mutual & Federal	F2	15	-	129	-	(93)	-	51
Shares issued in lieu of cash dividends		2	17	-	-	11	-	30
Exercise of share options		1	4	-	-	-	-	5
Other issues of ordinary share capital by the Company		-	3	-	-	-	-	3
Change in share-based payments reserve		-	-	4	-	-	-	4
Transactions with shareholders		18	24	133	-	(238)	(44)	(107)
Attributable to equity holders of the parent at end of the year		570	795	3,391	1,176	2,331	688	8,951

							£m
Other reserves attributable to equity holders of the parent		Merger reserve	Available for sale reserve	Property revaluation reserve	Share-based payments reserve	Other reserves	Total
At beginning of the year		2,716	82	87	191	11	3,087
Fair value gains/(losses)
Property revaluation		-	-	21	-	-	21
Available-for-sale investments
Fair value gains		-	562	-	-	-	562
Recycled to income statement		-	(12)	-	-	-	(12)
Shadow accounting		-	(343)	(6)	-	-	(349)
Other movements		-	2	(1)	20	(6)	15
Income tax relating to components of other comprehensive income		-	(66)	-	-	-	(66)
Acquisition of non-controlling interest in M&F	F2	129	-	-	-	-	129
Change in share-based payments reserve		-	-	-	4	-	4
At end of the year		2,845	225	101	215	5	3,391

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

Consolidated statement of changes in equity

For the year ended 31 December 2010 continued

		Millions				£m
Year ended 31 December 2009	Notes	Number of shares issued and fully paid		Attributable to equity holders of the parent	Total  non-controlling interests	Total equity
Shareholders' equity at beginning of the year		5,516		7,737	1,840	9,577
(Loss)/profit after tax for the financial year		-		(340)	222	(118)
Other comprehensive income
Fair value gains/(losses)
Property revaluation		-		(12)	2	(10)
Net investment hedge		-		(41)	-	(41)
Available-for-sale investments
Fair value gains		-		1,087	-	1,087
Recycled to the income statement		-		239	-	239
Shadow accounting		-		27	-	27
Currency translation differences/exchange differences on translating foreign operations		-		124	178	302
Other movements		-		22	(1)	21
Income tax relating to components of other comprehensive income	D1(c)	-		(397)	-	(397)
Total comprehensive income for the financial year		-		709	401	1,110
Dividends for the year	C4	-		(45)	(145)	(190)
Net sale of treasury shares		-		39	-	39
Issue of ordinary share capital by the Company		-		2	-	2
Change in participation in subsidiaries		-		-	150	150
Exercise of share options		2		3	-	3
Change in share-based payments reserve		-		19	1	20
Transactions with shareholders		2		18	6	24
Shareholders' equity at end of the year		5,518		8,464	2,247	10,711

								£m
Year ended 31 December 2009	Notes	Share capital	Share premium	Other reserves	Translation reserve	Retained earnings	Perpetual preferred callable securities	Total
Attributable to equity holders of the parent at beginning of the year		552	766	2,130	386	3,215	688	7,737
(Loss)/profit for the financial year attributable to equity holders of the parent		-	-	-	-	(372)	32	(340)
Other comprehensive income
Fair value gains/(losses)
Property revaluation		-	-	(12)	-	-	-	(12)
Net investment hedge		-	-	-	(41)	-	-	(41)
Available-for-sale investments
Fair value gains		-	-	1,087	-	-	-	1,087
Recycled to income statement		-	-	239	-	-	-	239
Shadow accounting		-	-	27	-	-	-	27
Currency translation differences/exchange differences on translating foreign operations		-	-	-	124	-	-	124
Other movements		-	-	7	-	15	-	22
Income tax relating to components of other comprehensive income		-	-	(410)	-	-	13	(397)
Total comprehensive income for the financial year		-	-	938	83	(357)	45	709
Dividends for the year	C4	-	-	-	-	-	(45)	(45)
Net sale of treasury shares		-	-	-	-	39	-	39
Issue of ordinary share capital by the Company		-	2	-	-	-	-	2
Exercise of share options		-	3	-	-	-	-	3
Change in share-based payments reserve		-	-	19	-	-	-	19
Transactions with shareholders		-	5	19	-	39	(45)	18
Attributable to equity holders of the parent at end of the year		552	771	3,087	469	2,897	688	8,464

							£m
Other reserves attributable to equity holders of the parent		Merger reserve	Available for sale reserve	Property revaluation reserve	Share-based payments reserve	Other reserves	Total
At beginning of the year		2,716	(844)	85	171	2	2,130
Fair value gains/(losses)
Property revaluation		-	-	(12)	-	-	(12)
Available-for-sale investments
Fair value gains		-	1,087	-	-	-	1,087
Recycled to income statement		-	239	-	-	-	239
Shadow accounting		-	9	18	-	-	27
Other movements		-	1	(4)	1	9	7
Income tax relating to components of other comprehensive income		-	(410)	-	-	-	(410)
Change in share-based payments reserve		-	-	-	19	-	19
At end of the year		2,716	82	87	191	11	3,087

Retained earnings were reduced by £379 million at 31 December 2009 in respect of own shares held in policyholders' funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings.

Notes to the consolidated financial statements

For the year ended 31 December 2010

A: Accounting policies

Basis of preparation

The consolidated financial information contained herein has been prepared in accordance with the recognition and measurement principles of International financial Reporting Standards adopted by the EU. The Group's results for the year ended 31 December 2010 and the position at that date have been prepared using accounting policies consistent with those applied in the preparation of the Group's 2009 Annual Report and Accounts.

The consolidated financial statements have been prepared on the going concern basis which the directors believe to be appropriate.

At 31 December 2010 the Group was in advanced stage negotiations for the disposal of its life assurance operations in the United States, which represent almost the entirety of the US Life operating segment. As a result of this, the assets and liabilities of the US Life disposal group have been classified as held for sale in the statement of financial position for the current year in accordance with IFRS  5. This sale will represent the Group's exit from the life assurance market in the United States and therefore meets the criteria of a discontinued operation. Consequently the comparative information in the income statement, statement of comprehensive income, statement of cash flows, and the related notes has been restated where applicable to reflect this. For the purposes of adjusted operating profit, US Life has been reclassified as a non-core operation for the year ended 31 December 2010 with the comparative information restated accordingly.

The financial information set out herein does not constitute the Company's statutory accounts for the years ended 31 December 2010 or 2009. Statutory accounts for 2009 have been delivered to the Registrar of Companies, and those for 2010 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors draw attention by way of emphasis without qualifying their reports, and (iii) did not contain statements under section 498(2) or (3) of the Companies Act 2006.

Segment reporting

The Group's results are analysed and reported consistent with the way that management and the Board of Directors considers information when making operating decisions and the basis on which resources are allocated and performance assessed by management and the Board of Directors, covering both core and non-core operations. The core operating segments are Emerging Markets, Nordic, Retail Europe and  Wealth Management (collectively being Long-Term Savings) plus Nedbank, Mutual & Federal (M&F), US Asset Management and Other operations (which includes the Group head office functions). The non-core operating segment includes US Life and the Bermuda segments. The above reported segments have been revised during the year to reflect the reclassification of US Life as non-core, with the comparative information having been revised to report on a consistent basis to the amended structure.

There are four principal business activities from which the Group generates revenues. These are life assurance (premium income), asset management business (fee and commission income), banking (banking interest receivable) and general insurance (premium income). The revenues generated in each reported segment can be seen in the analysis of profits and losses in note B.

The information reflected in note B reflects the measures of profit and loss, assets and liabilities for each operating segment as regularly 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. A reconciliation between the segment revenues and expenses and the Group's revenues and expenses is shown in note B.

In line with internal reporting, assets, liabilities, revenues or 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 customers within any of the segments.

Reclassifications of comparative segment information have been made to align segment information to the Group's revised management reporting structure described above. There was no impact on net profit or net assets.

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

B: Segment information

B1: Basis of segmentation

The Group's core operations are Emerging Markets, Nordic, Retail Europe and Wealth Management (collectively Long-Term Savings), Nedbank, Mutual & Federal, US Asset Management and Other (including the Group head office functions). The Bermuda operating segment is regarded as non-core. This is consistent with the revised way that management and the Board of Directors considers information when making operating decisions and is the basis on which resources are allocated and performance assessed by management and the Board of Directors, being in line with that reported in the previous financial year. This information is presented to the Board in local currency however this note is presented in pounds sterling, the presentation currency of the Group. As detailed above US Life has been reclassified as discontinued and as a result also non-core with the comparative segment information restated accordingly, with this resulting in a reduction in adjusted operating profit before tax and non-controlling interest of £49 million for the year ended 31 December 2009. The Group generates revenue from four principal business activities: life assurance, asset management, banking and general insurance. The types of products and services from which each operating segment derives its revenues are as follows:

Core operations

Emerging Markets - life assurance and asset management

Nordic - life assurance, asset management and banking

Retail Europe - life assurance and asset management

Wealth Management - life assurance and asset management

Nedbank - banking and asset management

Mutual & Federal - general insurance

US Asset Management - asset management

Other - other operating segments and business activities

Non-core operations

Bermuda - life assurance

US Life - life assurance

Adjusted operating profit is one of the key measures reported to the Group's management and Board of Directors for their consideration in the allocation of resources to and the review of performance of the segments. The Group utilises additional measures to assess the performance of each of the segments, in particular the level of net client cash flows and funds under management. Additional performance measures considered by management and the Board of Directors in assessing the performance of the segments can be found in the Market Consistent Embedded Value basis supplementary information.

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

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

B: Segment information continued

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

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

Of the total revenues, excluding intercompany revenues, £5,143 million was generated in the UK (2009: £5,544 million), £2,937 million in rest of Euorpe (2009: £3,938 million), £12,575 million in South Africa (2009: £10,084 million), £829 million in United States (2009: £993 million) and £90 million relates to other operating segments (2009: £81 million).

 

 

 

B: Segment information continued

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

								£m
Nedbank	M&F	USAM	Other	Consolidation adjustments	Adjusted operating profit	Adjusting  items (Note C1)	Non-core operations*	IFRS Income statement
-	728	-	-	-	3,582	-	-	3,582
-	(140)	-	-	-	(304)	-	(1)	(305)
-	588	-	-	-	3,278	-	(1)	3,277
-	56	16	61	435	10,585	(93)	299	10,791
3,913	-	-	-	-	4,082	-	-	4,082
199	-	-	-	-	204	-	-	204
946	28	465	1	-	3,160	(99)	-	3,061
35	-	9	(1)	3	137	-	22	159
20	20	4	29	(207)	(43)	-	43	-
5,113	692	494	90	231	21,403	(192)	363	21,574
-	(436)	-	-	-	(4,790)	-	(249)	(5,039)
-	58	-	-	-	226	-	1	227
-	(378)	-	-	-	(4,564)	-	(248)	(4,812)
-	-	-	-	-	(6,899)	-	-	(6,899)
(548)	-	-	1	-	(552)	-	-	(552)
	-	-	(128)	-	(128)	(141)	-	(269)
(2,422)	-	-	-	-	(2,500)	(19)	-	(2,519)
(3)	(109)	(23)	-	(36)	(1,027)	149	(85)	(963)
(1,485)	(83)	(384)	(93)	(14)	(3,729)	41	(26)	(3,714)
-	-	-	-	-	-	(1)	-	(1)
-	-	-	-	(388)	(388)	-	-	(388)
-	-	-	-	-	-	(297)	-	(297)
-	-	-	-	-	(149)	149	-	-
(54)	(20)	-	(77)	207	7		(7)	-
(4,512)	(590)	(407)	(297)	(231)	(19,929)	(119)	(366)	(20,414)
-	1	-	-	-	7	-	-	7
-	-	-	-	-	-	(22)	-	(22)
601	103	87	(207)	-	1,481	(333)	(3)	1,145
(128)	(24)	(17)	45	-	(347)	(113)	4	(456)
(232)	(5)	-	(41)	-	(279)	21	-	(258)
241	74	70	(203)	-	855	(425)	1	431
10	(11)	(20)	(151)	-	(425)	425	-	-
251	63	50	(354)	-	430	-	1	431
-	-	-	-	-	-	-	(713)	(713)
251	63	50	(354)	-	430	-	(712)	(282)

*       Non-core operations relates to Bermuda with the exception of £19 million of Inter-segment revenue and expenses and the Loss from discontinued operations after tax, with these reflecting the results of US Life which has been classified as a discontinued operation as detailed in notes A1 and B1. Bermuda profit after tax for 2010 was £22 million. Further detail on the results of discontinued operations is provided in note H1.

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

B: Segment information continued

B2: Adjusted operating profit statement - segment information year ended 31 December 2009 (restated)

	Long-Term Savings
	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long- Term Savings
Revenue
Gross earned premiums	1,946	109	31	315	2,401
Outward reinsurance	(56)	(5)	(8)	(81)	(150)
Net earned premiums	1,890	104	23	234	2,251
Investment return (non-banking)	2,636	2,035	564	4,997	10,232
Banking interest and similar income	-	157	-	-	157
Banking trading, investment and similar income	-	-	-	-	-
Fee and commission income, and income from service activities	305	190	189	746	1,430
Other income	65	6	-	24	95
Inter-segment revenues	55	32	10	27	124
Total revenues	4,951	2,524	786	6,028	14,289
Expenses
Claims and benefits (including change in insurance contract provisions)	(2,551)	(72)	(37)	(255)	(2,915)
Reinsurance recoveries	76	2	5	46	129
Net claims and benefits incurred	(2,475)	(70)	(32)	(209)	(2,786)
Change in investment contract liabilities	(1,040)	(1,972)	(554)	(4,775)	(8,341)
Losses on loans and advances	-	(5)	(1)	-	(6)
Finance costs (including interest and similar expenses)	-	-	-	-	-
Banking interest payable and similar expenses	-	(70)	-	-	(70)
Fee and commission expenses, and other acquisition costs	(184)	(53)	(79)	(394)	(710)
Other operating and administrative expenses	(768)	(215)	(96)	(380)	(1,459)
Goodwill impairment	-	-	-	-	-
Change in third-party interest in consolidated funds	-	-	-	-	-
Amortisation of PVIF and other acquired intangibles	-	-	-	-	-
Income tax attributable to policyholder returns	(37)	(39)	-	(116)	(192)
Inter-segment expenses	(5)	(38)	(2)	(48)	(93)
Total expenses	(4,509)	(2,462)	(764)	(5,922)	(13,657)
Share of associated undertakings' and joint ventures' profit/(loss) after tax	4	-	-	-	4
Profit on disposal of subsidiaries, associated undertakings and strategic investments	-	-	-	-	-
Adjusted operating profit/(loss) before tax and non-controlling interests	446	62	22	106	636
Tax expense	(130)	9	(8)	(20)	(149)
Non-controlling interests	(2)	-	-	-	(2)
Adjusted operating profit/(loss) after tax and non-controlling interests	314	71	14	86	485
Adjusting items net of tax and non-controlling interests	(200)	(4)	(228)	(225)	(657)
Profit/(loss) after tax from continuing operations	114	67	(214)	(139)	(172)
Loss from discontinued operations after tax	-	-	-	-	-
Profit/(loss) after tax attributable to equity holders of the parent	114	67	(214)	(139)	(172)

 

 

B: Segment information continued

B2: Adjusted operating profit statement - segment information year ended 31 December 2009 (restated) continued

								£m
Nedbank	M&F	USAM	Other	Consolidation adjustments	Adjusted operating profit	Adjusting  items (Note C1)	Non-core operations *	IFRS Income statement
-	612	-	-	-	3,013	-	7	3,020
-	(117)	-	-	-	(267)	-	-	(267)
-	495	-	-	-	2,746	-	7	2,753
-	58	13	91	509	10,903	(275)	484	11,112
3,832	-	-	-	-	3,989	-	-	3,989
168	-	-	-	-	168	-	-	168
663	22	429	-	(6)	2,538	(116)	-	2,422
70	1	7	-	1	174	-	22	196
31	29	6	30	(251)	(31)	-	31	-
4,764	605	455	121	253	20,487	(391)	544	20,640
-	(412)	-	-	-	(3,327)	-	(459)	(3,786)
-	72	-	-	-	201	-	(1)	200
-	(340)	-	-	-	(3,126)	-	(460)	(3,586)
-	-	-	-	-	(8,341)	-	(4)	(8,345)
(505)	-	-	-	-	(511)	-	-	(511)
-	-	-	(104)	-	(104)	(218)	-	(322)
(2,557)	-	-	-	-	(2,627)	-	-	(2,627)
(2)	(106)	(18)	-	(12)	(848)	167	(47)	(728)
(1,167)	(64)	(354)	(84)	(22)	(3,150)	97	(19)	(3,072)
-	-	-	-	-	-	(266)	-	(266)
-	-	-	-	(470)	(470)	-	-	(470)
-	-	-	-	-	-	(312)	-	(312)
-	-	-	-	-	(192)	192	-	-
(65)	(25)	-	(55)	251	13	-	(13)	-
(4,296)	(535)	(372)	(243)	(253)	(19,356)	(340)	(543)	(20,239)
2	-	-	(4)	-	2	-	-	2
-	-	-	-	-	-	(50)	-	(50)
470	70	83	(126)	-	1,133	(781)	1	353
(96)	(15)	(19)	(4)	-	(283)	(128)	11	(400)
(193)	(16)	-	(34)	-	(245)	23	-	(222)
181	39	64	(164)	-	605	(886)	12	(269)
15	-	(3)	(241)	-	(886)	886	-	-
196	39	61	(405)	-	(281)	-	12	(269)
-	-	-	-	-	-	-	(71)	(71)
196	39	61	(405)	-	(281)	-	(59)	(340)

*       Non-core operations relates to Bermuda with the exception of £(21) million of Inter-segment revenues and the Loss from discontinued operations after tax, with these reflecting the results of US Life which has been classified as a discontinued operation as detailed in notes A1 and B1. Bermuda profit after tax for 2009 was £33 million. Further detail on the results of discontinued operations is provided in note H1.

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

B: Segment information continued

B3: Gross earned premiums

Year ended 31 December 2010	Long-Term Savings
	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total  Long-Term Savings
Life assurance - insurance contracts	1,498	122	28	351	1,999
Life assurance - investment contracts with discretionary participation features	855	-	-	-	855
General insurance	-	-	-	-	-
Gross earned premiums	2,353	122	28	351	2,854
Life assurance - other investment contracts recognised as deposits	1,829	1,040	656	6,287	9,812
	Long-Term Savings
Year ended 31 December 2009	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long-Term Savings
Life assurance - insurance contracts	1,287	109	31	315	1,742
Life assurance - investment contracts with discretionary participation features	659	-	-	-	659
General insurance	-	-	-	-	-
Gross earned premiums	1,946	109	31	315	2,401
Life assurance - other investment contracts recognised as deposits	2,726	1,199	733	4,906	9,564

B4: Impairments of financial assets

				£m
			Year ended  31 December 2010		Year ended 31 December 2009
Nordic			4		5
Total Long-Term Savings			4		5
Nedbank			547		504
Bermuda			-		13
Total			551		522

B5: Funds under management

						£m
As at 31 December 2010	Emerging Markets	Nordic	Retail Europe	Wealth Management			Total Long- Term Savings
Life assurance policyholder funds	31,750	11,722	4,317	40,401			88,190
Unit trusts and mutual funds	10,613	1,800	398	14,525			27,336
Third-party client funds	11,732	-	-	-			11,732
Total client funds under management	54,095	13,522	4,715	54,926			127,258
Shareholder funds	2,882	431	245	958			4,516
Total funds under management	56,977	13,953	4,960	55,884			131,774
As at 31 December 2009	Emerging Markets	Nordic	Retail Europe	Wealth Management			Total Long- Term Savings
Life assurance policyholder funds	25,454	9,221	3,569	34,721			72,965
Unit trusts and mutual funds	7,686	1,428	391	11,308			20,813
Third-party client funds	8,229	-	-	-			8,229
Total client funds under management	41,369	10,649	3,960	46,029			102,007
Shareholder funds	2,130	360	210	830			3,530
Total funds under management	43,499	11,009	4,170	46,859			105,537

 

 

B: Segment information continued

B3: Gross earned premiums continued

					£m
Nedbank	M&F	USAM	Total core operations	Non-core operations	Total
-	-	-	1,999	-	1,999
-	-	-	855	-	855
-	728	-	728	-	728
-	728	-	3,582	-	3,582
-	-	-	9,812	-	9,812
Nedbank	M&F	USAM	Total core operations	Non-core operations	Total Restated
-	-	-	1,742	7	1,749
-	-	-	659	-	659
-	612	-	612	-	612
-	612	-	3,013	7	3,020
-	-	-	9,564	8	9,572

 

 

B5: Funds under management

					£m
Nedbank	M&F	USAM	Total core operations	Non-core operations	Total
846	-	3,846	92,882	13,489	106,371
5,713	-	4,974	38,023	-	38,023
4,164	-	157,555	173,451	-	173,451
10,723	-	166,375	304,356	13,489	317,845
-	210	226	4,952	-	4,952
10,723	210	166,601	309,308	13,489	322,797
					£m
Nedbank	M&F	USAM	Total core operations	Non-core operations	Total
658	-	6,789	80,412	9,602	90,014
3,775	-	4,095	28,683	-	28,683
3,800	-	150,423	162,452	-	162,452
8,233	-	161,307	271,547	9,602	281,149
-	162	169	3,861	-	3,861
8,233	162	161,476	275,408	9,602	285,010

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

B: Segment information continued

B6: Statement of financial position - segment information year ended 31 December 2010

		Long-Term Savings
At 31 December 2010		Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long- Term Savings
Assets
Goodwill and other intangible assets		120	995	522	1,463	3,100
Goodwill		101	243	198	655	1,197
Present value of acquired in-force business		-	568	246	593	1,407
Software development		11	4	3	20	38
Other intangibles		8	180	75	195	458
Mandatory reserve deposits with central banks		-	-	-	-	-
Property, plant and equipment		396	12	3	16	427
Investment property		1,679	-	-	-	1,679
Deferred tax assets		96	78	27	27	228
Investments in associated undertakings and joint ventures		26	4	-	1	31
Deferred acquisition costs		139	66	316	855	1,376
Insurance contracts		1	14	7	47	69
Investment contracts		118	52	306	711	1,187
Asset management		20	-	3	97	120
Reinsurers' share of life assurance policyholder liabilities		24	12	8	907	951
Insurance contracts		24	1	2	83	110
Unit-linked investment contracts and similar contracts		-	8	-	813	821
Outstanding claims		-	3	6	11	20
Reinsurers' share of general insurance liabilities		-	-	-	-	-
Deposits held with reinsurers		-	-	-	-	-
Loans and advances		343	5,216	1	185	5,745
Policyholder loans		63	-	1	185	249
Other loans and advances		280	5,216	-	-	5,496
Investments and securities		34,519	13,392	4,466	40,856	93,233
Government and government-guaranteed securities		4,704	167	74	272	5,217
Listed other debt securities, preference shares and debentures		2,324	2,798	46	-	5,168
Unlisted other debt securities, preference shares and debentures		4,209	-	20	140	4,369
Listed equity securities		10,991	-	7	-	10,998
Unlisted equity securities		1,945	4	-	-	1,949
Listed pooled investments		672	408	3	1,779	2,862
Unlisted pooled investments		7,936	10,015	4,316	37,671	59,938
Short-term funds and securities treated as investments		1,704	-	-	994	2,698
Other securities		34	-	-	-	34
Current tax receivable		4	1	9	95	109
Client indebtedness for acceptances		-	-	-	-	-
Trade, other receivables and other assets		854	191	58	274	1,377
Derivative financial instruments - assets		557	10	-	-	567
Cash and cash equivalents		1,141	198	93	336	1,768
Non-current assets held for sale		-	-	-	6	6
Inter-segment assets		947	58	56	294	1,355
Total assets		40,845	20,233	5,559	45,315	111,952

 

 

B: Segment information continued

B6: Statement of financial position - segment information year ended 31 December 2010 continued

							£m
Nedbank	M&F	USAM	Other	Bermuda	US Life	Consolidation adjustments	Total
637	33	1,181	14	-	-	-	4,965
453	13	1,155	13	-	-	-	2,831
-	-	-	-	-	-	-	1,407
184	20	-	1	-	-	-	243
-	-	26	-	-	-	-	484
1,079	-	-	-	-	-	-	1,079
546	25	16	1	-	-	-	1,015
19	-	-	1	-	-	341	2,040
28	12	148	-	-	-	-	416
96	2	8	25	-	-	-	162
1	19	14	-	124	-	-	1,534
-	19	-	-	124	-	-	212
-	-	-	-	-	-	-	1,187
1	-	14	-	-	-	-	135
31	-	-	-	-	-	-	982
31	-	-	-	-	-	-	141
-	-	-	-	-	-	-	821
-	-	-	-	-	-	-	20
-	122	-	-	-	-	-	122
-	2	-	-	-	-	-	2
46,032	1	-	-	-	-	-	51,778
-	-	-	-	-	-	-	249
46,032	1	-	-	-	-	-	51,529
6,886	553	218	109	2,567	-	2,587	106,153
1,997	-	-	-	17	-	2,044	9,275
3,730	2	-	52	323	-	2,081	11,356
-	4	-	-	201	-	-	4,574
52	119	-	-	-	-	12,033	23,202
241	8	-	-	5	-	48	2,251
866	43	179	1	1,919	-	2,721	8,591
-	-	39	3	-	-	(16,528)	43,452
-	377	-	19	102	-	156	3,352
-	-	-	34	-	-	32	100
47	-	-	-	-	-	-	156
190	-	-	-	-	-	-	190
943	82	138	62	1,038	-	292	3,932
1,350	-	-	109	1	-	476	2,503
841	131	171	458	74	-	689	4,132
1	-	-	-	-	12,384	-	12,391
202	23	4	975	874	47	(3,480)	-
58,929	1,005	1,898	1,754	4,678	12,431	905	193,552

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

B: Segment information continued

B6: Statement of financial position - segment information year ended 31 December 2010 continued

		Long-Term Savings
At 31 December 2010	Notes	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long- Term Savings
Liabilities
Life assurance policyholder liabilities		35,676	12,248	4,460	41,468	93,852
Insurance contracts		14,122	45	130	1,109	15,406
Unit-linked investment contracts and similar contracts		12,789	12,094	4,308	40,347	69,538
Other investment contracts		137	-	-	-	137
Discretionary participating investment contracts		8,249	-	-	-	8,249
Outstanding claims		379	109	22	12	522
General insurance liabilities		-	-	-	-	-
Third-party interests in consolidated funds		-	-	-	-	-
Borrowed funds	E1	291	2	-	1	294
Senior debt securities		-	2	-	-	2
Mortgage backed securities		-	-	-	-	-
Subordinated debt securities		291	-	-	1	292
Provisions	F1	158	(38)	4	50	174
Deferred revenue		22	1	197	498	718
Life assurance		17	1	194	408	620
Asset management		5	-	3	90	98
General insurance		-	-	-	-	-
Deferred tax liabilities		225	98	124	224	671
Current tax payable		123	12	4	65	204
Trade, other payables and other liabilities		2,246	259	94	544	3,143
Liabilities under acceptances		-	-	-	-	-
Amounts owed to bank depositors		-	5,957	-	-	5,957
Derivative financial instruments - liabilities		135	10	-	-	145
Non-current liabilities held for sale		-	-	-	-	-
Inter-segment liabilities		123	1	4	99	227
Total liabilities		38,999	18,550	4,887	42,949	105,385
Net assets		1,846	1,683	672	2,366	6,567
Equity
Equity attributable to equity holders of the parent		1,847	1,683	672	2,366	6,568
Non-controlling interests		(1)	-	-	-	(1)
Non-controlling interests - ordinary shares	F2(b)	(1)	-	-	-	(1)
Non-controlling interests - preference shares	F2(b)	-	-	-	-	-
Total equity		1,846	1,683	672	2,366	6,567

 

B: Segment information continued

B6: Statement of financial position - segment information year ended 31 December 2010 continued

							£m
Nedbank	M&F	USAM	Other	Bermuda	US Life	Consolidation adjustments	Total
846	-	-	-	3,933	-	-	98,631
136	-	-	-	3,635	-	-	19,177
-	-	-	-	-	-	-	69,538
710	-	-	-	298	-	-	1,145
-	-	-	-	-	-	-	8,249
-	-	-	-	-	-	-	522
-	397	-	-	-	-	-	397
-	-	-	-	-	-	3,584	3,584
2,456	-	11	1,443	-	-	-	4,204
1,186	-	11	537	-	-	-	1,736
112	-	-	-	-	-	-	112
1,158	-	-	906	-	-	-	2,356
(4)	40	3	47	-	-	-	260
1	11	-	-	-	-	-	730
1	-	-	-	-	-	-	621
-	-	-	-	-	-	-	98
-	11	-	-	-	-	-	11
158	13	-	16	-	-	-	858
12	1	7	13	1	-	-	238
1,717	114	210	120	7	-	350	5,661
190	-	-	-	-	-	-	190
47,279	-	-	-	-	-	-	53,236
1,172	-	-	102	-	-	451	1,870
-	-	-	-	-	12,219	-	12,219
431	2	803	1,860	-	157	(3,480)	-
54,258	578	1,034	3,601	3,941	12,376	905	182,078
4,671	427	864	(1,847)	737	55	-	11,474
2,643	409	832	(2,293)	737	55	-	8,951
2,028	18	32	446	-	-	-	2,523
1,714	18	32	-	-	-	-	1,763
314	-	-	446	-	-	-	760
4,671	427	864	(1,847)	737	55	-	11,474

The net assets of Emerging Markets are stated after eliminating investments in Group equity and debt instruments of £340 million (2009: £340 million) held in policyholder funds. These include investments in the Company's ordinary shares and subordinated liabilities and preferred securities issued by the Group's banking subsidiary Nedbank Limited. All Emerging Markets debt relates to life assurance. All other debt relates to other shareholders' net assets.

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

B: Segment information continued

B6: Statement of financial position - segment information year ended 31 December 2009

		Long-Term Savings
At 31 December 2009		Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long- Term Savings
Assets
Goodwill and other intangible assets		106	1,035	563	1,602	3,306
Goodwill		91	219	204	656	1,170
Present value of acquired in-force business		-	624	265	671	1,560
Software development		6	1	3	35	45
Other intangibles		9	191	91	240	531
Mandatory reserve deposits with central banks		-	-	-	-	-
Property, plant and equipment		336	7	4	19	366
Investment property		1,518	-	-	2	1,520
Deferred tax assets		54	108	17	23	202
Investments in associated undertakings and joint ventures		20	2	-	-	22
Deferred acquisition costs		123	49	275	778	1,225
Insurance contracts		-	2	-	50	52
Investment contracts		107	47	271	654	1,079
Asset management		16	-	4	74	94
Reinsurers' share of life assurance policyholder liabilities		11	10	6	772	799
Insurance contracts		11	7	4	45	67
Unit-linked investment contracts and similar contracts		-	-	-	717	717
Outstanding claims		-	3	2	10	15
Reinsurers' share of general insurance liabilities		-	-	-	-	-
Deposits held with reinsurers		-	108	-	-	108
Loans and advances		340	4,209	2	148	4,699
Policyholder loans		58	2	2	148	210
Other loans and advances		282	4,207	-	-	4,489
Investments and securities		27,603	10,836	3,693	35,120	77,252
Government and government-guaranteed securities		3,586	150	60	251	4,047
Listed other debt securities, preference shares and debentures		1,825	1,453	53	-	3,331
Unlisted other debt securities, preference shares and debentures		2,989	-	2	104	3,095
Listed equity securities		8,854	1	10	-	8,865
Unlisted equity securities		1,223	15	-	-	1,238
Listed pooled investments		457	547	-	437	1,441
Unlisted pooled investments		6,123	8,670	3,568	34,327	52,688
Short-term funds and securities treated as investments		2,543	-	-	1	2,544
Other securities		3	-	-	-	3
Current tax receivable		4	4	16	86	110
Client indebtedness for acceptances		-	-	-	-	-
Trade, other receivables and other assets		630	155	58	232	1,075
Derivative financial instruments - assets		327	9	-	-	336
Cash and cash equivalents		189	344	81	278	892
Non-current assets held for sale		-	-	-	-	-
Inter-segment assets		1,352	59	23	277	1,711
Total assets		32,613	16,935	4,738	39,337	93,623

 

 

B: Segment information continued

B6: Statement of financial position - segment information year ended 31 December 2009 continued

							£m
Nedbank	M&F	USAM	Other	Bermuda	US Life	Consolidation adjustments	Total
543	30	1,171	13	2	94	-	5,159
393	11	1,142	13	-	-	-	2,729
-	-	-	-	-	89	-	1,649
150	19	1	-	2	5	-	222
-	-	28	-	-	-	-	559
882	-	-	-	-	-	-	882
417	23	19	2	-	1	-	828
18	-	-	-	-	-	221	1,759
24	6	147	8	-	183	-	570
82	-	7	24	-	-	-	135
2	17	29	-	194	1,671	-	3,138
-	17	-	-	194	1,671	-	1,934
-	-	-	-	-	-	-	1,079
2	-	29	-	-	-	-	125
22	-	-	-	-	475	-	1,296
22	-	-	-	-	450	-	539
-	-	-	-	-	-	-	717
-	-	-	-	-	25	-	40
-	120	-	-	-	-	-	120
-	3	-	-	-	35	-	146
37,638	2	-	-	-	54	-	42,393
-	-	-	-	-	53	-	263
37,638	2	-	-	-	1	-	42,130
5,501	425	162	43	2,942	10,045	2,091	98,461
2,044	-	-	-	-	302	1,775	8,168
2,532	2	-	-	461	6,766	1,729	14,821
-	4	-	-	167	2,439	-	5,705
41	87	-	-	-	-	9,503	18,496
209	6	-	-	37	-	-	1,490
675	41	122	-	2,059	3	1,400	5,741
-	-	40	-	-	16	(12,678)	40,066
-	285	-	-	218	519	293	3,859
-	-	-	43	-	-	69	115
51	-	-	8	-	-	-	169
170	-	-	-	-	-	-	170
432	96	126	111	878	213	120	3,051
1,067	-	-	154	-	187	802	2,546
660	79	173	425	32	4	717	2,982
1	-	-	-	-	-	-	1
148	48	1	1,363	564	74	(3,909)	-
47,658	849	1,835	2,151	4,612	13,036	42	163,806

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

B: Segment information continued

B6: Statement of financial position - segment information year ended 31 December 2009 continued

		Long-Term Savings
At 31 December 2009	Notes	Emerging Markets	Nordic	Retail Europe	Wealth Management	Total Long- Term Savings
Liabilities
Life assurance policyholder liabilities		28,655	9,514	3,689	35,554	77,412
Insurance contracts		11,783	74	121	901	12,879
Unit-linked investment contracts and similar contracts		9,838	9,335	3,560	34,639	57,372
Other investment contracts		115	-	-	-	115
Discretionary participating investment contracts		6,639	-	-	-	6,639
Outstanding claims		280	105	8	14	407
General insurance liabilities		-	-	-	-	-
Third-party interests in consolidated funds		-	-	-	-	-
Borrowed funds	E1	272	26	-	-	298
Senior debt securities		-	26	-	-	26
Mortgage backed securities		-	-	-	-	-
Subordinated debt securities		272	-	-	-	272
Provisions	F1	147	11	8	33	199
Deferred revenue		23	5	160	456	644
Life assurance		16	5	155	379	555
Asset management		7	-	5	77	89
General insurance		-	-	-	-	-
Deferred tax liabilities		200	113	124	167	604
Current tax payable		70	20	2	37	129
Trade, other payables and other liabilities		1,512	203	79	550	2,344
Liabilities under acceptances		-	-	-	-	-
Amounts owed to bank depositors		-	5,448	-	-	5,448
Derivative financial instruments - liabilities		141	22	-	-	163
Non-current liabilities held for sale		-	-	-	-	-
Intersegment liabilities		51	37	-	181	269
Total liabilities		31,071	15,399	4,062	36,978	87,510
Net assets		1,542	1,536	676	2,359	6,113
Equity
Equity attributable to equity holders of the parent		1,540	1,536	676	2,359	6,111
Non-controlling interests		2	-	-	-	2
Non-controlling interests - ordinary shares	F2(b)	2	-	-	-	2
Non-controlling interests - preference shares	F2(b)	-	-	-	-	-
Total equity		1,542	1,536	676	2,359	6,113

 

 

B: Segment information continued

B6: Statement of financial position - segment information year ended 31 December 2009 continued

							£m
Nedbank	M&F	USAM	Other	Bermuda	US Life	Consolidation adjustments	Total
661	-	-	-	4,178	11,625	-	93,876
95	-	-	-	3,788	10,787	-	27,549
-	-	-	-	-	-	-	57,372
566	-	-	-	390	788	-	1,859
-	-	-	-	-	-	-	6,639
-	-	-	-	-	50	-	457
-	372	-	-	-	-	-	372
-	-	-	-	-	-	2,906	2,906
1,614	-	-	1,397	-	-	-	3,309
484	-	-	636	-	-	-	1,146
118	-	-	-	-	-	-	118
1,012	-	-	761	-	-	-	2,045
1	21	2	40	-	-	-	263
1	9	-	-	-	-	-	654
1	-	-	-	-	-	-	556
-	-	-	-	-	-	-	89
-	9	-	-	-	-	-	9
148	2	-	25	-	126	-	905
21	-	10	45	5	-	-	210
897	118	221	120	(9)	359	255	4,305
170	-	-	-	-	-	-	170
38,687	-	-	-	-	-	-	44,135
969	-	-	59	-	9	790	1,990
-	-	-	-	-	-	-	-
697	-	1,202	1,571	-	170	(3,909)	-
43,866	522	1,435	3,257	4,174	12,289	42	153,095
3,792	327	400	(1,106)	438	747	-	10,711
2,084	265	371	(1,552)	438	747	-	8,464
1,708	62	29	446	-	-	-	2,247
1,444	62	29	-	-	-	-	1,537
264	-	-	446	-	-	-	710
3,792	327	400	(1,106)	438	747	-	10,711

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

C: Other key performance information

C1: Operating profit adjusting items

(a) Summary of adjusting items

In determining the adjusted operating profit 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 adjusted operating profit to profit before and after tax.

£m
Year ended 31 December 2010	Notes	Long-Term Savings
		Emerging Markets	Nordic	Retail Europe	Wealth Management	Long-Term Savings
Income/(expense)
Goodwill impairment and impact of acquisition accounting	C1(b)	(2)	(89)	(41)	(74)	(206)
Loss on disposal of subsidiaries, associated undertakings and strategic investments	C1(c)	-	-	-	-	-
Short-term fluctuations in investment return	C1(d)	1	(1)	1	(71)	(70)
Investment return adjustment for Group equity and debt instruments held in life funds	C1(e)	(10)	-	-	-	(10)
Dividends declared to holders of perpetual preferred callable securities	C1(f)	-	-	-	-	-
US Asset Management equity plans and non-controlling interests	C1(g)	-	-	-	-	-
Credit-related fair value losses on Group debt instruments	C1(h)	-	-	-	-	-
Total adjusting items		(11)	(90)	(40)	(145)	(286)
Tax on adjusting items	D1(d)	10	3	15	5	33
Non-controlling interest in adjusting items	F11(a)(iii)	-	-	-	-	-
Total adjusting items after tax and non-controlling interests		(1)	(87)	(25)	(140)	(253)

£m
Year ended 31 December 2009*	Notes	Long-Term Savings
		Emerging Markets	Nordic	Retail Europe	Wealth Management	Long-Term Savings
Income/(expense)
Goodwill impairment and impact of acquisition accounting	C1(b)	(1)	(12)	(243)	(167)	(423)
(Loss)/profit on disposal of subsidiaries, associated undertakings and strategic investments	C1(c)	(51)	-	-	(7)	(58)
Short-term fluctuations in investment return	C1(d)	(38)	(1)	1	(88)	(126)
Investment return adjustment for Group equity and debt instruments held in life funds	C1(e)	(109)	-	-	-	(109)
Dividends declared to holders of perpetual preferred callable securities	C1(f)	-	-	-	-	-
US Asset Management equity plans and non-controlling interests	C1(g)	-	-	-	-	-
Credit-related fair value gains on Group debt instruments	C1(h)	-	-	-	-	-
Total adjusting items		(199)	(13)	(242)	(262)	(716)
Tax on adjusting items	D1(d)	(1)	9	14	37	59
Non-controlling interest in adjusting items	F2(a)(iii)	-	-	-	-	-
Total adjusting items after tax and non-controlling interests		(200)	(4)	(228)	(225)	(657)

*       The year ended 31 December 2009 has been restated to reflect US Life as non-core and discontinued.

 

 

C: Other key performance information continued

C1: Operating profit adjusting items continued

(a) Summary of adjusting items continued

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

				£m
Nedbank	M&F	USAM	Other	Total Restated
(4)	-	(2)	-	(429)
-	-	1	7	(50)
-	(10)	-	(30)	(166)
-	-	-	-	(109)
-	-	-	45	45
-	-	(1)	-	(1)
-	-	-	(263)	(263)
(4)	(10)	(2)	(241)	(973)
-	3	2		64
19	7	(3)	-	23
15	-	(3)	(241)	(886)

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

C: Other key performance information continued

C1: Operating profit adjusting items continued

(b) Goodwill impairment and impact of acquisition accounting

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

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

Year ended 31 December 2010
	Emerging Markets	Nordic	Retail Europe	Wealth Management	Nedbank	USAM	Total
Amortisation of acquired PVIF	-	(116)	(21)	(77)	-	-	(214)
Amortisation of acquired deferred costs and revenue	-	23	(7)	34	-	-	50
Amortisation of other acquired intangible assets	(1)	(26)	(13)	(35)	(6)	(2)	(83)
Change in acquisition date provisions	-	30	-	4	-	-	34
Goodwill impairment	(1)	-	-	-	-	-	(1)
	(2)	(89)	(41)	(74)	(6)	(2)	(214)

Year ended 31 December 2009*
	Emerging Markets	Nordic	Retail Europe	Wealth Management	Nedbank	USAM	Total Restated
Amortisation of acquired PVIF	-	(106)	(37)	(86)	-	-	(229)
Amortisation of acquired deferred costs and revenue	1	21	(5)	34	-	-	51
Amortisation of other acquired intangible assets	(2)	(25)	(14)	(36)	(4)	(2)	(83)
Change in acquisition date provisions	-	98	-	-	-	-	98
Goodwill impairment	-	-	(187)	(79)	-	-	(266)
	(1)	(12)	(243)	(167)	(4)	(2)	(429)

*       The year ended 31 December 2009 has been restated to reflect US Life as non-core and discontinued.

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

C: Other key performance information continued

C1: Operating profit adjusting items continued

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

On 27 August 2010 USAM disposed of a subsidiary at a loss of £21 million.

In August 2008, an agreement with ABN AMRO Asset Management Asia and their parent company, Fortis Bank was entered into to acquire the 49% stake that Fortis held in AATEDA, a major Chinese asset management joint venture for €165 million. On 27 May 2009 the termination of this agreement with ABN AMRO Asset Management Asia and Fortis Bank was announced, with an exit fee of £41 million which has been accounted for as a loss on disposal.

 (Loss)/profits on the disposal of subsidiaries, associated undertakings and strategic investments are analysed below:

		£m
	Year ended 31 December 2010	Year ended 31 December 2009
Emerging Markets	-	(51)
Wealth Management	-	(7)
Total Long-Term Savings	-	(58)
Nedbank	(1)	-
USAM	(21)	1
Other	-	7
(Loss)/profit on disposal of subsidiaries, associated undertakings and strategic investments	(22)	(50)

 (d) Long-term investment return

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

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

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

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

C: Other key performance information continued

C1: Operating profit adjusting items continued

(d) Long-term investment return continued

		%
Long-term investment rates	Year ended 31 December 2010	Year ended 31 December 2009
Emerging Markets	9.4	13.3
Nordic	1.8	1.8
Retail Europe	2.5	2.8
Wealth Management	2.0	5.0
M&F	9.4	13.3

Analysis of short-term fluctuations in investment return

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

	£m
Year ended 31 December 2009**	Emerging Markets	Nordic	Retail Europe	Wealth Management*	Total Long- Term Savings	M&F	Other	Total Restated
Long-term investment return	126	1	1	109	237	60	91	388
Less: Actual shareholder investment return	88	-	2	21	111	50	61	222
Short-term fluctuations in investment return	38	1	(1)	88	126	10	30	166

*       Wealth Management long-term investment return includes of £121 million (2009: £96m) in respect of income tax attributable to policyholder returns.

**     The year ended 31 December 2009 has been restated to reflect US Life as non-core and discontinued.

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

C: Other key performance information continued

C1: Operating profit adjusting items continued

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

Adjusted operating profit includes investment returns on policyholder investments in Group equity and debt instruments held by the Group's life funds. These include investments in the Company's ordinary shares, and the subordinated liabilities and ordinary securities of Nedbank. These investment returns are eliminated within the consolidated income statement in arriving at profit before tax, but are included in adjusted operating profit. In 2010 the investment return adjustment increased adjusted operating profit by £10 million (2009: increase of £109 million).

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

Dividends declared to the holders of the Group's perpetual preferred callable securities were £44 million in the year ended 31 December 2010 (2009: £45 million). These are recognised in finance costs on an accruals basis for the purpose of determining adjusted operating profit. In the IFRS financial statements this cost is recognised in equity.

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

US Asset Management has a number of long-term incentive arrangements with senior employees in its asset management affiliates.

In accordance with IFRS requirements the cost of these schemes is disclosed as being attributable to non-controlling interests. However, this is treated as a compensation expense in determining adjusted operating profit. The loss recognised in 2010 was £6 million (2009: gain £1 million).

The Group has issued put options to senior employees as part of some of its US affiliate incentive schemes. The impact of revaluing these instruments is recognised in accordance with IFRS, but excluded from adjusted operating profit. As at 31 December 2010 these instruments were revalued, the impact of which was £3 million (2009: £4 million).

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

The narrowing of credit spread of the Group's debt instruments in the market price has resulted in losses of £183 million (2009: losses due to narrowing of £263 million) on Other operating segments and £20 million (2009: £ nil) in Nedbank being recorded in the Group's income statement for those instruments that are recorded at fair value.

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

C2 Foreign currencies

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

	Income statement (average rate)	Statement of financial position (closing rate)
31 December 2010
Rand	11.3095	10.2796
US dollars	1.5459	1.5530
Swedish kronor	11.1364	10.4227
Euro	1.1650	1.1614
31 December 2009
Rand	13.1746	11.9172
US dollars	1.5655	1.6148
Swedish kronor	11.9743	11.5562
Euro	1.1227	1.1268

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

C: Other key performance information continued

C3: Earnings and earnings per share

(a) Basic and diluted earnings per share

Basic earnings per share is calculated by dividing the profit for the financial year 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, ESOP trusts, Black Economic Empowerment trusts and other related undertakings.

	£m
	Year ended 31 December 2010	Year ended 31 December 2009
Profit/(loss) for the financial year attributable to equity holders of the parent from continuing operations	431	(269)
Loss for the financial year attributable to equity holders of the parent from discontinued operations	(713)	(71)
Loss for the financial year attributable to equity holders of the parent	(282)	(340)
Dividends declared to holders of perpetual preferred callable securities	(32)	(32)
Loss attributable to ordinary equity holders	(314)	(372)

Total dividends declared to holders of perpetual preferred callable securities of £44 million in 2010 (2009: £45 million) are stated net of tax credits of £12 million (2009: £13 million).

Millions
	Year ended 31 December 2010	Year ended 31 December 2009
Weighted average number of ordinary shares in issue	5,422	5,277
Shares held in charitable foundations	(7)	(7)
Shares held in ESOP trusts	(56)	(41)
Adjusted weighted average number of ordinary shares	5,359	5,229
Shares held in life funds	(205)	(236)
Shares held in Black Economic Empowerment trusts	(295)	(235)
Weighted average number of ordinary shares	4,859	4,758
Basic earnings per ordinary share (pence)	(6.5)	(7.8)

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

Millions
		Year ended 31 December 2010	Year ended 31 December 2009
Weighted average number of ordinary shares		4,859	4,758
Adjustments for share options held by ESOP trusts		137	-
Adjustments for shares held in Black Economic Empowerment trusts		295	-
	5,291		4,758
Diluted earnings per ordinary share (pence)		(6.1)	(7.8)

No adjustments to the weighted average number of ordinary shares have been effected for 2009 in order to calculate the diluted earnings per ordinary share as any adjustments would be antidilutive.

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

C: Other key performance information continued 

C3: Earnings and earnings per share continued

(b) Adjusted operating earnings per ordinary share

Adjusted operating earnings per ordinary share is determined based on adjusted operating profit. Adjusted operating profit represents the directors' view of the underlying performance of the Group. For long-term and general insurance business adjusted operating profit is based on long-term investment return, including investment returns on life funds' investments in Group equity and debt instruments and is stated net of income tax attributable to policyholder returns. For the US Asset Management business it includes compensation costs in respect of certain long-term incentive schemes defined as non-controlling interests in accordance with IFRS. For all businesses, adjusted operating profit excludes goodwill impairment, the impact of acquisition accounting, revaluations of put options related to long-term incentive schemes, the impact of closure of unclaimed shares trusts, profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments, dividends declared to holders of perpetual preferred callable securities, income/(expense) from closure of unclaimed shares trusts and fair value gains/(losses) on Group debt instruments.

The reconciliation of profit for the financial year to adjusted operating profit after tax attributable to ordinary equity holders is as follows:

£m
	Year ended 31 December 2010	Year ended 31 December 2009 Restated
Loss for the financial year attributable to equity holders of the parent	(282)	(340)
Adjusting items	482	973
Tax on adjusting items	(36)	(64)
Non-core operations	(1)	(12)
Loss from discontinued operations - US Life	713	71
Non-controlling interest on adjusting items	(21)	(23)
Adjusted operating profit after tax attributable to ordinary equity holders	855	605
Adjusted weighted average number of ordinary shares - (millions)	5,359	5,229
Adjusted operating earnings per ordinary share - (pence)	16.0	11.6

(c) Headline earnings per share

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

£m
	Year ended 31 December 2010		Year ended 31 December 2009 Restated
	Gross	Net	Gross	Net
Loss for the financial year attributable to equity holders of the parent	(282)	(282)	(340)	(340)
Dividends declared to holders of perpetual preferred callable securities	(32)	(32)	(32)	(32)
Loss attributable to ordinary equity holders	(314)	(314)	(372)	(372)
Adjustments:
Impairments of goodwill and intangible assets	20	20	266	266
Impairment of discontinued operations	827	827	-	-
Loss/(profit) on disposal of subsidiaries, associated undertakings and strategic investments	22	17	50	53
Realised gains/losses (including impairments) on available-for-sale financial assets	(12)	(12)	239	239
Headline earnings	543	538	183	186
Weighted average number of ordinary shares	4,859	4,859	4,758	4,758
Diluted weighted average number of ordinary shares	5,291	5,291	5,109	5,109
Headline earnings per share (pence)	11.2	11.1	3.8	3.9
Diluted headline earnings per share (pence)	10.1	10.0	3.6	3.6

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

C: Other key performance information continued 

C4: Dividends

Dividends paid were as follows:

			£m
		Year ended 31 December 2010	Year ended 31 December 2009
2009 Final dividend paid - 1.5p per 10p share		77	-
2010 Interim dividend paid - 1.1p per 10p share		54	-
Dividends to ordinary equity holders		131	-
Dividends declared to holders of perpetual preferred callable securities		44	45
Dividend payments for the year		175	45

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

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

In March and November 2010, £22 million and £22 million respectively were declared and paid to holders of perpetual preferred callable securities (March 2009: £22 million and November 2009: £23 million).

A final dividend of 2.9 pence per 10p share has been recommended by the directors. Subject to shareholders' approval, the dividend will be paid on 31 May 2011 to shareholders on the register at the close of business on 15 April 2011. The dividend will absorb an estimated £142 million of shareholders' funds before taking into account any election for the scrip dividend alternative. The Company is planning to offer a scrip dividend alternative for eligible shareholders.

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

D: Other income statement notes

D1: Income tax expense/(credit)

(a) Analysis of total income tax expense/(credit)

	£m
	Year ended 31 December 2010	Year ended 31 December 2009 Restated
Current tax
United Kingdom tax
Corporation tax	23	46
Overseas tax
South Africa	346	257
United States	(4)	(7)
Europe	61	49
Secondary Tax on Companies (STC)	4	13
Prior year adjustments	(1)	14
Total current tax	429	372
Deferred tax
Origination and reversal of temporary differences	(10)	105
Changes in tax rates/bases	(4)	-
Write down/recognition of deferred tax assets	41	(77)
Total deferred tax	27	28
Total income tax expense/(credit)	456	400

(b) Reconciliation of total income tax expense/(credit)

		£m
	Year ended 31 December 2010	Year ended 31 December 2009 Restated
Profit before tax	1,145	353
Tax at standard rate of 28% (2009: 28%)	321	99
Different tax rate or basis on overseas operations	(22)	(2)
Untaxed and low taxed income	(171)	(83)
Disallowable expenses	124	180
Net movement on deferred tax assets not recognised	92	69
Effect on deferred tax of changes in tax rates	(7)	(2)
STC	(3)	19
Income tax attributable to policyholder returns	134	142
Other	(12)	(22)
Total income tax expense/(credit)	456	400

(c) Income tax relating to components of other comprehensive income

	£m
	Year ended 31 December 2010	Year ended 31 December  2009 Restated
Preferred perpetual callable securities	(12)	(13)
Other	(1)	-
Income tax expense/(credit) - continuing operations	(13)	(13)
Fair value gains/(losses)	181	428
Shadow accounting	(114)	(18)
Income tax expense/(credit) - discontinued operations	67	410
Income tax expense/(credit) relating to components of other comprehensive income	54	397

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

D: Other income statement notescontinued

D1: Income tax expense/(credit) continued

(d) Income tax on adjusted operating profit

	£m
	Year ended 31 December 2010		Year ended 31 December  2009 Restated
Income tax expense/(credit)	456	400
Tax on adjusting items
Impact of acquisition accounting	35	40
Profit on disposal of subsidiaries, associated undertakings and strategic investments	5	(2)
Short-term fluctuations in investment return	3	39
Income tax attributable to policyholders returns	(149)	(192)
Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity	(12)	(13)
Fair value gains and losses on group debt instruments	5	-
Tax on non-core operations	4	11
Income tax on adjusted operating profit	347	283

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

E: Financial assets and liabilities continued

E1: Borrowed funds

							£m
	Notes	Group excluding Nedbank	Nedbank	At 31 December 2010	Group excluding Nedbank	Nedbank	At 31 December 2009
Senior debt securities and term loans	E1(a)	550	1,186	1,736	662	484	1,146
Mortgage backed securities	E1(b)	-	112	112	-	119	119
Subordinated debt securities (net of Group holdings)	E1(c)	1,198	1,158	2,356	1,034	1,010	2,044
Borrowed funds		1,748	2,456	4,204	1,696	1,613	3,309
Other issues treated as equity for accounting purposes
US$750 million cumulative preference securities	F2(b)	458			458
€500 million perpetual preferred callable securities	F2(b)	338			338
£350 million perpetual preferred callable securities	F2(b)	350			350
Total: Book value		2,894			2,842
Nominal value of the above		3,045			3,162

The table below is a maturity analysis of liability cash flows based on contractual maturity dates for borrowed funds. Maturity analysis is undiscounted and based on year end exchange rates.

							£m
		Group excluding Nedbank	Nedbank	At 31 December 2010	Group excluding Nedbank	Nedbank	At 31 December 2009
Less than 1 year		498	323	821	219	156	375
Greater than 1 year and less than 5 years		921	2,164	3,085	1,413	1,226	2,639
Greater than 5 years		880	722	1,602	899	1,033	1,932
Total		2,299	3,209	5,508	2,531	2,415	4,946

(a) Senior debt securities and term loans

							£m
		Group excluding Nedbank	Nedbank	At 31 December 2010	Group excluding Nedbank	Nedbank	At 31 December 2009
Floating rate notes1		86	720	806	114	265	379
Fixed rate notes2		462	466	928	548	219	767
Revolving credit facility3		-	-	-	-	-	-
Term loan and other loans		2	-	2	-	-	-
Total senior debt securities and term loan		550	1,186	1,736	662	484	1,146

Senior debt securities and term loan comprise:

1.     Floating rate notes

        Nedbank

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

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

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

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

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

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

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

        Group excluding Nedbank

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

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

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

-      €22 million repayable January 2010 at 3 month EURIBOR plus 0.35%. - repaid

-      SEK50 million repayable March 2010 at 3 month STIBOR plus 0.38% - repaid.

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

2.     Fixed rate notes

        Nedbank

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

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

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

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

        Group excluding Nedbank

-      £500 million euro bond repayable October 2016 at 7.125%.

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

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

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

-      €20 million euro bond repayable August 2013, capital and interest swapped into floating rate US dollars at 3 month LIBOR + 1.30% - repaid.

The total fair value of the swap derivatives associated with the Senior notes is £nil (2009: £12 million). These are recognised as assets and are included within note E5.

3.     Revolving credit facilities and irrevocable letters of credit

The Group has a £1,250 million five-year multi-currency revolving credit facility, which had an original maturity date of September 2010. On 18 August 2007 syndicate banks agreed to extend the maturity date of £1,232 million of the facility until September 2012. At 31 December 2010
£499 million (2009: £480 million) of this facility was utilised, £nil (2009: £nil) in the form of drawn debt and £499 million (2009: £480 million) in the form of irrevocable letters of credit.

The Group has committed standby facilities totalling £275 million, which were put in place in December 2010 and have a latest maturity date of 29 June 2012.

The Group has a SEK1,500 million revolving credit facility, which has a maturity date of 1 July 2011. At 31 December 2010 this facility was undrawn (2009: undrawn).

(b) Mortgage backed securities - Nedbank

	£m
	At 31 December 2010	At 31 December 2009
R291 million notes (class A1) repayable 18 November 2039 (11.467%)	4	25
R1.4 billion notes (class A2A) repayable 18 November 2039 (11.817%)	96	84
R98 million notes (class B note) repayable 18 November 2039 (12.067%)	7	6
R76 million notes (class C note) repayable 18 November 2039 (13.317%)	5	4
	112	119

(c) Subordinated debt securities

	£m
	At 31 December 2010	At 31 December 2009
Nedbank
R1.5 billion repayable 24 April 2016 (7.85%)1	148	126
R1.8 billion repayable 20 September 2018 (9.84%)2	186	149
R500 million repayable on 30 December 2010 (8.38%)3	-	41
R650 million repayable 8 February 2017 (9.03%)4	67	55
R1.7 billion repayable 8 February 2019 (8.9%)5	171	138
R2.0 billion repayable 6 July 2022 (3 month JIBAR plus 0.47%)6	198	171
R500 million repayable 15 August 2012 (3 month JIBAR plus 0.45%)7	49	42
R1.0 billion repayable 17 September 2020 (10.54%)8	105	84
R500 million repayable 14 December 2017 (3 month JIBAR plus 0.70%)9	49	42
R120 million repayable 14 December 2017 (10.38%)10	12	10
R487 million repayable 20 November 2018 (15.05%)11	51	41
R1,265 million repayable 20 November 2018 (JIBAR plus 4.75%)12	125	108
R300 million repayable on 4 December 2013 (JIBAR + 2.5%)13	15	13
US$100 million repayable on 3 March 2022 (3 month USD LIBOR)14	65	62
	1,241	1,082
Less: banking subordinated debt securities held by other Group companies	(83)	(72)
Banking subordinated debt securities (net of Group holdings)	1,158	1,010
Group excluding Nedbank
R3.0 billion repayable 27 October 2015 (8.9%)15	293	252
£300 million repayable 21 January 2016 (5.0%)16	296	252
R250 million preference shares repayable 9 June 201117  - repaid	-	21
€750 million repayable 18 January 2017 (4.5%)18	609	509
	1,198	1,034
Total subordinated liabilities	2,356	2,044

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

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

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

3.    Unsecured callable Bonds issued 30 March 2006.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

F: Other statement of financial position notes continued 

F1: Provisions

	£m
	At 31 December 2010	At 31 December 2009
Surplus property	16	20
Client compensation	39	30
Warranties on sale of business	3	17
Liability for long service leave	57	49
Restructuring	15	5
Provision for donations	89	84
Other provisions	92	90
	311	295
Post employment benefits	(51)	(32)
Total	260	263

								£m
Year ended 31 December 2010	Surplus property	Client compensation	Warranties on sale of business	Liability for long service leave	Restruct-uring	Provision for donations	Other	Total
Balance at beginning of the year	20	30	17	49	5	84	90	295
Unused amounts reversed	-	-	(10)	-	-	-	(19)	(29)
Unwind of discount	-	-	-	-	-	-	-	-
Charge to income statement	-	7	-	28	9	-	25	69
Utilised during the year	(4)	(9)	-	(27)	-	-	(5)	(45)
Foreign exchange and other movements	-	11	(4)	7	1	5	1	21
Balance at end of the year	16	39	3	57	15	89	92	311

								£m
Year ended 31 December 2009	Surplus property	Client compensation	Warranties on sale of business	Liability for long service leave	Restruct-uring	Provision for donations	Other	Total
Balance at beginning of the year	23	27	111	38	-	80	201	480
Unused amounts reversed	-	(2)	(54)	-	-	-	(52)	(108)
Unwind of discount	1	-	-	-	-	-	-	1
Charge to income statement	3	(3)	-	24	5	-	8	37
Utilised during the year	(7)	(2)	(26)	(20)	-	-	(65)	(120)
Foreign exchange and other movements	-	10	(14)	7	-	4	(2)	5
Balance at end of the year	20	30	17	49	5	84	90	295

2010 provisions in relation to surplus property amounted to £16 million (2009: £20 million). These relate to the onerous costs of vacant properties leased by the Group of which £16 million (2009: £13 million) is estimated to be payable after more than one year.

Provisions in relation to client compensation were £39 million (2009: £30 million), primarily relating to possible mis-selling of guarantee contracts in Wealth Management. £1 million (2009: £5 million) is estimated to be payable after more than one year.

Provisions in relation to warranties on the sale of businesses amounted to £3 million (2009: £17 million). £3 million (2009: £9 million) is estimated to be payable after more than one year.

The liability for long service leave of £57 million (2009: £49 million) relates to provision for staff payments for long serving employees, all of which estimated to be payable in less than one year.

Provisions in relation to restructuring were £15 million (2009: £5 million), primarily in respect of consolidation and related office relocation for Wealth Management. £11 million (2009: £3 million) is estimated to be payable after more than one year.

The provision for donations is held by Emerging Markets. It relates to the payment of charitable donations in future periods to which the Group is committed, out of the funds made available on the closure of the Group's unclaimed shares trusts, which were set up as part of the demutualisation in 1999 and closed in 2006 of which £70 million (2009: £84 million) is estimated to be payable after more than one year.

Other provisions includes provisions for tax on long-term staff benefits and legal fees.

Where material, provisions are discounted at discount rates specific to the risks inherent in the liability. The timing and final amounts of payments in respect of some of the provisions, particularly those in respect of litigation claims and similar actions against the Group, are uncertain and could result in adjustments to the amounts recorded. Of the total provisions recorded above, £163 million (2009: £188 million) is estimated to be payable after more than one year.

F2: Non-controlling interests

(a) Income statement

(i) Ordinary shares

The non-controlling interests charge to profit for the financial year has been calculated on the basis of the Group's effective ownership of the subsidiaries in which it does not own 100% of the ordinary equity. The principal subsidiaries where a non-controlling interest exists are the Group's banking business in South Africa and, prior to the acquisition of the non-controlling interest in Mutual & Federal in February 2010 (see F2(b)), the general insurance business in South Africa. For the year ended 31 December 2010 the non-controlling interests attributable to ordinary shares was £196 million (2009: £158 million).

(ii) Preferred securities

	£m
	At 31 December 2010	At 31 December 2009
R2,000 million non-cumulative preference shares	14	16
R773 million non-cumulative preference shares	5	6
R300 million non-cumulative preference shares	2	2
US$750 million cumulative preferred securities	38	38
R364 million non-cumulative preference shares	3	2
Non-controlling interests - preferred securities	62	64

(iii) Non-controlling interests - adjusted operating profit

The following table reconciles non-controlling interests' share of profit for the financial year to non-controlling interests' share of adjusted operating profit:

	£m
Reconciliation of non-controlling interests share of profit for the financial year	Year ended 31 December 2010	Year ended 31 December 2009
The non-controlling interests charge is analysed as follows:
Non-controlling interests - ordinary shares	196	158
Goodwill impairment and impact of acquisition accounting	2	1
Short-term fluctuations in investment return	-	2
Income attributable to Black Economic Empowerment trusts of listed subsidiaries	22	23
Fair value gains on group debt instruments	6	-
Income attributable to US Asset Management non-controlling interests	(9)	(3)
Non-controlling interests share of adjusted operating profit	217	181

The Group uses revised weighted average effective ownership interests when calculating the non-controllable interest applicable to the adjusted operating profit of its South Africa banking and, prior to the acquisition of the non-controlling interest in February 2010, general insurance businesses. This reflects the legal ownership of these businesses following the implementation for Black Economic Empowerment (BEE) schemes in 2005. In accordance with IFRS accounting rules the shares issued for BEE purposes are deemed to be, in substance, options. Therefore the effective ownership interest of the minorities reflected in arriving at profit after tax in the consolidated income statement is lower than that applied in arriving at adjusted operating profit after tax. In 2010 the increase in adjusted operating profit attributable to non-controlling interests as a result of this was £22 million (2009: £23 million).

(b) Statement of financial position

(i) Ordinary shares

Reconciliation of movements in non-controlling interests	£m
	Year to 31 December 2010	Year to 31 December 2009
Balance at beginning of the year	1,537	1,147
Non-controlling interests' share of profit	196	158
Non-controlling interests' share of dividends paid	(88)	(80)
Net acquisition of interests	(116)	63
Foreign exchange and other movements	234	249
Balance at end of the year	1,763	1,537

Acquisition on non-controlling interest in Mutual & Federal

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

Other acquisitions

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

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

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

F: Other statement of financial position notes continued 

F2: Non-controlling interests continued

(b) Statement of financial position continued

(ii) Preferred securities

	£m
	At 31 December 2010	At 31 December 2009
R2,000 million non-cumulative preference shares1	140	140
R773 million non-cumulative preference shares2	71	71
R300 million non-cumulative preference shares3	12	12
US$750 million cumulative preferred securities4	458	458
R364 million non-cumulative preference shares5	25	25
R363 million non-cumulative preference shares6	17	17
R92 million non-cumulative preference status7	50	-
	773	723
Unamortised issue costs	(13)	(13)
Total in issue at 31 December	760	710

Preferred securities are held at historic value of consideration received less unamortised issue costs.

1.     200 million R10 preference shares issued by Nedbank Limited (Nedbank), the Group's banking subsidiary. These shares are non-redeemable and non-cumulative and pay a cash dividend equivalent to 75% of the prime overdraft interest rate of Nedbank. Preference shareholders are only entitled to vote during periods when a dividend or any part of it remains unpaid after the due date for payment or when resolutions are proposed that directly affect any rights attaching to the shares or the rights of the holders. Preference shareholders will be entitled to receive their dividends in priority to any payment of dividends made in respect of any other class of Nedbank's shares.

2.     77.3 million R10 preference shares issued at R10.68 per share by Nedbank on the same terms as the securities described in (1) above.

3.     30 million R10 preference shares issued on 22 June 2006 by Imperial Bank Limited a subsidiary of Nedbank Limited, on the same terms as the securities described in (1) above.

4.     US$750 million Guaranteed Cumulative Perpetual Preference Securities issued on 19 May 2003 by Old Mutual Capital Funding L.P., a subsidiary of the Group. Subject to certain limitations, holders of these securities are entitled to receive preferential cash distributions at a fixed rate of 8.0% per annum payable in arrears on a quarterly basis. The Group may defer payment of distributions at its sole discretion, but such an act may restrict Old Mutual plc from paying dividends on its ordinary shares for a period of 12 months. Arrears of distributions are payable quarterly cumulatively only on redemption of the securities or at the Group's option. The securities are perpetual, but may be redeemed at the discretion of the Group from 22 December 2008. The costs of issue have been amortised over the period to 22 December 2008.

5.     35 million R10 preference shares issued in 16 April 2007 at R10.27 per share by Nedbank on the same terms as the securities described in (1) above.

6.     36.3 million R10 preference shares issued by Nedbank in seven instalments between September 09 and December 09 on the same terms as the securities described in (1) above.

7.     9.2 million R10 preference shares issued by Nedbank on 11 March 2010 on the same terms as the securities in note 1 above.

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

G: Other notes

G1: Contingent liabilities

£m
	At 31 December 2010	At 31 December 2009
Guarantees and assets pledged as collateral security	2,883	2,375
Irrevocable letters of credit	207	605
Secured lending	775	555
Other contingent liabilities	55	49

The Group has pledged debt securities amounting to £1,379 million (2009: £1,253 million) as collateral for deposits received under re-purchase agreements. These amounts represent assets that have been transferred but do not qualify for derecognition under IAS 39.These transactions are entered into under terms and conditions that are standard industry practice to securities borrowing and lending activities.

Nedbank structured financing

Historically a number of the Group's South African banking businesses entered into structured finance transactions with third parties using the tax base of these companies. Pursuant to the terms of the majority of these transactions, the underlying third-party has contractually agreed to accept the risk of any tax being imposed by the South African Revenue Service (SARS), although the obligation to pay in the first instance rests with the Group's companies. It is only in limited cases where, for example, the credit quality of a client becomes doubtful, or where the client has specifically contracted out of the re-pricing of additional taxes, that the recovery from a client could be less than the liability that could arise on assessment, in which case provisions are made. SARS has examined the tax aspects of some of these types of structures and SARS could assess these structures in a manner different to that initially envisaged by the contracting parties. As a result Group companies could be obliged to pay additional amounts to SARS and recover these from clients under the applicable contractual arrangements.

Nedbank litigation

There are a number of legal or potential claims against Nedbank and its subsidiary companies, the outcome of which cannot at present be foreseen. The largest of these potential actions is a claim in the High Court for R1.3 billion against Nedbank by certain shareholders in Pinnacle Point Group Limited, alleging that Nedbank had a legal duty of care to them arising from a share swap transaction. Nedbank and its legal advisers are of the opinion that the claim is without merit and it will be defended vigorously.

Nedbank Securitisations

The Group through Nedbank is party to securitisation transactions involving GreenHouse Funding (Pty) Limited ("GreenHouse"), a residential mortgage backed securitisation programme, Octane ABS 1 (Pty) Limited ("Octane"), a securitisation programme of auto loans advanced by a subsidiary of Nedbank, and Synthesis Funding Limited ("Synthesis"), an asset backed commercial paper mortgage programme.

Synthesis primarily invests in long-term rated bonds and offers capital market funding to South African corporates. These assets are funded through the issuance of short-dated investment-grade commercial paper to institutional investors. All the commercial paper issued by Synthesis Funding Limited is assigned the highest short-term RSA local-currency credit rating by both Fitch and Moody's, and is listed on the Bond Exchange of South Africa (BESA).

Under GreenHouse Series 1, R2 billion of residential mortgages originated by Nedbank Retail was securitised. The commercial paper issued by GreenHouse has been assigned credit ratings by both Fitch and Moody's and is listed on the JSE. The homeloans of GreenHouse continue to be recognised in the statement of financial position of the Group, due to the significant risks and rewards associated with the homeloans not being transferred to the external investors. In January 2010 the arrears levels in GreenHouse breached the Arrear Trigger level. As a result, the Stop Purchase Event remains in effect resulting in no further home loans (other than servicing redraws - ie access facilities on existing GreenHouse loans) being acquired for as long as the arrears level remains above the Arrear Trigger level. As a consequence, all capital repayments were directed to noteholders.

Octane is a securitisation programme of auto loans originated by a subsidiary of Nedbank.  The inaugural transaction entailed the securitisation of R2 billion of motor vehicle loans under Octane Series 1. The commercial paper issued by Octane Series 1 has been assigned credit ratings by Fitch and is listed on the JSE. The auto loans of Octane continue to be recognised on the statement of financial position of the Group due to the significant risks and rewards associated with the autoloans not being transferred to the external investors. During 2010 the transaction continued to repay investors in the normal course, as envisaged in the transaction documents.

The following table shows the carrying amount of securitised assets, stated at the amount of the Group's continuing involvement where appropriate, together with the associated liabilities, for each category of asset in the statement of financial position:*

				£m
	Carrying amount of assets	Associated liabilities	Carrying amount of assets	Associated liabilities
	Year ended 31 December 2010		Year ended 31 December 2009
Loans and advances to customers
Residential mortgage loans	165	171	166	169
Motor vehicle financing **	59	78	122	134
Other Financial Assets
Corporate and bank paper	155	-	145	-
Other securities	327	-	338	-
Commercial paper	-	484	-	484
Total	706	733	771	787

This table presents the gross balances within the securitisation schemes and does not reflect any eliminations of intercompany and cash balances held by the various securitisation vehicles.

*       The value of any derivative instruments taken out to hedge any financial asset or liability, is adjusted against such instrument in this disclosure.

**     Comparative information relating to motor vehicle financing has been restated to only disclose auto loans relating to the Octane transaction.  This approach ensures consistency with the disclosure provided for Greenhouse and Synthesis.  The effect of this restatement is a £21 million decrease in the carrying amount of motor vehicle financing assets.

G2: Events after the reporting date

On 21 January 2011 the Group redeemed the £300 million Tier 2 bond repayable 21 January, taking the option to redeem at the first call date.

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

H: Discontinued operations and held for sale operations

H1: Discontinued operations

The results of the Group's United States life business, US Life, are shown as a discontinued operation in these financial statements.  At 31 December 2010 the Group had entered into an agreement to dispose of the controlling interest in US Life to Harbinger OM LLC, an affiliate of Harbinger Capital Partners, and is seeking to gain regulatory approval for the sale. The disposal is expected to be completed at or around the end of the first quarter of 2011.

US Life has been classified as a discontinued operation in these financial statements. Analysis of the results of discontinued operations is given below.

(a) Income statement from discontinued operations

		£m
	Year ended 31 December 2010	Year ended 31 December 2009
Revenue	1,608	1,208
Expenses	(1,557)	(1,314)
Profit/(loss) before tax from discontinued operations	51	(106)
Loss on remeasurement to fair value less costs to sell	(827)	-
Loss before tax	(776)	(106)
Tax credit	63	35
Loss from discontinued operations after tax	(713)	(71)

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

(b) Statement of comprehensive income from discontinued operations

			£m
		Year ended 31 December 2010	Year ended 31 December 2009
(Loss)/profit after tax for the financial year		(713)	(71)
Other comprehensive income for the financial year
Fair value (losses)/gains
Available-for-sale investments
Fair value gains/(losses)		530	975
Recycled to the income statement		(12)	227
Shadow accounting		(334)	(9)
Currency translation differences/exchange differences on translating foreign operations		29	(68)
Other movements		(34)	-
Income tax relating to components of other comprehensive income		(67)	(410)
Total other comprehensive income for the financial year		112	715
Total comprehensive (loss)/income for the financial year		(601)	644
Attributable to
Equity holders of the parent		(601)	644
Total comprehensive (loss)/income for the financial year		(601)	644

(c) Net cash flows from discontinued operations

		£m
	Year ended 31 December 2010	Year ended 31 December 2009
Operating activities	(167)	(191)
Investing activities	63	144
Net cash flows	(104)	(47)

Notes to the consolidated financial statements

For the year ended 31 December 2010 continued

H2: Disposal group held for sale

The assets and liabilities of the Group's United States life business, US Life, are shown as held for sale in these financial statements. The Group has entered into an agreement to dispose of the controlling interest in US Life to Harbinger OM LLC, an affiliate of Harbinger Capital Partners, and is seeking to gain regulatory approval for the sale.

On reclassification of the assets and liabilities of US Life to held for sale the fair value based on agreed terms with Harbinger less expected costs to sell was assessed and an impairment charge was taken to write down the net assets to this amount.

(a) Statement of financial position

Assets directly associated with disposal group held for sale

		£m
		At  31 December  2010
Deferred tax assets		78
Deferred acquisition costs		551
Reinsurers' share of long-term business policyholder liabilities		506
Deposits held with reinsurers		36
Loans and advances		57
Investments and securities		10,794
Trade, other receivables and other assets		209
Derivative financial instruments - assets		127
Cash and cash equivalents		26
		12,384

Liabilities directly associated with disposal group held for sale

		£m
		At 31 December 2010
Long-term business policyholder liabilities		11,975
Deferred tax liabilities		22
Trade, other payables and other liabilities		222
		12,219

Included within Investments and securities is £395 million of short term cash balances.

In addition to the disposal group held for sale, namely US Life, the Group had additional non-current assets held for sale of £7 million (2009: £1 million).

(b) Equity attributable to equity holders of the parent directly associated with disposal group held for sale

		£m
		At 31 December 2010
Retained earnings		36
Available-for-sale reserve		18
Share-based payments reserve		1
		55

 

END

 

 

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