Preliminary Results 2013 - Part 2

RNS Number : 1596B

Old Mutual PLC

28 February 2014

Index to the financial information For the year ended 31 December 2013

Statement of directors' responsibilities in respect of the preliminary announcement of the Annual Report and the financial statements		52
Consolidated income statement		53
Consolidated statement of comprehensive income		54
Reconciliation of adjusted operating profit to profit after tax		55
Consolidated statement of financial position		56
Condensed consolidated statement of cash flows		57
Consolidated statement of changes in equity		58
Notes to the consolidated financial statements
	A: Significant accounting policies	62
	B: Segment information	66
	C: Other key performance information	76
	D: Other income statement notes	82
	E: Financial assets and liabilities	84
	F: Other statement of financial position notes	87
	G: Other notes	88
	H: Discontinued operations and disposal groups held for sale	90
	I: Changes in accounting policies	91

Adjusted Group MCEV by line of business		94
Adjusted operating group MCEV statement of earnings		95
Adjusted operating Group MCEV earnings per share		96
Group MCEV statement of earnings		97
Notes to the MCEV basis supplementary information		98
	A: MCEV policies	98
	B: Segment information	107
	C: Other supporting information	114
	D: Sensitivity tests	117

Statement of directors' responsibilities

in respect of the preliminary announcement of the Annual Report and the financial statements

The directors confirm that to the best of their knowledge:

n The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

n The Annual Report includes a fair review of the development and performance of the business and the position of Old Mutual plc and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Julian Roberts Philip Broadley
Group Chief Executive Group Finance Director

28 February 2014

Consolidated income statement
For the year ended 31 December 2013
			£m
	Notes	Year ended 31 December 2013	Year ended 31 December 2012 Restated¹
Revenue
Gross earned premiums	B2	3,701	3,725
Outward reinsurance		(317)	(322)
Net earned premiums		3,384	3,403
Investment return (non-banking)		9,986	9,880
Banking interest and similar income		3,050	3,431
Banking trading, investment and similar income		195	214
Fee and commission income, and income from service activities		3,095	3,039
Other income		100	125
Total revenue		19,810	20,092
Expenses
Claims and benefits (including change in insurance contract provisions)		(5,410)	(5,612)
Reinsurance recoveries		246	221
Net claims and benefits incurred		(5,164)	(5,391)
Change in investment contract liabilities		(5,873)	(5,361)
Losses on loans and advances		(368)	(400)
Finance costs		(81)	(214)
Banking interest payable and similar expenses		(1,616)	(1,887)
Fee and commission expenses, and other acquisition costs		(976)	(1,064)
Change in third-party interest in consolidated funds		(564)	(651)
Other operating and administrative expenses		(3,653)	(3,715)
Total expenses		(18,295)	(18,683)
Share of associated undertakings' and joint ventures' profit after tax		21	32
Loss on disposal of subsidiaries, associated undertakings and strategic investments	C1(c)	(4)	(56)
Profit before tax		1,532	1,385
Income tax expense	D1	(552)	(471)
Profit from continuing operations after tax		980	914
Discontinued operations
Profit from discontinued operations after tax	H1(a)	3	564
Profit after tax for the financial year		983	1,478
Attributable to
Equity holders of the parent		705	1,172
Non-controlling interests
Ordinary shares	F1(a)	259	256
Preferred securities	F1(a)	19	50
Profit after tax for the financial year		983	1,478
Earnings per share
Basic earnings per share based on profit from continuing operations (pence)		14.9	12.6
Basic earnings per share based on profit from discontinued operations (pence)		0.1	12.3
Basic earnings per ordinary share (pence)	C2(a)	15.0	24.9
Diluted basic earnings per share based on profit from continuing operations (pence)		13.8	11.6
Diluted basic earnings per share based on profit from discontinued operations (pence)		0.1	11.5
Diluted basic earnings per ordinary share (pence)	C2(b)	13.9	23.1
Weighted average number of ordinary shares (millions)	C2(a)	4,442	4,587

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details

Consolidated statement of comprehensive income
For the year ended 31 December 2013
			£m
	Notes	Year ended 31 December 2013	Year ended 31 December 2012 Restated¹
Profit after tax for the financial year		983	1,478
Other comprehensive income for the financial year
Items that will not be reclassified subsequently to profit or loss
Fair value gains
Property revaluation		23	20
Measurement gains on defined benefit plans		70	8
Income tax on items that will not be reclassified subsequently to profit or loss	D1(c)	(12)	6
		81	34
Items that may be reclassified subsequently to profit or loss
Fair value gains
Net investment hedge		43	160
Available-for-sale investments
Fair value (losses)/gains		(5)	30
Recycled to profit or loss		(9)	(21)
Shadow accounting		-	6
Currency translation differences on translating foreign operations		(1,257)	(641)
Other movements		9	(22)
Income tax on items that may be reclassified subsequently to profit or loss	D1(c)	2	(5)
		(1,217)	(493)
Total other comprehensive income for the financial year from continuing operations		(1,136)	(459)
Total other comprehensive income for the financial year from discontinued operations²	H1(b)	-	(348)
Total other comprehensive income for the financial year		(1,136)	(807)
Total comprehensive income for the financial year		(153)	671
Attributable to
Equity holders of the parent		(96)	503
Non-controlling interests
Ordinary shares		(76)	118
Preferred securities		19	50
Total comprehensive income for the financial year		(153)	671

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

²Total other comprehensive income from discontinued operations for the year ended 31 December 2012 includes £350 million cumulative foreign exchange translation gains, previously included in foreign currency translation reserves that was realised on the disposal of Nordic.

Reconciliation of adjusted operating profit to profit after tax
For the year ended 31 December 2013
			£m
	Notes	Year ended 31 December 2013	Year ended 31 December 2012 Restated¹
Core operations
Emerging Markets	B3	590	611
Old Mutual Wealth	B3	217	195
Property & Casualty	B3	4	37
Nedbank	B3	797	825
USAM	B3	111	91
		1,719	1,759
Finance costs	B3	(92)	(130)
Long-term investment return on excess assets		43	54
Net interest payable to non-core operations		(11)	(18)
Corporate costs		(54)	(54)
Other net income		7	1
Adjusted operating profit before tax		1,612	1,612
Adjusting items	C1(a)	(286)	(467)
Non-core operations	B3	32	165
Profit before tax (net of policyholder tax)		1,358	1,310
Income tax attributable to policyholder returns	D1(d)	174	75
Profit before tax		1,532	1,385
Total tax expense	D1(a)	(552)	(471)
Profit from continuing operations after tax		980	914
Profit from discontinued operations after tax	H1(a)	3	564
Profit after tax for the financial year		983	1,478

Adjusted operating profit after tax attributable to ordinary equity holders of the parent
			£m
	Notes	Year ended 31 December 2013	Year ended 31 December 2012 Restated¹
Adjusted operating profit before tax	B3	1,612	1,612
Tax on adjusted operating profit	D1(d)	(424)	(440)
Adjusted operating profit after tax		1,188	1,172
Non-controlling interests - ordinary shares	F1(a)	(279)	(281)
Non-controlling interests - preferred securities	F1(a)	(19)	(50)
Adjusted operating profit after tax attributable to ordinary equity holders of the parent	B3	890	841
Adjusted weighted average number of shares (millions)	C2(c)	4,836	4,818
Adjusted operating earnings per share (pence)	C2(c)	18.4	17.5

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

Basis of preparation of adjusted operating profit

Adjusted operating profit (AOP) reflects the directors' view of the underlying long-term performance of the Group. AOP is a measure of profitability which adjusts the standard IFRS profit measures for the specific items detailed in note C1 and, as such, it is a non-GAAP measure. This reconciliation explains the differences between adjusted operating profit and profit after tax as reported under IFRS.

For core life assurance and property & casualty businesses, AOP is based on a long-term investment return, including returns on investments held by life funds in Group equity and debt instruments, and is stated net of income tax attributable to policyholder returns. For all core businesses, AOP excludes goodwill impairment, the impact of acquisition accounting intangibles and costs related to successful acquisitions, revaluations of put options related to long-term incentive schemes, profit/(loss) on acquisition/disposal of subsidiaries, associated undertakings and strategic investments, fair value profits/(losses) on certain Group debt movements and costs related to the fundamental restructuring of continuing businesses. AOP includes dividends declared to holders of perpetual preferred callable securities. Old Mutual Bermuda and Nordic are treated as non-core operations in the AOP disclosure, as such they are not included in AOP. Refer to note B1 for further information on the basis of segmentation.

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

Consolidated statement of financial position
At 31 December 2013
			£m
	Notes	At 31 December 2013	At 31 December 2012 Restated¹
Assets
Goodwill and other intangible assets		2,835	3,056
Mandatory reserve deposits with central banks		759	921
Property, plant and equipment		722	847
Investment property		1,811	1,947
Deferred tax assets		303	345
Investments in associated undertakings and joint ventures		168	152
Deferred acquisition costs		1,211	1,288
Reinsurers' share of policyholder liabilities		1,875	1,406
Loans and advances		33,386	38,495
Investments and securities		88,417	88,513
Current tax receivable		128	103
Trade, other receivables and other assets		2,583	3,006
Derivative financial instruments		1,259	1,780
Cash and cash equivalents		4,869	5,061
Non-current assets held for sale		5	42
Total assets		140,331	146,962
Liabilities
Long-term business policyholder liabilities		81,141	80,188
General insurance liabilities		332	346
Third-party interests in consolidated funds		5,478	6,116
Borrowed funds	E1	2,629	3,050
Provisions and accruals		236	265
Deferred revenue		628	689
Deferred tax liabilities		491	404
Current tax payable		237	287
Trade, other payables and other liabilities		4,274	4,940
Amounts owed to bank depositors		34,370	39,499
Derivative financial instruments		1,478	1,402
Non-current liabilities held for sale		-	3
Total liabilities		131,294	137,189
Net assets		9,037	9,773
Shareholders' equity
Equity attributable to equity holders of the parent		7,270	7,816
Non-controlling interests
Ordinary shares	F1(b)	1,502	1,684
Preferred securities	F1(b)	265	273
Total non-controlling interests		1,767	1,957
Total equity		9,037	9,773

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

Consolidated statement of cash flows
For the year ended 31 December 2013
		£m
	Year ended 31 December 2013	Year ended 31 December 2012 Restated¹
Cash flows from operating activities
Profit before tax	1,532	1,385
Non-cash movements in profit before tax	1,423	249
Changes in working capital	447	1,039
Taxation paid	(458)	(295)
Net cash inflow from operating activities	2,944	2,378
Cash flows from investing activities
Net acquisitions of investments and securities	(1,658)	(1,449)
Acquisition of investment properties	(47)	(55)
Proceeds from disposal of investment properties	22	67
Acquisition of property, plant and equipment	(113)	(120)
Proceeds from disposal of property, plant and equipment	6	7
Acquisition of intangible assets	(86)	(72)
Acquisition of interests in subsidiaries, associated undertakings and strategic investments	(119)	(23)
Disposal of interests in subsidiaries, associated undertakings and strategic investments	8	1,883
Net cash (outflow)/inflow from investing activities	(1,987)	238
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company	(336)	(1,172)
Non-controlling interests and preferred security interests	(183)	(211)
Dividends received from associated undertakings	13	7
Interest paid (excluding banking interest paid)	(51)	(85)
Proceeds from issue of ordinary shares (including by subsidiaries to non-controlling interests)	11	35
Net disposal of treasury shares	55	19
Issue of subordinated and other debt	586	290
Subordinated and other debt repaid	(578)	(1,293)
Net cash outflow from financing activities	(483)	(2,410)
Net increase in cash and cash equivalents	474	206
Net decrease in cash and cash equivalents - discontinued operations	-	(129)
Effects of exchange rate changes on cash and cash equivalents	(828)	(380)
Cash and cash equivalents at beginning of the year	5,982	6,285
Cash and cash equivalents at end of the year	5,628	5,982
Consisting of
Cash and cash equivalents	4,869	5,061
Mandatory reserve deposits with central banks	759	921
Total	5,628	5,982

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

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

Except for mandatory reserve deposits with central banks of £759 million (2012: £921 million) and cash and cash equivalents subject to consolidation of funds of £1,667 million (2012: £1,893 million), management do not consider that there are any material amounts of cash and cash equivalents which are not available for use in the Group's day-to-day operations. Mandatory reserve deposits are, however, included in cash and cash equivalents for the purposes of the statement of cash flows in line with market practice in South Africa.

Consolidated statement of changes in equity
For the year ended 31 December 2013
		Millions
Year ended 31 December 2013	Notes	Number of shares issued and fully paid	Share capital	Share premium	Merger reserve	Available-for-sale reserve
Shareholders' equity at beginning of the year		4,892	559	835	1,717	65
Impact of changes in accounting policies	I1	-	-	-	-	-
Restated shareholders' equity at beginning of the year		4,892	559	835	1,717	65
Profit after tax for the financial year		-	-	-	-	-
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Fair value gains
Property revaluation		-	-	-	-	-
Measurement gains on defined benefit plans		-	-	-	-	-
Income tax on items that will not be reclassified subsequently to profit or loss	D1(c)	-	-	-	-	-
		-	-	-	-	-
Items that may be reclassified subsequently to profit or loss
Fair value gains/(losses)
Net investment hedge		-	-	-	-	-
Available-for-sale investments
Fair value losses		-	-	-	-	(6)
Recycled to profit or loss		-	-	-	-	(9)
Currency translation differences on translating foreign operations		-	-	-	-	-
Other movements		-	-	-	-	-
Income tax on items that may be reclassified subsequently to profit or loss	D1(c)	-	-	-	-	2
Total comprehensive income for the financial year		-	-	-	-	(13)
Dividends for the year	C3	-	-	-	-	-
Equity share-based payment transactions		-	-	-	-	-
Other movements in share capital		5	1	10	-	-
Preferred securities purchased		-	-	-	-	-
Change in participation in subsidiaries		-	-	-	-	-
Transactions with shareholders		5	1	10	-	-
Shareholders' equity at end of the year		4,897	560	845	1,717	52



								£m
Property revaluation reserve	Share-based payments reserve	Other reserves	Foreign currency translation reserve	Retained earnings	Perpetual preferred callable securities	Attributable to equity holders of the parent	Total non-controlling interests	Total equity
144	268	33	(378)	3,908	682	7,833	1,965	9,798
-	-	-	-	(17)	-	(17)	(8)	(25)
144	268	33	(378)	3,891	682	7,816	1,957	9,773
-	-	-	-	668	37	705	278	983



17	-	-	-	-	-	17	6	23
-	-	-	-	52	-	52	18	70
-	-	-	-	(14)	10	(4)	(8)	(12)
17	-	-	-	38	10	65	16	81


-	-	-	43	-	-	43	-	43

-	-	-	-	-	-	(6)	1	(5)
-	-	-	-	-	-	(9)	-	(9)
-	-	-	(899)	-	-	(899)	(358)	(1,257)
-	-	4	-	(1)	-	3	6	9
-	-	-	-	-	-	2	-	2
17	-	4	(856)	705	47	(96)	(57)	(153)
-	-	-	-	(336)	(47)	(383)	(136)	(519)
-	48	-	-	13	-	61	(17)	44
-	-	-	-	55	-	66	3	69
-	-	-	-	(21)	(156)	(177)	-	(177)
-	-	-	-	(17)	-	(17)	17	-
-	48	-	-	(306)	(203)	(450)	(133)	(583)
161	316	37	(1,234)	4,290	526	7,270	1,767	9,037

Retained earnings were reduced in respect of own shares held in policyholder's funds, ESOP trusts, Black Economic Empowerment trusts and other undertakings at 31 December 2013 by £428 million. (2012: £489 million).

Consolidated statement of changes in equity
For the year ended 31 December 2013
		Millions
Year ended 31 December 2012 Restated¹	Notes	Number of shares issued and fully paid	Share capital	Share premium	Merger reserve	Available-for-sale reserve
Shareholders' equity at beginning of the year		5,801	580	805	2,532	53
Impact of changes in accounting policies	I1	-	-	-	-	-
Restated shareholders' equity at beginning of the year		5,801	580	805	2,532	53
Profit after tax for the financial year		-	-	-	-	-
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Fair value gains
Property revaluation		-	-	-	-	-
Measurement gain on defined benefit plans		-	-	-	-	-
Income tax on items that will not be reclassified subsequently to profit or loss	D1(c)	-	-	-	-	-
		-	-	-	-	-
Items that may be reclassified subsequently to profit or loss
Fair value gains/(losses)
Net investment hedge		-	-	-	-	-
Available-for-sale investments
Fair value gains		-	-	-	-	33
Recycled to profit or loss		-	-	-	-	(21)
Exchange differences recycled to profit or loss		-	-	-	-	-
Shadow accounting		-	-	-	-	6
Currency translation differences on translating foreign operations		-	-	-	-	-
Other movements		-	-	-	-	-
Income tax on items that may be reclassified subsequently to profit or loss	D1(c)	-	-	-	-	(6)
Total comprehensive income for the financial year		-	-	-	-	12
Dividends for the year	C3	-	-	-	-	-
Equity share-based payment transactions		-	-	-	-	-
Other movements in share capital		27	3	30	-	-
Cancellation of treasury shares		(239)	(24)	-	-	-
Share consolidation		(697)	-	-	-	-
Preferred securities purchased		-	-	-	-	-
Merger reserve realised in the year		-	-	-	(815)	-
Change in participation in subsidiaries		-	-	-	-	-
Transactions with shareholders		(909)	(21)	30	(815)	-
Shareholders' equity at end of the year		4,892	559	835	1,717	65

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.



								£m
Property revaluation reserve	Share-based payments reserve	Other reserves	Foreign currency translation reserve	Retained earnings	Perpetual preferred callable securities	Attributable to equity holders of the parent	Total non-controlling interests	Total equity
124	230	5	301	3,170	688	8,488	2,370	10,858
-	-	-	-	(20)	-	(20)	-	(20)
124	230	5	301	3,150	688	8,468	2,370	10,838
-	-	-	-	1,140	32	1,172	306	1,478



19	-	-	-	-	-	19	1	20
-	-	-	-	8	-	8	-	8
-	-	-	-	(4)	10	6	-	6
19	-	-	-	4	10	33	1	34


-	-	-	160	-	-	160	-	160

-	-	-	-	-	-	33	1	34
-	-	-	-	-	-	(21)	-	(21)
-	-	-	(350)	-	-	(350)	-	(350)
-	-	-	-	-	-	6	-	6
-	-	-	(489)	-	-	(489)	(150)	(639)
1	-	4	-	(40)	-	(35)	10	(25)
-	-	-	-	-	-	(6)	-	(6)
20	-	4	(679)	1,104	42	503	168	671
-	-	-	-	(1,172)	(42)	(1,214)	(169)	(1,383)
-	38	-	-	-	-	38	13	51
-	-	-	-	7	-	40	-	40
-	-	24	-	-	-	-	-	-
-	-	-	-	-	-	-	-	-
-	-	-	-	(13)	(6)	(19)	(445)	(464)
-	-	-	-	815	-	-	-	-
-	-	-	-	-	-	-	20	20
-	38	24	-	(363)	(48)	(1,155)	(581)	(1,736)
144	268	33	(378)	3,891	682	7,816	1,957	9,773

Notes to the consolidated financial statements

For the year ended 31 December 2013

A: Significant accounting policies

A1: Basis of preparation

The Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU. The accounting policies adopted by the Group, unless otherwise stated, have been applied consistently with those applied in the preparation of the Group's 2012 Annual Report and Accounts.

The Group financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments, financial assets and liabilities designated as fair value through the income statement or as available-for-sale, owner-occupied property and investment property. Non-current assets and disposal groups held for sale are stated at the lower of the previous carrying amount and the fair value less costs to sell.

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

The financial statements contained herein do not constitute the Company's statutory accounts for the financial years ended 31 December 2013 and 31 December 2012 within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the financial year ended 31 December 2012 have been reported on by the Company's auditor and delivered to the Registrar of Companies. The statutory accounts for the financial year ended year ended 31 December 2013 will be delivered in due course. The report of the auditor for the financial year ended 31 December 2012 was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Translation of foreign operations

The assets and liabilities of foreign operations are translated from their respective functional currencies into the Group's presentation currency using the year end exchange rates, and their income and expenses using the average exchange rates. Other than in respect of cumulative translation gains and losses up to 1 January 2004, cumulative unrealised gains or losses resulting from translation of functional currencies to the presentation currency are included as a separate component of shareholders' equity. To the extent that these gains and losses are effectively hedged, the cumulative effect of such gains and losses arising on the hedging instruments are also included in that component of shareholders' equity. Upon the disposal of subsidiaries the cumulative amount of exchange differences deferred in shareholders' equity, net of attributable amounts in relation to net investments, is recognised in the income statement. Cumulative translation gains and losses up to 1 January 2004 were reset to zero.

The principal exchange rates used to translate the operating results, assets and liabilities of key foreign business segments to pounds sterling are:
	Year ended 31 December 2013		Year ended 31 December 2012
	Income statement (average rate)	Statement of financial position (closing rate)	Income statement (average rate)	Statement of financial position (closing rate)
Rand	15.0959	17.4284	13.0123	13.7696
US dollars	1.5650	1.6566	1.5850	1.6242
Euro	1.1782	1.2014	1.2326	1.2307

A2: Significant corporate activity and business changes during the period

Acquisitions effective during the year

Life assurance in Nigeria

On 22 February 2012, the Group announced that it had made an offer to acquire a majority stake in Oceanic Life, the life assurance operations of Ecobank Transitional Incorporated. The Group consolidated the financial results of Oceanic Life with effect from 1 January 2013.

General insurance in Nigeria

In December 2013 the Group completed its acquisition of the majority stake in the general insurance business of Oceanic General, the general insurance operations of Ecobank Transitional Incorporated. The balance sheet has been included in the Group consolidated statement of financial position as at 31 December 2013.

Life assurance in Ghana

On 3 June 2013, the Group announced that it would expand its African presence through the acquisition of a majority stake in Provident Life Assurance Company Limited. The Group consolidated the financial results of Provident Life with effect from 12 September 2013.

Platform and distribution business in Uruguay

On 19 November 2012, the Group announced that it had acquired a majority stake in AIVA Holding Group SA, a business platform and distribution business based in Uruguay and spanning the Latin American region. The Group consolidated the financial results with effect from 19 November 2012.

Refer to note G2 for further information on the Group's acquisitions during the year.

The Group is currently progressing the following transactions

Lending in Kenya

On 3 July 2013, the Group announced that it is to enter into a strategic partnership with Faulu Kenya DTM LTD through the acquisition of a controlling stake in the business. The completion of this transaction is subject to the conclusion of the relevant closing conditions.

Lending in Mozambique

On 3 May 2013, the Group announced that Nedbank had entered into an agreement to acquire an initial 36.4% shareholding of Banco Unico, SA, located in Mozambique and to increase the stake to a majority shareholding over time. The completion of this transaction is subject to certain conditions precedent being met.

Skandia Poland

On 12 November 2013, the Group announced that terms have been agreed to sell Skandia Poland, part of Old Mutual Wealth. The transaction is subject to regulatory approvals and is expected to be completed during 2014.

The Group has completed the following intra-Group transfers during 2013

Transfer of Latin American business to Old Mutual South Africa

The Financial Services Board has approved the acquisition of Skandia Europe and Latin America Holdings Limited by Old Mutual South Africa from Old Mutual plc and the transaction was completed on 12 July 2013. This resulted in a remittance of £120 million to Old Mutual plc.

Transfer of Old Mutual Guodian Life Insurance Company Limited (Guodian) to Old Mutual Life Assurance Company (South Africa) Limited (OMLACSA)

Legal ownership of the Guodian business, the Group's Chinese joint venture, was transferred to OMLACSA during the year in order to align legal ownership and management structures. Guodian was previously owned by the Skandia Insurance Company Limited (SICL), which was sold as part of the sale of the Nordic businesses in 2012. The transfer of Guodian from SICL had been subject to regulatory approval. Upon transfer OMLACSA paid consideration of £44 million, which was ultimately remitted to Old Mutual plc. The results of the Guodian business were reported in the Emerging Markets segmental result in both of the years ended 31 December 2012 and 2013.

Financing activities

Repayment of Group debt

On 19 November 2013, the Group repurchased £75 million of its £348 million Tier 1 preferred callable securities and €121 million of its €495 million Upper Tier 2 preferred callable securities via a Modified Dutch Auction tender. At 31 December 2013, £273 million Tier 1 and €374 million Upper Tier 2 preferred callable securities remained outstanding. For the year ended 31 December 2013, the Group recognised a loss of £21 million directly in equity, as these securities are classified as equity instruments for accounting purposes.

A total $14 million of the outstanding $16 million secured senior debt was repaid in two tranches on 1 November 2013 and 15 December 2013.

New debt issued by Nedbank

During the year, Nedbank issued R3.0 billion new-style, fully loss-absorbent, Basel lll compliant, Tier 2 subordinated-debt capital to replace the R2.1 billion of Basel II tier 2 capital that matured in September 2013 and December 2013.

Repatriation of Old Mutual Bermuda capital

In July 2013, Old Mutual Bermuda received formal written approval from the Bermuda Monitory Authority (BMA) to repatriate $450 million via cancellation of OM Group (UK) Limited loan notes. In December 2013, the BMA approved an additional repatriation of $100 million via cancellation of further loan notes.

Notes to the consolidated financial statements

For the year ended 31 December 2013

A: Significant accounting policies continued

(a) Loans and advances

Provisions for impairment of loans and advances

The majority of loans and advances are in respect of Nedbank, which assesses its loan portfolios for impairment at each financial reporting date. Nedbank actively manages its exposure to loans and advances through robust credit approval processes. The credit loss ratio at year ended 31 December 2013 was 1.06% (2012: 1.05%). The impairment for performing loans is calculated on a portfolio basis, based on historical loss experience, adjusted for national and industry specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These include early arrears and other indicators of potential default, such as changes in macro-economic conditions and legislation affecting credit recovery. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period.

For portfolios which comprise large numbers of small homogenous assets with similar risk characteristics where credit scoring techniques are generally used, statistical techniques are used to calculate impairment allowances on the portfolio, based on historical recovery rates and assumed emergence periods. There are a number of models in use, each tailored to a product, line of business or client category. Judgement and knowledge are needed in selecting the statistical methods to use when the models are developed or revised.

For wholesale (larger) exposures impairment allowances are calculated on an individual basis and all relevant considerations that have a bearing on the expected future cash flows are taken into account. The level of impairment allowance is the difference between the value of the discounted expected future cash flows and its carrying amount. Subjective judgements are made in the calculations of future cash flows and change with time as new information becomes available or as strategies evolve, resulting in frequent revisions to the impairment provision as individual decisions are taken.

Further detail is provided in note E3 in the Annual Report and Accounts.

(b) Policyholder liabilities

Emerging Markets discretionary reserves

Technical provisions in South Africa are derived as the aggregate of:

§ Best estimate liabilities, with assumptions allowing for the best estimate of future experience and a market-consistent valuation of financial options and guarantees

§ Compulsory margins, prescribed in the South African professional actuarial guidance note (SAP 104) as explicit changes to actuarial assumptions that increase the level of technical provisions held, and

§ Discretionary margins, permitted by SAP 104, to allow for the uncertainty inherent in estimates of future experience after considering available options of managing that experience over time, or to defer the release of profits consistent with policy design or company practice

Discretionary margins are held as either implicit or explicit margins. Explicit discretionary margins are derived as conscious changes to assumptions used to project future experience to increase technical provisions. Implicit discretionary margins arise where the method used to calculate overall technical provisions results in liabilities that are greater than the sum of best estimate liabilities and compulsory margins.

Explicit discretionary margins of £489 million (1.9% of total technical provisions) were held at 31 December 2013. This consisted largely of:

§ Margins held for Mass Foundation Cluster protection business, which allow for the uncertainty related to the future progression of the AIDS pandemic in South Africa, as well as future lapse experience and future investment returns, and to ensure that profit is released appropriately over the term of the policies

§ Margins to allow for the uncertainty inherent in the assumptions used to value financial options and guarantees, implied volatility assumptions in particular, which are difficult to hedge due to the short term nature of the equity option market in South Africa

§ Margins on non-profit annuities, due to the inability to fully match assets to liabilities as a result of the limited availability of long-dated bonds, and to provide for longevity risk, and

§ A margin set up in 2013 to allow for the uncertainty inherent in future economic assumptions used to calculate, mainly protection product liabilities, in the Retail Affluent business. Although interest rate hedging is used to manage interest rate risk on these products, the volatility of bond yields in South Africa means that it is difficult to maintain appropriate hedging positions without incurring significant trading costs. The discretionary margin therefore caters for the residual uncertainty present after allowing for the hedge programme that is in place.

Emerging Markets Financial Soundness Valuation discount rate

The calculation of the Group's South African life assurance contract liabilities is sensitive to the discount rate used to value the liabilities. The methodology applied by the Group requires discount rates to be set according to the South African professional guidance note (SAP 104). In line with these principles, the reference rate is selected as the Bond Exchange of South Africa (BESA) par bond 10-year yield.

The reference rate was relatively volatile over 2013, ranging from 6.2% to 8.5% during the year ended 31 December 2013 (2012: 6.9% to 8.2%). At 31 December 2013 the reference discount rate was 8.1% (31 December 2012: 6.9%). The volatile interest rate environment had a much smaller impact on the operating profit for the South African life assurance businesses in 2013, given the management actions taken over 2013 to mitigate these impacts. These included the continuance of the hedging program put in place during the second half of 2012, the establishment of discretionary margins to allow for the uncertainty in respect of interest rate volatility in Retail Affluent, and changes to the annual premium and cover increase policy on Mass Foundation Cluster funeral products.

The Group estimates that a 1% reduction in the reference discount rate will result in an increase in policyholder liabilities of £6 million (2012: £39 million), allowing for the impact of the hedging program. The 2013 impact is significantly lower than 2012 mainly, due to the management actions taken to reduce the impact of changing discount rates on operating profit, as well as the depreciation of the rand which reduced the impact in sterling terms.

Further disclosure of the policyholder sensitivity to interest rates is provided in note E8(g) in the Annual Report and Accounts.

Old Mutual Bermuda guarantees

Since the closure of Old Mutual Bermuda to new business in March 2009, management's key priorities have been to de-risk the business, manage the risk and solvency position and preserve shareholder value. The run-off of the book and hedging of the guarantees significantly reduces the Group's risk exposure. The active contracts for which reserves are held are deferred and fixed index annuity investments and variable annuity products, which include guaranteed minimum accumulation benefits (GMAB) and guaranteed minimum death benefits (GMDB). The key risk to the Group relates to the 120% of the initial deposit (or, if elected, the highest anniversary account value) on the 10th anniversary which will commence in 2017. The Group has implemented a hedging strategy to protect against markets rising above the 120% guarantee and then subsequently falling, which would reset some guarantees above 120%, with account values at a lower level. This reduces the uncertainty and volatility of capital exposure and cash flows arising from the highest anniversary value guarantees. The remaining 120% of premium guarantee, relating to equity and foreign exchange downside risks, for the 10-year obligations are being managed by the dynamic hedge programme. There are no significant risks to the Group associated with GMDB and management continues to operate strong oversight over the business.

During 2013 the business continued to experience high rates of surrender activity which can be attributed to the variable annuity UGO (Universal Guarantee Option) GMAB policyholders passing through a top-up process on the fifth anniversary following product inception. This process was completed in 2013. The reduced size of the book has meant that the associated GMAB reserves have reduced from $229 million at 31 December 2012 to $84 million at 31 December 2013.

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in other comprehensive income, in which case it is recognised in other comprehensive income.

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

(d) Consolidation set of standards

The Group has applied the following key judgements in the application of the requirements of the consolidation set of standards (IFRS 10 'Consolidated Financial Statements' and IFRS 11 'Joint Arrangements'):

Consolidation of investment funds and securitisation vehicles

The Group acts as a fund manager to a number of investment funds. In determining whether the Group controls such a fund, it will focus on an assessment of the aggregate economic interests of the Group (comprising any carried interests and expected management fees) and the investor's rights to remove the fund manager. The Group assesses, on an annual basis, such interests to determine if the fund will be consolidated. See note G3(b) in the Annual Report and Accounts for disclosures in respect of the investment funds in which the Group has an interest.

The Group has sponsored certain asset backed financing (securitisation) vehicles under its securitisation programme which are run according to pre-determined criteria that are part of the initial design of the vehicles. The Group is exposed to variability of returns from the vehicles through its holding of junior debt securities in the vehicles. It has concluded that it controls these vehicles and therefore has consolidated these asset backed financing vehicles.

Structured entities

The Group is required to make judgements on what constitutes a structured entity. Accounting standards define a structured entity as an entity designed so that its activities are not governed by way of voting rights. In assessing whether the Group has power over such investees in which it has an interest, the Group considers factors such as the purpose and design of the investee, its practical ability to direct the relevant activities of the investee, the nature of its relationship with the investee and the size of its exposure to the variability of returns of the investee. The Group has evaluated all exposures and has concluded that all investments in investment funds and securitisation vehicles represent investments in structured entities.

Notes to the consolidated financial statements

For the year ended 31 December 2013

B: Segment information

B1: Basis of segmentation

The Group's segmental results are analysed and reported on a basis consistent with the way that management and the Board of directors assesses performance and allocates resources. Information is presented to the Board on a consolidated basis in pounds sterling (the presentation currency) and in the functional currency of each business.

Adjusted operating profit 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, depending on the business line, this typically includes net client cash flows, funds under management, gross earned premiums, underwriting results, net interest income and non-interest revenue and credit losses.

A reconciliation between the segment revenues and expenses and the Group's revenues and expenses is shown in note B3. Consistent with internal reporting, assets, liabilities, revenues and expenses that are not directly attributable to a particular segment are allocated between segments where appropriate and where there is a reasonable basis for doing so. The Group accounts for inter-segment revenues and transfers as if the transactions were with third parties at current market prices. Given the nature of the operations, there are no major trading activities between the segments.

The revenues generated in each reported segment can be seen in the analysis of profits and losses in note B3. The segmental information in notes B3 and B4, reflects the adjusted and IFRS measures of profit and loss and the assets and liabilities for each operating segment as provided to management and the Board of directors. There are no differences between the measurement of the assets and liabilities reflected in the primary statements and that reported for the segments.

There are four primary business activities from which the Group generates revenues. These are life assurance (premium income), asset management business (fee and commission income), banking (banking interest receivable) and general insurance (premium income). The principal lines of business from which each operating segment derives its revenues are as follows:

Core operations

Emerging Markets - life assurance and asset management

Old Mutual Wealth - life assurance and asset management

Property & Casualty - general insurance

Nedbank - banking and asset management

US Asset Management - asset management

Non-core operations

Old Mutual Bermuda - life assurance

Segment presentation

In the 2012 Annual Report and Accounts, the Group announced that, with effect from 1 January 2013, all of the Group's Property & Casualty activities would be reported as a single segment. Consequently, the Mutual & Federal (M&F) segment has been renamed as Property & Casualty. This segment includes M&F, 100% of iWyze, previously reported as a 50% joint venture between Emerging Markets and M&F, and the general insurance businesses in Namibia and Botswana. The name change has been applied to all reporting periods. Comparative information for the year ended 31 December 2012 has been restated accordingly.

In addition to the above, the Long-Term Savings aggregation has been removed from the adjusted operating profit statement, segmental information and in the statement of financial position in notes B3 and B4 of the annual financial statements. The Long-Term Savings segment was a sub total of the Emerging Markets and Old Mutual Wealth segments which the Group previously elected to disclose. This presentational change has been applied to all reporting periods.

The Group's reported segments are now Emerging Markets, Old Mutual Wealth, Property & Casualty, Nedbank and US Asset Management (USAM). The Other segment includes Group head office. Old Mutual Bermuda is the principal component of the non-core operations. For all reporting periods, Old Mutual Bermuda is classified as a continuing operation in the IFRS income statement, but as non-core in determining the Group's adjusted operating profit.

The Group continues to incur costs related to the sale of its Nordic business in 2012. These costs largely relate to the transition of IT information and support services that were previously provided by the Nordic business to the wider Group, back to the Group. These costs are included in the expenses related to the discontinued operations in the annual financial statements for the year ended 31 December 2013. Further information on the results of discontinued operations is provided in note H1. The Nordic business has been classified as a discontinued operation in the IFRS consolidated income statement and its results as non-core in determining the Group's adjusted operating profit.

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

B2: Gross earned premiums and deposits to investment contracts
				£m
Year ended 31 December 2013	Emerging Markets	Old Mutual Wealth	Property & Casualty	Total
Life assurance - insurance contracts	1,616	336	-	1,952
Life assurance - investment contracts with discretionary participation features	1,025	-	-	1,025
General insurance	-	-	724	724
Gross earned premiums	2,641	336	724	3,701
Life assurance - other investment contracts recognised as deposits	2,015	5,889	-	7,904

				£m
Year ended 31 December 2012	Emerging Markets	Old Mutual Wealth	Property & Casualty	Total
Life assurance - insurance contracts	1,673	362	-	2,035
Life assurance - investment contracts with discretionary participation features	970	-	-	970
General insurance	-	-	720	720
Gross earned premiums	2,643	362	720	3,725
Life assurance - other investment contracts recognised as deposits	2,022	5,699	-	7,721

Notes to the consolidated financial statements
For the year ended 31 December 2013

B: Segment information continued
B3: Adjusted operating profit statement - segment information for the year ended 31 December 2013


		Emerging Markets	Old Mutual Wealth	Property & Casualty
Revenue
Gross earned premiums	B2	2,641	336	724
Outward reinsurance		(80)	(87)	(150)
Net earned premiums		2,561	249	574
Investment return (non-banking)		5,153	4,159	31
Banking interest and similar income		-	-	-
Banking trading, investment and similar income		-	-	-
Fee and commission income, and income from service activities		527	1,173	25
Other income		39	21	-
Inter-segment revenues		61	1	14
Total revenue		8,341	5,603	644
Expenses
Claims and benefits (including change in insurance contract provisions)		(4,505)	(347)	(556)
Reinsurance recoveries		79	45	122
Net claims and benefits incurred		(4,426)	(302)	(434)
Change in investment contract liabilities		(1,952)	(3,921)	-
Losses on loans and advances		-	-	-
Finance costs (including interest and similar expenses)		-	-	-
Banking interest payable and similar expenses		-	-	-
Fee and commission expenses, and other acquisition costs		(228)	(622)	(113)
Change in third-party interest in consolidated funds		-	-	-
Other operating and administrative expenses		(1,088)	(408)	(77)
Income tax attributable to policyholder returns		(62)	(112)	-
Inter-segment expenses		(6)	(21)	(19)
Total expenses		(7,762)	(5,386)	(643)
Share of associated undertakings' and joint ventures' profit after tax		11	-	3
Loss on disposal of subsidiaries, associated undertakings and strategic investments	C1(c)	-	-	-
Adjusted operating profit/(loss) before tax and non-controlling interests		590	217	4
Income tax expense	D1	(155)	(40)	-
Non-controlling interests		(11)	-	(5)
Adjusted operating profit/(loss) after tax and non-controlling interests		424	177	(1)
Adjusting items net of tax and non-controlling interests	C1(a)	(74)	(139)	(10)
Profit/(loss) after tax from continuing operations		350	38	(11)
Profit from discontinued operations after tax	H1(a)	-	-	-
Profit/(loss) after tax attributable to equity holders of the parent		350	38	(11)

¹Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the year ended 31 December 2013 was £32 million. Non-core operations also include a net gain of £3 million divestment cost and additional proceeds received in relation to the Nordic business sold in 2012. Further information on discontinued operations is provided in note H1.

Of the total revenues, excluding intercompany revenues, £4,947 million was generated in the UK (2012: £4,318), £864 million in the rest of Europe (2012: £1,196 million), £13,446 million in Southern Africa (2012: £13,966 million), £439 million in United States (2012: £529 million) and £114 million relates to other operating segments (2012: £83 million).







							£m
Nedbank	USAM	Other	Consolidation adjustments	Adjusted operating profit	Adjusting items (note C1)	Discontinued and non-core operations¹	IFRS Income statement

-	-	-	-	3,701	-	-	3,701
-	-	-	-	(317)	-	-	(317)
-	-	-	-	3,384	-	-	3,384
-	-	68	634	10,045	(94)	35	9,986
3,050	-	-	-	3,050	-	-	3,050
195	-	-	-	195	-	-	195
1,048	381	-	8	3,162	(67)	-	3,095
31	3	(2)	2	94	-	6	100
11	-	8	(106)	(11)	-	11	-
4,335	384	74	538	19,919	(161)	52	19,810

-	-	-	-	(5,408)	-	(2)	(5,410)
-	-	-	-	246	-	-	246
-	-	-	-	(5,162)	-	(2)	(5,164)
-	-	-	-	(5,873)	-	-	(5,873)
(368)	-	-	-	(368)	-	-	(368)
-	-	(92)	-	(92)	11	-	(81)
(1,616)	-	-	-	(1,616)	-	-	(1,616)
(12)	(4)	-	(70)	(1,049)	78	(5)	(976)
-	-	-	(564)	(564)	-	-	(564)
(1,495)	(274)	(78)	(10)	(3,430)	(210)	(13)	(3,653)
-	-	-	-	(174)	174	-	-
(49)	-	(11)	106	-	-	-	-
(3,540)	(278)	(181)	(538)	(18,328)	53	(20)	(18,295)
2	5	-	-	21	-	-	21
-	-	-	-	-	(4)	-	(4)
797	111	(107)	-	1,612	(112)	32	1,532
(200)	(27)	(2)	-	(424)	(128)	-	(552)
(282)	-	-	-	(298)	20	-	(278)
315	84	(109)	-	890	(220)	32	702
12	(30)	21	-	(220)	220	-	-
327	54	(88)	-	670	-	32	702
-	-	-	-	-	-	3	3
327	54	(88)	-	670	-	35	705

Notes to the consolidated financial statements
For the year ended 31 December 2013

B: Segment information continued
B3: Adjusted operating profit statement - segment information for the year ended 31 December 2012 Restated¹


		Emerging Markets	Old Mutual Wealth	Property & Casualty
Revenue
Gross earned premiums	B2	2,643	362	720
Outward reinsurance		(82)	(87)	(153)
Net earned premiums		2,561	275	567
Investment return (non-banking)		5,288	3,806	44
Banking interest and similar income		-	-	-
Banking trading, investment and similar income		-	-	-
Fee and commission income, and income from service activities		440	1,199	26
Other income		61	26	1
Inter-segment revenues		83	3	18
Total revenue		8,433	5,309	656
Expenses
Claims and benefits (including change in insurance contract provisions)		(4,813)	(387)	(485)
Reinsurance recoveries		89	59	73
Net claims and benefits incurred		(4,724)	(328)	(412)
Change in investment contract liabilities		(1,756)	(3,605)	-
Losses on loans and advances		-	-	-
Finance costs (including interest and similar expenses)		-	-	-
Banking interest payable and similar expenses		-	-	-
Fee and commission expenses, and other acquisition costs		(227)	(677)	(113)
Change in third-party interest in consolidated funds		-	-	-
Other operating and administrative expenses		(1,066)	(446)	(82)
Income tax attributable to policyholder returns		(49)	(26)	-
Inter-segment expenses		(20)	(32)	(14)
Total expenses		(7,842)	(5,114)	(621)
Share of associated undertakings' and joint ventures' profit after tax		20	-	2
Loss on disposal of subsidiaries, associated undertakings and strategic investments	C1(c)	-	-	-
Adjusted operating profit/(loss) before tax and non-controlling interests		611	195	37
Income tax expense	D1	(164)	(43)	(9)
Non-controlling interests		(9)	-	(8)
Adjusted operating profit/(loss) after tax and non-controlling interests		438	152	20
Adjusting items net of tax and non-controlling interests	C1(a)	(153)	(134)	(15)
Profit/(loss) after tax from continuing operations		285	18	5
Profit from discontinued operations after tax	H1(a)	-	-	-
Profit/(loss) after tax attributable to equity holders of the parent		285	18	5

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

²Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the year ended 31 December 2012 was £161 million. It also includes £4 million of inter-segment revenue and the after tax results of the Group's discontinued operations. Further information on discontinued operations is provided in note H1.







							£m
Nedbank	USAM	Other	Consolidation adjustments	Adjusted operating profit	Adjusting items (note C1)	Discontinued and non-core operations²	IFRS Income statement

-	-	-	-	3,725	-	-	3,725
-	-	-	-	(322)	-	-	(322)
-	-	-	-	3,403	-	-	3,403
-	1	75	722	9,936	(191)	135	9,880
3,431	-	-	-	3,431	-	-	3,431
214	-	-	-	214	-	-	214
1,084	360	-	6	3,115	(76)	-	3,039
23	1	-	(1)	111	-	14	125
21	-	7	(156)	(24)	-	24	-
4,773	362	82	571	20,186	(267)	173	20,092

-	-	-	-	(5,685)	-	73	(5,612)
-	-	-	-	221	-	-	221
-	-	-	-	(5,464)	-	73	(5,391)
-	-	-	-	(5,361)	-	-	(5,361)
(400)	-	-	-	(400)	-	-	(400)
-	-	(130)	-	(130)	(84)	-	(214)
(1,886)	-	-	-	(1,886)	(1)	-	(1,887)
-	(5)	-	(67)	(1,089)	88	(63)	(1,064)
-	-	-	(651)	(651)	-	-	(651)
(1,604)	(276)	(67)	(9)	(3,550)	(147)	(18)	(3,715)
-	-	-	-	(75)	75	-	-
(58)	-	(32)	156	-	-	-	-
(3,948)	(281)	(229)	(571)	(18,606)	(69)	(8)	(18,683)
-	10	-	-	32	-	-	32
-	-	-	-	-	(56)	-	(56)
825	91	(147)	-	1,612	(392)	165	1,385
(221)	(15)	12	-	(440)	(31)	-	(471)
(287)	-	(27)	-	(331)	25	-	(306)
317	76	(162)	-	841	(398)	165	608
16	(10)	(102)	-	(398)	398	-	-
333	66	(264)	-	443	-	165	608
-	-	-	-	-	-	564	564
333	66	(264)	-	443	-	729	1,172

Notes to the consolidated financial statements
For the year ended 31 December 2013

B: Segment information continued
B4: Statement of financial position - segment information at 31 December 2013

	Notes	Emerging Markets	Old Mutual Wealth	Property & Casualty
Assets
Goodwill and other intangible assets		123	1,461	11
Mandatory reserve deposits with central banks		-	-	-
Property, plant and equipment		281	12	22
Investment property		1,443	-	-
Deferred tax assets		88	20	16
Investments in associated undertakings and joint ventures		73	-	3
Deferred acquisition costs		91	1,094	16
Reinsurers' share of policyholder liabilities		61	1,690	113
Loans and advances		58	183	-
Investments and securities		28,492	49,868	297
Current tax receivable		9	84	3
Trade, other receivables and other assets		617	426	96
Derivative financial instruments		349	-	-
Cash and cash equivalents		611	687	91
Non-current assets held for sale		-	5	-
Inter-segment assets		610	93	25
Total assets		32,906	55,623	693
Liabilities
Life assurance policyholder liabilities		28,043	51,327	-
General insurance liabilities		-	-	332
Third-party interests in consolidated funds		-	-	-
Borrowed funds	E1	172	-	-
Provisions		125	32	8
Deferred revenue		7	610	11
Deferred tax liabilities		169	254	13
Current tax payable		125	52	-
Trade, other payables and other liabilities		1,821	786	126
Amounts owed to bank depositors		280	7	-
Derivative financial instruments		466	-	-
Non-current liabilities held for sale		-	-	-
Inter-segment liabilities		197	312	-
Total liabilities		31,405	53,380	490
Net assets		1,501	2,243	203
Equity
Equity attributable to equity holders of the parent		1,471	2,243	183
Non-controlling interests		30	-	20
Ordinary shares	F1(b)	30	-	20
Preferred securities	F1(b)	-	-	-

Total equity		1,501	2,243	203

The net assets of Emerging Markets are stated after eliminating investments in Group equity and debt instruments of £302 million (2012: £364 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.






					£m
Nedbank	USAM	Other	Consolidation adjustments	Non-core operations	Total

446	794	-	-	-	2,835
759	-	-	-	-	759
391	15	1	-	-	722
11	-	-	357	-	1,811
11	167	-	-	1	303
63	19	10	-	-	168
-	10	-	-	-	1,211
11	-	-	-	-	1,875
33,145	-	-	-	-	33,386
5,387	33	378	3,502	460	88,417
32	-	-	-	-	128
585	113	43	351	352	2,583
791	-	62	49	8	1,259
1,196	117	457	1,667	43	4,869
-	-	-	-	-	5
77	21	976	(2,083)	281	-
42,905	1,289	1,927	3,843	1,145	140,331

852	-	-	-	919	81,141
-	-	-	-	-	332
-	-	-	5,478	-	5,478
1,813	2	642	-	-	2,629
40	2	29	-	-	236
-	-	-	-	-	628
34	-	21	-	-	491
17	3	40	-	-	237
832	248	40	412	9	4,274
34,083	-	-	-	-	34,370
974	-	-	36	2	1,478
-	-	-	-	-	-
567	487	520	(2,083)	-	-
39,212	742	1,292	3,843	930	131,294
3,693	547	635	-	215	9,037

1,976	547	635	-	215	7,270
1,717	-	-	-	-	1,767
1,452	-	-	-	-	1,502
265	-	-	-	-	265

3,693	547	635	-	215	9,037

Notes to the consolidated financial statements
For the year ended 31 December 2013

B: Segment information continued
B4: Statement of financial position - segment information at 31 December 2012 Restated¹

	Notes	Emerging Markets	Old Mutual Wealth	Property & Casualty
Assets
Goodwill and other intangible assets		98	1,594	14
Mandatory reserve deposits with central banks		-	-	-
Property, plant and equipment		336	13	20
Investment property		1,588	-	-
Deferred tax assets		82	44	20
Investments in associated undertakings and joint ventures		57	-	2
Deferred acquisition costs		103	1,159	18
Reinsurers' share of policyholder liabilities		55	1,236	100
Loans and advances		142	180	-
Investments and securities		31,157	45,402	397
Current tax receivable		16	64	5
Trade, other receivables and other assets		714	333	92
Derivative financial instruments		612	-	-
Cash and cash equivalents		816	576	109
Non-current assets held for sale		-	5	-
Inter-segment assets		562	101	43
Total assets		36,338	50,707	820
Liabilities
Life assurance policyholder liabilities		31,124	46,455	-
General insurance liabilities		-	-	346
Third-party interests in consolidated funds		-	-	-
Borrowed funds	E1	218	-	-
Provisions		120	54	11
Deferred revenue		11	667	10
Deferred tax liabilities		130	189	21
Current tax payable		198	39	-
Trade, other payables and other liabilities		2,238	669	146
Amounts owed to bank depositors		86	-	-
Derivative financial instruments		377	-	-
Non-current liabilities held for sale		-	-	-
Inter-segment liabilities		216	587	2
Total liabilities		34,718	48,660	536
Net assets		1,620	2,047	284
Equity
Equity attributable to equity holders of the parent		1,606	2,047	261
Non-controlling interests		14	-	23
Ordinary shares	F1(b)	14	-	23
Preferred securities	F1(b)	-	-	-

Total equity		1,620	2,047	284

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.






					£m
Nedbank	USAM	Other	Consolidation adjustments	Non-core operations	Total

534	816	-	-	-	3,056
921	-	-	-	-	921
465	12	1	-	-	847
15	-	-	344	-	1,947
34	162	2	-	1	345
49	18	26	-	-	152
-	8	-	-	-	1,288
15	-	-	-	-	1,406
38,173	-	-	-	-	38,495
6,303	37	368	3,897	952	88,513
18	-	-	-	-	103
733	105	62	372	595	3,006
1,003	-	97	50	18	1,780
1,049	115	379	1,892	125	5,061
37	-	-	-	-	42
111	21	1,366	(2,877)	673	-
49,460	1,294	2,301	3,678	2,364	146,962

907	-	-	-	1,702	80,188
-	-	-	-	-	346
-	-	-	6,116	-	6,116
2,163	10	659	-	-	3,050
49	1	30	-	-	265
1	-	-	-	-	689
40	-	24	-	-	404
9	6	34	-	1	287
1,122	193	80	400	92	4,940
39,413	-	-	-	-	39,499
977	-	8	39	1	1,402
3	-	-	-	-	3
596	554	922	(2,877)	-	-
45,280	764	1,757	3,678	1,796	137,189
4,180	530	544	-	568	9,773

2,283	507	544	-	568	7,816
1,897	23	-	-	-	1,957
1,624	23	-	-	-	1,684
273	-	-	-	-	273

4,180	530	544	-	568	9,773

Notes to the consolidated financial statements

For the year ended 31 December 2013

C: Other key performance information

C1: Operating profit adjusting items

(a) Summary of adjusting items for determination of AOP

In determining the AOP of the Group for core operations, certain adjustments are made to profit before tax to reflect the directors' view of the underlying long-term performance of the Group. The following table shows an analysis of those adjustments from AOP to profit before and after tax.

		£m
	Notes	Year ended 31 December 2013	Year ended 31 December 2012
Income/(expense)
Goodwill impairment and impact of acquisition accounting	C1(b)	(141)	(123)
Loss on disposal of subsidiaries, associated undertakings and strategic investments	C1(c)	(4)	(56)
Short-term fluctuations in investment return	C1(d)	6	(78)
Investment return adjustment for Group equity and debt instruments held in life funds	C1(e)	(100)	(113)
Dividends declared to holders of perpetual preferred callable securities	C1(f)	42	42
US Asset Management equity plans	C1(g)	(38)	(13)
Credit-related fair value losses on Group debt instruments	C1(h)	(31)	(126)
Restructuring costs	C1(i)	(20)	-
Total adjusting items		(286)	(467)
Tax on adjusting items	D1(d)	46	44
Non-controlling interest in adjusting items		20	25
Total adjusting items after tax and non-controlling interests		(220)	(398)

(b) Goodwill impairment and impact of acquisition accounting

When applying acquisition accounting, deferred acquisition costs and deferred revenues existing at the point of acquisition are not recognised under IFRS. These are reversed 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 AOP, the Group recognises deferred revenue and acquisition costs and deferred revenue in relation to policies sold by acquired businesses pre-acquisition. The Group excludes the impairment of goodwill and the amortisation and impairment of acquired other intangibles and acquired PVIF and the movements in certain acquisition date provisions. Costs incurred on successful acquisitions are also excluded from AOP. If the intangible assets recognised as a result of a business combination are subsequently impaired, this is excluded from AOP. The effect of these adjustments to determine AOP are summarised below:

				£m
Year ended 31 December 2013	Emerging Markets	Old Mutual Wealth	USAM	Total
Amortisation of acquired PVIF	-	(76)	-	(76)
Amortisation of acquired deferred costs and revenue	-	11	-	11
Amortisation of other acquired intangible assets	(2)	(46)	-	(48)
Impairment of goodwill and other intangible assets	(8)	(20)	-	(28)
	(10)	(131)	-	(141)


				£m
Year ended 31 December 2012	Emerging Markets	Old Mutual Wealth	USAM	Total
Amortisation of acquired PVIF	-	(84)	-	(84)
Amortisation of acquired deferred costs and revenue	-	12	-	12
Amortisation of other acquired intangible assets	(2)	(48)	(1)	(51)
Impairment of goodwill and other intangible assets	-	-	-	-
	(2)	(120)	(1)	(123)

Loss on disposal of subsidiaries, associated undertakings and strategic investments is analysed below:

		£m
	Year ended 31 December 2013	Year ended 31 December 2012
USAM	(4)	(16)
Emerging Markets	-	(15)
Old Mutual Wealth	-	(25)
Loss on disposal of subsidiaries, associated undertakings and strategic investments	(4)	(56)

USAM

On 2 January 2013, USAM completed the sale of five of its affiliates incurring a loss of £1 million.

On 11 October 2013, USAM committed to a plan to cease the operations of Echo Point. The incremental cost of £3 million associated with discontinuing the entity was recognised in full during October 2013.

On 13 April 2012, USAM disposed of Old Mutual Capital, Inc, a subsidiary, at a profit of £12 million. On 15 May 2012, USAM disposed of Dwight Asset Management Company LLC, a fixed income affiliate, at a profit of £7 million. On 11 October 2012, the Group announced that it had finalised agreements to sell five USAM affiliates at a loss of £32 million. A £3 million loss was also recognised during the year ended 31 December 2012 in relation to disposals of other USAM subsidiaries in previous periods.

Emerging Markets

On 20 November 2012, the Emerging Markets segment recognised a profit of £3 million on the acquisition of a strategic investment Curo Fund Services (Pty) Ltd. Also during the year ended 31 December 2012, the Group incurred expenses of £18 million as initial costs regarding Zimbabwean Indigenisation and Black Economic Empowerment Schemes. These costs were directly related to the acquisition of the Zimbabwean business.

Old Mutual Wealth

On 31 August 2012, Old Mutual Wealth completed the sale of its Finnish branch at a loss of £27 million. A profit of £2 million was recognised on the sale of Skandia Services AG (Switzerland) on 30 June 2012.

(d) Short-term fluctuations in investment return

Profit before tax, as disclosed in the consolidated IFRS income statement, includes actual investment returns earned on the shareholder assets of the Group's life assurance and general insurance businesses. AOP is stated after recalculating shareholder asset investment returns based on a long-term investment return rate. The difference between the actual and the long-term investment returns is referred to as the short-term fluctuation in investment return.

Long-term rates of return are based on achieved rates of return appropriate to the underlying asset base, adjusted for current inflation expectations, default assumptions, costs of investment management and consensus economic investment forecasts. The underlying rates are principally derived with reference to 10-year government bond rates, cash and money market rates and an explicit equity risk premium for South African businesses. The rates set out below reflect the apportionment of underlying investments in cash deposits, money market instruments and equity assets. Long-term rates of return are reviewed frequently by the Board, usually annually, for appropriateness. The review of the long-term rates of return seeks to ensure that the returns credited to 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 Old Mutual Wealth, the return is applied to average investible assets. For Property & Casualty, the return is an average value of investible assets supporting shareholders' funds and insurance liabilities, adjusted for net fund flows.

		%
Long-term investment rates	Year ended 31 December 2013	Year ended 31 December 2012
Emerging Markets	8.0	9.0
Old Mutual Wealth	1.0	1.5 - 2.0
Property & Casualty	7.4	8.6

Notes to the consolidated financial statements

For the year ended 31 December 2013

C: Other key performance information continued

C1: Operating profit adjusting items continued

(d) Short-term fluctuations in investment return continued

Analysis of short-term fluctuations in investment return
	£m
Year ended 31 December 2013	Emerging Markets	Old Mutual Wealth¹	Property & Casualty	Other	Total
Actual shareholder investment return	135	22	25	34	216
Less: Long-term investment return	106	30	31	43	210
Short-term fluctuations in investment return	29	(8)	(6)	(9)	6

	£m
Year ended 31 December 2012	Emerging Markets	Old Mutual Wealth¹	Property & Casualty	Other	Total
Actual shareholder investment return	81	65	34	34	214
Less: Long-term investment return	124	67	47	54	292
Short-term fluctuations in investment return	(43)	(2)	(13)	(20)	(78)

¹Old Mutual Wealth long-term investment return includes £25 million (2012: £59 million) transitional adjustments to restate the effects of policyholder tax in arriving at AOP.

(e) Investment return adjustment for Group equity and debt instruments held in policyholder funds

AOP includes investment returns on policyholder investments in Group equity and debt instruments held by the Group's life funds. These include investments in the Company's ordinary shares and the subordinated liabilities and ordinary shares issued by Nedbank. These investment returns are eliminated within the consolidated income statement in arriving at profit before tax in the IFRS income statement, but are included in adjusted operating profit. During the year ended 31 December 2013, the investment return adjustment increased AOP by £100 million (2012: increase of £113 million).

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

Dividends declared to the holders of the Group's perpetual preferred callable securities on an adjusted operating profit basis were £42 million for the year ended 31 December 2013 (2012: £42 million). These are recognised in finance costs on an accruals basis for the purpose of determining adjusted operating profit. In accordance with IFRS the total cash distribution of £47 million (2012: £42 million) is recognised directly in equity. This distribution included £5 million accrued interest paid in respect of securities accepted for repurchase.

(g) US Asset Management equity plans

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

The Group has issued put options in equities in the affiliates to senior employees as part of its US affiliate incentive schemes. The impact of revaluing these instruments is recognised in accordance with IFRS, but excluded from AOP. At 31 December 2013, these instruments were revalued, the impact of which was a loss of £38 million (2012: loss of £13 million).

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

The widening of credit spread is related to the Group's debt instruments causes the market value of these instruments to decrease, resulting in gains being recognised in the consolidated income statement. Conversely, if the credit spread narrows and the market value of debt instruments rises then losses are recognised in the consolidated income statement. In the directors' view, such movements are not reflective of the underlying performance of the Group and will reverse over time and they have therefore been excluded from AOP. For the year ended 31 December 2013 a net loss of £31 million was recognised (2012: loss of £55 million).

On 1 August 2012, the Group redeemed £388 million of the £500 million senior bond due in 2016 at a cash consideration of £459 million. The £71 million excess over the nominal value reflected the market value of the instrument prior to redemption.

(i) Old Mutual Wealth restructuring expenditure

The Old Mutual Wealth business embarked on a significant change project to fundamentally restructure the way in which its UK platform business operates. Over the next two to three years, it will migrate certain elements of service provision to International Financial Data Services (IFDS). Costs related to decommissioning of existing technology and service provision and the migration of service to IFDS will be excluded from AOP.

These costs will comprise payments to IFDS and directly attributable internal project costs and totalled £20 million in 2013.

C2: Earnings and earnings per share

The Group calculates earnings per share (EPS) on several different bases. IFRS requires the calculation of basic and diluted EPS. Adjusted operating EPS reflects earnings per share consistent with the Group's alternative profit measure. JSE Limited (JSE) Listing Requirements also require the Group to calculate headline EPS. The Group's EPS on these different bases are summarised below:

				Pence
	Source of guidance	Notes	Year ended 31 December 2013	Year ended 31 December 2012 Restated
Basic earnings per share¹	IFRS	C2(a)	15.0	24.9
Diluted basic earnings per share¹	IFRS	C2(b)	13.9	23.1
Adjusted operating earnings per share¹	Group policy	C2(c)	18.4	17.5
Headline earnings per share (Gross of tax)²	JSE Listing Requirements	C2(d)	15.6	13.5
Headline earnings per share (Net of tax)²	JSE Listing Requirements	C2(d)	15.2	13.8
Diluted headline earnings per share (Gross of tax)²	JSE Listing Requirements	C2(d)	14.6	12.7
Diluted headline earnings per share (Net of tax)²	JSE Listing Requirements	C2(d)	14.3	12.9

¹Restatement for the impact of changes in policies did not result in changes to basic, diluted basic and adjusted operating earnings per share for the year ended 31 December 2012.

²The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

(a) Basic 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.

The table below reconciles the profit attributable to equity holders of the parent to profit attributable to ordinary equity holders:

		£m
	Year ended 31 December 2013	Year ended 31 December 2012 Restated¹
Profit for the financial year attributable to equity holders of the parent from continuing operations	702	608
Profit for the financial year attributable to equity holders of the parent from discontinued operations	3	564
Profit for the financial year attributable to equity holders of the parent	705	1,172
Dividends paid to holders of perpetual preferred callable securities, net of tax credits	(37)	(32)
Profit attributable to ordinary equity holders	668	1,140

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

Total dividends paid to holders of perpetual preferred callable securities of £37 million for the year ended 31 December 2013 (year ended 31 December 2012: £32 million) are stated net of tax credits of £10 million (year ended 31 December 2012: £10 million).

The table below summarises the calculation of the weighted average number of ordinary shares for the purposes of calculating basic earnings per share:

		Millions
	Year ended 31 December 2013	Year ended 31 December 2012
Weighted average number of ordinary shares in issue	4,897	5,096
Shares held in charitable foundations	(6)	(6)
Shares held in ESOP trusts	(55)	(61)
Adjusted weighted average number of ordinary shares	4,836	5,029
Shares held in life funds	(155)	(181)
Shares held in Black Economic Empowerment trusts	(239)	(261)
Weighted average number of ordinary shares used to calculate basic earnings per share	4,442	4,587

Basic earnings per ordinary share (pence)¹	15.0	24.9

¹Restatement for the impact of changes in policies did not result in changes to basic earnings per share for the year ended 31 December 2012.

Notes to the consolidated financial statements

For the year ended 31 December 2013

C: Other key performance information continued

C2: Earnings per share continued

(b) Diluted basic earnings per share

Diluted basic EPS recognises the dilutive impact of share options held in ESOP trusts and Black Economic Empowerment trusts, to the extent they have value, in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full period.

The tables below reconcile the profit attributable to ordinary equity holders to diluted profit attributable to ordinary equity holders and summarises the calculation of weighted average number of shares for the purpose of calculating diluted basic earnings per share:


	Notes	Year ended 31 December 2013	Year ended 31 December 2012 Restated¹
Profit attributable to ordinary equity holders (£m)		668	1,140
Dilution effect on profit relating to share options issued by subsidiaries (£m)		(10)	(10)
Diluted profit attributable to ordinary equity holders (£m)		658	1,130
Weighted average number of ordinary shares (millions)	C2(a)	4,442	4,587
Adjustments for share options held by ESOP trusts (millions)		45	53
Adjustments for shares held in Black Economic Empowerment trusts (millions)		239	261
Weighted average number of ordinary shares used to calculate diluted basic earnings per share (millions)		4,726	4,901

Diluted basic earnings per ordinary share (pence)²		13.9	23.1

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

²Restatement for the impact of changes in policies did not result in changes to diluted basic earnings per share for the year ended 31 December 2012.

The following table presents a reconciliation of profit for the financial year to adjusted operating profit after tax attributable to ordinary equity holders and summarises the calculation of adjusted operating earnings per share:


	Notes	Year ended 31 December 2013	Year ended 31 December 2012 Restated¹
Profit for the financial year attributable to equity holders of the parent (£m)		705	1,172
Adjusting items (£m)		286	467
Tax on adjusting items (£m)		(46)	(44)
Non-core operations (£m)		(32)	(165)
Profit from discontinued operations (£m)		(3)	(564)
Non-controlling interest on adjusting items (£m)		(20)	(25)
Adjusted operating profit after tax attributable to ordinary equity holders (£m)		890	841
Adjusted weighted average number of ordinary shares used to calculate adjusted operating earnings per share (millions)²	C2(a)	4,836	4,818

Adjusted operating earnings per share (pence)		18.4	17.5

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

²For the year ended 31 December 2012, the weighted average number of shares used in the calculation of basic and diluted basic EPS was adjusted for the seven-for-eight share consolidation that was affected on 23 April 2012. For adjusted operating EPS, the adjustment of the weighted average number of shares has been made effective from 1 January 2012. This adjustment had the effect of presenting adjusted EPS on a more consistent basis, but resulted in a difference between the adjusted weighted average number of shares for IFRS and AOP.

(d) Headline earnings per share

The Group is required to calculate headline earnings per share (HEPS) in accordance with the JSE Limited (JSE) Listing Requirements, determined by reference to the South African Institute of Chartered Accountants' circular 02/2013 (Revised) 'Headline Earnings'. The table below sets out a reconciliation of basic EPS and HEPS in accordance with that circular. Disclosure of HEPS is not a requirement of IFRS, but it is a commonly used measure of earnings in South Africa.

The table below reconciles the profit for the financial year attributable to equity holders of the parent to headline earnings and summarises the calculation of basic and diluted HEPS:

					£m
		Year ended 31 December 2013		Year ended 31 December 2012 Restated¹
	Notes	Gross	Net	Gross	Net
Profit for the financial year attributable to equity holders of the parent		705	705	1,172	1,172
Dividends paid to holders of perpetual preferred callable securities		(37)	(37)	(32)	(32)
Profit attributable to ordinary equity holders		668	668	1,140	1,140
Adjustments:
Impairments of goodwill and intangible assets		28	28	35	35
Loss/(profit) on disposal of subsidiaries, associated undertakings and strategic investments		4	(12)	(183)	(173)
Realised gains (net of impairments) on available-for-sale financial assets		(8)	(8)	(21)	(21)
Exchange differences realised on disposal		-	-	(350)	(350)
Headline earnings		692	676	621	631

Weighted average number of ordinary shares	C2(a)	4,442	4,442	4,587	4,587

Diluted weighted average number of ordinary shares	C2(b)	4,726	4,726	4,901	4,901

Headline earnings per share (pence)		15.6	15.2	13.5	13.8

Diluted headline earnings per share (pence)		14.6	14.3	12.7	12.9

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details. Impairment of intangible assets is now excluded from the determination of HEPS.

C3: Dividends
		£m
	Year ended 31 December 2013	Year ended 31 December 2012
2011 Final dividend paid - 3.5p per 10p share	-	178
Special dividend - 18.0p per 10p share	-	915
2012 Interim dividend paid - 1.75p per 11 3/7p share	-	79
2012 Final dividend paid - 5.25p per 11 3/7p share	238	-
2013 Interim dividend paid - 2.10p per 11 3/7p share	98	-
Dividends to ordinary equity holders	336	1,172
Dividends paid to holders of perpetual preferred callable securities	47	42
Dividend payments for the period	383	1,214

Final and interim dividends paid to ordinary equity holders are calculated using the number of shares in issue at the record date less own shares held in ESOP trusts, life funds of Group entities, Black Economic Empowerment trusts and related undertakings.

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

A final dividend of 6.0 pence (or its equivalent in other applicable currencies) per ordinary share in the Company has been recommended by the directors. The final dividend will be paid on 30 May 2014 to shareholders on the register at the close of business on 14 April 2014 for the Malawi register, 16 April 2014 for the South African, Zimbabwe and Namibian registers and 22 April 2014 for the UK register. The dividend will absorb an estimated £275 million of shareholders' funds. The Company is not planning to offer a scrip dividend alternative.

In March and November 2013, £22 million and £25 million respectively, were declared and paid to holders of perpetual preferred callable securities (March 2012: £22 million, November 2012: £20 million).

Notes to the consolidated financial statements

For the year ended 31 December 2013

D: Other income statement notes

D1: Income tax expense

(a) Analysis of total income tax expense
		£m
	Year ended 31 December 2013	Year ended 31 December 2012 Restated¹
Current tax
United Kingdom	(3)	18
Overseas tax
- Africa	407	501
- Europe	19	30
- Rest of the world	7	16
Withholding taxes (STC)	16	23
Adjustment to current tax in respect of prior years	(25)	5
Total current tax	421	593
Deferred tax
Origination and reversal of temporary differences	142	(122)
Effect on deferred tax of changes in tax rates	(15)	2
Recognition of deferred tax assets	1	(2)
Adjustments to deferred tax in respect of prior years	3	-
Total deferred tax	131	(122)
Total income tax expense	552	471

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

(b) Reconciliation of total income tax expense
		£m
	Year ended 31 December 2013	Year ended 31 December 2012 Restated¹
Profit before tax	1,532	1,385
Tax at UK standard rate of 23.25% (2012: 24.5%)	356	339
Different tax rate or basis on overseas operations	57	19
Untaxed and low taxed income	(76)	(83)
Disallowable expenses	35	48
Net movement on deferred tax assets not recognised	31	48
Effect on deferred tax of changes in tax rates	(15)	2
Withholding taxes (STC)	10	20
Income tax attributable to policyholder returns	133	59
Tax on Group equity held in life funds	21	26
Other	-	(7)
Total income tax expense	552	471

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

(c) Income tax relating to components of other comprehensive income
		£m
	Year ended 31 December 2013	Year ended 31 December 2012 Restated¹
Preferred perpetual callable securities	(10)	(10)
Measurement gains on defined benefit plans	22	4
Income tax on items that will not be reclassified subsequently to profit or loss	12	(6)
Income tax on items that may be reclassified subsequently to profit or loss	(2)	5
Income tax expense/(credit) - continuing operations	10	(1)
Income tax expense on fair value movements - discontinued operations	-	1
Income tax expense relating to components of other comprehensive income	10	-

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

(d) Reconciliation of income tax expense in the IFRS income statement to income tax on adjusted operating profit
		£m
	Year ended 31 December 2013	Year ended 31 December 2012 Restated¹
Income tax expense	552	471
Tax on adjusting items
Goodwill impairment and impact of acquisition accounting	26	51
Profit/(loss) on disposal of subsidiaries, associates and strategic investments	16	(10)
Short-term fluctuations in investment return	(2)	7
Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity	(10)	(10)
US Asset Management equity plans	11	6
Restructuring costs	5	-
Total tax on adjusting items	46	44
Income tax attributable to policyholders returns	(174)	(75)
Income tax on adjusted operating profit	424	440

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

Notes to the consolidated financial statements

For the year ended 31 December 2013

E: Financial assets and liabilities

E1: Borrowed funds

							£m
	Notes	Group excluding Nedbank	Nedbank	At 31 December 2013 Group	Group excluding Nedbank	Nedbank	At 31 December 2012 Group
Senior debt securities and term loans		113	1,151	1,264	122	1,363	1,485
Floating rate notes	E1(a)	-	673	673	-	849	849
Fixed rate notes	E1(b)	113	478	591	122	514	636
Mortgage-backed securities	E1(d)	-	65	65	-	131	131
Subordinated debt securities (net of Group holdings)	E1(e)	703	597	1,300	765	669	1,434
Borrowed funds		816	1,813	2,629	887	2,163	3,050
Other instruments treated as equity for accounting purposes
€374 million perpetual preferred¹ callable securities		253			334
£273 million perpetual preferred² callable securities		273			348
Total: Book value		1,342			1,569
Nominal value of the above		1,370			1,590

¹The €374 million perpetual callable security was previously €495 million with €121 million being acquired via a Modified Dutch Auction tender on 19 November 2013.

²The £273 million perpetual callable security was previously £348 million with £75 million being acquired via a Modified Dutch Auction tender on 19 November 2013.

The table below is a maturity analysis of the liability cash flows based on contractual maturity dates for borrowed funds. Maturity analysis is undiscounted and based on year-end exchange rates.
						£m
	Group excluding Nedbank	Nedbank	At 31 December 2013 Group	Group excluding Nedbank	Nedbank	At 31 December 2012 Group
Less than 1 year	98	385	483	110	522	632
Greater than 1 year and less than 5 years	751	1,727	2,478	907	1,820	2,727
Greater than 5 years	1,099	236	1,335	1,311	314	1,625
Total	1,948	2,348	4,296	2,328	2,656	4,984

Contractual maturity tables include all the data available for both years as at 31 December 2013.

Senior debt securities and term loans
(a) Floating rate notes
			£m
	Maturity date	At 31 December 2013	At 31 December 2012
Nedbank - Floating rate unsecured senior debt
R98 million at inflation linked (3.80% real yield)	Repaid	-	8
R1,750 million at inflation linked (3.90% real yield)	Repaid	-	151
R1,552 million at JIBAR + 1.48%	Repaid	-	114
R988 million at JIBAR + 1.05%	March 2014	50	71
R500 million at JIBAR + 1.00%	April 2014	26	33
R1,075 million at JIBAR + 0.94%	October 2014	62	79
R1,297 million at JIBAR + 1.00%	February 2015	75	95
R1,027 million at JIBAR + 1.75%	April 2015	60	76
R250 million at JIBAR + 1.00%	August 2015	14	18
R1,044 million at JIBAR + 2.20%	September 2015	61	76
R677 million at JIBAR + 1.25%	March 2016	39	49
R3,056 million at JIBAR + 0.8%	July 2016	176	-
R694 million at JIBAR + 0.75%	November 2016	40	-
R405 million at JIBAR + 1.30%	February 2017	23	30
R786 million at JIBAR + 1.30%	August 2017	42	43
R80 million at JIBAR + 2.15%	April 2020	5	6
Total floating rate notes		673	849

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

(b) Fixed rate notes
			£m
	Maturity date	At 31 December 2013	At 31 December 2012
Nedbank - Fixed rate unsecured senior debt (net of Group holdings)
R450 million at 8.39%	March 2014	26	33
R478 million at 9.68%	April 2015	28	35
R3,244 million at 10.55%	September 2015	192	242
R1,137 million at 9.36%	March 2016	67	85
R151 million at 6.91%	July 2016	9	-
R1,273 million at 11.39%	September 2019	80	102
R1,888 million at 8.92%	November 2020	109	-
R660 million at zero coupon	October 2024	14	17
		525	514
Less: fixed rate notes held by other Group companies		(47)	-
Banking fixed rate unsecured senior debt (net of Group holdings)		478	514

Group excluding Nedbank
US$2 million secured senior debt at 5.23%¹	August 2014	1	10
£112 million eurobond at 7.125%	October 2016	112	112
		113	122
Total fixed rate notes		591	636

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

¹ $14 million of the $16 million senior bond was repaid, with repayment of $12 million on 1 November 2013 and $2 million on 15 December 2013.

Notes to the consolidated financial statements

For the year ended 31 December 2013

E: Financial assets and liabilities continued

E1: Borrowed funds continued

Following an internal review of Group funding requirements, the Group reduced its revolving credit facility by £400 million in August 2013. The Group now has access to a £800 million (2012: £1,200 million) five-year multi-currency revolving credit facility which matures in April 2016. At 31 December 2013 and 31 December 2012, none of this facility was drawn down and there were no irrevocable letters of credit in issue against this facility.

(d) Mortgage-backed securities (net of Group holdings)
				£m
	Tier	Maturity date	At 31 December 2013	At 31 December 2012
Nedbank
R480 million (class A1) at JIBAR + 1.10%	Tier 2	25 October 2039	13	32
R336 million (class A2) at JIBAR + 1.25%	Tier 2	25 October 2039	20	25
R900 million (class A3) at JIBAR + 1.54%	Tier 2	25 October 2039	52	66
R110 million (class B) at JIBAR + 1.90%	Tier 2	25 October 2039	6	8
			91	131
Less: Mortgage backed securities held by other Group companies			(26)	-
Total mortgage-backed securities			65	131

(e) Subordinated debt securities (net of Group holdings)
					£m
	Tier	First call date	Maturity date	At 31December 2013	At 31December 2012
Nedbank
R300 million at JIBAR + 2.50%	Tier 2	Repaid	Repaid	-	11
R1,800 million at 9.84%	Tier 2	Repaid	Repaid	-	137
R1,265 million at JIBAR + 4.75%	Non-core Tier 1	November 2018	November 2018	74	93
R487 million at 15.05%	Non-core Tier 1	November 2018	November 2018	32	43
R1,700 million at 8.90%	Tier 2	February 2014	February 2019	101	132
R1,000 million at 10.54%	Tier 2	September 2015	September 2020	62	81
US$100 million at 3 month USD LIBOR	Tier 2 Secondary	March 2017	March 2022	60	62
R2,000 million at JIBAR + 0.47%	Tier 2	July 2017	July 2022	116	146
R1,800 million at JIBAR + 2.75%	Tier 2	July 2018	July 2023	105	-
R1,200 million at JIBAR + 2.55%	Tier 2	November 2018	November 2023	69	-
				619	705
Less: Banking subordinated debt securities held by other Group companies				(22)	(36)
Banking subordinated securities (net of Group holdings)				597	669
Group excluding Nedbank
R3,000 million at 8.92% until October 2015 and 3 month JIBAR + 1.59% thereafter	Lower Tier 2	October 2015	October 2020	172	218
£500 million at 8.00%¹	Lower Tier 2	-	June 2021	531	547
				703	765
Total subordinated debt securities				1,300	1,434

¹The principal and coupon on the bond were initially swapped into floating rate Swedish kronor, at 3 month STIBOR plus 5.46%. Following the Nordic sale, £375 million of the coupon is now swapped into floating rate sterling at 6 month GBP LIBOR plus 4.15% and £125 million of principal and coupon is swapped into US dollars at 6 month USD LIBOR plus 5.49%.

F: Other statement of financial position notes

F1: Non-controlling interests

(a) Profit or loss

(i) Ordinary shares

The non-controlling interests share of profit for the financial year has been calculated on the basis of the Group's effective ownership of the subsidiaries in which it does not own 100% of the ordinary equity. The principal subsidiaries where a non-controlling interest exists is the Group's banking business in South Africa, Nedbank. For the year ended 31 December 2013 the non-controlling interests attributable to ordinary shares was £259 million (2012: £256 million).

(ii) Preferred securities
		£m
	At 31 December 2013	At 31 December 2012
Nedbank
R3,583 million non-cumulative preference shares	19	23

Group excluding Nedbank
US$750 million cumulative preferred securities¹	-	27
Non-controlling interests - preferred securities	19	50

¹On 24 September 2012, the Group repaid the US$750 million cumulative preference securities at their nominal value.

(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 2013	Year ended 31 December 2012 Restated¹
The non-controlling interests share is analysed as follows:
Non-controlling interests - ordinary shares	259	256
Income attributable to Black Economic Empowerment trusts	20	25
Non-controlling interests share of adjusted operating profit	279	281

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

The Group uses revised weighted average effective ownership interests when calculating the non-controllable interest applicable to the adjusted operating profit of its Southern African 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 2013 the increase in adjusted operating profit attributable to non-controlling interests as a result of this was £20 million (2012: £25 million).

(b) Statement of financial position

(i) Ordinary shares
		£m
Reconciliation of movements in non-controlling interests	At 31 December 2013	At 31 December 2012 Restated¹
Balance at beginning of the year	1,684	1,652
Non-controlling interests' share of profit	259	256
Non-controlling interests' share of dividends paid	(117)	(119)
Net disposal of interests	20	20
Foreign exchange and other movements	(344)	(125)
Balance at end of the year	1,502	1,684

¹The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.

Notes to the consolidated financial statements

For the year ended 31 December 2013

F: Other statement of financial position notes continued

F1: Non-controlling interests continued

(ii) Preferred securities
		£m
	At 31 December 2013	At 31 December 2012
Nedbank
R3,583 million non-cumulative preference shares¹	265	273
Total in issue at 31 December	265	273

Preferred securities at 31 December 2013 are held at historic value of consideration received less unamortised issue costs and are stated net of securities held by Group companies

¹3,583 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.

G: Other notes

G1: Contingent liabilities

		£m
	At 31 December 2013	At 31 December 2012
Guarantees and assets pledged as collateral security	2,052	2,521
Irrevocable letters of credit	184	177
Secured lending	304	492
Other contingent liabilities	30	57

The Group, through its South African banking business, has pledged debt securities amounting to £703 million (2012: £1,203 million) as collateral for deposits received under re-purchase agreements. These amounts represent assets that have been transferred but do not qualify for derecognition under IAS 39. These transactions are entered into under terms and conditions that are standard industry practice to securities borrowing and lending activities.

Contingent liabilities - tax

The Revenue authorities in the principal jurisdictions in which the Group operates (South Africa and the United Kingdom) routinely review historic transactions undertaken and tax law interpretations made by the Group. The financial statements accordingly include provisions that reflect the Group's assessment of liabilities which might reasonably be expected to materialise.

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. As previously disclosed, the largest of these potential actions are claims in the High Court against Nedbank by certain shareholders in Pinnacle Point Group Ltd, alleging that Nedbank had a legal duty of care to them arising from a share swap transaction. In 2013 two of these claims of R147 million and of R802 million were dismissed by the North Gauteng High Court. The only claim remaining is for R355 million.

Originally these shareholders and others lodged proceedings with the Securities Regulation Panel (SRP) for an order declaring that an affected transaction took place. The SRP ruled that no affected transaction took place. The last remaining claimant brought an application to the South Gauteng High Court for the review of the SRP ruling. This application was dismissed with costs on 15 November 2013. The applicant filed a notice to apply for leave to appeal this judgment, which Nedbank will oppose.

During 2011 further actions were instituted against Nedbank Ltd by other stakeholders for R210 million, and by Absa Bank Limited for R773 million. In both these actions Nedbank have filed exceptions against the claims.

Nedbank Ltd and its legal advisers remain of the opinion that the remaining claims are ambitious, and that the remaining claimants will have great difficulty succeeding.

Consumer protection

Old Mutual is committed to supporting its customers in meeting their lifetime goals and treating customers fairly is central to how our businesses operate. We routinely engage with customers and regulators to ensure that we meet this commitment, but there is the risk of regulatory intervention across various jurisdictions, giving rise to the potential for customer redress which can result in retrospective changes to policyholder benefits, penalties or fines. Where this occurs, the Group makes financial provision for the related costs.

G2: Businesses acquired during the year

The Group continued to expand operations in Africa and Latin America through the following completed acquisitions:

Acquiree	Country	Nature of business	Consideration paid (£m)	Shares acquired	Effective date
Oceanic Life	Nigeria	Life insurance	9	70%	20 December 2012
Aiva Holdings Group S.A	Uruguay	Business platform and distribution business	22	86%	2 January 2013
Provident Life Assurance Company Limited	Ghana	Life insurance	7	90%	12 September 2013
Oceanic General	Nigeria	General insurance	12	70%	26 November 2013

Goodwill of £30 million has been recognised on these acquisitions. Refer to note F1 in the Annual Report and Accounts for further analysis of the goodwill recognised. Acquisition costs of £2 million are included in operating expenses and have been excluded from the Group's adjusted operating profit. The net profit received from the above acquisitions has been consolidated for the 31 December 2013 financial year.

The table below sets out the consolidated assets and liabilities acquired as a result of these acquisitions:

	£m
	Acquirees' carrying amount
Assets
Investment property	13
Investments and securities	20
Cash and cash equivalents	17
Trade, other receivables and other assets	5
Total assets	55
Liabilities
Long-term business policyholder liabilities	18
Current tax payable	1
Trade, other payables and other liabilities	10
Total liabilities	29
Net assets acquired	26

Group's portion of net assets acquired	20
Consideration paid	50
Goodwill recognised	30

The carrying value of assets and liabilities in the entities statement of financial position on acquisition date approximates the fair value of these items determined by the Group. The receivables recognised by the Group are included in other assets and represent their fair value due to their short-term nature. No indemnification assets or contingent liabilities were recognised on acquisition of the above business. Contingent consideration of £11 million is payable to the sellers of Aiva Holdings Group SA in 2016 and 2018 dependent on the achievement of pre-determined performance indicators, an estimate which has been included in the purchase consideration.

G3: Events after the reporting date

On 28 February 2014, the Group announced the acquisition of Intrinsic Financial Services Limited, the third largest adviser network in the UK with more than 3,000 advisers, both restricted and independent. This will enable the Old Mutual Wealth business to provide advice to UK retail customers. The purchase of Intrinsic Financial Services Limited is a critical part of the Old Mutual Wealth strategy to create a leading wealth management business that combines financial advice, investment solutions and high quality asset management to deliver first class outcomes for our customers.

On 28 February 2014, the Group announced that during 2014 it intends to proceed with an Initial Public Offering of a minority stake in its US Asset Management Business (USAM), subject to market conditions. The offering will enhance USAM's financial and operating flexibility to deploy capital to continue to grow and further develop the business. This transaction will require a registration statement to be filed with the U.S. Securities and Exchange Commission. The registration statement will include additional information. The announcement was made pursuant to and in accordance with Rule 135 under the U.S. Securities Act (1933). This disclosure does not constitute an offer to sell or the solicitation of an offer to buy securities, and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that jurisdiction.

In line with Nedbank's scheduled capital plans, there was a full capital redemption of NED8, the R1.7 billion unsecured subordinated note that qualified as Tier 2 capital under Basel II, with effect from 8 February 2014. This event is not an adjusting post balance sheet event.

Notes to the consolidated financial statements

For the year ended 31 December 2013

H: Discontinued operations and disposal groups held for sale

H1: Discontinued operations

Discontinued operations relate to the results of the Group's Swedish, Danish and Norwegian life businesses, collectively Nordic. The disposal of Nordic was completed on 21 March 2012 following shareholder and regulatory approval and was reported up until that date. The Group continues to incur costs that are directly related to the sale of Nordic. These costs relate to the transition of IT and other services, previously provided by Nordic to the wider Group, back to the Group. These costs are included in the expenses related to the discontinued operations. The profit on disposal of discontinued operations for the year ending 31 December 2013 was recognised following the finalisation of the transfer of Old Mutual Guodian Life Assurance Company Ltd, the Group's Chinese joint venture, from Nordic to Old Mutual Life Assurance Company (South Africa) Limited. This transaction was included in the Nordic sale agreement and was subject to regulatory approval which was obtained in June 2013.

(a) Income statement from discontinued operations (Nordic)
		£m
	Year ended 31 December 2013	Year ended 31 December 2012
Revenue	-	842
Expenses	(26)	(866)
Loss before tax from discontinued operations - trading activities	(26)	(24)
Profit on disposal	27	239
Realised available-for-sale investment gains and exchange differences on disposal	-	350
Profit before tax from discontinued operations	1	565
Income tax credit/(charge)	2	(1)
Profit after tax from discontinued operations	3	564

(b) Statement of comprehensive income from discontinued operations (Nordic)
		£m
	Year ended 31 December 2013	Year ended 31 December 2012
Profit from discontinued operations after tax	3	564
Other comprehensive income for the financial year
Fair value gains	-	4
Exchange differences realised on disposal	-	(350)
Currency translation differences/exchange differences on translating foreign operations	-	2
Other movements	-	(3)
Aggregate tax on transfers from equity	-	(1)
Total other comprehensive loss from discontinued operations	-	(348)
Total comprehensive income for the financial year from discontinued operations	3	216
Attributable to
Equity holders of the parent	3	216

(c) Net cash flows from discontinued operations (Nordic)
		£m
	Year ended 31 December 2013	Year ended 31 December 2012
Operating activities	-	(8)
Investing activities	-	(121)
Net cash flows from discontinued operations	-	(129)

H2: Contingent liabilities in respect of the disposal of US Life

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

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

I: Changes in accounting policies

I1: Accounting policies adopted for the year ended 31 December 2013

Several new accounting standards are applicable to the Group for the year ended 31 December 2013, with restatement of the comparative information for the year ended 31 December 2012 as required and restatement of the opening statement of financial position as at 1 January 2012.

The standards that were relevant and have required restatement include IAS 1 'Presentation of Financial Statements', IAS 19 (Revised 2011) 'Employee Benefits', IFRS 10 'Consolidated Financial Statements' and IFRS 11 'Joint Arrangements'.

Three other standards and amendments have also been applied for the first time in 2013 but these are disclosure standards and have not required a restatement of the statement of financial position. These include IFRS 7 'Financial Instruments: Disclosures (Amended 2011), IFRS 12 'Disclosure of Interest in Other Entities' and IFRS 13 'Fair Value Measurement' and IAS 36 (Amended) 'Impairment of Assets'. Refer to note A5 in the Annual Report and Accounts for further information.

IFRS 11 'Joint Arrangements' replaces IAS 31 'Interests in Joint Ventures' and SIC-13 'Jointly Controlled Entities' and removes the option to account for joint arrangements using proportionate consolidation. Jointly controlled entities that meet the definition of a joint arrangement under IFRS 11 'Joint Arrangements' must now be accounted for using the equity method. This did not have a material impact on the Group's statement of financial position.

The following standards adopted by the Group had an impact on the financial statements:

Amendments to IAS 1 'Presentation of Items of Other Comprehensive Income'

The amendments to IAS 1 'Presentation of Items of Other Comprehensive Income' require that an entity present separately the items of other comprehensive income (OCI) that may be reclassified to profit or loss in the future, from those that will never be reclassified to profit or loss. The amendment affected presentation only and had no impact on the shareholders' equity or profit.

IAS 19 'Employee Benefits' (Revised 2011)

The Group has adopted IAS 19 'Employee Benefits' (Revised 2011) with a date of initial application of 1 January 2013.

The key amendments are:

n The corridor method has been removed and all actuarial gains and losses are required to be recognised in OCI rather than in profit or loss. Expected returns on plan assets are no longer recognised in profit or loss. Instead, interest is recognised on the net defined benefit liability or asset in profit or loss, calculated using the discount rate used to measure the defined benefit obligation.

n Past service costs arising from plan amendments or curtailment are now recognised in profit or loss at the earlier of when the amendment occurs or when the related restructuring or termination cost are recognised. The option to amortise such cost over future years has also been eliminated.

n Administration costs, other than costs of managing plan assets, are recognised in the profit and loss when the service is provided.

The change in accounting policy has been applied retrospectively and as a result, the comparative information for the year ended 31 December 2012 has been restated accordingly.

The major impact of the adoption of the standard was an increase in operating and administrative expenses and a net increase in OCI. The overall impact on the Group was a decrease in equity, an increase in the assets and an increase in the liabilities of the Group. The standard affects the accounting for certain defined pension schemes in Emerging Markets, Nedbank and Old Mutual plc.

The transitional adjustment, applied to the opening statement of financial position as at 1 January 2013, had an effect of decreasing equity by £17 million, increasing total assets by £81 million and increasing total liabilities by £98 million.

Notes to the consolidated financial statements

For the year ended 31 December 2013

I: Changes in accounting policies continued

I1: Accounting policies adopted for the year ended 31 December 2013 continued

IFRS 10 'Consolidated Financial Statements'

The Group has early adopted IFRS 10 'Consolidated Financial Statements' with a date of initial application of 1 January 2013.

IFRS 10 'Consolidated Financial Statements'introduces a single control model that applies to all entities, including special purpose entities. IFRS 10 'Consolidated Financial Statements' replaces the parts of IAS 27 'Consolidated and Separate Financial Statements' that dealt with consolidated financial statements and SIC-12 'Consolidation - Special Purpose Entities'. IFRS 10 'Consolidated Financial Statements' changes the definition of control such that an investor controls an investee when it has power over the investee, when it is exposed, or has rights, to variable returns from its involvement with the investee and when it has the ability to use its power over the investee to affect those returns. To meet the definition of control in IFRS 10 'Consolidated Financial Statements', all three of these criteria must be met.

The implementation of this standard did not have a significant financial impact on the Group's assessment of its interests in investment funds, but it did increase the number of investment funds consolidated. The principal effect was a gross up of the consolidated statement of financial position for the difference between the value of the newly consolidated assets and liabilities and the carrying value of the Group's interest, and the equal and opposite liability for the interests of external parties in these investment funds.

The transitional adjustment, applied to the opening statement of financial position as at 1 January 2013, had an effect of decreasing non-controlling interest by £8 million, increasing total assets by £3,384 million and increasing total liabilities by £3,392 million.

The Group has only considered the consolidation suite of standards for interests that existed at 1 January 2013. The change in accounting policy has been applied retrospectively and as a result, the comparative information for the year ended 31 December 2012 and the opening position at 1 January 2012 have been restated accordingly.

Effect of the adoption of IAS 19 (Revised) and IFRS 10 'Consolidated Financial Statements'

The following tables summarise the impact of the restatements in the financial statements:

				£m
Year ended 31 December 2012	As previously reported	Adjustments for adoption of IAS 19	Adjustments for adoption of IFRS 10	As restated
Consolidated income statement
Profit after tax from continuing operations	923	(1)	(8)	914
Profit after tax for the financial year	1,487	(1)	(8)	1,478
Non-controlling interests	314	-	(8)	306
Consolidated statement of comprehensive income
Total other comprehensive income for the financial year¹	(811)	4	-	(807)
Total comprehensive income for the financial year¹	676	3	(8)	671
Reconciliation of adjusted operating profit to profit after tax
Adjusting items	(459)	-	(8)	(467)
Adjusted operating profit after tax attributable to equity holders of the parent	842	(1)	-	841
Consolidated statement of financial position
Total assets	143,497	81	3,384	146,962
Total liabilities	133,699	98	3,392	137,189
Equity attributable to ordinary shareholders of the parent	7,833	(17)	-	7,816
Non-controlling interests	1,965	-	(8)	1,957

¹The comparative information has been restated to reflect the fact that all movements on the share-based payment reserve are reflected directly in equity and no longer in other comprehensive income.

				£m
At 1 January 2012	As previously reported	Adjustments for adoption of IAS 19	Adjustments for adoption of IFRS 10	As restated
Consolidated statement of financial position
Total assets	162,385	(12)	2,798	165,171
Total liabilities	151,527	8	2,798	154,333
Equity attributable to ordinary shareholders of the parent	8,488	(20)	-	8,468

This information is provided by RNS

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