| Thu 15 Dec 2011, 9:00 | | OML - Old Mutual plc - Proposed sale of Old Mutual`s Nordic business |
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OML
OLOML
OML - Old Mutual plc - Proposed sale of Old Mutual`s Nordic business
(excluding Finland) for GBP2.1 billion
OLD MUTUAL plc
Issuer code: OLOML
JSE Share code: OML
NSX share code: OLM
ISIN: GB0007389926
Ref 231/11
15 December 2011
PROPOSED SALE OF OLD MUTUAL`s NORDIC BUSINESS (EXCLUDING FINLAND)
FOR GBP2.1 BILLION
Old Mutual plc ("Old Mutual") announces that it intends to divest its
Nordic business, Skandia Insurance Company Ltd (publ) ("Skandia AB" or
"Nordic"), comprising Old Mutual`s long-term savings and banking operations
in Sweden, Denmark and Norway operating under the Skandia brand, to Skandia
Liv ("Skandia Liv") for a gross cash consideration of SEK22.5 billion
(GBP2.1 billion) (the "Transaction").
Highlights of the Transaction (which should be read in conjunction with the
full text of this announcement) include:
* Proposed disposal of Nordic for a gross cash consideration of SEK22.5
billion (GBP2.1 billion) (the "Purchase Price") payable to Old Mutual
on completion of the Transaction ("Completion"). It is expected that
no tax will be payable by Old Mutual on the Purchase Price.
* The unaudited Pro-Forma Net Assets and Pro-Forma MCEV of Nordic as at
30 June 2011 (as set out in Appendix II) were GBP1.7 billion and
GBP1.9 billion respectively. For the six month period to 30 June
2011, Nordic recorded IFRS adjusted operating profit before tax of
GBP60 million.
* Old Mutual intends to use the proceeds of the Transaction to reduce
group debt and to return surplus capital arising from the Transaction
to shareholders in due course.
* Old Mutual will retain ownership of and continue to use the Skandia
brand following Completion in markets outside of Sweden, Denmark and
Norway as it implements its long-term savings strategy. Skandia Liv
will have ownership of and continue to use the Skandia brand in
Sweden, Denmark and Norway.
* The Transaction is conditional upon, among other things, the approval
of Old Mutual shareholders at an Extraordinary General Meeting as well
as regulatory and competition authority approvals. Completion of the
Transaction is expected to take place towards the end of the first
quarter of 2012. The Transaction does not require the approval of
Skandia Liv`s policyholders.
Commenting on the Transaction, Julian Roberts, Group Chief Executive of Old
Mutual, said:
"The sale of Nordic to Skandia Liv represents a truly unique opportunity to
create value for both Skandia Liv`s policyholders and Old Mutual`s
shareholders through unlocking significant synergies from the combination
of Skandia Liv and Nordic. These synergies would not have been available
to the same extent in the absence of the Transaction given the specific
nature of Skandia Liv`s hybrid corporate structure and the restrictions on
realising efficiencies that it imposes. The creation of a strong and
efficient Nordic champion represents a valuable opportunity for Old
Mutual`s shareholders and Skandia Liv`s policyholders.
"The Transaction will also enable us to reduce complexity within the Group
consistent with our stated strategy and to focus more sharply on those
parts of our Long-Term Savings business where the greatest opportunities
are available.
"This Transaction represents a material step in the execution of our
restructuring programme. We intend to use the proceeds from the sale to
accelerate the reduction in group borrowings and to return surplus capital
arising from the Transaction to shareholders. We will also reassess our
debt repayment plan."
Further information about the background to and the terms of the
Transaction, as well as its benefits to the businesses concerned, is
contained in Appendix I to this announcement.
Owing to the size of the Transaction relative to the size of Old Mutual and
the relationship between the entities involved, the Transaction constitutes
a Class 1 transaction and a related party transaction for the purpose of
the Listing Rules.
A circular containing further details of the Transaction, including notice
of the Extraordinary General Meeting to seek Old Mutual shareholders`
approval for the Transaction and the recommendation of the Board to vote in
favour of the Transaction, is expected to be sent to shareholders in
February 2012.
A conference call for analysts and investors will be held today at 08:30
London time (09.30 central European time / 10.30 South African time).
Analysts and investors who wish to participate in the call should dial the
following numbers quoting conference ID 36261749:
UK local 0844 871 9397
International +44 1452 560 063
Sweden Free Call 0200 887 531
South Africa 0800 980 759
USA Free call 1866 437 8387
Please dial in 10 minutes before the scheduled start time of the call to
avoid excess holding.
There will be a replay of the call available until 28 December 2011 on the
following numbers by quoting access number 36261749#:
UK Local 0845 245 5205
International +44 1452 55 00 00
USA Free Call 1866 247 4222
Enquiries:
Media Investors/Analysts
William +44 20 7002 7133 Patrick Bowes +44 20 7002 7440
Baldwin- +44 7834 524 833
Charles
Advisers:
Evercore Partners Morgan Stanley
(joint financial adviser to Old (joint financial adviser and UK
Mutual) sponsor to Old Mutual)
Andrew Sibbald +44 20 7653 6000 Jakob Lindquist +44 20 7425 8000
Ollie Clayton Chris Kaladeen
Tony D`Souza Paul Baker
(corporate
broking)
Bank of America Merrill Lynch Deutsche Bank
(corporate broker to Old Mutual) (corporate broker to Old Mutual)
Henrietta +44 20 7628 1000 James Agnew +44 20 7545 8000
Baldock Peter Andrew Thompson
Brown
Finsbury
Andrew Dowler +44 20 7251 3801
Sponsor:
Merrill Lynch South Africa (Pty) Limited
About Old Mutual plc
Old Mutual is an international long-term savings, protection and investment
Group. Originating in South Africa in 1845, the Group provides life
assurance, asset management, banking and general insurance to more than 15
million customers in Europe, the Americas, Africa and Asia. Old Mutual is
listed on the London Stock Exchange and the Johannesburg Stock Exchange,
among others.
In the year ended 31 December 2010, the Group reported adjusted operating
profit before tax of GBP1.5 billion (on an IFRS basis) and had GBP309
billion of funds under management from core operations, and shareholders`
equity of GBP9.0 billion.
Forward-Looking Statements
This statement may contain certain `forward-looking statements` with
respect to certain of Old Mutual`s plans and its current goals and
expectations relating to its future financial condition, performance,
results, strategy and objectives. Statements containing the words
`believes`, `intends`, `expects`, `plans`, `seeks` and `anticipates`, and
words of similar meaning, are forward-looking. By their nature, all forward-
looking statements involve risk and uncertainty because they relate to
future events and circumstances which are beyond Old Mutual`s control
including among other things, economic and business conditions, market
related risks such as fluctuations in interest rates and exchange rates,
and the performance of financial markets generally; the policies and
actions of regulatory authorities, the impact of competition, inflation,
and deflation; experience in particular with regard to mortality and
morbidity trends, lapse rates and policy renewal rates; the timing, impact
and other uncertainties of future acquisitions or combinations within
relevant industries; and the impact of changes in capital, solvency or
accounting standards, and tax and other legislation and regulations in the
jurisdictions in which Old Mutual and its affiliates operate. This may for
example result in changes to assumptions used for determining results of
operations or re-estimations of reserves for future policy benefits. As a
result, Old Mutual`s actual future financial condition, performance and
results may differ materially from the plans, goals, and expectations set
forth in Old Mutual`s forward-looking statements. Old Mutual undertakes no
obligation to update the forward-looking statements contained in this
statement or any other forward-looking statements it may make.
This announcement is for information purposes only and does not constitute
an offer or invitation to acquire or dispose of any securities or
investment advice in any jurisdiction.
Evercore Partners International LLP ("Evercore Partners"), which is
authorised and regulated in the United Kingdom by the Financial Services
Authority, is acting as financial adviser to Old Mutual and no one else in
connection with the Transaction and will not be responsible to any person
other than Old Mutual for providing the protections afforded to the clients
of Evercore Partners, nor for providing advice in relation to the
Transaction, the contents of this announcement or any other matters
referred to herein.
Morgan Stanley & Co. Limited ("Morgan Stanley") is acting as financial
adviser and sponsor under the United Kingdom Listing Rules to Old Mutual
and no one else in connection with the Transaction and will not be
responsible to any person other than Old Mutual for providing the
protections afforded to the clients of Morgan Stanley, nor for providing
advice in relation to the Transaction, the contents of this announcement or
any other matters referred to herein.
Merrill Lynch International ("Bank of America Merrill Lynch") is acting as
corporate broker and sponsor under the Johannesburg Stock Exchange listing
requirements and has provided financial advice to Old Mutual and no one
else in connection with the Transaction and will not be responsible to any
person other than Old Mutual for providing the protections afforded to the
clients of Bank of America Merrill Lynch, nor for providing advice in
relation to the Transaction, the contents of this announcement or any other
matters referred to herein.
Deutsche Bank AG, London Branch ("Deutsche Bank") is acting as corporate
broker and has provided financial advice to Old Mutual and no one else in
connection with the Transaction and will not be responsible to any person
other than Old Mutual for providing the protections afforded to the clients
of Deutsche Bank, nor for providing advice in relation to the Transaction,
the contents of this announcement or any other matters referred to herein.
Appendix I
1. Background
Nordic - Summary
Old Mutual operates in Sweden, Denmark and Norway offering banking, long-
term savings, investment and insurance services to both retail and
corporate customers under the Skandia brand. Skandia AB is the parent
company for Old Mutual`s operations in these countries.
Established in 1855 in Stockholm, Skandia AB is one of the largest life
assurers in Sweden, providing a full product range under the Skandia brand
name in the areas of protection, investments, healthcare and pensions.
Skandia Link has a strong and growing unit-linked business which is a
market leader in the Swedish unit-linked market. Private Health Care
Solutions is a market leader in health care insurance solutions to
individual customers and corporate employees in Sweden and also provides a
range of pensions and healthcare products to both retail and corporate
customers in Denmark and Norway. Skandiabanken is a successful consumer on-
line banking operation in Sweden and Norway.
Summary financial information with respect to Nordic is set out in Appendix
II.
Nordic - Key Individuals
Nordic`s key individuals and their principal functions are set out below:
Person Position
Paul Hanratty Chairman
MArten Andersson Chief Executive
Marek Ryden Chief Financial Officer
Pelle Wahlstrom Deputy Chief Executive
Bo Agren Head of BU Advice
Oyvind Thomassen Head of BU Direct
Bengt-Ake Fagerman CEO Skandia Liv
Ann-Charlotte Stjerna Chief Risk Officer
Johan Ekstrom Head of Strategy & Change
Nils Bolmstrand Head of Product
Viveka Classon Head of Legal
MArten Lundberg HR Director
Paul Hanratty will remain with Old Mutual following the Transaction in his
role as Chief Executive of Long-Term Savings.
Skandia Liv - Summary
Skandia Liv is a traditional life assurance company serving customers in
Sweden and Denmark. Skandia Liv aims to offer value-for-money products
with guarantees that are easy to understand and give its policyholders
financial security for retirement, illness and death.
Skandia Liv has a hybrid structure whereby it is a wholly owned subsidiary
of Skandia AB, which is itself a wholly owned subsidiary of Old Mutual, but
is operated on a mutual basis with independent governance (a "Hybrid
Structure"). It operates within a strict Swedish legal framework under the
Swedish Insurance Business Act. The benefits usually associated with share
ownership accrue to Skandia Liv`s policyholders rather than Old Mutual. In
particular, Skandia Liv is prohibited from distributing profits to Old
Mutual; all profits accrue to Skandia Liv policyholders and, save for the
share capital, all assets and liabilities of Skandia Liv are wholly
attributable to the policyholders of Skandia Liv. Old Mutual therefore
lacks the financial benefits which would usually be associated with control
of a subsidiary.
Skandia Liv is not consolidated within the financial results of Old Mutual.
Skandia Liv and Skandia AB co-operate across certain functions such as
distribution, premises and information technology with the aim of achieving
revenue and expense synergy benefits for Skandia Liv policyholders and
Skandia AB. However, the degree of co-operation is restricted by the
existing Hybrid Structure.
As at 31 December 2010, Skandia Liv had policyholder assets of SEK295
billion (GBP28 billion) and solvency capital of SEK122 billion (GBP12
billion).
Skandia Liv - Governance
Reflecting Skandia Liv`s Hybrid Structure, Skandia Liv`s board of directors
(the "Skandia Liv Board") comprises a majority of independent members who
are not employed within the Old Mutual Group (other than at Skandia Liv).
Any board member holding a board seat in an Old Mutual Group company (other
than at Skandia Liv) has a conflict of interest in all issues in relation
to agreements between Skandia Liv and Old Mutual Group companies. These
rules are aimed at safeguarding policyholder interests.
Skandia Liv has confirmed to Old Mutual that, with respect to the
Transaction, it has addressed all conflict of interest issues and has
relied upon proper internal resources and external advisers. Accordingly,
it has ensured that any board member in Skandia Liv also being a board
member in another Old Mutual Group company is disqualified from
participating in any matters related to the Transaction and has received
advice from independent financial and legal advisers. Skandia Liv has also
appointed different independent financial advisers to provide fairness
opinions to the Skandia Liv Board.
Skandia Liv has confirmed that the discussions regarding the Transaction
were initiated and managed by the independent members of the Skandia Liv
Board (comprising Gunnar Palme, Chairman of the Skandia Liv Board, Jens
Erik Christensen, Gunnar Holmgren, Monica Lindstedt and Leif Victorin).
2. Background to and reasons for the Disposal
On 11 March 2010, Old Mutual set out its strategy to build a cohesive long-
term savings, protection and investment group by leveraging the strength of
its capabilities in South Africa and around the world. In addition, Old
Mutual committed to reduce the complexity of the Group by streamlining and
simplifying the Group`s operations to maximise the value of its assets and
to reinforce its focus on its core business. Old Mutual also announced its
intention to reduce Group debt by at least GBP1.5 billion by the end of
2012.
A significant step in realising this strategy was the sale of Old Mutual`s
US Life operations to affiliates of Harbinger Capital Partners LLC which
completed on 7 April 2011.
Discussions with respect to the sale of Nordic were initiated by Skandia
Liv, with Skandia Liv submitting an indication of interest, subject to due
diligence and contract, to Old Mutual. Following a process of due
diligence, discussions with Skandia Liv regarding its proposal and the
preparation of legal documentation to effect the Transaction, Skandia Liv
and Old Mutual have entered into a binding agreement with respect to the
Transaction.
Subject to the next two sentences, the Board of Old Mutual has unanimously
concluded that it is in the best interests of Old Mutual shareholders to
accept the Skandia Liv proposal and effect the Transaction. Lars Otterbeck
is a member of the boards of Old Mutual, Skandia AB and Skandia Liv. Given
the potential conflict of interest, Lars Otterbeck has not participated in
any matters related to the Transaction.
Benefits for Old Mutual
Nordic continues to be a successful contributor to the performance of the
Group. However, the level of synergies achieved with the broader Old
Mutual Group is limited. Nordic achieved a return on equity of 11.2
percent in 2010 and 11.7 percent in 1H 2011 (12.8 percent, excluding one-
off costs associated with the cost reduction programme). This compares to
Old Mutual`s target return on equity for Nordic of 12 to 15 percent and for
its long-term savings business as a whole of 16 to 18 percent. Were the
Transaction not to take place, the Board believes that there would be
opportunities to improve its profitability under Old Mutual`s ownership,
including through closer integration with other parts of the Old Mutual
Group.
While Nordic has previously been considered to be a core part of the Group,
the acquisition of Nordic by Skandia Liv will allow for realisation of
significant synergies which would not have been achievable under the
current corporate structure. The Transaction proposed by Skandia Liv
provides Old Mutual with cash consideration that reflects Nordic`s current
leading market position, its potential future development and a share of
the synergies expected to be realised by Skandia Liv through the
Transaction. The Board of Old Mutual therefore believes that the
Transaction is in the best interests of Old Mutual shareholders.
The Transaction will allow Old Mutual to accelerate the reduction of group
debt and return surplus capital arising from the Transaction to
shareholders. Old Mutual will also reassess its debt repayment plan.
Old Mutual`s strategy will continue to be that of building a long-term
savings, protection and investment group by leveraging the strength of its
people and capabilities in South Africa and around the world. Old Mutual
is confident of meeting the targets it has set and will continue to reduce
the complexity of the Group and improve its structure. Following the
Transaction Old Mutual will retain ownership of, and will continue to use,
the Skandia brand in markets outside Sweden, Denmark and Norway.
Benefits for Skandia Liv
Skandia Liv has informed Old Mutual that it expects the Transaction to
result in the following benefits for Skandia Liv and its policyholders:
* The creation of a Nordic market champion under a unified
ownership structure that provides the best available platform for
long-term growth;
* A lean operating structure allowing increased efficiency and
realisation of significant synergies. Skandia Liv considers that
the existing Hybrid Structure creates operational inefficiencies
which the Transaction removes; and
* Accelerated product development plans enabling Skandia Liv to
offer a wider product range at an attractive price level to
existing and new policyholders.
The Transaction is in line with Skandia Liv`s investment strategy of
seeking to increase the proportion of its investment fund held in unlisted
equity. The Purchase Price would have represented approximately 8 percent
of Skandia Liv`s investment assets as at 31 December 2010. Skandia Liv
believes that following the Transaction its solvency and debt coverage
ratios will continue to be substantially above the requirements of the
Swedish FSA. Skandia Liv also believes its investment fund will be in a
position to continue to provide attractive long-term returns to Skandia Liv
policyholders.
In addition to receiving independent financial advice, Skandia Liv has also
received fairness opinions in relation to the terms of the Transaction from
two well-known investment banks.
3. Use of proceeds
Old Mutual expects the net cash consideration of SEK22.4 billion (GBP2.1
billion) to be available to the Group since it is expected that no UK tax
will be payable by Old Mutual on the Purchase Price as a result of the
substantial shareholder exemption.
Old Mutual intends to use the proceeds to reduce group debt and return
surplus capital arising as a result of the Transaction to shareholders.
The timing and process for implementing further debt reduction will be
determined based on optimising the benefits for Old Mutual shareholders,
the Group and market conditions.
Old Mutual intends to provide further details of the amount of surplus
capital to be returned to shareholders in the circular to shareholders
which is expected to be sent to shareholders in February 2012. The process
and timing for returning capital to shareholders will be determined
following detailed analysis and taking account, so far as possible, of the
differing jurisdictions and taxation positions of our shareholder base.
Old Mutual intends to provide an update on the mechanism by which to return
capital to shareholders no later than its 2011 preliminary results
presentation on 9 March. Further shareholder approvals may be required to
implement the intended return of capital to shareholders.
4. Principal terms and conditions of the Disposal
Structure
A new foundation (the "Foundation") has been established by Skandia Liv as
a Swedish legal entity acting in the interest of Skandia Liv policyholders.
Under the terms of the share sale agreement (the "Sale Agreement"), at
Completion, Old Mutual will sell its entire shareholding in Skandia Liv to
the Foundation for SEK600,000. Following this, Skandia Liv will be
established as a standalone entity, separate from Old Mutual. Skandia Liv
will then immediately acquire Nordic from Old Mutual for the Purchase
Price.
The directors of the Foundation are Bo Eklof, Leif Goran Victorin and Kajsa
LindstAhl.
The Sale Agreement contains representations, warranties, covenants and
indemnities given by Old Mutual to Skandia Liv and the Foundation and from
Skandia Liv and the Foundation to Old Mutual which are customary for a
transaction of this nature.
Brand
Old Mutual will retain ownership of and continue to use the Skandia brand
following Completion in markets outside of Sweden, Denmark and Norway as it
implements its long-term savings strategy. Skandia Liv will have ownership
of and continue to use the Skandia brand in Sweden, Denmark and Norway.
Chinese JV
Old Mutual has a joint venture in China with Guodian (the "China JV"). Old
Mutual`s stake in the China JV is held through Nordic.
Nordic is in the process of transferring its stake in the China JV to Old
Mutual South Africa (the "Transfer"). The Transfer remains subject to
receipt of Chinese regulatory approval. Old Mutual South Africa will pay
the consideration to Nordic with respect to the Transfer. It has been
agreed as part of the Sale Agreement that this consideration will be paid
on by Nordic to Old Mutual plc.
As part of the Sale Agreement, Old Mutual has provided certain indemnities
to Skandia Liv with respect to the China JV.
Approvals and Consents
Owing to the size of the Transaction relative to the size of Old Mutual,
the Transaction constitutes a Class 1 transaction for the purpose of the
Listing Rules. In addition, in view of the fact that Leif Goran Victorin
is a director of Skandia Liv and also a director of the Foundation, the
Transaction is categorised as a related party transaction under the terms
of the Listing Rules.
Accordingly, the Transaction is conditional, amongst other things, upon
obtaining the approval of Old Mutual shareholders by ordinary resolution at
an Extraordinary General Meeting. The Transaction does not require the
approval of Skandia Liv policyholders.
The Transaction is also subject to regulatory, competition authority and
other approvals and is expected to complete towards the end of the first
quarter of 2012.
If these approvals are not received or if certain of the other conditions
to Completion set out in the Sale Agreement are not satisfied or waived on
or before 30 April 2012, Old Mutual and Skandia Liv are entitled to
terminate the Sale Agreement by giving 25 business days` notice to the
other. If the approvals and conditions precedent are fulfilled or waived
by parties to the Sale Agreement during that notice period, the parties are
required to proceed to Completion notwithstanding the service of any such
notice to terminate unless Old Mutual and Skandia Liv agree otherwise.
Consideration
The gross cash consideration to be paid by Skandia Liv is SEK 22.5 billion
(GBP2.1 billion) at Completion.
Net of remaining inter-company loans from Nordic to Old Mutual of SEK 97
million (GBP9 million) which will be repaid at or before Completion by Old
Mutual, the net cash consideration receivable by Old Mutual with respect to
the Transaction will be SEK22.4 billion (GBP2.1 billion).
Old Mutual will also receive interest on the Purchase Price at an
annualised rate of 5 percent with respect to the period from 20 February
2012 to Completion.
Pre-Signing Dividend
On 9 December 2011, Nordic paid a dividend to Old Mutual of SEK1.7 billion
(the "Pre-Signing Dividend") by way of a waiver of certain inter-company
loans from Nordic to Old Mutual. This had the effect of reducing the net
assets of Nordic by an equivalent amount.
Pre-Completion Dividend
After the date of this announcement but prior to Completion, Nordic will
pay a further dividend to Old Mutual of GBP10 million (the "Pre-Completion
Dividend"). This will have the effect of reducing the net assets of Nordic
by an equivalent amount. The Pre-Completion Dividend will have no impact
on the Purchase Price.
Further details of the Sale Agreement will be set out in the Circular to be
sent to shareholders in due course.
5. Management and employees
Skandia Liv has confirmed to Old Mutual that, following Completion of the
Transaction, the existing employment rights, including pension rights, of
all management and employees of Nordic will be fully safeguarded.
6. Financial effects of the Disposal
The net cash proceeds of SEK22.4 billion (GBP2.1 billion) represent
approximately 33 percent of Old Mutual`s market capitalisation as at 14
December 2011, being the last practicable date immediately prior to this
announcement. As set out above, it is intended that the proceeds will be
used to reduce group debt and return surplus capital arising as a result of
the Transaction to shareholders.
The removal of Nordic`s earnings from the Group`s results means the
Transaction is expected to reduce the Group`s total earnings. However, it
is expected that the Transaction will facilitate a reduction in group debt
and a return of surplus capital arising from the Transaction to Old Mutual
shareholders.
Old Mutual`s dividend policy will continue to have regard to the Group`s
overall capital requirements, liquidity and profitability, and targets a
dividend cover, in respect of ordinary dividends, of at least 2.5 times
IFRS adjusted operating profit over time.
7. Further information and details of the Transaction
A circular containing further details of the Transaction, including notice
of the Extraordinary General Meeting to seek Shareholders` approval for the
Transaction and the recommendation of the Board to vote in favour of the
Transaction, is expected to be sent to Shareholders in February 2012.
Appendix II
Sources and Bases
In this announcement, unless otherwise stated or the context otherwise
requires, the financial information relating to Nordic has been extracted
from the interim financial results of Old Mutual with respect to the six
months ended 30 June 2011 or the audited financial statements (as relevant)
for prior financial periods.
Exchange Rates
The exchange rates used to translate Swedish Krona (SEK) into Sterling in
this announcement are as follows:
For the Purchase Price and net cash consideration 10.8384
(this rate being the closing rate on 14 December
2011, being the latest practicable date prior to
the publication of this document)
For balance sheet or MCEV figures stated as at 30 10.1564
June 2011 (closing rate)
For income statement figures with respect to the 1H 10.3023
2011 period (average rate)
For balance sheet or MCEV figures stated as at 31 10.4227
December 2010 (closing rate)
For income statement figures with respect to the 11.1364
2010 full year period (average rate)
Nordic - Summary financial information
The table below sets out summary financial information for Nordic.
GBPm 1H 2011 FY 2010
(ended (ended
30 June 2011) 31 December 2010)
IFRS basis
Adjusted operating profit before 60 110
tax
Basic IFRS profit after tax 31 3
Gross assets 21,460 20,233
Net assets 1,885 1,683
Funds under management 14,046 13,953
MCEV basis
Adjusted operating MCEV earnings 78 65
before tax for the covered
business
Adjusted operating MCEV earnings 63 45
after tax for the covered
business
MCEV 1,812 1,836
Nordic - Pro-Forma Summary financial information
The table below sets out the net assets for Nordic as at 30 June 2011
adjusted for the Pre-Signing Dividend, the Pre-Completion Dividend and the
Transfer (the "Pro-Forma Net Assets").
The table below also sets out the MCEV for Nordic as at 30 June 2011
adjusted for the Pre-Completion Dividend, the Transfer and the net value of
investment hedges (the "Pro-Forma MCEV"). Note that no adjustment with
respect to the Pre-Signing Dividend is required for the calculation of the
Pro-Forma MCEV on the basis that the stated MCEV for Nordic as at 30 June
2011 already excluded inter-company loans from Nordic to Old Mutual. Note
also that the stated MCEV for Nordic in Old Mutual`s accounts takes into
account the allocated net value of investment hedges undertaken by the
Group which hedge the value of Old Mutual`s investment in Nordic. As at 30
June 2011, there was negative net value of the investment hedges of GBP151
million. An adjustment is therefore also made to the Pro-Forma MCEV to
remove this impact as the net value of investment hedges will reside with
Old Mutual post-Completion.
These figures are unaudited.
GBPm 1H 2011
(ended 30 June
2011)
IFRS basis
Net assets 1,885
Less: Pre-Signing Dividend (164)
Less: Pre-Completion Dividend (10)
Less: Book value of investment in China JV (32)
Pro-Forma Net Assets 1,678
MCEV basis
MCEV 1,812
Less: Pre-Signing Dividend n/a
Less: Pre-Completion Dividend (10)
Less: Book value of investment in China JV (32)
Add: Removal of allocation of Group net investment 151
hedge
Pro-Forma MCEV 1,921
Appendix III
Definitions
The following definitions apply throughout this announcement unless the
context otherwise requires:
"Bank of America Merrill Lynch International
Merrill Lynch"
"Board" the directors of Old Mutual. Lars Otterbeck is a
member of the boards of Old Mutual, Skandia AB and
Skandia Liv. Given the potential conflict of
interest, Lars Otterbeck has not participated in
any matters related to the Transaction
"Company" or "Old Old Mutual plc, a public limited company
Mutual" incorporated in England and Wales with registered
number 03591559 and with its registered office at
5th Floor, Old Mutual Place, 2 Lambeth Hill, London
EC4V 4GG
"Completion" completion of the sale of the Transaction pursuant
to the terms of the Sale Agreement
"China JV" Old Mutual`s joint venture in China with Guodian
(Old Mutual-Guodian Life Insurance Company Ltd)
"Deutsche Bank" Deutsche Bank AG, London Branch
"Evercore Evercore Partners International LLP
Partners"
"Extraordinary the extraordinary general meeting of the Company to
General Meeting" be held for Old Mutual shareholders to vote on the
Transaction, notice of which will be set out in the
Circular
"Foundation" the Swedish legal entity established by Skandia Liv
acting in the interest of Skandia Liv policyholders
to acquire Skandia Liv from Old Mutual
"IFRS" International Financial Reporting Standards as
adopted by the European Union
"Skandia Liv" Livforsakringsaktiebolaget Skandia (publ),
registered number 502019-6365, a limited liability
life insurance company incorporated under the laws
of Sweden
"Skandia Liv the directors of Skandia Liv
Board"
"Listing Rules" the rules and regulations made by the UK Listing
Authority pursuant to Section 74 of the Financial
Services and Markets Act 2000, as amended from time
to time
"MCEV" Old Mutual`s Market Consistent Embedded Value
methodology
"Morgan Stanley" Morgan Stanley & Co. Limited
"Nordic" Old Mutual`s long-term savings and banking
operations in Sweden, Denmark and Norway operating
under the Skandia brand. Skandia is the holding
company for Nordic
"Old Mutual Group" the Company and its subsidiaries as at the date of
or the "Group" this announcement
"Pre-Completion the dividend to be paid by Nordic to Old Mutual of
Dividend" GBP10 million prior to Completion
"Pre-Signing the dividend paid by Nordic to Old Mutual of SEK1.7
Dividend" billion on 9 December 2011 by way of a waiver of
certain inter-company loans from Nordic to Old
Mutual
"Purchase Price" the gross cash consideration of SEK22.5 billion
(GBP2.1 billion) payable to Old Mutual on
completion of the Transaction
"Sale Agreement" the binding agreement dated 14 December 2011
between Old Mutual and Skandia Liv relating to the
Sale
"SEK" Swedish Krona
"Skandia AB" Forsakringsaktiebolaget Skandia (publ) (the English
version of which is Skandia Insurance Company Ltd
(publ)), registered number 502017-3083, a limited
liability life insurance company incorporated under
the laws of Sweden
"Swedish FSA" Swedish Financial Supervisory Authority
"Transfer" the transfer by Nordic of its stake in the China JV
to Old Mutual South Africa or a nominee of Old
Mutual South Africa
"Transaction" the proposed sale by Old Mutual plc of Nordic
pursuant to and subject to the conditions of the
Sale Agreement
"United Kingdom" the United Kingdom of Great Britain and Northern
or "UK" Ireland
Date: 15/12/2011 09:00:01 Produced by the JSE SENS Department.
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