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OML
OLOML
OML - Old Mutual plc - Index to the financial information for the year ended
31 December 2011
OLD MUTUAL plc
Issuer code: OLOML
JSE Share code: OML
NSX share code: OLM
ISIN: GB0007389926
Old Mutual plc
Index to the financial information
For the year ended 31 December 2011
Statement of directors` responsibilities in respect of the preliminary
announcement of the Annual Report and the financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Reconciliation of adjusted operating profit to profit after tax
Consolidated statement of financial position
Condensed consolidated statement of cash flows
Consolidated statement of changes in equity
A1: Accounting policies
A2: Significant corporate activity and business changes
B: Segment information
C: Other key performance information
D: Other income statement notes
E: Borrowed funds
F: Other statement of financial position notes
G: Other notes
H: Discontinued operations and held for sale operations
Statement of directors` responsibilities in respect of the preliminary
announcement of the Annual Report and the financial statements
We confirm that to the best of our knowledge:
- The financial statements, prepared in accordance with the applicable set of
accounting standards, gives a true and fair view of the assets, liabilities,
financial position and profit of the Group and the undertakings included in
the consolidation taken as a whole;
- The Group Finance Director`s review and the Business review include a fair
view of the development and performance of the business and the position of
the Group and the undertakings included in the consolidation taken as a whole,
together with a description of the important events, principal risks and
uncertainties that they face.
Julian Roberts Philip Broadley
Group Chief Executive Group Finance Director
9 March 2012 9 March 2012
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2011
GBPm
Year ended Year ended
31 December 31 December
Notes 2011 2010*
Revenue
Gross earned premiums B3 3,584 3,460
Outward reinsurance (325) (300)
Net earned premiums 3,259 3,160
Investment return (non-banking) (567) 9,553
Banking interest and similar income 3,669 3,913
Banking trading, investment and similar income 217 199
Fee and commission income, and income
from service activities 3,035 2,823
Other income 171 149
Total revenues 9,784 19,797
Expenses
Claims and benefits (including change in
insurance contract provisions) (3,331) (4,956)
Reinsurance recoveries 123 222
Net claims and benefits incurred (3,208) (4,734)
Change in investment contract liabilities 1,889 (5,833)
Losses on loans and advances (458) (548)
Finance costs (58) (269)
Banking interest payable and similar
expenses (2,095) (2,441)
Fee and commission expenses, and other
acquisition costs (1,007) (917)
Other operating and administrative
expenses (3,852) (3,643)
Goodwill impairment C1(b) (264) (1)
Change in third-party interest in
consolidated funds 2 (299)
Total expenses (9,051) (18,685)
Share of associated undertakings and
joint ventures` profit after tax 10 5
Profit/(loss) on acquisition/disposal of
subsidiaries, associated undertakings
and strategic
investments C1(c) 251 (22)
Profit before tax 994 1,095
Income tax expense D1(a) (225) (391)
Profit from continuing operations after
tax 769 704
Discontinued operations
Profit/(loss) from discontinued
operations after tax H1(a) 198 (728)
Profit/(loss) after tax for the
financial year 967 (24)
Attributable to
Equity holders of the parent 667 (282)
Non-controlling interests
Ordinary shares F2(a) 238 196
Preferred securities F2(a) 62 62
Profit/(loss) after tax for the
financial year 967 (24)
Earnings per share
Basic earnings per share based on profit
from continuing operations (pence) 8.9 8.5
Basic earnings per share based on
profit/(loss) from discontinued
operations (pence) 4.0 (15.0)
Basic earnings per ordinary share (pence) C3(a) 12.9 (6.5)
Diluted earnings per share based on
profit from continuing operations (pence) 8.0 7.7
Diluted earnings per share based on
profit/(loss) from discontinued
operations (pence) 3.7 (13.8)
Diluted earnings per ordinary share
(pence) C3(a) 11.7 (6.1)
Weighted average number of shares -
millions C3(a) 4,935 4,859
* The year ended 31 December 2010 has been restated to reflect Nordic as
discontinued (see note A2).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2011
GBPm
Year ended Year ended
31 December 31 December
Notes 2011 2010*
Profit/(loss) after tax for the
financial year 967 (24)
Other comprehensive income for the
financial year
Fair value gain/(losses)
Property revaluation 39 26
Net investment hedge 28 (87)
Available-for-sale investments
Fair value (losses)/gains (1) 37
Recycled to the income statement (6) -
Shadow accounting (22) (15)
Currency translation
differences/exchange differences on
translating foreign operations (1,240) 882
Other movements (49) 17
Income tax relating to components of
other comprehensive income D1(c) 12 13
Total other comprehensive income for the
financial year from continuing
operations (1,239) 873
Total other comprehensive income for the
financial year from discontinued
operations H1(b) (161) 278
Total other comprehensive income for the
financial year (1,400) 1,151
Total comprehensive income for the
financial year (433) 1,127
Attributable to
Equity holders of the parent (408) 594
Non-controlling interests
Ordinary shares (87) 428
Preferred securities 62 105
Total comprehensive income for the
financial year (433) 1,127
* The year ended 31 December 2010 has been restated to reflect Nordic as
discontinued (see note A2).
RECONCILIATION OF ADJUSTED OPERATING PROFIT TO PROFIT
AFTER TAX
For the year ended 31 December 2011
GBPm
Year ended Year ended
31 December 31 December
Notes 2011 2010*
Core operations
Long-Term Savings B2 793 787
Nedbank B2 755 601
Mutual and Federal B2 89 103
USAM B2 67 72
1,704 1,563
Finance costs (128) (128)
Long term investment return on excess
assets 37 31
Net interest payable to non-core
operations (23) (39)
Corporate costs (57) (60)
Other net (expenses)/income (18) 4
Adjusted operating profit before tax 1,515 1,371
Adjusting items C1(a) (329) (392)
Non-core operations B2 (183) 15
Profit before tax (net of policyholder
tax) 1,003 994
Income tax attributable to policyholder
returns B2 (9) 101
Profit before tax 994 1,095
Total tax expense D1(a) (225) (391)
Profit from continuing operations after
tax 769 704
Profit/(loss) from discontinued
operations after tax H1(a) 198 (728)
Profit/(loss) after tax for the
financial year 967 (24)
Adjusted operating profit after tax attributable to ordinary equity holders of
the parent
GBPm
Year ended Year ended
31 December 31 December
2011 2010*
Notes
Adjusted operating profit before tax 1,515 1,371
Tax on adjusted operating profit D1(d) (341) (327)
Adjusted operating profit after tax 1,174 1,044
Non-controlling interests - ordinary
shares F2(a) (257) (217)
Non-controlling - preferred securities F2(a) (62) (62)
Adjusted operating profit after tax
attributable to ordinary equity holders
of the parent 855 765
Adjusted weighted average number of
shares (millions) C3(a) 5,435 5,359
Adjusted operating earnings per share
(pence) C3(b) 15.7 14.3
* The year ended 31 December 2010 has been restated to reflect Nordic as
discontinued and non-core (see note A2).
Basis of preparation
The reconciliation of adjusted operating profit has been prepared so as to
reflect the directors` view of the underlying long-term performance of the
Group. The statement reconciles adjusted operating profit to profit after tax
as reported under IFRS as adopted by the EU.
For core life assurance and general insurance businesses, adjusted operating
profit is based on a long-term investment return, including investment returns
on life funds` investments in Group equity and debt instruments, and is stated
net of income tax attributable to policyholder returns. For the US Asset
Management business it includes compensation costs in respect of certain long-
term incentive schemes defined as non-controlling interests in accordance with
IFRS. For all core businesses, adjusted operating profit excludes goodwill
impairment, the impact of acquisition accounting, revaluations of put options
related to long-term incentive schemes, profit/(loss) on acquisition/disposal
of subsidiaries, associated undertakings and strategic investments, and fair
value profits/(losses) on certain Group debt movements but includes dividends
declared to holders of perpetual preferred callable securities. Bermuda, which
is non-core, and Nordic and US Life, which are discontinued and non-core, are
not included in adjusted operating profit.
Adjusted operating earnings per share is calculated on the same basis as
adjusted operating profit. It is stated after tax attributable to adjusted
operating profit and non-controlling interests. It excludes income
attributable to Black Economic Empowerment trusts of listed subsidiaries. The
calculation of the adjusted weighted average number of shares includes own
shares held in policyholders` funds and Black Economic Empowerment trusts.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December 2011
GBPm
At At
31 December 31 December
Notes 2011 2010
Assets
Goodwill and other intangible assets 3,358 4,965
Mandatory reserve deposits with central banks 951 1,079
Property, plant and equipment 925 1,015
Investment property 2,064 2,040
Deferred tax assets 339 416
Investments in associated undertakings
and joint ventures 111 162
Deferred acquisition costs 1,351 1,534
Reinsurers` share of policyholder
liabilities 989 1,104
Loans and advances 39,764 51,778
Investments and securities 81,253 106,153
Current tax receivable 138 156
Client indebtedness for acceptances 237 190
Trade, other receivables and other assets 3,348 3,934
Derivative financial instruments - assets 1,795 2,503
Cash and cash equivalents 3,624 4,132
Non-current assets held for sale H2 22,138 12,391
Total assets 162,385 193,552
Liabilities
Life assurance policyholder liabilities 76,350 98,631
General insurance liabilities 325 397
Third-party interests in consolidated
funds 1,893 3,584
Borrowed funds E1 3,656 4,204
Provisions F1 269 260
Deferred revenue 701 730
Deferred tax liabilities 504 858
Current tax payable 199 238
Trade, other payables and other
liabilities 4,243 5,661
Liabilities under acceptances 237 190
Amounts owed to bank depositors 40,978 53,236
Derivative financial instruments -
liabilities 1,755 1,870
Non-current liabilities held for sale H2 20,417 12,219
Total liabilities 151,527 182,078
Net assets 10,858 11,474
Shareholders` equity
Equity attributable to equity holders of
the parent 8,488 8,951
Non-controlling interests
Ordinary shares F2(b) 1,652 1,763
Preferred securities F2(b) 718 760
Total non-controlling interests 2,370 2,523
Total equity 10,858 11,474
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2011
GBPm
Year ended Year ended
31 December 31 December
2011 2010*
Cash flows from operating activities - continuing
operations
Profit before tax 994 1,095
Non-cash movements in profit before tax 1,372 (515)
Changes in working capital (1,415) 3,195
Taxation paid (402) (356)
Net cash inflow from operating activities -
continuing operations 549 3,419
Cash flows from investing activities
Net disposals/(acquisitions) of financial
investments 43 (2,349)
Acquisition of investment properties (57) (162)
Proceeds from disposal of investment properties 6 272
Acquisition of property, plant and equipment (184) (145)
Proceeds from disposal of property, plant and
equipment 43 -
Acquisition of intangible assets (91) (76)
Acquisition of interests in subsidiaries,
associated undertakings and strategic investments 103 (75)
Disposal of interests in subsidiaries, associated
undertakings and strategic investments (329) (16)
Net cash outflow from investing activities -
continuing operations (466) (2,551)
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company (97) (102)
Non-controlling interests and preferred security
interests (206) (196)
Interest paid (excluding banking interest paid) (87) (79)
Proceeds from issue of ordinary shares (including
by subsidiaries to non-controlling interests) 10 5
Net acquisition of treasury shares (17) (25)
Issue of subordinated and other debt 890 492
Subordinated and other debt repaid (905) (104)
Net cash outflow from financing activities -
continuing operations (412) (9)
Net (decrease)/increase in cash and cash
equivalents - continuing operations (329) 859
Net increase/(decrease) in cash and cash
equivalents - discontinued operations 346 (364)
Effects of exchange rate changes on cash and cash
equivalents (594) 376
Cash and cash equivalents at beginning of the year 5,632 4,761
Cash and cash equivalents at end of the year 5,055 5,632
Consisting of
Cash and cash equivalents in the statement of
financial position 3,624 4,132
Mandatory reserve deposits with central banks 951 1,079
Cash and cash equivalents included in assets held
for sale 480 421
Total 5,055 5,632
* The year ended 31 December 2010 has been restated to reflect Nordic as
discontinued (see note A2).
Cash flows presented in this statement include all cash flows relating to
policyholders` funds for life assurance.
Except for mandatory reserve deposits with central banks of GBP951 million
(2010: GBP1,079 million) and cash and cash equivalents subject to
consolidation of funds of GBP756 million (2010: GBP689 million), management do
not consider that there are any material amounts of cash and cash equivalents
which are not available for use in the Group`s day-to-day operations.
Mandatory reserve deposits are, however, included in cash and cash equivalents
for the purposes of the cash flow statement in line with market practice in
South Africa.
Included within the above is interest income received (including banking
interest) of GBP4,936 million (2010: GBP5,196 million), dividend income
received of GBP371 million (2010: GBP360 million) and interest paid (including
banking interest) of GBP2,143 million (2010: GBP2,198 million).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2011
Millions GBPm
Number of
shares issued Share
Year ended 31 December 2011 Notes and fully paid capital
Shareholders` equity at beginning of the
year 5,695 570
Profit after tax for the financial year - -
Other comprehensive income
Fair value gains/(losses)
Property revaluation - -
Net investment hedge - -
Available-for-sale investments
Fair value gains - -
Recycled to the income statement - -
Realised on disposal - -
Exchange differences realised on disposal - -
Shadow accounting - -
Currency translation differences/exchange
differences on
translating foreign operations - -
Other movements - -
Income tax relating to components of
other comprehensive
income D1(c) - -
Total comprehensive income for the
financial year - -
Dividends for the year C4 - -
Other movements in share capital and
payment reserve 7 -
Merger reserve realised in the year - -
Change in participation in subsidiaries F2 - -
Reclassification of translation
differences on non controlling
interests - -
Shares issued in lieu of cash dividend 99 10
Transactions with shareholders 106 10
Shareholders` equity at end of the year 5,801 580
GBPm
Available-
Share Merger for-sale
Year ended 31 December 2011 premium reserve reserve
Shareholders` equity at beginning of the
year 795 2,845 225
Profit after tax for the financial year - - -
Other comprehensive income
Fair value gains/(losses)
Property revaluation - - -
Net investment hedge - - -
Available-for-sale investments
Fair value gains - - 51
Recycled to the income statement - - (10)
Realised on disposal - - (157)
Exchange differences realised on disposal - - -
Shadow accounting - - (58)
Currency translation differences/exchange
differences on
translating foreign operations - - -
Other movements - - -
Income tax relating to components of other
comprehensive income - - 2
Total comprehensive income for the
financial year - - (172)
Dividends for the year - - -
Other movements in share capital and
payment reserve 10 - -
Merger reserve realised in the year - (313)
Change in participation in subsidiaries - - -
Reclassification of translation differences
on non controlling interests - - -
Shares issued in lieu of cash dividend - - -
Transactions with shareholders 10 (313) -
Shareholders` equity at end of the year 805 2,532 53
Millions GBPm
Number of
shares issued Share
Notes and fully paid capital
Year ended 31 December 2010
Shareholders` equity at beginning of the
year 5,518 552
Loss after tax for the financial year - -
Other comprehensive income
Fair value gains/(losses)
Property revaluation - -
Net investment hedge - -
Available-for-sale investments
Fair value gains - -
Recycled to the income statement - -
Shadow accounting - -
Currency translation differences/exchange
differences on translating foreign
operations - -
Other movements - -
Income tax relating to components of
other comprehensive income D1(c) - -
Total comprehensive income for the
financial year - -
Dividends for the year C4 - -
Other movements in share capital and
payment reserve 6 1
Acquisition of non-controlling interest
in Mutual & Federal F2 147 15
Change in participation in other
subsidiaries F2 - -
Shares issued in lieu of cash dividend 24 2
Transactions with shareholders 177 18
Shareholders` equity at end of the year 5,695 570
GBPm
Available-
Share Merger for-sale
premium reserve reserve
Year ended 31 December 2010
Shareholders` equity at beginning of the
year 771 2,716 82
Loss after tax for the financial year - - -
Other comprehensive income
Fair value gains/(losses)
Property revaluation - - -
Net investment hedge - - -
Available-for-sale investments
Fair value gains - - 562
Recycled to the income statement - - (12)
Shadow accounting - - (343)
Currency translation differences/exchange
differences on
translating foreign operations - - -
Other movements - - 2
Income tax relating to components of other
comprehensive income - - (66)
Total comprehensive income for the
financial year - - 143
Dividends for the year - - -
Other movements in share capital and
payment reserve 7 - -
Acquisition of non-controlling interest in
Mutual & Federal - 129 -
Change in participation in other
subsidiaries - - -
Shares issued in lieu of cash dividend 17 - -
Transactions with shareholders 24 129 -
Shareholders` equity at end of the year 795 2,845 225
Property Share-based GBPm
revaluation payments Other Translation Retained
reserve reserve reserves reserve earnings
101 215 5 1,176 2,331
- - - - 635
30 - - - -
- - - 28 -
- - - - -
- (1) - - -
- - - - -
- - - 24 -
(7) - - - -
- - - (970) -
- (34) - - 15
- - - - -
23 (35) - (918) 650
- - - - (221)
- 50 - - (17)
- - - - 313
- - - - -
- - - 43 -
- - - - 114
- 50 - 43 189
124 230 5 301 3,170
Perpetual Attributable Total GBPm
preferred to equity non-
callable holders of controlling Total
securities the parent interests equity
688 8,951 2,523 11,474
32 667 300 967
- 30 9 39
- 28 - 28
- 51 (1) 50
- (11) - (11)
- (157) - (157)
- 24 - 24
- (65) - (65)
- (970) (313) (1,283)
- (19) (20) (39)
12 14 - 14
44 (408) (25) (433)
(44) (265) (162) (427)
- 43 16 59
- - - -
- - 61 61
- 43 (43) -
- 124 - 124
(44) (55) (128) (183)
688 8,488 2,370 10,858
Property Share-based GBPM
revaluation payments Other Translation Retained
reserve reserve reserves reserve earnings
87 191 11 469 2,897
- - - - (314)
21 - - - -
- - - (87) -
- - - - -
- - - - -
(6) - - - -
- - - 794 -
(1) 20 (6) - (14)
- - - - -
14 20 (6) 707 (328)
- (131)
- 4 - - (25)
- - - - (93)
- - - - -
- - - - 11
- 4 - - (238)
101 215 5 1,176 2,331
GBPm
Perpetual Total
preferred Attributable to non-
callable equity holders controlling Total
securities of the parent interests equity
688 8,464 2,247 10,711
32 (282) 258 (24)
- 21 5 26
- (87) - (87)
- 562 - 562
- (12) - (12)
- (349) - (349)
- 794 274 1,068
- 1 (4) (3)
12 (54) - (54)
44 594 533 1,127
(44) (175) (152) (327)
- (13) 3 (10)
- 51 (51) -
- - (57) (57)
- 30 - 30
(44) (107) (257) (364)
688 8,951 2,523 11,474
Retained earnings were reduced in respect of own shares held in policyholders`
funds, ESOP trusts, Black Economic Empowerment trusts and other related
undertakings at 31 December 2011 by GBP501 million (2010: GBP478 million).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2011
A1: Accounting policies
Basis of preparation
The consolidated financial information contained herein has been prepared in
accordance with the recognition and measurement principles of International
Financial Reporting Standards adopted by the EU. The Group`s results for the
year ended 31 December 2011 and the position at that date have been prepared
using accounting policies consistent with those applied in the preparation of
the Group`s 2010 Annual Report and Accounts.
The consolidated financial statements have been prepared on the going concern
basis which the directors believe to be appropriate.
The financial information set out herein does not constitute the Company`s
statutory accounts for the years ended 31 December 2011 or 2010. Statutory
accounts for 2010 have been delivered to the Registrar of Companies, and those
for 2011 will be delivered in due course. The auditor has reported on those
accounts; the reports were (i) unqualified, (ii) did not include references to
any matters to which the auditor draws attention by way of emphasis without
qualifying the reports, and (iii) did not contain statements under section
498(2) or (3) of the Companies Act 2006.
A2: Significant corporate activity and business changes
Disposal of US Life
As previously reported at 31 December 2010 the Group was in advanced stage
negotiations for the disposal of its life assurance operations in the United
States, which represented almost the entirety of the US Life operating
segment. Following US regulatory approval the disposal of US Life was
completed on 7 April 2011. The sale represented the Group`s exit from the life
assurance market in the United States and therefore met the criteria of a
discontinued operation. For the purposes of adjusted operating profit US Life
has been classified as a discontinued and non-core operation and consequently
is not included.
Skandia Liv and the disposal of Nordic
In line with previous periods the consolidated financial statements do not
include the company Livforsakringsaktiebolaget Skandia (Skandia Liv) and its
subsidiaries. Skandia Liv`s business is a mutual life assurance company that
is highly regulated within a strict legal framework for mutual life assurance
companies in Sweden, particularly in relation to its relationship with its
holding company. The Group does not have the power to control Skandia Liv in
such a way as to access the benefits usually associated with share ownership
due to the legal and regulatory restrictions. Those benefits accrue to the
policyholders of Skandia Liv. Consequently, Skandia Liv is not consolidated.
The shares in Skandia Liv are accounted for in accordance with the accounting
policies for equity financial instruments.
As announced on 15 December 2011, the Group has agreed to sell the Nordic
business unit comprising the life assurance, asset management and banking
operations in Sweden, Denmark and Norway to Skandia Liv. As a result the
assets and liabilities of the Nordic disposal group have been classified as
held for sale in the statement of financial position for the current year in
accordance with IFRS 5. This sale will result in the Group`s exit from the
life assurance, asset management and banking operations in the Nordic region
and therefore meets the criteria of a discontinued operation. Consequently the
comparative information in the income statement, statement of comprehensive
income, statement of cash flows and the related notes have been restated where
applicable to reflect this. For the purposes of adjusted operating profit,
Nordic has been reclassified as a discontinued and non-core operation for the
year ended 31 December 2011 with the comparative restated accordingly.
Disposal of the Finnish branch in Wealth Management
On 21 December 2011 the Group announced that it had agreed terms to sell the
Finnish branch of Wealth Management to OP-Pohjola osk. As a result of this the
assets and liabilities of the Finnish branch have been classified as held for
sale in the statement of financial position for the current year.
Further details of the impact for discontinued operations and disposal groups
are provided in notes H1 and H2. In addition, certain comparative information
has been revised in accordance with changes to presentation made in the
current year.
Consolidation of other African businesses
In preparing the consolidated financial statements for the year ended 31
December 2010 the Emerging Markets segment included its South African and
Namibian businesses but excluded all other African businesses. This was
consistent with prior periods. Nedbank and Mutual & Federal consolidated the
results of all African businesses under their control.
Following a period of greater political and currency stability in Zimbabwe and
an expectation that the Group will be able to extract benefits from its
Zimbabwean business the Group re-evaluated its ability to control this
business within the meaning of accounting standards. As a result the Group`s
Zimbabwean business has been consolidated for the first time together with
operations in Kenya, Malawi, Swaziland and Nigeria (collectively the other
African businesses), with this being effective from 1 January 2011.
The acquisition has been accounted for at the net asset value of the
underlying businesses on 1 January 2011, being the fair value of the Group`s
investment in these operations for the assets and liabilities acquired. Deemed
consideration for the acquisition is the fair value of the Group`s investment
immediately prior to control. The result was a gain for the Group in these
businesses that is accounted for as a profit on acquisition in the year. This
profit has been excluded from adjusted operating profit. On initial
recognition the assets directly associated with other African businesses
consisted of GBP290 million of investment property, GBP576 million of
investments and securities and GBP115 million of other assets, with
liabilities at this time being GBP624 million of policyholder liabilities and
GBP108 million of other liabilities.
The trading results of the other African businesses for the year ending 31
December 2011 have been included in the Group`s income statement and adjusted
operating profit. In anticipation of the indigenisation of the Zimbabwe
business a non-controlling interest adjustment has been included for this
operation in respect of adjusted operating profit to reflect the most likely
expected indigenous shareholding to be provided. At 31 December 2011 the Group
retained a 100% holding in the ordinary shares of Zimbabwe and consequently
the operation has been consolidated as a wholly owned subsidiary for the
purposes of IFRS reporting.
B: Segment information
B1: Basis of segmentation
The Group`s results are analysed and reported on a basis consistent with the
way that management and the Board of Directors considers information when
making operating decisions and the basis on which resources are allocated and
performance assessed by management and the Board of Directors, being in line
with that reported in the previous financial year. This information is
presented to the Board in local currency, however this note is presented in
pounds sterling, the presentation currency of the Group. As detailed in note
A2, Nordic has been reclassified as discontinued and as a result also non-
core, with the comparative segment information restated accordingly, resulting
in a reduction in adjusted operating profit before tax and non-controlling
interests of GBP110 million for the year ended 31 December 2010.
There are four principal business activities from which the Group generates
revenues. These are life assurance (premium income), asset management business
(fee and commission income), banking (banking interest receivable) and general
insurance (premium income). The revenues generated in each reported segment
can be seen in the analysis of profits and losses in note B2.
The information reflects the measures of profit and loss, assets and
liabilities for each operating segment as regularly provided to management and
the Board of Directors. There are no differences between the measurement of
the assets and liabilities reflected in the primary statements and that
reported for the segments. A reconciliation between the segment revenues and
expenses and the Group`s revenues and expenses is shown in note B2.
In line with internal reporting, assets, liabilities, revenues or expenses
that are not directly attributable to a particular segment are allocated
between segments where appropriate and where there is a reasonable basis for
doing so. The Group accounts for inter-segment revenues and transfers as if
the transactions were with third parties at current market prices. Given the
nature of the operations, there are no major customers within any of the
segments.
The types of products and services from which each operating segment derives
its revenues are as follows:
Core operations
Long Term Savings
Emerging Markets - life assurance and asset management
Retail Europe - life assurance and asset management
Wealth Management - life assurance and asset management
Other core operations
Nedbank - banking and asset management
Mutual & Federal - general insurance
US Asset Management - asset management
Other - other operating segments and business activities
Discontinued and non-core operations
Bermuda - life assurance (non-core)
Nordic - life assurance, asset management and banking (discontinued and non-
core)
US Life - life assurance (discontinued and non-core)
Income statement segmentation
For the IFRS income statement Nordic and US Life have been classified as
discontinued operations. All other businesses including Bermuda are classified
as continuing.
The profits of the Nordic, US Life and Bermuda businesses are excluded in
determining adjusting operating profit in both periods, on the basis that they
are either discontinued (Nordic and US Life) or non-core (Bermuda).
Statement of financial position segmentation
The segmental analysis of the statement of financial position at both 31
December 2011 and 31 December 2010 discloses Bermuda as non-core, consistent
with the treatment of the business for AOP purposes.
Nordic is disclosed as discontinued in the statement of financial position
consistent with the income statement classification. The agreement to dispose
of Nordic announced on 15 December 2011 resulted in the assets and liabilities
of the business being classified as held for sale at 31 December 2011. For the
corresponding period Nordic has been reported on a line by line basis.
US Life is disclosed as discontinued at 31 December 2010, being classified as
held for sale. The disposal of US Life was completed on 7 April 2011.
Adjusted operating profit is one of the key measures reported to the Group`s
management and Board of Directors for their consideration in the allocation of
resources to and the review of performance of the segments. The Group utilises
additional measures to assess the performance of each of the segments, in
particular the level of net client cash flows and funds under management.
Additional performance measures considered by management and the Board of
Directors in assessing the performance of the segments can be found in the
Market Consistent Embedded Value basis supplementary information.
In the analysis that follows, consolidation adjustments include the
elimination of inter-segment revenues, expenses, assets and liabilities
together with the impacts of the consolidation of the Group`s interest in unit
trusts, mutual funds and similar entities.
B2: Adjusted operating profit statement - segment information year ended 31
December 2011
Long-Term Savings
Emerging Retail
Markets Europe
Revenue
Gross earned premiums 2,542 30
Outward reinsurance (88) (8)
Net earned premiums 2,454 22
Investment return (non-banking) 2,626 (214)
Banking interest and similar income - -
Banking trading, investment and similar income - -
Fee and commission income, and income from service
activities 411 201
Other income 68 2
Inter-segment revenues 66 5
Total revenues 5,625 16
Expenses
Claims and benefits (including change in insurance
contract provisions) (2,854) (20)
Reinsurance recoveries 73 3
Net claims and benefits incurred (2,781) (17)
Change in investment contract liabilities (925) 226
Losses on loans and advances - (1)
Finance costs (including interest and similar
expenses) - -
Banking interest payable and similar expenses - -
Fee and commission expenses, and other acquisition
costs (223) (84)
Other operating and administrative expenses (1,076) (93)
Goodwill impairment - -
Change in third-party interest in consolidated funds - -
Income tax attributable to policyholder returns (53) -
Inter-segment expenses (7) (3)
Total expenses (5,065) 28
Share of associated undertakings` and joint ventures`
profit after tax 10 -
Profit on disposal of subsidiaries, associated
undertakings and strategic
investments - -
Adjusted operating profit/(loss) before tax and
non-controlling interests 570 44
Income tax expense (120) (11)
Non-controlling interests (3) -
Adjusted operating profit/(loss) after tax and
non-controlling interests 447 33
Adjusting items net of tax and non-controlling
interests 126 (30)
Profit/(loss) after tax from continuing operations 573 3
Profit from discontinued operations after tax - -
Profit/(loss) after tax attributable to equity
holders of the parent 573 3
Total
Wealth Long-Term
Management Savings
Revenue
Gross earned premiums 274 2,846
Outward reinsurance (80) (176)
Net earned premiums 194 2,670
Investment return (non-banking) (2,664) (252)
Banking interest and similar income - -
Banking trading, investment and similar income - -
Fee and commission income, and income from service
activities 982 1,594
Other income 21 91
Inter-segment revenues 6 77
Total revenues (1,461) 4,180
Expenses
Claims and benefits (including change in insurance
contract provisions) (82) (2,956)
Reinsurance recoveries 6 82
Net claims and benefits incurred (76) (2,874)
Change in investment contract liabilities 2,588 1,889
Losses on loans and advances - (1)
Finance costs (including interest and similar expenses) - -
Banking interest payable and similar expenses - -
Fee and commission expenses, and other acquisition
costs (580) (887)
Other operating and administrative expenses (311) (1,480)
Goodwill impairment - -
Change in third-party interest in consolidated funds - -
Income tax attributable to policyholder returns 62 9
Inter-segment expenses (43) (53)
Total expenses 1,640 (3,397)
Share of associated undertakings` and joint ventures`
profit after tax - 10
Profit on disposal of subsidiaries, associated
undertakings and strategic
investments - -
Adjusted operating profit/(loss) before tax and
non-controlling interests 179 793
Income tax expense (15) (146)
Non-controlling interests - (3)
Adjusted operating profit/(loss) after tax and
non-controlling interests 164 644
Adjusting items net of tax and non-controlling
interests (57) 39
Profit/(loss) after tax from continuing operations 107 683
Profit from discontinued operations after tax - -
Profit/(loss) after tax attributable to equity
holders of the parent 107 683
Of the total revenues, excluding intercompany revenues, (GBP1,492) million was
generated in the UK (2010: GBP5,143 million), (GBP81) million in rest of
Europe (2010: GBP1,160 million), GBP11,007 million in Southern Africa (2010:
GBP12,575 million), GBP270 million in United States (2010: GBP829 million) and
GBP80 million relates to other operating segments (2010: GBP90 million).
*Non-core operations relates to Bermuda with the exception of GBP22 million
and GBP5 million of inter-segment revenue and expenses and the profit from
discontinued operations after tax, with these reflecting the results of Nordic
and US Life both of which have been classified as discontinued operations as
detailed in notes A2 and B1. Bermuda loss after tax for 2011 was GBP201
million. Further detail on the results of discontinued operations is
provided in note H1.
GBPm
Consolidation
Nedbank M&F USAM Other adjustments
- 736 - - -
- (149) - - -
- 587 - - -
- 54 - 52 30
3,669 - - - -
217 - - - -
1,051 34 447 - -
50 - 10 - -
27 18 1 16 (185)
5,014 693 458 68 (155)
- (422) - - -
- 41 - - -
- (381) - - -
- - - - -
(457) - - - -
- - - (128) -
(2,091) - - - -
(9) (109) (12) - (24)
(1,641) (95) (379) (81) (8)
- - - - -
- - - - 2
- - - - -
(61) (19) - (48) 185
(4,259) (604) (391) (257) 155
- - - - -
- - - - -
755 89 67 (189) -
(188) (22) (8) 23 -
(269) (8) - (39) -
298 59 59 (205) -
16 (24) (260) 27 -
314 35 (201) (178) -
- - - - -
314 35 (201) (178) -
GBPm
Adjusted Adjusting Discontinued IFRS
operating items and non-core Income
profit (note C1) operations* statement
3,582 - 2 3,584
(325) - - (325)
3,257 - 2 3,259
(116) (241) (210) (567)
3,669 - - 3,669
217 - - 217
3,126 (91) - 3,035
151 - 20 171
(46) - 46 -
10,258 (332) (142) 9,784
(3,378) - 47 (3,331)
123 - - 123
(3,255) - 47 (3,208)
1,889 - - 1,889
(458) - - (458)
(128) 70 - (58)
(2,091) (4) - (2,095)
(1,041) 104 (70) (1,007)
(3,684) (154) (14) (3,852)
- (264) - (264)
2 - - 2
9 (9) - -
4 (4) -
(8,753) (257) (41) (9,051)
10 - - 10
- 251 - 251
1,515 (338) (183) 994
(341) 117 (1) (225)
(319) 19 - (300)
855 (202) (184) 469
(202) 202 - -
653 - (184) 469
- - 198 198
653 - 14 667
B2: Adjusted operating profit statement - segment information year ended 31
December 2010 (restated)
Long-Term Savings
Emerging
Markets Retail Europe
Revenue
Gross earned premiums 2,353 28
Outward reinsurance (72) (8)
Net earned premiums 2,281 20
Investment return (non-banking) 4,072 392
Banking interest and similar income - -
Banking trading, investment and similar income - -
Fee and commission income, and income from service
activities 372 198
Other income 72 -
Inter-segment revenues 54 5
Total revenues 6,851 615
Expenses
Claims and benefits (including change in insurance
contract provisions) (3,943) (25)
Reinsurance recoveries 83 5
Net claims and benefits incurred (3,860) (20)
Change in investment contract liabilities (1,261) (382)
Losses on loans and advances - (1)
Finance costs (including interest and similar
expenses) - -
Banking interest payable and similar expenses - -
Fee and commission expenses, and other acquisition
costs (219) (75)
Other operating and administrative expenses (941) (84)
Goodwill impairment - -
Change in third-party interest in consolidated funds - -
Income tax attributable to policyholder returns (32) -
Inter-segment expenses (2) (2)
Total expenses (6,315) (564)
Share of associated undertakings` and joint
ventures` profit after tax 3 -
Loss on disposal of subsidiaries, associated
undertakings and strategic
investments - -
Adjusted operating profit/(loss) before tax and
non-controlling interests 539 51
Income tax expense (146) (13)
Non-controlling interests (1) -
Adjusted operating profit/(loss) after tax and
non-controlling interests 392 38
Adjusting items net of tax and non-controlling
interests (1) (25)
Profit/(loss) after tax from continuing operations 391 13
Loss from discontinued operations after tax - -
Profit/(loss) after tax attributable to equity
holders of the parent 391 13
Total
Wealth Long-Term
Management Savings
Revenue
Gross earned premiums 351 2,732
Outward reinsurance (79) (159)
Net earned premiums 272 2,573
Investment return (non-banking) 4,409 8,873
Banking interest and similar income - -
Banking trading, investment and similar income - -
Fee and commission income, and income from service
activities 912 1,482
Other income 11 83
Inter-segment revenues 12 71
Total revenues 5,616 13,082
Expenses
Claims and benefits (including change in insurance
contract provisions) (303) (4,271)
Reinsurance recoveries 75 163
Net claims and benefits incurred (228) (4,108)
Change in investment contract liabilities (4,190) (5,833)
Losses on loans and advances - (1)
Finance costs (including interest and similar
expenses) - -
Banking interest payable and similar expenses - -
Fee and commission expenses, and other acquisition
costs (500) (794)
Other operating and administrative expenses (390) (1,415)
Goodwill impairment - -
Change in third-party interest in consolidated funds - -
Income tax attributable to policyholder returns (69) (101)
Inter-segment expenses (43) (47)
Total expenses (5,420) (12,299)
Share of associated undertakings` and joint ventures`
profit after tax 1 4
Loss on disposal of subsidiaries, associated
undertakings and strategic
investments - -
Adjusted operating profit/(loss) before tax and
non-controlling interests 197 787
Income tax expense (44) (203)
Non-controlling interests - (1)
Adjusted operating profit/(loss) after tax and
non-controlling interests 153 583
Adjusting items net of tax and non-controlling
interests (140) (166)
Profit/(loss) after tax from continuing operations 13 417
Loss from discontinued operations after tax - -
Profit/(loss) after tax attributable to equity
holders of the parent 13 417
*Non-core operations relates to Bermuda with the exception of GBP18 million
and GBP21 million of inter-segment revenue and expenses and the loss from
discontinued operations after tax, with these reflecting the results of Nordic
and US Life both of which have been classified as discontinued operations as
detailed in notes A2 and B1. Bermuda profit after tax for 2010 was GBP22
million. Further detail on the results of discontinued operations is provided
in note H1.
GBPm
Adjusted
Consolidation operating
Nedbank M&F USAM Other adjustments profit
- 728 - - - 3,460
- (140) - - - (299)
- 588 - - - 3,161
- 56 1 76 340 9,346
3,913 - - - - 3,913
199 - - - - 199
946 28 465 1 - 2,922
35 - 9 (1) 1 127
20 20 4 29 (207) (63)
5,113 692 479 105 134 19,605
- (436) - - - (4,707)
- 58 - - - 221
- (378) - - - (4,486)
- - - - - (5,833)
(548) - - 1 - (548)
- - - (128) - (128)
(2,422) - - - - (2,422)
(3) (109) (23) - (29) (958)
(1,485) (83) (384) (93) (13) (3,473)
- - - - - -
- - - (299) (299)
- - - - - (101)
(54) (20) - (77) 207 9
(4,512) (590) (407) (297) (134) (18,239)
- 1 - - - 5
- - - - - -
601 103 72 (192) - 1,371
(128) (24) (13) 41 - (327)
(232) (5) - (41) - (279)
241 74 59 (192) - 765
10 (11) (20) (151) - (338)
251 63 39 (343) - 427
- - - - - -
251 63 39 (343) - 427
GBPm
Adjusting Discontinued IFRS
items (note and non-core Income
C1) operations* statement
- - 3,460
- (1) (300)
- (1) 3,160
(92) 299 9,553
- - 3,913
- - 199
(99) - 2,823
- 22 149
- 63 -
(191) 383 19,797
- (249) (4,956)
- 1 222
- (248) (4,734)
- - (5,833)
- - (548)
(141) - (269)
(19) - (2,441)
126 (85) (917)
(144) (26) (3,643)
(1) - (1)
- - (299)
101 - -
- (9) -
(78) (368) (18,685)
- - 5
(22) - (22)
(291) 15 1,095
(68) 4 (391)
21 - (258)
(338) 19 446
338 - -
- 19 446
- (728) (728)
- (709) (282)
B3: Gross earned premiums
GBPM
Emerging Retail Wealth Long-Term
Year ended 31 December 2011 Markets Europe Management Savings
Life assurance - insurance
contracts 1,567 30 274 1,871
Life assurance - investment
contracts with discretionary
participation features 975 - - 975
General insurance - - - -
Gross earned premiums 2,542 30 274 2,846
Life assurance - other
investment contracts
recognised as deposits 2,088 666 5,740 8,494
GBPm
Year ended 31 December 2011 M&F Bermuda Total
Life assurance - insurance contracts - 2 1,873
Life assurance - investment contracts with
discretionary participation features - - 975
General insurance 736 - 736
Gross earned premiums 736 2 3,584
Life assurance - other investment
contracts recognised as deposits - - 8,494
GBPm
Emerging Retail Wealth Long-Term
Markets Europe Management Savings
Year ended 31 December 2010
Life assurance - insurance
contracts 1,498 28 351 1,877
Life assurance - investment
contracts with discretionary
participation features 855 - - 855
General insurance - - - -
Gross earned premiums 2,353 28 351 2,732
Life assurance - other
investment contracts
recognised as deposits 1,829 656 6,287 8,772
GBPm
Total
M&F Bermuda Restated
Year ended 31 December 2010
Life assurance - insurance contracts - - 1,877
Life assurance - investment contracts with
discretionary participation features - - 855
General insurance 728 - 728
Gross earned premiums 728 - 3,460
Life assurance - other investment
contracts recognised as deposits - - 8,772
B4: Statement of financial position - segment information year ended 31
December 2011
GBPm
Emerging
At 31 December 2011 Notes Markets Retail Europe
Assets
Goodwill and other intangible assets 104 474
Mandatory reserve deposits with central
banks - -
Property, plant and equipment 374 3
Investment property 1,666 -
Deferred tax assets 81 22
Investments in associated undertakings
and joint ventures 32 -
Deferred acquisition costs 113 334
Reinsurers` share of policyholder
liabilities 31 8
Loans and advances 299 1
Investments and securities 30,064 4,188
Current tax receivable 10 9
Client indebtedness for acceptances - -
Trade, other receivables and other assets 711 56
Derivative financial instruments - assets 298 -
Cash and cash equivalents 339 108
Non-current assets held for sale H2(a) - -
Inter-segment assets 1,025 52
Total assets 35,147 5,255
Liabilities
Life assurance policyholder liabilities 30,270 4,201
General insurance liabilities - -
Third-party interests in consolidated
funds - -
Borrowed funds E1 239 -
Provisions F1 137 4
Deferred revenue 17 219
Deferred tax liabilities 185 102
Current tax payable 120 16
Trade, other payables and other
liabilities 1,667 77
Liabilities under acceptances - -
Amounts owed to bank depositors - -
Derivative financial instruments -
liabilities 230 -
Non-current liabilities held for sale H2(a) - -
Inter-segment liabilities 141 1
Total liabilities 33,006 4,620
Net assets 2,141 635
Equity
Equity attributable to equity holders of
the parent 2,144 635
Non-controlling interests (3) -
Ordinary shares F2(b) (3) -
Preferred securities F2(b) - -
Total equity 2,141 635
GBPm
Total
Wealth Long-Term
At 31 December 2011 Management Savings
Assets
Goodwill and other intangible assets 1,282 1,860
Mandatory reserve deposits with central banks - -
Property, plant and equipment 13 390
Investment property - 1,666
Deferred tax assets 43 146
Investments in associated undertakings and joint
ventures - 32
Deferred acquisition costs 830 1,277
Reinsurers` share of policyholder liabilities 836 875
Loans and advances 189 489
Investments and securities 37,320 71,572
Current tax receivable 61 80
Client indebtedness for acceptances - -
Trade, other receivables and other assets 254 1,021
Derivative financial instruments - assets - 298
Cash and cash equivalents 408 855
Non-current assets held for sale 1,161 1,161
Inter-segment assets 86 1,163
Total assets 42,483 82,885
Liabilities
Life assurance policyholder liabilities 37,958 72,429
General insurance liabilities - -
Third-party interests in consolidated funds - -
Borrowed funds - 239
Provisions 60 201
Deferred revenue 454 690
Deferred tax liabilities 87 374
Current tax payable 23 159
Trade, other payables and other liabilities 596 2,340
Liabilities under acceptances - -
Amounts owed to bank depositors - -
Derivative financial instruments - liabilities - 230
Non-current liabilities held for sale 1,120 1,120
Inter-segment liabilities 461 603
Total liabilities 40,759 78,385
Net assets 1,724 4,500
Equity
Equity attributable to equity holders of the parent 1,724 4,503
Non-controlling interests - (3)
Ordinary shares - (3)
Preferred securities - -
Total equity 1,724 4,500
GBPm
Consolidation
Nedbank M&F USAM Other adjustments
557 23 904 13 -
951 - - -
502 21 11 1 -
49 - - - 349
21 14 165 (8) -
49 1 2 27 -
- 16 9 - -
16 98 - - -
39,274 1 - - -
6,403 416 41 216 874
56 2 - - -
237 - - - -
943 75 126 54 293
1,022 - - 86 388
1,071 113 197 467 756
1 - 16 - -
206 23 21 1,136 (3,155)
51,358 803 1,492 1,992 (495)
815 - - - -
- 325 - - -
- - - - 1,893
2,273 - 11 1,133 -
- 32 3 33 -
1 10 - - -
93 13 - 24 -
10 - (3) 32 -
1,123 108 219 96 348
237 - - - -
40,978 - - - -
1,103 - - 3 419
- - 8 - -
501 2 598 1,451 (3,155)
47,134 490 836 2,772 (495)
4,224 313 656 (780) -
2,347 294 625 (1,226) -
1,877 19 31 446 -
1,605 19 31 - -
272 - - 446 -
4,224 313 656 (780) -
GBPm
Non-core
operations - Discontinued
Bermuda operations* Total
1 - 3,358
- - 951
- - 925
- - 2,064
1 - 339
- - 111
49 - 1,351
- - 989
- - 39,764
1,731 - 81,253
- - 138
- - 237
836 - 3,348
1 - 1,795
165 - 3,624
- 20,960 22,138
566 40 -
3,350 21,000 162,385
3,106 - 76,350
- - 325
- - 1,893
- - 3,656
- - 269
- - 701
- - 504
1 - 199
9 - 4,243
- - 237
- - 40,978
- - 1,755
- 19,289 20,417
- - -
3,116 19,289 151,527
234 1,711 10,858
234 1,711 8,488
- - 2,370
- 1,652
- 718
234 1,711 10,858
* Discontinued operations relates to Nordic. Further detail is provided in
note H2.
The net assets of Emerging Markets are stated after eliminating investments in
Group equity and debt instruments of GBP368 million (2010: GBP399 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.
B4: Statement of financial position - segment information year ended 31
December 2010
Emerging
At 31 December 2010 Notes Markets Retail Europe
Assets
Goodwill and other intangible assets 120 522
Mandatory reserve deposits with central banks - -
Property, plant and equipment 396 3
Investment property 1,679 -
Deferred tax assets 96 27
Investments in associated undertakings
and joint ventures 26 -
Deferred acquisition costs 139 316
Reinsurers` share of policyholder
liabilities 24 8
Loans and advances 343 1
Investments and securities 34,519 4,466
Current tax receivable 4 9
Client indebtedness for acceptances - -
Trade, other receivables and other assets 854 58
Derivative financial instruments - assets 557 -
Cash and cash equivalents 1,141 93
Non-current assets held for sale - -
Inter-segment assets 947 56
Total assets 40,845 5,559
Liabilities
Life assurance policyholder liabilities 35,676 4,460
General insurance liabilities - -
Third-party interests in consolidated
funds - -
Borrowed funds E1 291 -
Provisions F1 158 4
Deferred revenue 22 197
Deferred tax liabilities 225 124
Current tax payable 123 4
Trade, other payables and other
liabilities 2,246 94
Liabilities under acceptances - -
Amounts owed to bank depositors - -
Derivative financial instruments -
liabilities 135 -
Non-current liabilities held for sale - -
Inter-segment liabilities 123 4
Total liabilities 38,999 4,887
Net assets 1,846 672
Equity
Equity attributable to equity holders of
the parent 1,847 672
Non-controlling interests (1) -
Ordinary shares F2(b) (1) -
Preferred securities F2(b) - -
Total equity 1,846 672
Total
Wealth Long-Term
At 31 December 2010 Management Savings
Assets
Goodwill and other intangible assets 1,463 2,105
Mandatory reserve deposits with central banks - -
Property, plant and equipment 16 415
Investment property - 1,679
Deferred tax assets 27 150
Investments in associated undertakings and joint
ventures 1 27
Deferred acquisition costs 855 1,310
Reinsurers` share of policyholder liabilities 907 939
Loans and advances 185 529
Investments and securities 40,856 79,841
Current tax receivable 95 108
Client indebtedness for acceptances - -
Trade, other receivables and other assets 274 1,186
Derivative financial instruments - assets - 557
Cash and cash equivalents 336 1,570
Non-current assets held for sale 6 6
Inter-segment assets 294 1,297
Total assets 45,315 91,719
Liabilities
Life assurance policyholder liabilities 41,468 81,604
General insurance liabilities - -
Third-party interests in consolidated funds - -
Borrowed funds 1 292
Provisions 50 212
Deferred revenue 498 717
Deferred tax liabilities 224 573
Current tax payable 65 192
Trade, other payables and other liabilities 544 2,884
Liabilities under acceptances - -
Amounts owed to bank depositors - -
Derivative financial instruments - liabilities - 135
Non-current liabilities held for sale - -
Inter-segment liabilities 99 226
Total liabilities 42,949 86,835
Net assets 2,366 4,884
Equity
Equity attributable to equity holders of the parent 2,366 4,885
Non-controlling interests - (1)
Ordinary shares - (1)
Preferred securities - -
Total equity 2,366 4,884
GBPm
Consolidation
Nedbank M&F USAM Other adjustments
637 33 1,181 14 -
1,079 - - - -
546 25 16 1 -
19 - - 1 341
28 12 156 (8) -
96 2 8 25 -
1 19 14 - -
31 122 - - -
46,032 1 - - -
6,886 553 42 285 2,587
47 - - - -
190 - - - -
943 84 138 62 292
1,350 - - 109 476
841 131 171 458 689
1 - - - -
202 23 4 975 (3,480)
58,929 1,005 1,730 1,922 905
846 - - - -
- 397 - - -
- - - - 3,584
2,456 - 11 1,443 -
(4) 40 3 47 -
1 11 - - -
158 13 - 16 -
12 1 7 13 -
1,717 114 210 120 350
190 - - - -
47,279 - - - -
1,172 - - 102 451
- - - - -
431 2 646 2,017 (3,480)
54,258 578 877 3,758 905
4,671 427 853 (1,836) -
2,643 409 821 (2,282) -
2,028 18 32 446 -
1,714 18 32 - -
314 - - 446 -
4,671 427 853 (1,836) -
GBPm
Non-core
operations - Discontinued
Bermuda operations* Total
- 995 4,965
- - 1,079
- 12 1,015
- - 2,040
- 78 416
- 4 162
124 66 1,534
- 12 1,104
- 5,216 51,778
2,567 13,392 106,153
- 1 156
- - 190
1,038 191 3,934
1 10 2,503
74 198 4,132
- 12,384 12,391
874 105 -
4,678 32,664 193,552
3,933 12,248 98,631
- - 397
- - 3,584
- 2 4,204
- (38) 260
- 1 730
- 98 858
1 12 238
7 259 5,661
- - 190
- 5,957 53,236
- 10 1,870
- 12,219 12,219
- 158 -
3,941 30,926 182,078
737 1,738 11,474
737 1,738 8,951
- - 2,523
- - 1,763
- - 760
737 1,738 11,474
* Discontinued operations relates to Nordic with the exception of non-current
assets and liabilities held for sale which are in respect of US Life. Further
detail is provided in note H2.
C: Other key performance information
C1: Operating profit adjusting items
(a) Summary of adjusting items
In determining the adjusted operating profit of the Group for core operations
certain adjustments are made to profit before tax to reflect the directors`
view of the underlying long-term performance of the Group. The following table
shows an analysis of those adjustments from adjusted operating profit to
profit before and after tax.
GBPm
Emerging Retail
Year ended 31 December 2011 Notes Markets Europe
Income/(expense)
Goodwill impairment and impact of
acquisition accounting C1(b) (2) (40)
Profit on acquisition/disposal of
subsidiaries, associated undertakings
and strategic investments C1(c) 249 -
Short-term fluctuations in investment return C1(d) (98) (1)
Investment return adjustment for Group
equity and debt instruments
held in life funds C1(e) (71) -
Dividends declared to holders of perpetual
preferred callable securities C1(f) - -
US Asset Management equity plans and
non-controlling interests C1(g) - -
Credit-related fair value gains/(losses) on
Group debt instruments C1(h) - -
Total adjusting items 78 (41)
Tax on adjusting items D1(d) 43 11
Non-controlling interest in adjusting items F2(a)(iii) 5 -
Total adjusting items after tax and
non-controlling interests 126 (30)
GBPm
Total
Wealth Long-Term
Year ended 31 December 2011 Management Savings
Income/(expense)
Goodwill impairment and impact of acquisition
accounting (87) (129)
Profit on acquisition/disposal of subsidiaries,
associated undertakings
and strategic investments - 249
Short-term fluctuations in investment return (13) (112)
Investment return adjustment for Group equity and
debt instruments
held in life funds - (71)
Dividends declared to holders of perpetual preferred
callable securities - -
US Asset Management equity plans and non-controlling
interests - -
Credit-related fair value gains/(losses) on Group
debt instruments - -
Total adjusting items (100) (63)
Tax on adjusting items 43 97
Non-controlling interest in adjusting items - 5
Total adjusting items after tax and non-controlling
interests (57) 39
GBPm
Emerging Retail
Year ended 31 December 2010* Notes Markets Europe
Income/(expense)
Goodwill impairment and impact of
acquisition accounting C1(b) (2) (41)
Loss on disposal of subsidiaries,
associated undertakings and strategic
investments C1(c) - -
Short-term fluctuations in investment return C1(d) 1 1
Investment return adjustment for Group
equity and debt instruments
held in life funds C1(e) (10) -
Dividends declared to holders of perpetual
preferred callable securities C1(f) - -
US Asset Management equity plans and
non-controlling interests C1(g) - -
Credit-related fair value losses on Group
debt instruments C1(h) - -
Total adjusting items (11) (40)
Tax on adjusting items D1(d) 10 15
Non-controlling interest in adjusting items F2(a)(iii) - -
Total adjusting items after tax and
non-controlling interests (1) (25)
GBPm
Total
Wealth Long-Term
Year ended 31 December 2010* Management Savings
Income/(expense)
Goodwill impairment and impact of acquisition accounting (74) (117)
Loss on disposal of subsidiaries, associated
undertakings and strategic investments - -
Short-term fluctuations in investment return (71) (69)
Investment return adjustment for Group equity and
debt instruments
held in life funds - (10)
Dividends declared to holders of perpetual preferred
callable securities - -
US Asset Management equity plans and non-controlling
interests - -
Credit-related fair value losses on Group debt
instruments - -
Total adjusting items (145) (196)
Tax on adjusting items 5 30
Non-controlling interest in adjusting items - -
Total adjusting items after tax and non-controlling
interests (140) (166)
* The year ended 31 December 2010 has been restated to reflect Nordic as non-
core and discontinued.
GBPm
Long-
Term
Year ended 31 December 2011 Notes Savings Nedbank
Income/(expense)
Goodwill impairment and impact of
acquisition accounting C1(b) (129) -
Profit on acquisition/disposal of
subsidiaries, associated
undertakings and strategic investments C1(c) 249 -
Short-term fluctuations in investment return C1(d) (112) -
Investment return adjustment for Group
equity and debt
instruments held in life funds C1(e) (71) -
Dividends declared to holders of perpetual
preferred callable
securities C1(f) - -
US Asset Management equity plans and
non-controlling interests C1(g) - -
Credit-related fair value gains/(losses) on
Group debt instruments C1(h) - (4)
Total adjusting items (63) (4)
Tax on adjusting items D1(d) 97 1
Non-controlling interest in adjusting items F2(a)(iii) 5 19
Total adjusting items after tax and
non-controlling interests 39 16
GBPm
Year ended 31 December 2011 M&F USAM Other Total
Income/(expense)
Goodwill impairment and impact of
acquisition accounting - (272) - (401)
Profit on acquisition/disposal of
subsidiaries, associated
undertakings and strategic investments - 2 - 251
Short-term fluctuations in investment return(28) - (31) (171)
Investment return adjustment for Group
equity and debt
instruments held in life funds - - - (71)
Dividends declared to holders of perpetual
preferred callable
securities - - 44 44
US Asset Management equity plans and
non-controlling interests - (4) - (4)
Credit-related fair value gains/(losses) on
Group debt instruments - - 27 23
Total adjusting items (28) (274) 40 (329)
Tax on adjusting items 3 20 (13) 108
Non-controlling interest in adjusting items 1 (6) - 19
Total adjusting items after tax and
non-controlling interests (24) (260) 27 (202)
GBPm
Long-
Term
Year ended 31 December 2010* Notes Savings Nedbank M&F
Income/(expense)
Goodwill impairment and impact of
acquisition accounting C1(b) (117) (6) -
Loss on disposal of subsidiaries,
associated undertakings and
strategic investments C1(c) - (1) -
Short-term fluctuations in
investment return C1(d) (69) - (7)
Investment return adjustment for
Group equity and debt
instruments held in life funds C1(e) (10) - -
Dividends declared to holders of
perpetual preferred callable
securities C1(f) - - -
US Asset Management equity plans
and non-controlling interests C1(g) - - -
Credit-related fair value losses
on Group debt instruments C1(h) - (20) -
Total adjusting items (196) (27) (7)
Tax on adjusting items D1(d) 30 7 (4)
Non-controlling interest in
adjusting items F2(a)(iii) - 30 -
Total adjusting items after tax
and non-controlling interests (166) 10 (11)
GBPm
Year ended 31 December 2010* USAM Other Total
Income/(expense)
Goodwill impairment and impact of acquisition
accounting (2) - (125)
Loss on disposal of subsidiaries, associated
undertakings and strategic investments (21) - (22)
Short-term fluctuations in investment return - (6) (82)
Investment return adjustment for Group equity and debt
instruments held in life funds - - (10)
Dividends declared to holders of perpetual preferred
callable securities - 44 44
US Asset Management equity plans and non-controlling
interests 6 - 6
Credit-related fair value losses on Group debt
instruments - (183) (203)
Total adjusting items (17) (145) (392)
Tax on adjusting items 6 (6) 33
Non-controlling interest in adjusting items (9) - 21
Total adjusting items after tax and non-controlling
interests (20) (151) (338)
* The year ended 31 December 2010 has been restated to reflect Nordic as non-
core and discontinued.
(b) Goodwill impairment and impact of acquisition accounting
Acquisition date deferred acquisition costs and deferred revenues are not
recognised. These are reversed in the acquisition statement of financial
position and replaced by goodwill, other intangible assets and the value of
the acquired present value of in-force business (`acquired PVIF`). In
determining its adjusted operating profit the Group recognises deferred
revenue and acquisition costs in relation to policies sold by acquired
businesses pre-acquisition, and excludes the impairment of goodwill and the
amortisation of acquired other intangibles and acquired PVIF and the movements
in certain acquisition date provisions.
Goodwill impairment and acquisition accounting adjustments to adjusted
operating profit are summarised below:
GBPm
Emerging Retail Wealth
Year ended 31 December 2011 Markets Europe Management
Amortisation of acquired PVIF - (20) (70)
Amortisation of acquired deferred costs and
revenue - (7) 20
Amortisation of other acquired intangible
assets (2) (13) (37)
Change in acquisition date provisions - - -
Goodwill impairment - - -
(2) (40) (87)
GBPm
Year ended 31 December 2011 Nedbank USAM Total
Amortisation of acquired PVIF - - (90)
Amortisation of acquired deferred costs and
revenue - - 13
Amortisation of other acquired intangible
assets - (8) (60)
Change in acquisition date provisions - - -
Goodwill impairment - (264) (264)
- (272) (401)
GBPm
Emerging Retail Wealth
Year ended 31 December 2010* Markets Europe Management
Amortisation of acquired PVIF - (21) (77)
Amortisation of acquired deferred costs and
revenue - (7) 34
Amortisation of other acquired intangible
assets (1) (13) (35)
Change in acquisition date provisions - - 4
Goodwill impairment (1) - -
(2) (41) (74)
GBPm
Year ended 31 December 2010* Nedbank USAM Total
Amortisation of acquired PVIF - - (98)
Amortisation of acquired deferred costs and
revenue - - 27
Amortisation of other acquired intangible
assets (6) (2) (57)
Change in acquisition date provisions - - 4
Goodwill impairment - - (1)
(6) (2) (125)
* The year ended 31 December 2010 has been restated to reflect Nordic as
discontinued and non-core.
(c) Profit/(loss) on acquisition/disposal of subsidiaries, associated
undertakings and strategic investments
Profit/(loss) on the acquisition/disposal of subsidiaries, associated
undertakings and strategic investments is analysed below:
GBPm
Year ended Year ended
31 December 31 December
2011 2010
Emerging Markets 249 -
Long-Term Savings 249 -
Nedbank - (1)
USAM 2 (21)
Profit/(loss) on acquisition/disposal of
subsidiaries, associated undertakings and
strategic investments 251 (22)
In preparing the consolidated financial statements for the year ended 31
December 2010 the Emerging Markets segment included the South African and
Namibian businesses but excluded all other African businesses. This was
consistent with prior periods. Following a period of greater political and
currency stability in Zimbabwe and an expectation that the Group will be able
to extract benefits from its Zimbabwean business it has been consolidated for
the first time together with operations in Kenya, Malawi, Swaziland and
Nigeria. Further detail has been provided in note A2.
On 30 December 2011 USAM disposed of Lincluden Management Ltd, a subsidiary,
at a profit of GBP2 million. On 27 August 2010 USAM disposed of Thomson,
Horstmann & Bryant, a subsidiary, for a loss of GBP21 million.
(d) Short-term fluctuations in investment return
Profit before tax includes actual investment returns earned on the shareholder
assets of the Group`s life assurance and general insurance businesses.
Adjusted operating profit is stated after recalculating shareholder asset
investment returns based on a long-term investment return rate. The difference
between the actual and the long-term investment returns are short-term
fluctuations in investment return.
Long-term rates of return are based on achieved 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 long-term rates of return are reviewed frequently,
usually annually, for appropriateness. These rates of return have been
selected with a view to ensuring that returns credited to adjusted operating
profit are consistent with the actual returns expected to be earned over the
long-term.
For Emerging Markets, the return is applied to an average value of investible
shareholders` assets, adjusted for net fund flows. For Retail Europe and
Wealth Management, the return is applied to average investible assets. For M&F
general insurance business, the return is an average value of investible
assets supporting shareholders` funds and insurance liabilities, adjusted for
net fund flows.
%
Year ended Year ended
31 December 31 December
Long-term investment rates 2011 2010
Emerging Markets 9.0 9.4
Retail Europe 2.1 2.5
Wealth Management 2.0 2.0
M&F 9.0 9.4
Analysis of short-term fluctuations in investment return
GBPm
Emerging Retail Wealth
Year ended 31 December 2011 Markets Europe Management*
Actual shareholder investment return 14 1 65
Less: Long-term investment return 112 2 78
Short-term fluctuations in investment return (98) (1) (13)
GBPm
Total
Long-Term
Year ended 31 December 2011 Savings M&F Other Total
Actual shareholder investment return 80 26 6 112
Less: Long-term investment return 192 54 37 283
Short-term fluctuations in investment
return (112) (28) (31) (171)
GBPm
Total
Emerging Retail Wealth Long-Term
Year ended 31 December 2010** Markets Europe Management* Savings
Actual shareholder
investment return 109 2 61 172
Less: Long-term investment
return 108 1 132 241
Short-term fluctuations in
investment return 1 1 (71) (69)
GBPm
Year ended 31 December 2010** M&F Other Total
Actual shareholder investment return 49 25 246
Less: Long-term investment return 56 31 328
Short-term fluctuations in investment return (7) (6) (82)
* Wealth Management long-term investment return includes GBP65 million (2010:
GBP121 million) in respect of income tax attributable to policyholder returns.
** The year ended 31 December 2010 has been restated to reflect Nordic as
discontinued and non-core.
(e) Investment return adjustment for Group equity and debt instruments held in
life funds
Adjusted operating profit includes investment returns on policyholder
investments in Group equity and debt instruments held by the Group`s life
funds. These include investments in the Company`s ordinary shares, and the
subordinated liabilities and ordinary securities of Nedbank. These investment
returns are eliminated within the consolidated income statement in arriving at
profit before tax, but are included in adjusted operating profit. In 2011 the
investment return adjustment increased adjusted operating profit by GBP71
million (2010: increase of GBP10 million).
(f) Dividends declared to holders of perpetual preferred callable securities
Dividends declared to the holders of the Group`s perpetual preferred callable
securities were GBP44 million in the year ended 31 December 2011 (2010: GBP44
million). These are recognised in finance costs on an accruals basis for the
purpose of determining adjusted operating profit. In the IFRS financial
statements this cost is recognised in equity.
(g) US Asset Management equity plans and non-controlling interests
US Asset Management has a number of long-term incentive arrangements with
senior employees in its asset management affiliates.
In accordance with IFRS requirements the cost of these schemes is disclosed as
being attributable to non-controlling interests. However, this is treated as a
compensation expense in determining adjusted operating profit. The loss
recognised in 2011 was GBP6 million (2010: loss GBP9 million).
The Group has issued put options to senior employees as part of some of its US
affiliate incentive schemes. The impact of revaluing these instruments is
recognised in accordance with IFRS, but excluded from adjusted operating
profit. At 31 December 2011 these instruments were revalued, the impact of
which was a profit of GBP10 million (2010: profit GBP3 million).
(h) Credit-related fair value gains and losses on Group debt instruments
The widening of credit spread of the Group`s debt instruments in the market
price has resulted in gains of GBP27 million (2010: losses due to narrowing of
GBP183 million) on Other operating segments and losses of GBP4 million (2010:
losses of GBP20 million) in Nedbank being recorded in the Group`s income
statement for those instruments that are recorded at fair value.
In the directors` view, such movements are not reflective of the underlying
performance of the Group and will reverse over time. They have therefore been
excluded from adjusted operating profit.
C2: Foreign currencies
The principal exchange rates used to translate the operating results, assets
and liabilities of key foreign business segments to pounds sterling are:
Year ended
31 December 2011
Statement of
Income financial
statement position
(average rate) (closing rate)
Rand 11.6445 12.5643
US dollars 1.6037 1.5553
Swedish kronor 10.4144 10.6801
Euro 1.1519 1.1970
Year ended
31 December 2010
Statement of
Income financial
statement position
(average rate) (closing rate)
Rand 11.3095 10.2796
US dollars 1.5459 1.5530
Swedish kronor 11.1364 10.4227
Euro 1.1650 1.1614
C3: Earnings and earnings per share
(a) Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the profit for the
financial year attributable to ordinary equity shareholders by the weighted
average number of ordinary shares in issue during the year excluding own
shares held in policyholder funds, ESOP trusts, Black Economic Empowerment
trusts and other related undertakings.
GBPm
Year ended Year ended
31 December 31 December
2011 2010
Restated
Profit for the financial year attributable to
equity holders of the parent from continuing
operations 469 446
Profit/(loss) for the financial year attributable
to equity holders of the parent from discontinued
operations 198 (728)
Profit/(loss) for the financial year attributable
to equity holders of the parent 667 (282)
Dividends declared to holders of perpetual
preferred callable securities (32) (32)
Profit/(loss) attributable to ordinary equity
holders 635 (314)
Total dividends declared to holders of perpetual preferred callable securities
of GBP44 million in 2011 (2010: GBP44 million) are stated net of tax credits
of GBP12 million (2010: GBP12 million).
Millions
Year ended Year ended
31 December 31 December
2011 2010
Weighted average number of ordinary shares in issue 5,502 5,422
Shares held in charitable foundations (6) (7)
Shares held in ESOP trusts (61) (56)
Adjusted weighted average number of ordinary shares 5,435 5,359
Shares held in life funds (201) (205)
Shares held in Black Economic Empowerment trusts (299) (295)
Weighted average number of ordinary shares 4,935 4,859
Basic earnings per ordinary share (pence) 12.9 (6.5)
Diluted earnings per share recognises the dilutive impact of share options
held in ESOP trusts and Black Economic Empowerment trusts which are currently
in the money in the calculation of the weighted average number of shares, as
if the relevant shares were in issue for the full period.
Year ended Year ended
31 December 31 December
2011 2010
Profit/(loss) attributable to ordinary equity
holders (GBPm) 635 (314)
Dilution effect on profit/(loss) relating to share
options issued by subsidiaries (GBPm) (8) (8)
Diluted profit/(loss) attributable to ordinary
equity holders (GBPm) 627 (322)
Weighted average number of ordinary shares
(millions) 4,935 4,859
Adjustments for share options held by ESOP trusts
(millions) 133 137
Adjustments for shares held in Black Economic
Empowerment trusts (millions) 299 295
Diluted earnings per ordinary share (pence) 5,367 5,291
11.7 (6.1)
(b) Adjusted operating earnings per ordinary share
The reconciliation of profit/(loss) for the financial year to adjusted
operating profit after tax attributable to ordinary equity holders is as
follows:
GBPm
Year ended Year ended
31 December 31 December
2011 2010
Restated
Profit/(loss) for the financial year attributable
to equity holders of the parent 667 (282)
Adjusting items 329 392
Tax on adjusting items (108) (33)
Non-core operations 184 (19)
(Profit)/loss from discontinued operations (198) 728
Non-controlling interest on adjusting items (19) (21)
Adjusted operating profit after tax attributable
to ordinary equity holders 855 765
Adjusted weighted average number of ordinary
shares (millions) 5,435 5,359
Adjusted operating earnings per ordinary share
(pence) 15.7 14.3
(c) Headline earnings per share
In accordance with the JSE Limited (JSE) listing requirements, the Group is
required to calculate a `headline earnings per share` (HEPS), determined by
reference to the South African Institute of Chartered Accountants` circular
3/2009 `Headline Earnings`. The table below sets out a reconciliation of basic
earnings per ordinary share and HEPS in accordance with that circular.
Disclosure of HEPS is not a requirement of IFRS.
GBPm
Year ended
31 December 2011
Gross Net
Profit/(loss) for the financial year attributable to equity
holders of the parent 667 667
Dividends declared to holders of perpetual preferred callable
securities (32) (32)
Profit/(loss) attributable to ordinary equity holders 635 635
Adjustments:
Impairments of goodwill and intangible assets 264 264
Impairment of discontinued operations - -
(Profit)/loss on acquisition/disposal of subsidiaries,
associated undertakings and
strategic investments (222) (228)
Realised gains (including impairments) on available-for-sale
financial assets (144) (144)
Headline earnings 533 527
Weighted average number of ordinary shares 4,935 4,935
Diluted weighted average number of ordinary shares 5,367 5,367
Headline earnings per share (pence) 10.8 10.7
Diluted headline earnings per share (pence) 9.8 9.7
GBPm
Year ended
31 December 2010
Gross Net
Profit/(loss) for the financial year attributable to equity
holders of the parent (282) (282)
Dividends declared to holders of perpetual preferred callable
securities (32) (32)
Profit/(loss) attributable to ordinary equity holders (314) (314)
Adjustments:
Impairments of goodwill and intangible assets 20 20
Impairment of discontinued operations 827 827
(Profit)/loss on acquisition/disposal of subsidiaries,
associated undertakings and strategic investments 22 17
Realised gains (including impairments) on available-for-sale
financial assets (12) (12)
Headline earnings 543 538
Weighted average number of ordinary shares 4,859 4,859
Diluted weighted average number of ordinary shares 5,291 5,291
Headline earnings per share (pence) 11.2 11.1
Diluted headline earnings per share (pence) 10.1 10.0
C4: Dividends
Dividends paid were as follows:
GBPm
Year ended Year ended
31 December 31 December
2011 2010
2009 Final dividend paid - 1.5p per 10p share - 77
2010 Interim dividend paid - 1.1p per 10p share - 54
2010 Final dividend paid - 2.9p per 10p share 145 -
2011 Interim dividend paid - 1.5p per 10p share 76 -
Dividends to ordinary equity holders 221 131
Dividends declared to holders of perpetual
preferred callable securities 44 44
Dividend payments for the year 265 175
Dividends paid to ordinary equity holders, as above, are calculated using the
number of shares in issue at the record date, less treasury shares held in
ESOP trusts, life funds of Group companies, Black Economic Empowerment trusts
and related undertakings.
As a consequence of the exchange control arrangements in place in certain
African territories, dividends to ordinary equity holders on the branch
registers of those countries (or, in the case of Namibia, the Namibian section
of the principal register) are settled through Dividend Access Trusts
established for that purpose.
In March and November 2011, GBP22 million and GBP22 million respectively were
declared and paid to holders of perpetual preferred callable securities (March
2010: GBP22 million and November 2010: GBP22 million).
A final dividend of 3.5 pence per 10p share has been recommended by the
directors. Subject to shareholders` approval, the dividend will be paid on 7
June 2012 to shareholders on the register at the close of business on 20 April
2012. The dividend will absorb an estimated GBP175 million of shareholders`
funds. The Company is not planning to offer a scrip dividend alternative.
In addition the Company announced on 3 February 2012 that as part of the
proposed sale of the Nordic business unit a special dividend of 18.0 pence per
10p share has been recommended by the directors. The special dividend will be
paid on 7 June 2012 to shareholders on the register at the close of business
on 20 April 2012 subject to both shareholder approval of the Nordic disposal
and the related share consolidation and completion of the Nordic disposal. The
special dividend will absorb an estimated GBP1.0 billion of shareholders`
funds. Further details of the disposal of the Nordic business unit have been
provided in notes A2, H1 and H2.
D: Other income statement notes
D1: Income tax expense
(a) Analysis of total income tax expense
GBPm
Year ended Year ended
31 December 31 December
2011 2010
Restated
Current tax
United Kingdom tax 22 23
Overseas tax
South Africa 390 346
United States (2) (4)
Europe 20 10
Secondary Tax on Companies (STC) 14 4
Prior year adjustments (7) (1)
Total current tax 437 378
Deferred tax
Origination and reversal of temporary differences (204) 10
Changes in tax rates/bases (8) (4)
Recognition of deferred tax assets - 7
Total deferred tax (212) 13
Total income tax expense 225 391
(b) Reconciliation of total income tax expense
GBPm
Year ended Year ended
31 December 31 December
2011 2010
Restated
Profit before tax 994 1,095
Tax at standard rate of 26.5% (2010: 28%) 263 307
Different tax rate or basis on overseas operations 57 (19)
Untaxed and low taxed income (166) (146)
Disallowable expenses 93 90
Net movement on deferred tax assets not recognised 5 85
Effect on deferred tax of changes in tax rates (8) (7)
STC 19 (3)
Income tax attributable to policyholder returns (28) 96
Other (10) (12)
Total income tax expense 225 391
(c) Income tax relating to components of other comprehensive income
GBPm
Year ended Year ended
31 December 31 December
2011 2010
Restated
Preferred perpetual callable securities (12) (12)
Other - (1)
Income tax credit - continuing operations (12) (13)
Fair value gains 2 181
Shadow accounting (4) (114)
Income tax (credit)/expense - discontinued
operations (2) 67
Income tax (credit)/expense relating to components
of other comprehensive income (14) 54
(d) Income tax on adjusted operating profit
GBPm
Year ended Year ended
31 December 31 December
2011 2010
Restated
Income tax expense 225 391
Tax on adjusting items
Impact of acquisition accounting 35 31
Profit on disposal of subsidiaries, associated
undertakings and strategic investments 6 5
Short-term fluctuations in investment return 75 4
Income tax attributable to policyholders returns 9 (101)
Tax on dividends declared to holders of perpetual
preferred callable securities recognised in equity (12) (12)
Fair value gains and losses on Group debt
instruments 2 5
US Asset Management equity plans 2 -
Tax on non-core operations (1) 4
Income tax on adjusted operating profit 341 327
E: Financial assets and liabilities
E1: Borrowed funds
GBPm
At
Group 31 December
excluding 2011
Notes Nedbank Nedbank Group
Senior debt securities and
term loans 507 1,355 1,862
Floating rate notes E1(a) - 844 844
Fixed rate notes E1(b) 507 511 1,018
Revolving credit facility E1(c) - - -
Term loan and other loans - - -
Mortgage backed securities E1(d) - 77 77
Subordinated debt securities
(net of Group holdings) 876 841 1,717
Borrowed funds E1(e) 1,383 2,273 3,656
Other issues treated as equity
for accounting purposes
US$750 million cumulative
preference F2(b)
securities (ii) 458
EUR500 million perpetual
preferred callable securities 338
GBP350 million perpetual
preferred callable securities 350
Total: Book value 2,529
Nominal value of the above 2,666
GBPm
At
Group 31 December
excluding 2010
Nedbank Nedbank Group
Senior debt securities and term loans 550 1,186 1,736
Floating rate notes 32 720 752
Fixed rate notes 516 466 982
Revolving credit facility - - -
Term loan and other loans 2 - 2
Mortgage backed securities - 112 112
Subordinated debt securities (net of
Group holdings) 1,198 1,158 2,356
Borrowed funds 1,748 2,456 4,204
Other issues treated as equity for
accounting purposes
US$750 million cumulative preference
securities 458
EUR500 million perpetual preferred callable
securities 338
GBP350 million perpetual preferred
callable securities 350
Total: Book value 2,894
Nominal value of the above 3,045
The table below is a maturity analysis of liability cash flows based on
contractual maturity dates for borrowed funds. Maturity analysis is
undiscounted and based on year end exchange rates.
GBPm
At
Group 31 December
excluding 2011
Nedbank Nedbank Group
Less than 1 year 272 512 784
Greater than 1 year and less than 5 years 898 1,936 2,834
Greater than 5 years 998 556 1,554
Total 2,168 3,004 5,172
GBPm
At
Group 31 December
excluding 2010
Nedbank Nedbank Group
Less than 1 year 498 323 821
Greater than 1 year and less than 5 years 921 2,164 3,085
Greater than 5 years 880 722 1,602
Total 2,299 3,209 5,508
Senior notes
(a) Floating rate notes
GBPm
At At
31 December 31 December
2011 Maturity date
2010
Nedbank
R1,690 million unsecured senior
debt at 3 month JIBAR + 1.5% 119 166 September 2012
R1,044 million unsecured senior
debt at 3 month JIBAR + 2.20% 84 102 September 2015
R1,750 million unsecured senior
debt inflation linked (3.9%
real yield) 158 180 March 2013
R98 million unsecured senior
debt inflation linked (3.8%
real yield) 9 10 March 2013
R1,552 million unsecured senior
debt at 3 month JIBAR + 1.48% 125 153 April 2013
R1,027 million unsecured senior
debt at 3 month JIBAR + 1.75% 83 101 April 2015
R80 million unsecured senior
debt JIBAR + 2.15% 6 8 April 2020
R837 million unsecured senior
debt at 3 month JIBAR + 1.05% 79 - March 2014
R677 million unsecured senior
debt at 3 month JIBAR + 1.25% 54 - March 2016
R500 million unsecured senior
debt at 3 month JIBAR + 1% 40 - April 2014
R1,075 million unsecured senior
debt at 3 month JIBAR + 0.94% 87 - October 2014
844 720
Group excluding Nedbank
US $50 million at 3 month LIBOR
plus 0.50% - 32 Repaid
- 32
Total floating rate notes 844 752
All floating rate notes are non-qualifying for the purposes of regulatory
tiers of capital.
(b) Fixed rate notes
GBPm
At At
31 December 31 December
2011 2010 Maturity date
Nedbank
R130 million unsecured senior
debt at zero coupon 14 16 October 2024
R3,244 million unsecured senior
debt at 10.55% 265 326 September 2015
R762 million unsecured senior
debt at 11.39% 63 77 September 2019
R478 million unsecured senior
debt at R157 + 1.75% 39 47 April 2015
R450 million unsecured senior
debt at R206 + 1.28% 37 - March 2014
R1,137 million unsecured senior
debt at R157 + 1.5% 93 - March 2016
511 466
Group excluding Nedbank
GBP500 million euro bond at
7.125% 496 496 October 2016
US $16.5 million secured senior
debt at 5.23% 11 11 August 2014
R100 million floating rate note
repayable February 2011 (3
months ZAR-JIBAR-
SAFEX plus 4.5%) - 9 Repaid
507 516
Total fixed rate notes 1,018 982
All fixed rate notes are non-qualifying for the purposes of regulatory tiers
of capital.
(c) Revolving credit facilities and irrevocable letters of credit
In April 2011 the Group signed a new GBP1,200 million five-year multi-currency
revolving credit facility, replacing the GBP1,232 million facility due to
mature in September 2012.
At 31 December 2011 GBP160 million (2010: GBP499 million) of this facility was
utilised, GBPnil (2010: GBPnil) in the form of drawn debt and GBP160 million
(2010: GBP499 million) in the form of irrevocable letters of credit.
The Group had a SEK1,500 million revolving credit facility with a maturity
date of 1 July 2011 which was subsequently extended on similar terms to 1 July
2012 and revised to SEK1,000 million. At 31 December 2011 this facility was
undrawn (31 December 2010: undrawn). On 22 February 2012 the facility was
terminated.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2011 continued
E: Financial assets and liabilities continued
E1: Borrowed funds continued
(d) Mortgage backed securities - Nedbank
GBPm
At At
31 December 31 December
2011 2010 Tier Maturity date
Nedbank
R291 million notes
(class A1) at 11.467% - 4 Tier 2 Repaid
R1.4 billion notes
(class A2A) at 11.817% 67 96 Tier 2 November 2039
R98 million notes
(class B note) at
12.067% 6 7 Tier 2 November 2039
R76 million notes
(class C note) at
13.317% 4 5 Tier 2 November 2039
Total mortgage backed
securities 77 112
(e) Subordinated debt securities (net of Group holdings)
GBPm
At At
31 December 31 December
2011 2010 Tier
Nedbank
R1.5 billion (7.85%) - 148 Tier 2
R1.8 billion (9.84%) 153 186 Tier 2
R650 million (9.03%) 54 67 Tier 2
R1.7 billion (8.9%) 144 171 Tier 2
R2.0 billion (3 month JIBAR
plus 0.47%) 161 198 Tier 2
R500 million (3 month JIBAR
plus 0.45%) 40 49 Tier 2
R1.0 billion (10.54%) 87 105 Tier 2
R500 million (3 month JIBAR
plus 0.70%) 40 49 Tier 2
R120 million (10.38%) 10 12 Tier 2
R487 million (15.05%) 42 51 Tier 2
R1,265 million (JIBAR plus
4.75%) 102 125 Non-core Tier 1
R300 million (JIBAR + 2.5%) 12 15 Non-core Tier 1
US$100 million (3 month USD
LIBOR) 65 65 Tier 2 Secondary
910 1,241
Less: banking subordinated
debt securities
held by other Group companies (69) (83)
Banking subordinated debt
securities
(net of Group holdings) 841 1,158
Group excluding Nedbank
R3.0 billion (8.9% to October
2015, 3 month
JIBAR plus 1.59% thereafter) 239 293 Lower Tier 2
GBP300 million (5.0%) - 296 Lower Tier 2
EUR200 million (2010: EUR750
million) (4.5% to
January 2012 and 6 month
EURIBOR plus
0.96% thereafter)* 166 609 Lower Tier 2
GBP500 million 8.0%** 471 - Lower Tier 2
876 1,198
Total subordinated debt
securities 1,717 2,356
First call date Maturity date
Nedbank
R1.5 billion (7.85%) - Repaid
R1.8 billion (9.84%) September 2013 September 2018
R650 million (9.03%) February 2012 February 2017
R1.7 billion (8.9%) February 2014 February 2019
R2.0 billion (3 month JIBAR plus 0.47%) July 2017 July 2022
R500 million (3 month JIBAR plus 0.45%) August 2012 August 2017
R1.0 billion (10.54%) September 2015 September 2020
R500 million (3 month JIBAR plus 0.70%) December 2012 December 2017
R120 million (10.38%) December 2012 December 2017
R487 million (15.05%) November 2018 November 2018
R1,265 million (JIBAR plus 4.75%) November 2018 November 2018
R300 million (JIBAR + 2.5%) December 2013 December 2013
US$100 million (3 month USD LIBOR) March 2017 March 2022
Less: banking subordinated debt securities
held by other Group companies
Banking subordinated debt securities
(net of Group holdings)
Group excluding Nedbank
R3.0 billion (8.9% to October 2015, 3 month
JIBAR plus 1.59% thereafter) October 2015 October 2020
GBP300 million (5.0%) January 2011 Repaid
EUR200 million (2010: EUR750 million) (4.5% to
January 2012 and 6 month EURIBOR plus
0.96% thereafter)* January 2012 January 2017
GBP500 million 8.0%** - June 2021
Total subordinated debt securities
* The principal and coupon on the bond were swapped equally into Sterling and
US Dollars with coupons of 6 month LIBOR plus 0.34% and 6 month US LIBOR plus
0.31% respectively. During the year a EUR550 million partial repayment,
together with settlements of associated currency swaps, was made. On 18
January 2012 the remaining EUR200 million was repaid.
** The principal and coupon on the bonds was swapped into floating rate of
quarterly STIBOR plus 5.46%. The currency swaps have a five year mandatory
break clause.
F: Other statement of financial position notes
F1: Provisions
GBPm
Liability for
Client long service
Year ended 31 December 2011 compensation leave Restructuring
Balance at beginning of the
year 39 57 34
Unused amounts reversed - (1) -
Charge to income statement - 33 11
Utilised during the year (3) (30) (7)
Foreign exchange and other
movements 7 (8) (1)
Transfer to non-current
assets held for sale - (4) -
43 47 37
Post employment benefits
Balance at end of the year 43 47 37
Provision for
Year ended 31 December 2011 donations Other Total
Balance at beginning of the year 89 92 311
Unused amounts reversed - (14) (15)
Charge to income statement - 14 58
Utilised during the year - (3) (43)
Foreign exchange and other movements (11) (18) (31)
Transfer to non-current assets held for sale - (9) (13)
78 62 267
Post employment benefits 2 2
Balance at end of the year 78 64 269
GBPm
Liability for
Client long service
Year ended 31 December 2010 compensation leave Restructuring
Balance at beginning of the
year 30 49 42
Unused amounts reversed - - (10)
Charge to income statement 7 28 9
Utilised during the year (9) (27) (4)
Foreign exchange and other
movements 11 7 (3)
39 57 34
Post employment benefits
Balance at end of the year 39 57 34
Provision for
Year ended 31 December 2010 donations Other Total
Balance at beginning of the year 84 90 295
Unused amounts reversed - (19) (29)
Charge to income statement - 25 69
Utilised during the year - (5) (45)
Foreign exchange and other movements 5 1 21
89 92 311
Post employment benefits (51) (51)
Balance at end of the year 89 41 260
Provisions in relation to client compensation were GBP43 million (2010: GBP39
million), primarily relating to possible mis-selling of guarantee contracts in
Wealth Management. GBP1 million (2010: GBP1 million) is estimated to be
payable after more than one year.
The liability for long service leave of GBP47 million (2010: GBP57 million)
relates to provision for staff payments for long serving employees, all of
which is estimated to be payable in less than one year.
Provisions in relation to restructuring were GBP37 million (2010: GBP34
million), primarily in respect of consolidation and related office relocation
for elements of Wealth Management. GBP21 million (2010: GBP30 million) is
estimated to be payable after more than one year.
The provision for donations is held by Long-Term Savings in respect of South
African operations, relating to the payment of charitable donations in future
periods to which the Group is committed to use these funds. The funds were
made available on the closure of the Group`s unclaimed shares trusts which
were set up as part of the demutualisation in 1999 and closed in 2006, with
GBP78 million (2010: GBP70 million) estimated to be payable after more than
one year.
Other provisions include provisions for long-term staff benefits and legal
fees.
Where material, provisions are discounted at discount rates specific to the
risks inherent in the liability. The timing and final amounts of payments in
respect of some of the provisions, particularly those in respect of litigation
claims and similar actions against the Group, are uncertain and could result
in adjustments to the amounts recorded. Of the total provisions recorded
above, GBP129 million (2010: GBP163 million) is estimated to be payable after
more than one year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2011 continued
F: Other statement of financial position notes continued
F2: Non-controlling interests
(a) Income statement
(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 are the Group`s banking
business in South Africa and, prior to the acquisition of the non-controlling
interest in Mutual & Federal in February 2010 (see F2(b)), the general
insurance business in South Africa. For the year ended 31 December 2011 the
non-controlling interests attributable to ordinary shares was GBP238 million
(2010: GBP196 million).
(ii) Preferred securities
GBPm
Year ended Year ended
31 December 31 December
2011 2010
R2,000 million non-cumulative preference shares 14 14
R773 million non-cumulative preference shares 5 5
R355 million non-cumulative preference shares 2 2
US$750 million cumulative preferred securities 37 38
R363 million non-cumulative preference shares 3 3
R92 million non-cumulative preference shares 1 -
Non-controlling interests - preferred securities 62 62
(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:
GBPm
Year ended Year ended
31 December 31 December
Reconciliation of non-controlling interests` share
of profit for the financial year 2011 2010
The non-controlling interests share is analysed as
follows:
Non-controlling interests - ordinary shares 238 196
Goodwill impairment and impact of acquisition
accounting - 2
Short-term fluctuations in investment return 1 -
Income attributable to Black Economic Empowerment
trusts of listed subsidiaries 22 22
Fair value gains on Group debt instruments 1 6
Income attributable to US Asset Management
non-controlling interests (5) (9)
Non-controlling interests share of adjusted
operating profit 257 217
The Group uses revised weighted average effective ownership interests when
calculating the non-controllable interest applicable to the adjusted operating
profit of its South Africa banking and, prior to the acquisition of the non-
controlling interest in February 2010, general insurance businesses. This
reflects the legal ownership of these businesses following the implementation
for Black Economic Empowerment (BEE) schemes in 2005. In accordance with IFRS
accounting rules the shares issued for BEE purposes are deemed to be, in
substance, options. Therefore the effective ownership interest of the
minorities reflected in arriving at profit after tax in the consolidated
income statement is lower than that applied in arriving at adjusted operating
profit after tax. In 2011 the increase in adjusted operating profit
attributable to non-controlling interests as a result of this was GBP22
million (2010: GBP22 million).
F2: Non-controlling interests
(b) Statement of financial position
(i) Ordinary shares
GBPm
At At
31 December 31 December
Reconciliation of movements in non-controlling
interests 2011 2010
Balance at beginning of the year 1,763 1,537
Non-controlling interests` share of profit 238 196
Non-controlling interests` share of dividends paid (100) (88)
Net disposal/(acquisition) of interests 61 (116)
Foreign exchange and other movements (310) 234
Balance at end of the year 1,652 1,763
Acquisition of non-controlling interest in Mutual & Federal
On 5 February 2010, the Group completed the acquisition of the remaining non-
controlling shareholdings in Mutual & Federal Insurance Company Limited,
following the fulfilment of all outstanding conditions precedent. On 8
February 2010, 147,313,449 new Old Mutual plc ordinary shares were issued in
exchange for Mutual & Federal shares and listed on the London Stock Exchange,
of which 68,378,851 were issued to Black Economic Empowerment trusts and
78,934,598 to other previous holders.
Other acquisitions
On 8 February 2010 Nedbank announced that it had obtained regulatory approval
for the acquisition of the remaining 49.9% indirect interest in Imperial Bank
Limited thereby satisfying all conditions precedent for the acquisition.
The purchase consideration was approximately GBP162 million (GBP155 million
plus a Johannesburg Interbank Agreed Rate (JIBAR) f actor applied up to 5
February 2010) which was settled in four instalments out of existing cash
resources of Nedbank Limited. The total amount, which included interest at the
three month JIBAR, amounted to GBP165 million.
(ii) Preferred securities
GBPm
At At
31 December 31 December
2011 2010
R2,000 million non-cumulative preference shares(1) 140 140
R773 million non-cumulative preference shares(2) 71 71
US$750 million cumulative preferred securities(3) 458 458
R355 million non-cumulative preference shares(4) 25 25
R363 million non-cumulative preference shares(5) 29 29
R92 million non-cumulative preference shares(6) 8 50
731 773
Unamortised issue costs (13) (13)
Total in issue at 31 December 718 760
Preferred securities are held at historic value of consideration received less
unamortised issue costs.
1. 200 million R10 preference shares issued by Nedbank Limited (Nedbank), the
Group`s banking subsidiary. These shares are non-redeemable and non-
cumulative and pay a cash dividend equivalent to 75% of the prime overdraft
interest rate of Nedbank. Preference shareholders are only entitled to vote
during periods when a dividend or any part of it remains unpaid after the due
date for payment or when resolutions are proposed that directly affect any
rights attaching to the shares or the rights of the holders. Preference
shareholders will be entitled to receive their dividends in priority to any
payment of dividends made in respect of any other class of Nedbank`s shares.
2. 77.3 million R10 preference shares issued at R10.68 per share by Nedbank on
the same terms as the securities described in (1) above.
3. US$750 million guaranteed cumulative perpetual preference securities issued
on 19 May 2003 by Old Mutual Capital Funding L.P., a subsidiary of the Group.
Subject to certain limitations, holders of these securities are entitled to
receive preferential cash distributions at a fixed rate of 8.0% per annum
payable in arrears on a quarterly basis. The Group may defer payment of
distributions at its sole discretion, but such an act may restrict Old Mutual
plc from paying dividends on its ordinary shares for a period of 12 months.
Arrears of distributions are payable quarterly cumulatively only on redemption
of the securities or at the Group`s option. The securities are perpetual, but
may be redeemed at the discretion of the Group from 22 December 2008.
4. 35 million R10 preference shares issued in 16 April 2007 at R10.27 per
share by Nedbank on the same terms as the securities described in (1) above.
5. 36.3 million R10 preference shares issued by Nedbank in seven instalments
between September 2009 and December 2009 on the same terms as the securities
described in (1) above.
6. 9.2 million R10 preference shares issued by Nedbank on 11 March 2010 on the
same terms as the securities described in (1) above.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2011 continued
G: Other notes
G1: Contingent liabilities
GBPm
At At
31 December 31 December
2011 2010
Guarantees and assets pledged as collateral
security 2,251 2,883
Irrevocable letters of credit 193 207
Secured lending 515 775
Other contingent liabilities 72 55
The Group has pledged debt securities amounting to GBP1,196 million (2010:
GBP1,379 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 principle jurisdictions in which the Group
operates (South Africa and the United Kingdom) are reviewing certain historic
transactions undertaken and tax law interpretations made by the Group. More
generally the Group is also experiencing increased review by fiscal
authorities of routine matters. Whilst provisions are made for liabilities
which might reasonably be expected to materialise, and whether or not legal
proceedings will be required to resolve them, the outcome is uncertain at this
stage.
Nedbank structured financing
Historically the Group`s South African banking business entered into
structured finance transactions with third parties using the tax base of these
companies. Pursuant to the terms of the majority of these transactions, the
underlying third-party has contractually agreed to accept the risk of any tax
being imposed by the South African Revenue Service (SARS), although the
obligation to pay in the first instance rests with the Group. It is only in
limited cases where, for example, the credit quality of a client becomes
doubtful, or where the client has specifically contracted out of the re-
pricing of additional taxes, that the recovery from a client could be less
than the liability that could arise on assessment, in which case provisions
are made. SARS has examined the tax aspects of some of these types of
structures and SARS could assess these structures in a manner different to
that initially envisaged by the contracting parties. As a result the Group
could be obliged to pay additional amounts to SARS and recover these from
clients under the applicable contractual arrangements.
Nedbank litigation
There are a number of legal or potential claims against Nedbank and its
subsidiary companies, the outcome of which cannot at present be foreseen. The
largest of these potential actions is a claim in the High Court for R1.3
billion against Nedbank by certain shareholders in Pinnacle Point Group
Limited, alleging that Nedbank had a legal duty of care to them arising from a
share swap transaction.
During 2011 further actions were instituted against Nedbank by other
stakeholders relating to this same issue. Nedbank and its legal advisers
remain of the opinion that the claims are extremely ambitious and that the
claimants will have great difficulty succeeding.
Nedbank Securitisations
The Group through Nedbank uses securitisation primarily as a funding
diversification tool and to add flexibility in mitigating structural liquidity
risk. Nedbank currently has two active traditional securitisation
transactions:
* Synthesis Funding Limited (Synthesis), an asset-backed commercial paper
(ABCP) programme launched in 2004; and
* GreenHouse Funding (Pty) Limited, Series 1 (GreenHouse), a residential
mortgage-backed securitisation programme launched in December 2007.
During October 2011 Octane ABS 1(Pty) Limited (Octane), a securitisation of
motor vehicle loans launched in 2007, exercised its clean up call option. The
remaining portfolio of securitised motor vehicle loans were acquired by
Nedbank at fair value and the proceeds used by Octane to fully redeem all
outstanding notes.
Synthesis primarily invests in long-term rated bonds and offers capital market
funding to South African corporates. These assets are funded through the
issuance of short-dated investment-grade commercial paper to institutional
investors. All the commercial paper issued by Synthesis is assigned the
highest short-term RSA local-currency credit rating by Fitch, and is listed on
JSE Limited.
Under GreenHouse Series 1, R2 billion of residential mortgages originated by
Nedbank were securitised. The commercial paper issued by GreenHouse has been
assigned credit ratings by both Fitch and Moody`s and is listed on JSE
Limited. Fitch placed the GreenHouse commercial paper on rating watch negative
as a result of changes it is effecting to its rating criteria for South
African residential mortgage backed securities transactions. This process is
ongoing. As the GreenHouse transaction was undertaken for funding and
liquidity purposes, only the senior notes were placed with third party
investors and the junior notes and subordinated loans to the special purpose
entity were retained by Nedbank. The assets transferred to the special purpose
entity have continued to be recognised as financial assets. GreenHouse
continues to direct all capital repayments it receives on the residential
mortgage portfolio to noteholders as a result of the stop purchase activated
by a breach of the arrear trigger in 2010. The GreenHouse commercial paper is
scheduled to be redeemed in November 2012.
G1: Contingent liabilities continued
Nedbank Securitisations continued
The following table shows the carrying amount of securitised assets, stated at
the amount of the Group`s continuing involvement where appropriate, together
with the associated liabilities, for each category of asset in the statement
of financial position:*
GBPm
Carrying amount of assets
At At
31 December 31 December
2011 2010
Loans and advances to customers
Residential mortgage loans 116 165
Motor vehicle financing - 59
Other financial assets
Corporate and bank paper 116 155
Other securities 199 327
Commercial paper - -
431 706
GBPm
Associated liabilities
At At
31 December 31 December
2011 2010
Loans and advances to customers
Residential mortgage loans 132 171
Motor vehicle financing - 78
Other financial assets
Corporate and bank paper - -
Other securities - -
Commercial paper 320 484
452 733
This table presents the gross balances within the securitisation schemes and
does not reflect any eliminations of intercompany and cash balances held by
the various securitisation vehicles.
* The value of any derivative instruments taken out to hedge any financial
asset or liability is adjusted against such instrument in this disclosure.
G2: Events after the reporting date
On 18 January 2012 the Group redeemed the remaining EUR200 million of the
EUR750 million Lower Tier 2 Bond which had not been repaid during 2011. On 3
February 2012, the Group issued a circular in respect of the proposed disposal
of the Nordic business unit. Additional details have been provided in notes
A2, H1 and H2. On 7 February 2012 the Group announced that it had sold Dwight
Asset Management subject to certain conditions. On 22 February 2012 the Group
announced that a preliminary non-binding offer had been accepted by Ecobank
Transnational Incorporated for the acquisition of Oceanic Life. In March 2012
Bermuda enhanced its hedging strategy by implementing an option based hedging
arrangement. On 8 March 2012 final regulatory approval was received in respect
of the disposal of the Nordic business unit.
H: Discontinued operations and held for sale operations
H1: Discontinued operations
The results of the Group`s Swedish, Danish and Norwegian life businesses,
collectively Nordic, and United States life business, US Life, are shown as
discontinued operations in these financial statements. At 31 December 2011 the
Group had entered into an agreement to dispose of the controlling interest in
Nordic to Skandia Liv, which remains subject to shareholder approval for the
sale. The disposal of US Life was completed on 7 April 2011 following
regulatory approval, and has been reported up until that date.
Analysis of the results is given below.
(a) Income statement from discontinued operations
GBPm
Nordic US Life
For the year ended 31 December 2011 2010 2011 2010
Revenue (421) 1,779 342 1,608
Expenses 541 (1,729) (330) (1,557)
Profit before tax from discontinued
operations 120 50 12 51
Impairment on remeasurement to fair
value less costs to sell - - - (827)
Loss on disposal - - (29) -
Realised available-for-sale
investment gains and exchange
differences on disposal - - 133 -
Profit/(loss) before tax 120 50 116 (776)
Income tax (charge)/credit (52) (65) 14 63
Profit/(loss) from discontinued
operations after tax 68 (15) 130 (713)
GBPm
Total
For the year ended 31 December 2011 2010
Revenue (79) 3,387
Expenses 211 (3,286)
Profit before tax from discontinued operations 132 101
Impairment on remeasurement to fair value less costs to sell - (827)
Loss on disposal (29) -
Realised available-for-sale investment gains and exchange
differences on disposal 133 -
Profit/(loss) before tax 236 (726)
Income tax (charge)/credit (38) (2)
Profit/(loss) from discontinued operations after tax 198 (728)
(b) Statement of comprehensive income from discontinued operations
GBPm
Nordic US Life
For the year ended 31 December 2011 2010 2011 2010
Profit/(loss) after tax for the
financial year 68 (15) 130 (713)
Other comprehensive income for the
financial year
Fair value gains/(losses)
Available-for-sale investments
Fair value gains/(losses) 3 (5) 48 530
Recycled to the income statement - - (5) (12)
Realised on disposal - - (157) -
Exchange differences realised on disposal - - 24 -
Shadow accounting - - (43) (334)
Currency translation
differences/exchange differences on
translating foreign operations (43) 157 - 29
Other movements 10 14 - (34)
Aggregate tax on transfers from equity (1) - 3 (67)
Total other comprehensive (loss)/income
for the financial year (31) 166 (130) 112
Total comprehensive income/(loss) for
the financial year 37 151 - (601)
Attributable to
Equity holders of the parent 37 151 - (601)
GBPm
Total
For the year ended 31 December 2011 2010
Profit/(loss) after tax for the financial year 198 (728)
Other comprehensive income for the financial year
Fair value gains/(losses)
Available-for-sale investments
Fair value gains/(losses) 51 525
Recycled to the income statement (5) (12)
Realised on disposal (157) -
Exchange differences realised on disposal 24 -
Shadow accounting (43) (334)
Currency translation differences/exchange differences on
translating foreign operations (43) 186
Other movements 10 (20)
Aggregate tax on transfers from equity 2 (67)
Total other comprehensive (loss)/income for the financial year (161) 278
Total comprehensive income/(loss) for the financial year 37 (450)
Attributable to
Equity holders of the parent 37 (450)
(c) Net cash flows from discontinued operations
GBPm
Nordic US Life
For the year ended 31 December 2011 2010 2011 2010
Operating activities 1,609 144 2 (167)
Investing activities (1,411) (404) 146 63
Net cash flows from discontinuing
operations 198 (260) 148 (104)
GBPm
Total
For the year ended 31 December 2011 2010
Operating activities 1,611 (23)
Investing activities (1,265) (341)
Net cash flows from discontinuing operations 346 (364)
H2: Disposal groups held for sale
The assets and liabilities of the Group`s Nordic business, Skandia Insurance
Company Ltd (publ) (Nordic), comprising Old Mutual`s long-term savings and
banking operations in Sweden, Denmark and Norway operating under the Skandia
brand, are shown as held for sale in these financial statements. The Group has
entered into an agreement to dispose of the controlling interest in Nordic to
Skandia Liv which remains subject to shareholder approval for the sale. On 8
March 2012 final regulatory approval was received. Further detail has been
provided in note A2.
In addition to the above the Group has agreed to sell the Finnish branch of
Skandia Life Assurance Company Ltd, a part of Wealth Management, to OP-Pohjola
osk and as a result of this the assets and liabilities of the Finnish branch
have been classified as held for sale.
(a) Statement of financial position
Assets directly associated with disposal groups held for sale
GBPm
Finnish
At 31 December 2011 Nordic branch Total
Assets
Goodwill and other intangible assets 901 72 973
Property, plant and equipment 10 - 10
Deferred tax assets 87 - 87
Investments in associated undertakings and joint
ventures 5 - 5
Deferred acquisition costs 75 45 120
Reinsurers` share of life assurance policyholder
liabilities 17 - 17
Loans and advances 5,194 - 5,194
Investments and securities 14,127 1,034 15,161
Current tax receivable 3 - 3
Trade, other receivables and other assets 240 1 241
Derivative financial instruments - assets 10 - 10
Cash and cash equivalents 291 4 295
Total assets 20,960 1,156 22,116
Liabilities
Life assurance policyholder liabilities 10,889 1,034 11,923
Third-party interests in consolidated funds 1,383 - 1,383
Borrowed funds 2 - 2
Provisions (54) - (54)
Deferred revenue 1 55 56
Deferred tax liabilities 103 26 129
Current tax payable 9 - 9
Trade, other payables and other liabilities 388 4 392
Amounts owed to bank depositors 6,552 - 6,552
Derivative financial instruments - liabilities 16 - 16
Total liabilities 19,289 1,119 20,408
Of the financial assets and liabilities included within disposal groups held
for sale, namely the Nordic business and the Finnish branch, all are level one
or level two in respect of the fair value hierarchy. In addition to the
disposal groups held for sale, the Group had additional non-current assets
held for sale of GBP22 million (2010: GBP7 million) and non-current
liabilities of GBP9 million (2010: GBPnil).
Included within investments and securities is GBP185 million of short term
cash balances.
(b) Equity attributable to equity holders of the parent directly associated
with disposal groups held for sale
GBPm
Finnish
At 31 December 2011 Nordic branch Total
Retained earnings 1,667 37 1,704
Available-for-sale investment reserve 2 - 2
Share-based payment reserve 2 - 2
1,671 37 1,708
At 31 December 2010 the assets and liabilities of the Group`s United States
life business, US Life, were shown as held for sale in the financial
statements, being GBP12,384 million and GBP12,219 million respectively. The
disposal of US Life was completed on 7 April 2011 following US regulatory
approval. At the time of disposal the assets directly associated with US Life
consisted of GBP10,518 million of investments and securities and GBP1,412
million of other assets, with liabilities at this time being GBP11,494 million
of long-term policyholder liabilities and GBP235 million of other liabilities.
Included within investments and liabilities was GBP565 million of short term
cash balances.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2011 continued
H: Discontinued operations and held for sale operations continued
H3: Contingent liabilities in respect of the disposal of US Life
Following completion of the disposal of US Life to the Harbinger group
(`Harbinger`) on 7 April 2011, the Group has retained certain residual
commitments and contingent liabilities. These relate to sale warranties and
indemnities that are typical in transactions of this nature including in
respect of litigation (including class actions) and regulatory enforcement
actions arising from events occurring before completion. The specific
conditions are in effect for varying periods of time, the longest dated of
these will expire on 31 December 2015. The main elements are summarised below:
- Harbinger intends to establish certain internal reinsurance arrangements
which are subject to regulatory approval. In the event that regulatory
approval of the full amount of reinsurance is not forthcoming there is
potential for a reduction in the purchase price, up to a maximum of US$50
million.
- US statutory regulations require reserving on a worst case scenario basis
for deferred annuity policies that permit free partial withdrawals (`CARVM
Reserves`). As such there is redundancy when comparing the worst case scenario
and the economic scenarios. These CARVM redundant reserves are currently
reinsured from US Life to Old Mutual Reassurance until no later than the end
of 2015. Old Mutual plc provides a $255 million letter of credit to back these
redundant reserves. In the event that this letter of credit is drawn upon
Harbinger are obligated to fully reimburse Old Mutual plc.
Date: 09/03/2012 09:01:03 Produced by the JSE SENS Department.
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