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OML 201608110006A
Old Mutual plc Interim results for the half year ended 30 June 2016 - Part II
OLD MUTUAL PLC
ISIN CODE: GB00B77J0862
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
Statement of directors' responsibilities in respect of the interim financial statements
For the six months ended 30 June 2016
We confirm that to the best of our knowledge:
- The Group interim financial statements contained herein are presented in accordance with the requirements of IAS 34 'Interim Financial
Reporting' as adopted by the EU.
- The interim management statement includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of
the financial year and that have materially affected the financial position or performance of the entity during that period; and any changes
in the related party transactions described in the last annual report that could do so.
Bruce Hemphill Ingrid Johnson
Group Chief Executive Group Finance Director
11 August 2016 11 August 2016
Independent review report to Old Mutual plc
For the six months ended 30 June 2016
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months
ended 30 June 2016 which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Financial Position, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity and the related
explanatory notes, which include the reconciliation of adjusted operating profit to profit after tax.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the
Disclosure and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority ('the UK FCA'). Our review has been undertaken so that we
might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-
yearly financial report in accordance with the DTR of the UK FCA.
The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements
included in this half-yearly financial report has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on
our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial
information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and
Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and
the DTR of the UK FCA.
Jonathan Holt (Senior Statutory Auditor)
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London E14 5GL
11 August 2016
Consolidated income statement
For the six months ended 30 June 2016
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2016 2015 2015
Revenue
Gross earned premiums B2 1,703 1,589 3,589
Outward reinsurance (178) (151) (335)
Net earned premiums 1,525 1,438 3,254
Investment return (non-banking) 2,947 3,186 3,795
Banking interest and similar income 1,609 1,691 3,320
Banking trading, investment and similar income 100 110 213
Fee and commission income, and income from service activities 1,395 1,537 3,027
Other income 72 70 86
Total revenue 7,648 8,032 13,695
Expenses
Claims and benefits (including change in insurance contract provisions) (1,960) (1,738) (3,450)
Reinsurance recoveries 209 120 279
Net claims and benefits incurred (1,751) (1,618) (3,171)
Change in investment contract liabilities (1,837) (2,035) (2,203)
Credit impairment charges (116) (134) (307)
Finance costs (38) (45) (49)
Banking interest payable and similar expenses (924) (962) (1,924)
Fee and commission expenses, and other acquisition costs (330) (459) (786)
Change in third-party interest in consolidated funds (244) (207) (208)
Other operating and administrative expenses (1,813) (1,928) (3,759)
Total expenses (7,053) (7,388) (12,407)
Share of associated undertakings' and joint ventures' (losses)/profit after tax (11) 37 67
Profit/(loss) on disposal of subsidiaries, associated undertakings and strategic
investments C1(c) 24 2 (36)
Profit before tax 608 683 1,319
Income tax expense D1 (183) (243) (374)
Profit from continuing operations after tax 425 440 945
Discontinued operations
Loss from discontinued operations after tax I1 - (21) (21)
Profit after tax for the financial period 425 419 924
Attributable to
Equity holders of the parent 284 260 614
Non-controlling interests
Ordinary shares 133 149 291
Preferred securities 8 10 19
Profit after tax for the financial period 425 419 924
Earnings per ordinary share
Basic earnings per share based on profit from continuing
operations (pence) 5.7 5.9 13.2
Basic earnings per share based on profit from discontinued
operations (pence) - (0.5) (0.5)
Basic earnings per ordinary share (pence) C2(a) 5.7 5.4 12.7
Diluted basic earnings per share based on profit from continuing
operations (pence) 5.6 5.4 12.6
Diluted basic earnings per share based on profit from discontinued
operations (pence) - (0.4) (0.4)
Diluted basic earnings per ordinary share (pence) C2(b) 5.6 5.0 12.2
Weighted average number of ordinary shares (millions) C2(a) 4,686 4,598 4,641
Consolidated statement of comprehensive income
For the six months ended 30 June 2016
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Profit after tax for the financial period 425 419 924
Other comprehensive income for the financial period
Items that will not be reclassified subsequently to profit or loss
Fair value movements
Property revaluation (1) (2) 18
Measurement movements on defined benefit plans 7 8 20
Income tax on items that will not be reclassified subsequently to profit or loss D1(c) 6 - (4)
12 6 34
Items that may be reclassified subsequently to profit or loss
Fair value movements
Net investment hedge (42) 6 13
Available-for-sale investments
Fair value gains/(losses) 7 (9) (7)
Recycled to profit or loss - - (5)
Exchange difference recycled to profit or loss on disposal of business - (30) (71)
Shadow accounting - - (10)
Currency translation differences on translating foreign operations 962 (442) (1,106)
Other movements (28) (13) (24)
899 (488) (1,210)
Total other comprehensive income for the financial period 911 (482) (1,176)
Total comprehensive income for the financial period 1,336 (63) (252)
Attributable to
Equity holders of the parent 933 (86) (232)
Non-controlling interests
Ordinary shares 395 13 (39)
Preferred securities 8 10 19
Total comprehensive income for the financial period 1,336 (63) (252)
Reconciliation of adjusted operating profit to profit after tax
For the six months ended 30 June 2016
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2016 2015 2015
Core operations
Emerging Markets B3 260 333 615
Nedbank B3 345 404 754
Old Mutual Wealth B3 104 151 307
Institutional Asset Management B3 58 83 149
767 971 1,825
Old Mutual plc finance costs (45) (42) (83)
Long-term investment return on excess assets 10 11 21
Corporate costs (30) (24) (57)
Other net shareholder income/(expenses) 6 (12) (43)
Adjusted operating profit before tax B3 708 904 1,663
Adjusting items C1(a) (117) (260) (344)
Non-core operations B3 (9) 4 (31)
Profit before tax (net of policyholder tax) 582 648 1,288
Income tax attributable to policyholder returns 26 35 31
Profit before tax 608 683 1,319
Total tax expense D1(a) (183) (243) (374)
Profit from continuing operations after tax 425 440 945
Loss from discontinued operations after tax I1 - (21) (21)
Profit after tax for the financial period 425 419 924
Adjusted operating profit after tax attributable to ordinary equity holders of the parent
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2016 2015 2015
Adjusted operating profit before tax B3 708 904 1,663
Tax on adjusted operating profit D1(d) (181) (235) (403)
Adjusted operating profit after tax 527 669 1,260
Non-controlling interests ? ordinary shares (137) (157) (310)
Non-controlling interests ? preferred securities (8) (10) (19)
Adjusted operating profit after tax attributable to ordinary equity
holders of the parent B3 382 502 931
Adjusted weighted average number of shares (millions) C2(a) 4,773 4,855 4,813
Adjusted operating earnings per share (pence) C2(c) 8.0 10.3 19.3
Basis of preparation of adjusted operating profit
Adjusted operating profit (AOP) reflects the directors' view of the underlying long-term performance of the Group. AOP is a measure of profitability
which adjusts the IFRS profit measures for the specific items detailed in note C1 and, as such, it is a non-IFRS measure. The reconciliation of adjusted
operating profit to profit after tax explains the differences between AOP and profit after tax as reported under IFRS.
For core life assurance and property & casualty businesses, AOP is based on a long-term investment return, including returns on investments held
by life funds in Group equity and debt instruments, and is stated net of income tax attributable to policyholder returns. For all core businesses, AOP
excludes goodwill impairment, the impact of accounting for intangibles acquired in a business combination, the costs related to completed acquisitions,
revaluations of put options related to long-term incentive schemes, profit/(loss) on acquisition/disposal of subsidiaries, associated undertakings and
strategic investments, fair value profits/(losses) on certain Group debt instruments, cost of hedging equity instruments and costs related to the
development of new Old Mutual Wealth platform capability and outsourcing of UK business administration. AOP includes dividends declared to holders
of perpetual preferred callable securities. Old Mutual Bermuda is treated as a non-core operation in the AOP disclosure and is therefore not included
in AOP. Refer to note B1 for further information on the basis of segmentation.
Although execution of the Group's strategy of managed separation is expected to entail a number of costs that may be regarded as non-operating, or
one-off in nature, all costs associated with the managed separation of the Group are recognised within both IFRS profit and AOP.
Adjusted operating earnings applied in the calculation of adjusted operating earnings per share is calculated based on AOP after tax and non-
controlling interests. It excludes income attributable to Black Economic Empowerment trusts of listed subsidiaries. The calculation of the adjusted
weighted average number of shares includes own shares held in policyholders' funds and Black Economic Empowerment trusts.
Consolidated statement of financial position
At 30 June 2016
GBPm
At At At
30 June 30 June 31 December
Notes 2016 2015 2015
Assets
Goodwill and other intangible assets G1 3,342 3,344 3,276
Mandatory reserve deposits with central banks 866 808 716
Property, plant and equipment 794 726 700
Investment property 1,508 1,318 1,233
Deferred tax assets 311 247 284
Investments in associated undertakings and joint ventures 527 470 514
Deferred acquisition costs 729 804 784
Reinsurers' share of policyholder liabilities F2 3,058 2,394 2,661
Loans and advances F1 36,801 34,655 30,965
Investments and securities 88,996 87,033 82,601
Current tax receivable 136 95 88
Trade, other receivables and other assets 3,368 2,938 2,007
Derivative financial instruments 1,541 1,161 3,076
Cash and cash equivalents 3,978 5,034 4,520
Assets held for sale I2 6,098 1,114 123
Total assets 152,053 142,141 133,548
Liabilities
Long-term business insurance policyholder liabilities F2 9,183 9,851 7,714
Investment contract liabilities F2 69,040 68,786 67,854
Property & casualty liabilities F2 425 394 341
Third-party interests in consolidated funds 6,585 5,678 4,661
Borrowed funds F3 4,231 3,566 3,524
Provisions and accruals 158 228 199
Deferred revenue 254 291 274
Deferred tax liabilities 408 476 417
Current tax payable 207 169 186
Trade, other payables and other liabilities 5,631 5,173 3,787
Amounts owed to bank depositors 38,607 36,000 32,328
Derivative financial instruments 1,584 1,161 3,317
Liabilities held for sale I2 5,853 833 12
Total liabilities 142,166 132,606 124,614
Net assets 9,887 9,535 8,934
Shareholders' equity
Equity attributable to equity holders of the parent 7,258 7,188 6,680
Non-controlling interests
Ordinary shares 2,316 2,075 1,982
Preferred securities 313 272 272
Total non-controlling interests 2,629 2,347 2,254
Total equity 9,887 9,535 8,934
Bruce Hemphill Ingrid Johnson
Group Chief Executive Group Finance Director
11 August 2016 11 August 2016
Consolidated statement of cash flows
For the six months ended 30 June 2016
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Cash flows from operating activities
Profit before tax 608 683 1,319
Non-cash movements in profit before tax 2,268 1,134 4,204
Net changes in working capital (327) 866 566
Taxation paid (234) (252) (399)
Net cash inflow from operating activities 2,315 2,431 5,690
Cash flows from investing activities
Net acquisitions of financial investments (3,019) (1,787) (4,868)
Acquisition of investment properties (40) (37) (146)
Dividends received from associated undertakings 9 3 7
Proceeds from disposal of investment properties 77 4 41
Acquisition of property, plant and equipment (52) (35) (151)
Proceeds from disposal of property, plant and equipment 1 3 7
Acquisition of intangible assets (47) (40) (102)
Acquisition of interests in subsidiaries, associated undertakings
joint ventures and strategic investments (23) (625) (796)
Disposal of a non-controlling interest in OM Asset Management plc - 163 163
Proceeds from the disposal of interests in subsidiaries, associated
undertakings joint ventures and strategic investments 22 9 88
Net cash outflow from investing activities (3,072) (2,342) (5,757)
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company (299) (296) (422)
Non-controlling interests and preferred security interests (95) (108) (190)
Interest paid (excluding banking interest paid) (35) (24) (51)
Proceeds from issue of ordinary shares (including by subsidiaries
to non-controlling interests) 1 2 2
Net acquisition of treasury shares (37) (12) (19)
Sale of shares held by BEE trusts - 172 175
Proceeds from issue of subordinated and other debt 415 880 1,615
Subordinated and other debt repaid (27) (349) (827)
Net cash (outflow)/inflow from financing activities (77) 265 283
Net increase in cash and cash equivalents (834) 354 216
Effects of exchange rate changes on cash and cash equivalents 439 (270) (746)
Cash and cash equivalents at beginning of the period 5,256 5,786 5,786
Cash and cash equivalents at end of the period 4,861 5,870 5,256
Consisting of
Cash and cash equivalents 3,978 5,034 4,520
Mandatory reserve deposits with central banks 866 808 716
Cash and cash equivalents included in assets held for sale 17 28 20
Total 4,861 5,870 5,256
Cash and cash equivalents in the cash flow statement above include mandatory reserve deposits, in line with market practice in South Africa. Except
for mandatory reserve deposits with central banks of GBP866 million (June 2015: GBP808 million; December 2015: GBP716 million) and cash and cash
equivalents subject to consolidation of funds of GBP1,144 million (June 2015: GBP1,373 million; December 2015: GBP1,643 million), management do not
consider that there are any material amounts of cash and cash equivalents which are not available for use in the Group's day-to-day operations.
Consolidated statement of changes in equity
For the six months ended 30 June 2016
Millions
Number of
shares Available-
issued and Share Share Merger for-sale
Six months ended 30 June 2016 Notes fully paid capital premium reserve reserve
Shareholders' equity at beginning of the period 4,929 563 1,040 1,252 40
Total comprehensive income for the financial period
Profit after tax for the financial period - - - - -
Other comprehensive income
Items that will not be reclassified subsequently to
profit or loss
Fair value gains
Property revaluation - - - - -
Measurement gains on defined benefit plans - - - - -
Income tax on items that will not be reclassified
subsequently to profit or loss D1(c) - - - - -
- - - - -
Items that may be reclassified subsequently to profit
or loss
Fair value gains/(losses)
Net investment hedge - - - - -
Available-for-sale investments
Fair value (losses)/gains(1) - - - - (2)
Recycled to profit or loss - - - - -
Currency translation differences on translating foreign
operations(1) - - - - -
Other movements - - - - -
Total comprehensive income for the financial period - - - - (2)
Transactions with the owners of the Company
Contributions and distributions
Dividends for the period C3 - - - - -
Tax relief on dividends paid - - - - -
Equity share-based payment transactions - - - - -
OM Asset Management plc shares buyback - - - - -
Additional tier 1 capital instruments issued(2) - - - - -
Preferred securities repurchased - - - - -
Other movements in share capital 1 - 1 - -
Total contributions and distributions 1 - 1 - -
Changes in ownership
Change in participation in subsidiaries - - - - -
Total changes in ownership - - - - -
Total transactions with the owners of the Company 1 - 1 - -
Shareholders' equity at end of the period 4,930 563 1,041 1,252 38
(1) Included in other reserves is a gain of GBP10 million relating to Economic Transactional Bank (ETI) available-for-sale reserve. Currency translation differences on translating foreign operations
include GBP63 million relating to foreign exchange losses on translation of ETI.
(2) Nedbank issued a new-style (Basel III-compliant) additional tier 1 capital instrument of GBP67 million (R1,524 million) in May 2016 at JIBAR + 7%. In line with regulations and subject to regulatory
approval, these instruments are callable only at the option of the issuer on 21 May 2021 and any interest payment date thereafter.
GBPm
Foreign Perpetual Total
Property Share-based currency preferred Attributable to non-
revaluation payments Other translation Retained callable equity holders controlling Total
reserve reserve reserves(1) reserve(1) earnings securities of the parent interests equity
184 367 30 (2,243) 5,174 273 6,680 2,254 8,934
- - - - 268 16 284 141 425
(1) - - - - - (1) - (1)
- - - - 6 - 6 1 7
- 4 - - - - 4 2 6
(1) 4 - - 6 - 9 3 12
- - - (42) - - (42) - (42)
- - 10 - (4) - 4 3 7
- - - - - - - - -
- - - 694 - - 694 268 962
(3) - (5) - (8) - (16) (12) (28)
(4) 4 5 652 262 16 933 403 1,336
- - - - (299) (17) (316) (78) (394)
- - - - - 1 1 - 1
- (6) - - 7 - 1 (5) (4)
- - - - (8) - (8) (3) (11)
- - - - - - - 67 67
- - - - - - - (26) (26)
- - - - (37) - (36) - (36)
- (6) - - (337) (16) (358) (45) (403)
- - - - 3 - 3 17 20
- - - - 3 - 3 17 20
- (6) - - (334) (16) (355) (28) (383)
180 365 35 (1,591) 5,102 273 7,258 2,629 9,887
Consolidated statement of changes in equity
For the six months ended 30 June 2016
Millions
Number of
shares
issued and Share Share Merger Available-for-
Six months ended 30 June 2015 Notes fully paid capital premium reserve sale reserve
Shareholders' equity at beginning of the period 4,907 561 856 1,342 48
Total comprehensive income for the financial period
Profit after tax for the financial period - - - - -
Other comprehensive income
Items that will not be reclassified subsequently to
profit or loss
Fair value gains
Property revaluation - - - - -
Measurement gains on defined benefit plans - - - - -
Income tax on items that will not be reclassified
subsequently to profit or loss D1(c) - - - - -
- - - - -
Items that may be reclassified subsequently to profit
or loss
Fair value gains/(losses)
Net investment hedge - - - - -
Available-for-sale investments
Fair value gains - - - - -
Exchange differences recycled to profit or loss
on disposal of business - - - - -
Currency translation differences on translating foreign
operations - - - - -
Other movements - - - - -
Total comprehensive income for the financial period - - - - -
Transactions with the owners of the Company
Contributions and distributions
Dividends for the year C3 - - - - -
Tax relief on dividends paid - - - - -
Equity share-based payment transactions - - - - -
Proceeds from BEE transactions - - 141 - -
Merger reserve released - - - (68) -
Other movements in share capital 2 - 2 - -
Total contributions and distributions 2 - 143 (68) -
Changes in ownership
Shares issued for the acquisition of Quilter Cheviott 19 2 40 - -
Share in movement in associate reserve - - - - -
Disposal of a non-controlling interest in
OM Asset Management plc - - - - -
Non-controlling interests in subsidiaries acquired - - - - -
Change in participation in subsidiaries - - - - -
Total changes in ownership 19 2 40 - -
Total transactions with owners of the Company 21 2 183 (68) -
Shareholders' equity at end of the period 4,928 563 1,039 1,274 48
GBPm
Foreign Perpetual Total
Property Share-based currency preferred Attributable to non-
revaluation payments Other translation Retained callable equity holders controlling Total
reserve reserve reserves reserve earnings securities of the parent interests equity
178 337 37 (1,370) 4,891 526 7,406 2,139 9,545
- - - - 246 14 260 159 419
(2) - - - - - (2) - (2)
- - - - 6 - 6 2 8
- - - - - - - - -
(2) - - - 6 - 4 2 6
- - - 6 - - 6 - 6
- - (9) - 4 - (5) (4) (9)
- - - (65) 35 - (30) - (30)
- - - (306) - - (306) (136) (442)
- - - - (15) - (15) 2 (13)
(2) - (9) (365) 276 14 (86) 23 (63)
- - - - (296) (17) (313) (91) (404)
- - - - - 3 3 - 3
- (15) - - (3) - (18) (4) (22)
- - - - 31 - 172 - 172
- - - - 68 - - - -
- - - - (14) - (12) - (12)
- (15) - - (214) (14) (168) (95) (263)
- - - - (42) - - - -
- - 10 - - - 10 - 10
- - - - 48 - 48 114 162
- - - - - - - 98 98
- - - - (22) - (22) 68 46
- - 10 - (16) - 36 280 316
- (15) 10 - (230) (14) (132) 185 53
176 322 38 (1,735) 4,937 526 7,188 2,347 9,535
Consolidated statement of changes in equity
For the six months ended 30 June 2016
Millions
Number of
shares
issued and Share Share Merger Available-for-
Year ended 31 December 2015 Notes fully paid capital premium reserve sale reserve
Shareholders' equity at beginning of the year 4,907 561 856 1,342 48
Total comprehensive income for the financial year
Profit after tax for the financial year - - - - -
Other comprehensive income
Items that will not be reclassified subsequently to
profit or loss
Fair value gains
Property revaluation - - - - -
Measurement gains on defined benefit plans - - - - -
Income tax on items that will not be reclassified
subsequently to profit or loss D1(c) - - - - -
- - - - -
Items that may be reclassified subsequently to profit
or loss
Fair value gains/(losses)
Net investment hedge - - - - -
Available-for-sale investments
Fair value gains - - - - -
Recycled to profit or loss - - - - (5)
Exchange differences recycled to profit or loss
on disposal of business - - - - -
Shadow accounting - - - - -
Currency translation differences on translating foreign
operations - - - - -
Other movements - - - - (3)
Total comprehensive income for the financial year - - - - (8)
Transactions with the owners of the Company
Contributions and distributions
Dividends for the year C3 - - - - -
Tax relief on dividends paid - - - - -
Equity share-based payment transactions - - - - -
Proceeds from BEE transactions - - 141 - -
Merger reserve released(1) - - - (90) -
Preferred securities repurchased - - - - -
Other movements in share capital 3 - 3 - -
Total contributions and distributions 3 - 144 (90) -
Changes in ownership
Shares issued for the acquisition of Quilter Cheviott 19 2 40 - -
Share in movement in associate reserve - - - - -
Disposal of a non-controlling interest in
OM Asset Management plc - - - - -
Non-controlling interests in subsidiaries acquired - - - - -
Change in participation in subsidiaries - - - - -
Total changes in ownership 19 2 40 - -
Total transactions with owners of the Company 22 2 184 (90) -
Shareholders' equity at end of the year 4,929 563 1,040 1,252 40
GBPm
Foreign Perpetual Total
Property Share-based currency preferred Attributable to non-
revaluation payments Other translation Retained callable equity holders controlling Total
reserve reserve reserves reserve earnings securities of the parent interests equity
178 337 37 (1,370) 4,891 526 7,406 2,139 9,545
- - - - 590 24 614 310 924
18 - - - (5) - 13 5 18
- - - - 13 - 13 7 20
(3) - - - (1) - (4) - (4)
15 - - - 7 - 22 12 34
- - - 13 - - 13 - 13
- - (7) - 3 - (4) (3) (7)
- - - - - - (5) - (5)
- - - (71) - - (71) - (71)
(10) - - - - - (10) - (10)
- - - (780) - - (780) (326) (1,106)
1 - (3) - (6) - (11) (13) (24)
6 - (10) (838) 594 24 (232) (20) (252)
- - - - (422) (30) (452) (160) (612)
- - - - - 6 6 - 6
- 30 - - 5 - 35 4 39
- - - - 34 - 175 - 175
- - - - 90 - - - -
- - - - (11) (253) (264) - (264)
- - - - (19) - (16) - (16)
- 30 - - (323) (277) (516) (156) (672)
- - - - (42) - - - -
- - 3 - - - 3 - 3
- - - (35) 84 - 49 114 163
- - - - - - - 105 105
- - - - (30) - (30) 72 42
- - 3 (35) 12 - 22 291 313
- 30 3 (35) (311) (277) (494) 135 (359)
184 367 30 (2,243) 5,174 273 6,680 2,254 8,934
Notes to the consolidated financial statements
For the six months ended 30 June 2016
A: Significant accounting policies
A1: Basis of preparation
The Group interim financial statements contained herein are presented in accordance with the requirements of IAS 34 'Interim Financial Reporting'
and are in compliance with IAS 34 as adopted by the EU. The Group's results for the six months ended 30 June 2016 and the financial position at
that date have been prepared using accounting policies consistent with those applied in the preparation of the Group's 2015 Annual Report and
Accounts. The results for the six months ended 30 June 2016 and the six months ended 30 June 2015, and the financial positions at these dates are
unaudited. The results for the year ended 31 December 2015 and the financial position at this date are audited.
The Group interim financial statements have been prepared on the going concern basis, which the directors believe is appropriate. Part 2 - Financial
Performance of the Interim Management Statement provides further details on the performance of the Group and the principal risks and uncertainties.
The comparative figures for the financial year ended 31 December 2015 represent the consolidated performance of the Group. They are not the
Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the Registrar
of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
Translation of foreign operations
The assets and liabilities of foreign operations are translated from their respective functional currencies into the Group's presentation currency using
the period end exchange rates, and their income and expenses using the average exchange rates. Other than in respect of cumulative translation
gains and losses up to 1 January 2004, cumulative unrealised gains or losses resulting from translation of functional currencies to the presentation
currency are included as a separate component of shareholders' equity. To the extent that these gains and losses are effectively hedged, the
cumulative effect of such gains and losses arising on the hedging instruments are also included in that component of shareholders' equity. Upon the
disposal of subsidiaries the cumulative amount of exchange differences deferred in shareholders' equity, net of attributable amounts in relation to net
investments, is recognised in the income statement.
The exchange rates used to translate the operating results, assets and liabilities of key foreign business segments to pounds sterling are:
Six months ended Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015
Statement of Statement of Statement of
Income financial Income financial Income financial
statement position Statement position statement position
(average rate) (closing rate) (average rate) (closing rate) (average rate) (closing rate)
Rand 22.0983 19.4900 18.1583 19.1081 19.5223 22.8183
US dollars 1.4339 1.3268 1.5240 1.5725 1.5285 1.4734
Euro 1.2845 1.1982 1.3640 1.4099 1.3765 1.3560
New standards, interpretations and amendments adopted by the Group affecting the financial statements for the six months ended 30 June 2016
During the period, there were no new standards implemented that had a material effect on the financial statements of the Group.
A2: Significant corporate activity and business changes during the year
Acquisitions completed during the period
Acquisition of AAM Advisory (AAM)
On 16 March 2016, Old Mutual Wealth completed the acquisition of 100% of AAM, a Singapore based wealth advice company. The consideration
payable was an initial SGD 14 million (GBP7 million) with additional potential deferred consideration of SGD 26 million (GBP13 million), which is subject to
AAM meeting certain performance targets for the period from 2016 to 2018.
Goodwill of GBP3 million and other intangible assets of GBP3 million were recognised as a result of the transaction.
Purchase of remaining stake in Credit Guarantee Insurance Company (CGIC)
On 1 March 2016 Emerging Markets acquired the remaining 13.9% of the shares in CGIC for R190 million (GBP10 million) taking its share to 100%. This
transaction has resulted in a debit being directly recognised in reserves of R78 million (GBP4 million), which is the excess of the consideration paid and
the proportionate share of the net assets of CGIC acquired.
Acquisitions and activities announced but not completed during the period
Acquisition of Landmark Partners
On 14 June 2016, OM Asset Management plc (OMAM) announced that it signed a definitive agreement to acquire a 60% equity interest in Landmark
Partners, a leading global secondary private equity, real estate and real asset investment firm for approximately $240 million in cash with the potential
for an additional payment based on the growth of the business through to 2018. The transaction is subject to regulatory approvals and is expected
to close in the third quarter of 2016.
Amendment of the OMAM Seed Capital Agreement
On 13 June, 2016, OMAM and Old Mutual plc entered into a Heads of Agreement amending certain terms of the Seed Capital Agreement, dated 8
October 2014. The amendments will result in OMAM purchasing approximately $35 million of seed capital investments in the third quarter of 2016,
as well as all remaining seed capital investments covered by the Seed Capital Agreement, up to an incremental $100 million, on or around 30 June
2017. All seed capital was originally expected to be transferred to OMAM's balance sheet on or around 15 January 2018.
Amendment of the OMAM Deferred Tax Asset Deed (DTA)
On 13 June 2016, OMAM and OM Group (UK) Limited (OMGUK) entered into a Heads of Agreement amending the DTA to provide that the obligations
of OMAM to make future payments to OMGUK under the DTA, which were originally scheduled to continue until 31 January 2020, would be terminated
as of 31 December 2016 in exchange for a payment of the net present value of the future payments due to OMGUK valued as of 31 December 2016.
The valuation will be calculated using a discount rate of 8.5% and be paid by OMAM to OMGUK in three instalments on each of 30 June 2017, 31
December 2017 and 30 June 2018, such payments forward valued at a discount rate of 8.5%. OMAM's current estimate of total payments to be
made during this period ranges from $135 million to $145 million. Payments under the DTA will continue as scheduled for the remainder of 2016.
Disposals completed during the period
Disposal of Rogge Global Partners Limited
On 31 May 2016, the Group completed the sale of its interest in Rogge Global Partners Limited (Rogge), a fixed income asset manager, to Allianz
Global Investors GmbH. The sales proceeds received are subject to adjustment as amounts could either be clawed back or future amounts become
payable based on Rogge's future performance. A profit on disposal of GBP12 million has been recognised, which reflects the directors' current
assessment of the likely final amount recoverable.
Disposals announced but not completed during the period
Disposal of Old Mutual Wealth Italy
On 9 August 2016, the Group announced that it has agreed to sell Old Mutual Wealth Italy, part of the Old Mutual Wealth business, to ERGO Italia,
owned by Cinven. The consideration for the transaction is EUR278 million in cash, plus interest to completion. The transaction is subject to regulatory
approval and is expected to complete within the next six months.
A goodwill impairment loss of GBP44 million has been recognised in profit or loss as the net asset value of the business disposed of exceed the expected
net proceeds. The related assets and liabilities have been classified as held for sale. Refer to note I2 for more information.
Financing activities during the period
Nedbank
Nedbank issued and redeemed debt instruments in the normal course of its funding program. Refer to note F3 for further information.
A3: Critical accounting estimates and judgements
In the preparation of these condensed financial statements, the Group is required to make estimates and judgements that affect items reported in the
consolidated income statement, statement of financial position, and other primary statements and related supporting notes.
Critical accounting estimates and judgements are those which involve the most complex or subjective judgements or assessments. Where applicable,
the Group applies estimation and assumption setting techniques that are aligned with relevant actuarial and accounting guidance based on knowledge
of the current situation and require assumptions and predictions of future events and actions. During the period, there have been no other significant
changes to the areas of critical accounting estimates and judgements that the Group applied at 31 December 2015.
The key areas of the Group's business that typically require such estimates and the relevant accounting policies and notes are set out in the following
notes of the 2015 Annual Report and Accounts:
Area Policy note More detail
Loans and advances G1 G1
Insurance and investment contracts G6 G6
Goodwill and other intangible assets H1 H1
Consolidation I1 I3
Tax D1 D1/H7
B: Segment information
B1: Basis of segmentation
Segment presentation
There have been no changes to the presentation of segment information for the six months ended 30 June 2016.
The Group's reported segments are Emerging Markets, Nedbank, Old Mutual Wealth and Institutional Asset Management. The 'Other' segment
includes central activities. For all reporting periods, these businesses have been classified as continuing operations in the IFRS income statement
and as core operations in determining the Group's adjusted operating profit (AOP).
For all reporting periods, Old Mutual Bermuda is classified as a continuing operation in the IFRS income statement, but as non-core in determining
the Group's AOP. For the six months ended 30 June 2016, following the repayment of the majority of outstanding notes, interest payable in respect
of Bermuda loan notes issued to Old Mutual plc are also included within non-core operations and excluded from AOP on the basis that it is no longer material.
For the six months ended 30 June 2016, the Group did not have any discontinued operations. For the year ended 31 December 2015 and six months
ended 30 June 2015, items disclosed as discontinued operations related to payments in respect of the disposal of US Life in 2011. Further detail is
included in note I1.
The Group's segmental results are analysed and reported on a basis consistent with the way that management and the Board of directors of Old Mutual plc
assesses performance of the underlying businesses and allocates resources. Information is presented to the Board on a consolidated basis in pounds
sterling (the presentation currency) and in the functional currency of each business.
Adjusted operating profit 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 the performance of the segments. As appropriate to the business line, the Board reviews additional
measures to assess the performance of each of the segments. These typically include sales, net client cash flows, funds under management, gross
earned premiums, underwriting results, net interest income, non-interest revenue and credit losses.
Consistent with internal reporting, assets, liabilities, revenues and expenses that are not directly attributable to a particular segment are allocated
between segments where appropriate and where there is a reasonable basis for doing so. The Group accounts for inter-segment revenues and
transfers as if the transactions were with third parties at current market prices. There are no major trading activities between the segments.
The revenues generated in each reported segment can be seen in the analysis of profits and losses in note B3. The segmental information in notes B3
and B4, reflects the adjusted and IFRS measures of profit or loss and the assets and liabilities for each operating segment as provided to management and
the Board of directors. There are no differences between the measurement of the assets and liabilities reflected in the primary statements and that reported
for the segments.
The Group is primarily engaged in the following business activities from which it generates revenue: life assurance (premium income), asset
management business (fee and commission income), banking (banking interest receivable and investment banking income) and property & casualty
(premium income). Other revenue includes gains and losses on investment securities. An analysis of segment revenues and expenses and the Group's
revenues and expenses is shown in note B3.
The principal lines of business from which each operating segment derives its revenues are as follows:
Core operations
Emerging Markets ? life assurance, property & casualty, asset management and banking
Nedbank ? banking, asset management and life assurance
Old Mutual Wealth ? life assurance and asset management
Institutional Asset Management ? asset management
Non-core operation
Old Mutual Bermuda ? life assurance
B2: Gross earned premiums and deposits to investment contracts
GBPm
Emerging Old Mutual
Six months ended 30 June 2016 Markets Wealth Total
Life assurance ? insurance contracts 595 70 665
Life assurance ? investment contracts with discretionary
participation features 672 - 672
Property & casualty 366 - 366
Gross earned premiums 1,633 70 1,703
GBPm
Emerging Old Mutual
Six months ended 30 June 2015 Markets Wealth Total
Life assurance ? insurance contracts 634 71 705
Life assurance ? investment contracts with discretionary
participation features 540 - 540
Property & casualty 344 - 344
Gross earned premiums 1,518 71 1,589
GBPm
Emerging Old Mutual
Year ended 31 December 2015 Markets Wealth Total
Life assurance ? insurance contracts 1,469 154 1,623
Life assurance ? investment contracts with discretionary
participation features 1,221 - 1,221
Property & casualty 745 - 745
Gross earned premiums 3,435 154 3,589
B3: Adjusted operating profit statement - segment information for the six months ended 30 June 2016
Emerging
Notes Markets Nedbank
Revenue
Gross earned premiums B2 1,633 -
Outward reinsurance (136) -
Net earned premiums 1,497 -
Investment return (non-banking) 1,193 -
Banking interest and similar income 108 1,501
Banking trading, investment and similar income 4 96
Fee and commission income, and income from service activities 261 410
Other income 52 12
Total revenue(2) 3,115 2,019
Expenses
Claims and benefits (including change in insurance contract provisions) (1,819) -
Reinsurance recoveries 95 -
Net claims and benefits incurred (1,724) -
Change in investment contract liabilities (386) -
Credit impairment charges (16) (100)
Finance costs (16) -
Banking interest payable and similar expenses (29) (895)
Fee and commission expenses, and other acquisition costs (136) (4)
Change in third-party interest in consolidated funds - -
Other operating and administrative expenses (533) (655)
Income tax attributable to policyholder returns (19) -
Total expenses (2,859) (1,654)
Share of associated undertakings' and joint ventures' profit after tax 4 (20)
Profit on disposal of subsidiaries, associated undertakings and strategic
investments C1(c) - -
Adjusted operating profit/(loss) before tax and non-controlling interests 260 345
Income tax expense D1 (73) (88)
Non-controlling interests (6) (123)
Adjusted operating profit/(loss) after tax and non-controlling interests 181 134
Adjusting items after tax and non-controlling interests C1(a) (22) 2
Profit/(loss) after tax from continuing operations 159 136
Loss from discontinued operations after tax I1 - -
Profit/(loss) after tax attributable to equity holders of the parent 159 136
(1) Consolidation adjustments comprise the consolidation of investment funds and eliminations of inter-segment transactions.
(2) Included within total revenue prior to consolidation adjustments are the following amounts derived from trading with other segments: Emerging Markets: GBP33 million
(June 2015: GBP45 million; December 2015: GBP80 million); Nedbank: GBP4 million (June 2015: GBP5 million; December 2015: GBP3 million); Old Mutual Wealth: GBP1 million (June
2015: GBP1 million; December 2015: GBP3 million); Institutional Asset Management: GBP3 million (June 2015: GBP3 million; December 2015: GBP6 million); and non-core operation:
GBP1 million (June 2015: GBP2 million; December 2015: GBP4 million).
(3) Non-core operations for the six months ended 30 June 2016 comprises Old Mutual Bermuda. Old Mutual Bermuda's loss for the six months ended 30 June 2016 was
GBP9 million, including interest payable in respect of Old Mutual Bermuda loan notes issued to Old Mutual plc of GBP1 million.
GBPm
Institutional Adjusted Adjusting IFRS
Old Mutual Asset Consolidation operating items Non-core Income
Wealth Management Other adjustments(1) profit (note C1) operations(3) statement
70 - - - 1,703 - - 1,703
(42) - - - (178) - - (178)
28 - - - 1,525 - - 1,525
1,499 - 33 255 2,980 (28) (5) 2,947
- - - - 1,609 - - 1,609
- - - - 100 - - 100
526 222 - (15) 1,404 (9) - 1,395
7 1 - (1) 71 - 1 72
2,060 223 33 239 7,689 (37) (4) 7,648
(141) - - - (1,960) - - (1,960)
112 - - 2 209 - - 209
(29) - - 2 (1,751) - - (1,751)
(1,451) - - - (1,837) - - (1,837)
- - - - (116) - - (116)
- (1) (44) - (61) 23 - (38)
- - - - (924) - - (924)
(185) (4) - (13) (342) 12 - (330)
- - - (244) (244) - - (244)
(284) (165) (48) 16 (1,669) (139) (5) (1,813)
(7) - - - (26) 26 - -
(1,956) (170) (92) (239) (6,970) (78) (5) (7,053)
- 5 - - (11) - - (11)
- - - - - 24 - 24
104 58 (59) - 708 (91) (9) 608
(16) (17) 13 - (181) (2) - (183)
- (16) - - (145) 4 - (141)
88 25 (46) - 382 (89) (9) 284
(111) 14 28 - (89) 89 - -
(23) 39 (18) - 293 - (9) 284
- - - - - - - -
(23) 39 (18) - 293 - (9) 284
B3: Adjusted operating profit statement - segment information for the six months ended 30 June 2015
Emerging
Notes Markets Nedbank
Revenue
Gross earned premiums B2 1,518 -
Outward reinsurance (109) -
Net earned premiums 1,409 -
Investment return (non-banking) 1,534 -
Banking interest and similar income 122 1,569
Banking trading, investment and similar income 5 105
Fee and commission income, and income from service activities 285 455
Other income 53 15
Total revenue 3,408 2,144
Expenses
Claims and benefits (including change in insurance contract provisions) (1,688) -
Reinsurance recoveries 82 -
Net claims and benefits incurred (1,606) -
Change in investment contract liabilities (668) -
Credit impairment charges (7) (127)
Finance costs (6) -
Banking interest payable and similar expenses (55) (910)
Fee and commission expenses, and other acquisition costs (162) (4)
Change in third-party interest in consolidated funds - -
Other operating and administrative expenses (565) (723)
Income tax attributable to policyholder returns (16) -
Total expenses (3,085) (1,764)
Share of associated undertakings' and joint ventures' profit after tax 10 24
Loss on disposal of subsidiaries, associated undertakings and strategic
investments C1(c) - -
Adjusted operating profit/(loss) before tax and non-controlling interests 333 404
Income tax expense D1 (95) (100)
Non-controlling interests (12) (143)
Adjusted operating profit/(loss) after tax and non-controlling interests 226 161
Adjusting items after tax and non-controlling interests C1(a) (49) 6
Profit/(loss) after tax from continuing operations 177 167
Loss from discontinued operations after tax I1 - -
Profit/(loss) after tax attributable to equity holders of the parent 177 167
(1) Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda's profit after tax for the six months ended 30 June 2015 was GBP4 million. Non-core operations
also include GBP21 million relating to the disposal of US Life in 2011. Further information on discontinued operations is provided in note I1.
GBPm
Institutional Adjusted Adjusting IFRS
Old Mutual Asset Consolidation operating items Non-core Income
Wealth Management Other adjustments(1) profit (note C1) operations(2) statement
71 - - - 1,589 - - 1,589
(42) - - - (151) - - (151)
29 - - - 1,438 - - 1,438
1,408 - 4 264 3,210 (41) 17 3,186
- - - - 1,691 - - 1,691
- - - - 110 - - 110
570 260 - (20) 1,550 (13) - 1,537
10 7 - (19) 66 - 4 70
2,017 267 4 225 8,065 (54) 21 8,032
(41) - - - (1,729) - (9) (1,738)
38 - - - 120 - - 120
(3) - - - (1,609) - (9) (1,618)
(1,367) - - - (2,035) - - (2,035)
- - - - (134) - - (134)
- (1) (42) - (49) 4 - (45)
- - - - (965) 3 - (962)
(287) (3) - (45) (501) 44 (2) (459)
- - - (207) (207) - - (207)
(190) (183) (29) 27 (1,663) (259) (6) (1,928)
(19) - - - (35) 35 - -
(1,866) (187) (71) (225) (7,198) (173) (17) (7,388)
- 3 - - 37 - - 37
- - - - - 2 - 2
151 83 (67) - 904 (225) 4 683
(19) (25) 4 - (235) (8) - (243)
- (12) - - (167) 8 - (159)
132 46 (63) - 502 (225) 4 281
(174) 2 (10) - (225) 225 - -
(42) 48 (73) - 277 - 4 281
- - - - - - (21) (21)
(42) 48 (73) - 277 - (17) 260
B3: Adjusted operating profit statement - segment information for the year ended 31 December 2015
Emerging
Notes Markets Nedbank
Revenue
Gross earned premiums B2 3,435 -
Outward reinsurance (253) -
Net earned premiums 3,182 -
Investment return (non-banking) 2,445 -
Banking interest and similar income 235 3,085
Banking trading, investment and similar income 5 208
Fee and commission income, and income from service activities 560 894
Other income 70 12
Total revenue 6,497 4,199
Expenses
Claims and benefits (including change in insurance contract provisions) (3,294) -
Reinsurance recoveries 184 -
Net claims and benefits incurred (3,110) -
Change in investment contract liabilities (1,142) -
Credit impairment charges (62) (245)
Finance costs (15) -
Banking interest payable and similar expenses (93) (1,833)
Fee and commission expenses, and other acquisition costs (323) (9)
Change in third-party interest in consolidated funds - -
Other operating and administrative expenses (1,121) (1,403)
Income tax attributable to policyholder returns (30) -
Total expenses (5,896) (3,490)
Share of associated undertakings' and joint ventures' profit after tax #N/A 14 45
Loss on disposal of subsidiaries, associated undertakings and strategic
investments C1(c) - -
Adjusted operating profit/(loss) before tax and non-controlling interests 615 754
Income tax expense D1 (173) (180)
Non-controlling interests (24) (272)
Adjusted operating profit/(loss) after tax and non-controlling interests 418 302
Adjusting items after tax and non-controlling interests C1(a) (56) 7
Profit/(loss) after tax from continuing operations 362 309
Loss from discontinued operations after tax I1 - -
Profit/(loss) after tax attributable to equity holders of the parent 362 309
(1) Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda's loss after tax for the year ended 31 December 2015 was GBP31 million. Non-core operations
also include GBP21 million relating to the disposal of US Life in 2011. Further information on discontinued operations is provided in note I1.
GBPm
Institutional Adjusted Adjusting Discontinued IFRS
Old Mutual Asset Consolidation operating items and non-core Income
Wealth Management Other adjustments(1) profit (note C1) operations(2) statement
154 - - - 3,589 - - 3,589
(82) - - - (335) - - (335)
72 - - - 3,254 - - 3,254
1,158 - 17 283 3,903 (73) (35) 3,795
- - - - 3,320 - - 3,320
- - - - 213 - - 213
1,140 491 - (39) 3,046 (19) - 3,027
13 5 - (21) 79 - 7 86
2,383 496 17 223 13,815 (92) (28) 13,695
(169) - - - (3,463) - 13 (3,450)
95 - - - 279 - - 279
(74) - - - (3,184) - 13 (3,171)
(1,061) - - - (2,203) - - (2,203)
- - - - (307) - - (307)
- (2) (83) - (100) 51 - (49)
- - - - (1,926) 2 - (1,924)
(416) (6) (4) (57) (815) 32 (3) (786)
- - - (208) (208) - - (208)
(524) (347) (92) 42 (3,445) (301) (13) (3,759)
(1) - - - (31) 31 - -
(2,076) (355) (179) (223) (12,219) (185) (3) (12,407)
- 8 - - 67 - - 67
- - - - - (36) - (36)
307 149 (162) - 1,663 (313) (31) 1,319
(43) (30) 23 - (403) 29 - (374)
- (33) - - (329) 19 - (310)
264 86 (139) - 931 (265) (31) 635
(222) (20) 26 - (265) 265 - -
42 66 (113) - 666 - (31) 635
- - - - - - (21) (21)
42 66 (113) - 666 - (52) 614
B4: Statement of financial position ? segment information at 30 June 2016
Emerging
Notes Markets(1) Nedbank
Assets
Goodwill and other intangible assets G1 468 466
Mandatory reserve deposits with central banks 6 860
Property, plant and equipment 292 457
Investment property 1,506 2
Deferred tax assets 38 17
Investments in associated undertakings and joint ventures 77 409
Deferred acquisition costs 101 -
Reinsurers' share of policyholder liabilities F2 189 6
Loans and advances F1 1,029 35,574
Investments and securities 29,870 7,557
Current tax receivable 34 64
Trade, other receivables and other assets 873 717
Derivative financial instruments 211 1,017
Cash and cash equivalents 1,275 1,141
Assets held for sale I2 17 -
Inter-segment funding - assets - -
Total assets 35,986 48,287
Liabilities
Long-term business insurance policyholder liabilities F2 8,610 182
Investment contract liabilities F2 20,397 679
Property & casualty liabilities F2 425 -
Third-party interests in consolidated funds - -
Borrowed funds F3 505 2,658
Provisions and accruals 112 -
Deferred revenue 22 -
Deferred tax liabilities 174 77
Current tax payable 88 19
Trade, other payables and other liabilities 2,505 1,471
Amounts owed to bank depositors 550 38,057
Derivative financial instruments 263 1,005
Liabilities held for sale I2 - -
Inter-segment funding - liabilities - -
Total liabilities 33,651 44,148
Net assets(1) 2,335 4,139
Equity
Equity attributable to equity holders of the parent 2,119 2,095
Non-controlling interests 216 2,044
Ordinary shares 216 1,731
Preferred securities - 313
Total equity 2,335 4,139
(1) The net assets of Emerging Markets exclude GBP199 million (June 2015: GBP234 million; December 2015: GBP167 million) of investments held by policyholder funds in Group
equity and debt instruments. These investments are in the Company's ordinary shares and in the subordinated liabilities and preferred securities issued by Nedbank.
(2) Consolidation adjustments comprise the consolidation of investment funds and eliminations of inter-segment balances.
GBPm
Institutional
Old Mutual Asset Non-core Consolidation
Wealth Management Other operation adjustments(2) Total
1,450 958 - - - 3,342
- - - - - 866
21 24 - - - 794
- - - - - 1,508
10 245 - 1 - 311
1 30 10 - - 527
599 29 - - - 729
2,863 - - - - 3,058
198 - - - - 36,801
45,286 95 454 - 5,734 88,996
38 - - - - 136
1,382 124 116 8 148 3,368
- - 55 19 239 1,541
761 49 351 80 321 3,978
6,081 - - - - 6,098
- - 903 90 (993) -
58,690 1,554 1,889 198 5,449 152,053
391 - - - - 9,183
47,867 - - 97 - 69,040
- - - - - 425
- - - - 6,585 6,585
- 38 1,103 - (73) 4,231
36 3 7 - - 158
232 - - - - 254
139 1 17 - - 408
- 80 20 - - 207
1,431 277 271 4 (328) 5,631
- - - - - 38,607
- 25 31 2 258 1,584
5,853 - - - - 5,853
790 97 106 - (993) -
56,739 521 1,555 103 5,449 142,166
1,951 1,033 334 95 - 9,887
1,951 664 334 95 - 7,258
- 369 - - - 2,629
- 369 - - - 2,316
- - - - - 313
1,951 1,033 334 95 - 9,887
B4: Statement of financial position ? segment information at 30 June 2015
Emerging
Notes Markets Nedbank
Assets
Goodwill and other intangible assets 408 437
Mandatory reserve deposits with central banks 4 804
Property, plant and equipment 294 394
Investment property 1,302 16
Deferred tax assets 56 16
Investments in associated undertakings and joint ventures 64 373
Deferred acquisition costs 99 -
Reinsurers' share of policyholder liabilities F2 163 5
Loans and advances F1 909 33,572
Investments and securities 28,563 6,447
Current tax receivable 16 24
Trade, other receivables and other assets 754 676
Derivative financial instruments 264 771
Cash and cash equivalents 1,417 1,660
Assets held for sale 212 -
Inter-segment funding - assets - -
Total assets 34,525 45,195
Liabilities
Long-term business insurance policyholder liabilities F2 8,746 211
Investment contract liabilities F2 19,159 638
Property & casualty liabilities F2 394 -
Third-party interests in consolidated funds - -
Borrowed funds F3 489 2,368
Provisions and accruals 167 1
Deferred revenue 19 1
Deferred tax liabilities 204 33
Current tax payable 91 13
Trade, other payables and other liabilities 2,377 1,789
Amounts owed to bank depositors 429 35,571
Derivative financial instruments 375 786
Liabilities held for sale I2 - -
Inter-segment funding - liabilities - -
Total liabilities 32,450 41,411
Net assets 2,075 3,784
Equity
Equity attributable to equity holders of the parent 1,866 1,942
Non-controlling interests 209 1,842
Ordinary shares 209 1,570
Preferred securities - 272
Total equity 2,075 3,784
GBPm
Institutional
Old Mutual Asset Non-core Consolidation
Wealth Management Other operation adjustments Total
1,668 831 - - - 3,344
- - - - - 808
20 18 - - - 726
- - - - - 1,318
7 167 - 1 - 247
- 23 10 - - 470
686 19 - - - 804
2,226 - - - - 2,394
174 - - - - 34,655
47,176 45 397 293 4,112 87,033
55 - - - - 95
710 117 107 442 132 2,938
- - 67 18 41 1,161
751 129 401 21 655 5,034
902 - - - - 1,114
64 - 865 - (929) -
54,439 1,349 1,847 775 4,011 142,141
258 - - 636 - 9,851
48,953 - - 36 - 68,786
- - - - - 394
- - - - 5,678 5,678
- 92 680 - (63) 3,566
35 2 23 - - 228
271 - - - - 291
221 - 18 - - 476
23 12 30 - - 169
1,154 370 148 10 (675) 5,173
- - - - - 36,000
- - - - - 1,161
833 - - - - 833
763 - 166 - (929) -
52,511 476 1,065 682 4,011 132,606
1,928 873 782 93 - 9,535
1,928 577 782 93 - 7,188
- 296 - - - 2,347
- 296 - - - 2,075
- - - - - 272
1,928 873 782 93 - 9,535
B4: Statement of financial position ? segment information at 31 December 2015
Emerging
Notes Markets Nedbank
Assets
Goodwill and other intangible assets G1 415 378
Mandatory reserve deposits with central banks 5 711
Property, plant and equipment 275 385
Investment property 1,232 1
Deferred tax assets 47 10
Investments in associated undertakings and joint ventures 60 420
Deferred acquisition costs 87 -
Reinsurers' share of policyholder liabilities F2 150 4
Loans and advances F1 912 29,873
Investments and securities 24,983 5,777
Current tax receivable 14 46
Trade, other receivables and other assets 759 495
Derivative financial instruments 386 1,335
Cash and cash equivalents 1,088 1,001
Assets held for sale 84 -
Inter-segment funding - assets - -
Total assets 30,497 40,436
Liabilities
Long-term business insurance policyholder liabilities F2 7,262 159
Investment contract liabilities F2 16,943 482
Property & casualty liabilities F2 341 -
Third-party interests in consolidated funds - -
Borrowed funds F3 449 1,971
Provisions and accruals 143 -
Deferred revenue 20 -
Deferred tax liabilities 183 45
Current tax payable 73 18
Trade, other payables and other liabilities 2,006 1,036
Amounts owed to bank depositors 518 31,810
Derivative financial instruments 558 1,474
Liabilities held for sale I2 - -
Inter-segment funding - liabilities - -
Total liabilities 28,496 36,995
Net assets 2,001 3,441
Equity
Equity attributable to equity holders of the parent 1,805 1,710
Non-controlling interests 196 1,731
Ordinary shares 196 1,459
Preferred securities - 272
Total equity 2,001 3,441
GBPm
Institutional
Old Mutual Asset Non-core Consolidation
Wealth Management Other operations adjustments Total
1,620 863 - - - 3,276
- - - - - 716
19 21 - - - 700
- - - - - 1,233
8 218 - 1 - 284
1 23 10 - - 514
673 24 - - - 784
2,507 - - - - 2,661
180 - - - - 30,965
48,157 80 467 - 3,137 82,601
28 - - - - 88
618 119 102 16 (102) 2,007
- - 55 17 1,283 3,076
792 92 527 26 994 4,520
4 35 - - - 123
- - 860 80 (940) -
54,607 1,475 2,021 140 4,372 133,548
293 - - - - 7,714
50,344 - - 85 - 67,854
- - - - - 341
- - - - 4,661 4,661
- 61 1,098 - (55) 3,524
34 3 19 - - 199
254 - - - - 274
172 - 17 - - 417
13 59 23 - - 186
799 297 212 6 (569) 3,787
- - - - - 32,328
- 6 4 - 1,275 3,317
- 12 - - - 12
748 99 93 - (940) -
52,657 537 1,466 91 4,372 124,614
1,950 938 555 49 - 8,934
1,950 611 555 49 - 6,680
- 327 - - - 2,254
- 327 - - - 1,982
- - - - - 272
1,950 938 555 49 - 8,934
C: Other key performance information
C1: Operating profit adjusting items
(a) Summary of adjusting items for determination of adjusted operating profit (AOP)
In determining the AOP of the Group for core operations, certain adjustments are made to profit before tax to reflect the directors' view of the underlying
long-term performance of the Group. The following table shows an analysis of those adjustments from AOP to profit before and after tax.
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2016 2015 2015
(Expense)/income
Goodwill impairment and impact of acquisition accounting C1(b) (90) (171) (167)
Net profit/(loss) on disposal of subsidiaries, associated undertakings and
strategic investments C1(c) 24 2 (36)
Short-term fluctuations in investment return C1(d) (23) (15) (42)
Investment return adjustment for Group equity and debt instruments held in
life funds C1(e) (5) (26) (31)
Dividends declared to holders of perpetual preferred callable securities C1(f) 9 15 31
Institutional Asset Management equity plans C1(g) 2 (6) (9)
Credit-related fair value gains/(losses) on Group debt instruments C1(h) 14 (19) 7
Old Mutual Wealth business transformation costs C1(i) (48) (40) (97)
Total adjusting items (117) (260) (344)
Tax on adjusting items D1(d) 24 27 60
Non-controlling interest on adjusting items 4 8 19
Total adjusting items after tax and non-controlling interests (89) (225) (265)
(b) Goodwill impairment and impact of acquisition accounting
When applying acquisition accounting, deferred acquisition costs and deferred revenue existing at the point of acquisition are not recognised under
IFRS. These are reversed on acquisition in the statement of financial position and replaced by goodwill, other intangible assets and the value of the
acquired present value of in-force business (acquired PVIF). In determining AOP, the Group recognises deferred revenue, acquisition costs and
deferred revenue in relation to policies sold by acquired businesses pre-acquisition. The Group excludes the impairment of goodwill, the amortisation
and impairment of acquired other intangible assets and acquired PVIF as well as the movements in certain acquisition date provisions. Costs incurred
on completed acquisitions are also excluded from AOP. If the intangible assets recognised as a result of a business combination are subsequently
impaired, this is excluded from AOP. The effect of these adjustments to determine AOP are summarised below:
GBPm
Institutional
Emerging Old Mutual Asset
Six months ended 30 June 2016 Markets Wealth Management Total
Impairment of goodwill and other intangible assets - (44) - (44)
Amortisation of acquired PVIF (2) (19) - (21)
Amortisation of acquired deferred costs and revenue - 3 - 3
Amortisation of other acquired intangible assets (3) (20) - (23)
Acquisition costs - (7) - (7)
Deferred consideration and other acquisition date provisions 2 - - 2
(3) (87) - (90)
GBPm
Institutional
Emerging Old Mutual Asset
Six months ended 30 June 2015 Markets Wealth Management Total
Impairment of goodwill and other intangible assets - (94) - (94)
Amortisation of acquired PVIF (5) (27) - (32)
Amortisation of acquired deferred costs and revenue - 7 - 7
Amortisation of other acquired intangible assets (7) (26) - (33)
Acquisition costs (3) (9) - (12)
Deferred consideration - (7) - (7)
(15) (156) - (171)
GBPm
Institutional
Emerging Old Mutual Asset
Year ended 31 December 2015 Markets Wealth Management Total
Impairment of goodwill and other intangible assets - - (23) (23)
Amortisation of acquired PVIF (7) (51) - (58)
Amortisation of acquired deferred costs and revenue - 13 - 13
Amortisation of other acquired intangible assets (13) (56) - (69)
Acquisition costs (4) (10) - (14)
Deferred consideration - (16) - (16)
(24) (120) (23) (167)
(c) Net profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments
The net profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments is analysed below:
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Emerging Markets - - 15
Old Mutual Wealth - 1 (52)
Institutional Asset Management 14 1 1
Old Mutual plc 10 - -
Net profit/(loss) on disposal of subsidiaries, associated undertakings
and strategic investments 24 2 (36)
Emerging Markets
Prior period transaction
On 10 December 2015, Old Mutual Investment Group, a subsidiary of the Group, acquired an additional 50% stake in African Infrastructure Investment
Managers (Pty) Limited (AIIM). The accounting related to the step up in ownership from 50% to 100% effectively involved a simultaneous sale of 50%
of the business, followed by an acquisition of the fair value of 100% of the business. The profit of GBP15 million realised in the financial year ended
31 December 2015 represents the difference between the fair value of the initial 50% and the carrying amount of the investment in AIIM at 10 December
2015.
Old Mutual Wealth
Prior period transactions
On 2 February 2015, the Group completed the sale of Skandia Luxembourg and Skandia France. For the year ended 31 December 2015, the Group
recognised a loss on disposal of GBP1 million (six months ended 30 June 2015: profit of GBP1 million), which comprised a loss on disposing the net assets
of the sold business of GBP31 million (six months ended 30 June 2015: loss of GBP29 million) and, for both the year ended 31 December 2015 and the six
months ended 30 June 2015, a gain of GBP30 million relating to amounts recycled from foreign currency translation reserve.
On 30 September 2015, the Group completed the sale of its Switzerland business, Skandia Leben AG. The Group recognised a loss on disposal of
GBP51 million, which comprised a loss on disposing the net assets of the sold business of GBP91 million and a gain of GBP40 million relating to amounts
recycled from the foreign currency translation reserve.
Institutional Asset Management
Current period transaction
On 31 May 2016, the Group completed the sale of its interest in Rogge Global Partners Limited (Rogge), a fixed income asset manager, to Allianz
Global Investors GmbH. The sales proceeds received are subject to adjustment as amounts could either be clawed back or future amounts become
payable based on Rogge's future performance. A profit on disposal of GBP12 million has been recognised in the current period reflecting the director's
current assessment of the likely final amount recoverable.
Current period and prior transactions
The Group received additional income of GBP2 million (six months ended 30 June 2015: GBP1 million; year ended 31 December 2015: GBP1 million) relating
to deferred consideration linked to earnout conditions in respect of Institutional Asset Management affiliates disposed in prior years.
Old Mutual plc
Current period transactions
During the period, Old Mutual plc received GBP10 million from Skandia Liv in respect of various matters relating to the completion of the separation of
the Skandia Nordic business from the Group.
(d) Short-term fluctuations in investment return
Profit before tax, as disclosed in the consolidated IFRS income statement, includes actual investment returns earned on the shareholder assets of
the Group's life assurance and property & casualty businesses. AOP is stated after recalculating shareholder asset investment returns based on a
long-term investment return rate. The difference between the actual and the long-term investment returns is referred to as the short-term fluctuation
in investment return.
Long-term rates of return are based on achieved rates of return appropriate to the underlying asset base, adjusted for current inflation expectations,
default assumptions, costs of investment management and consensus economic investment forecasts. The underlying rates are principally derived
with reference to 10-year government bond rates, cash and money market rates and an explicit equity risk premium for South African businesses.
The rates set out below reflect the apportionment of underlying investments in cash deposits, money market instruments and equity assets. Long-
term rates of return are reviewed annually by the Board. The Board's review of the long-term rates of return seeks to ensure that the returns credited
to AOP are consistent with the actual returns expected to be earned over the long-term.
For Emerging Markets, the return is applied to an average value of investible shareholders' assets, adjusted for net fund flows. For Old Mutual Wealth,
the return is applied to average investible assets.
%
Six months Six months
ended ended Year ended
30 June 30 June 31 December
Long-term investment rates 2016 2015 2015
Emerging Markets
Mutual & Federal(1) 7.4 7.4 7.4
Old Mutual South Africa 8.0 8.0 8.0
Rest of Africa 8.5 8.5 8.5
Old Mutual Wealth 1.0 1.0 1.0
(1) The long-term investment rate for Mutual & Federal relates solely to its South African business.
Analysis of short-term fluctuations in investment return
GBPm
Emerging Old Mutual
Six months ended 30 June 2016 Markets Wealth Other Total
Actual shareholder investment return 34 10 5 49
Less: Long-term investment return 59 3 10 72
Short-term fluctuations in investment return (25) 7 (5) (23)
GBPm
Emerging Old Mutual
Six months ended 30 June 2015 Markets Wealth Other Total
Actual shareholder investment return 57 (2) 8 63
Less: Long-term investment return 64 3 11 78
Short-term fluctuations in investment return (7) (5) (3) (15)
GBPm
Emerging Old Mutual
Year ended 31 December 2015 Markets Wealth Other Total
Actual shareholder investment return 88 8 12 108
Less: Long-term investment return 124 5 21 150
Short-term fluctuations in investment return (36) 3 (9) (42)
(e) Investment return adjustment for Group equity and debt instruments held in policyholder funds
AOP includes investment returns on policyholder investments in Group equity and debt instruments held by the Group's life funds. These include
investments in the Company's ordinary shares and the subordinated liabilities and ordinary shares issued by the Group. These investment returns
are eliminated within the consolidated income statement in arriving at profit before tax, but are included in AOP. This ensures consistency of treatment
with the measures in the related policyholder liability. During the six months ended 30 June 2016, the investment return adjustment increased AOP
by GBP5 million (six months ended 30 June 2015: GBP26 million; year ended 31 December 2015: GBP31 million).
(f) Dividends declared to holders of perpetual preferred callable securities
Dividends declared to the holders of the Group's perpetual preferred callable securities on an AOP basis were GBP9 million for the six months ended
30 June 2016 (six months ended 30 June 2015: GBP15 million; year ended 31 December 2015: GBP31 million). For the purpose of determining AOP, these
are recognised in finance costs on an accrual basis. In accordance with IFRS, the total cash distribution is recognised directly in equity.
(g) Institutional Asset Management equity plans
Institutional Asset Management has a number of long-term incentive arrangements with senior employees in its asset management affiliates.
As part of the incentive schemes in the Institutional Asset Management business, the Group has granted put options over the equity of certain affiliates
to senior affiliate employees. The impact of revaluing these instruments in accordance with IFRS, is excluded from AOP. At 30 June 2016, these instruments
were revalued, the impact of which was a gain of GBP2 million (six months ended 30 June 2015: loss of GBP6 million; year ended 31 December 2015: loss of
GBP9 million).
(h) Credit-related fair value losses on Group debt instruments
The widening of the credit spread on the Group's debt instruments can cause the market value of these instruments to decrease, resulting in gains
being recognised in profit or loss. Conversely, if the credit spread narrows the market value of debt instruments will increase causing losses to be
recognised in the consolidated income statement. In the directors' view, such movements are not reflective of the underlying performance of the
Group and will reverse over time. Therefore they have been excluded from AOP. For the six months ended 30 June 2016, due to widening of credit
spreads, a net gain of GBP14 million was recognised (six months ended 30 June 2015: net loss of GBP19 million; year ended 31 December 2015: net gain
of GBP7 million).
(i) Old Mutual Wealth restructuring expenditure
In 2013, Old Mutual Wealth UK business embarked on a significant programme to develop new platform capabilities and to outsource UK business
administration. This will involve replacing many aspects of the existing UK platform, and on completion certain elements of service provision will be
migrated to International Financial Data Services (IFDS) under a long-term outsourcing agreement. The cost of developing the new technology
typically cannot be capitalised, hence these costs and the costs of decommissioning existing technology and migrating of services to IFDS are
excluded from AOP. Only costs that are directly attributable to the programme are excluded. For the six months ended 30 June 2016, these costs
totalled GBP48 million (six months ended 30 June 2015: GBP40 million; year ended 31 December 2015: GBP97 million).
C2: Earnings and earnings per share
Pence
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Source of guidance Notes 2016 2015 2015
Basic earnings per share IFRS C2(a) 5.7 5.4 12.7
Diluted basic earnings per share IFRS C2(b) 5.6 5.0 12.2
Adjusted operating earnings per share Group policy C2(c) 8.0 10.3 19.3
Headline earnings per share (Gross of tax) JSE Listing Requirements C2(d) 6.1 7.4 13.9
Headline earnings per share (Net of tax) JSE Listing Requirements C2(d) 6.2 7.4 13.9
Diluted headline earnings per share (Gross of tax) JSE Listing Requirements C2(d) 6.0 6.9 13.3
Diluted headline earnings per share (Net of tax) JSE Listing Requirements C2(d) 6.0 6.9 13.3
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit for the financial period attributable to ordinary equity shareholders of the parent by the
weighted average number of ordinary shares in issue during the year excluding own shares held in policyholder funds, Employee Share Ownership Plan
Trusts (ESOP), Black Economic Empowerment trusts and other related undertakings.
The table below reconciles the profit attributable to equity holders of the parent to profit attributable to ordinary equity holders:
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Profit for the financial period attributable to equity holders of the parent from
continuing operations 284 281 635
Loss for the financial period attributable to equity holders of the parent from
discontinued operations - (21) (21)
Profit for the financial period attributable to equity holders of the parent 284 260 614
Dividends paid to holders of perpetual preferred callable securities,
net of tax credits (16) (14) (24)
Profit attributable to ordinary equity holders 268 246 590
Total dividends paid to holders of perpetual preferred callable securities of GBP16 million for the six months ended 30 June 2016 (six months ended
30 June 2015: GBP14 million; year ended 31 December 2015: GBP24 million) are stated net of tax credits of GBP1 million (six months ended 30 June 2015:
GBP3 million; year ended 31 December 2015: GBP6 million).
The table below summarises the calculation of the weighted average number of ordinary shares for the purposes of calculating basic earnings per share:
Millions
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Weighted average number of ordinary shares in issue 4,929 4,920 4,924
Shares held in charitable foundations and trusts (21) (6) (13)
Shares held in ESOP and similar trusts (135) (59) (98)
Adjusted weighted average number of ordinary shares 4,773 4,855 4,813
Shares held in life funds (80) (80) (81)
Shares held in Black Economic Empowerment trusts (7) (177) (91)
Weighted average number of ordinary shares used to calculate
basic earnings per share 4,686 4,598 4,641
Basic earnings per ordinary share (pence) 5.7 5.4 12.7
(b) Diluted basic earnings per share
Diluted basic EPS recognises the dilutive impact of shares and options held in ESOP and similar trusts and Black Economic Empowerment trusts, to
the extent they have value, in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full period.
The table below reconciles the profit attributable to ordinary equity holders to diluted profit attributable to ordinary equity holders and summarises the
calculation of weighted average number of shares for the purpose of calculating diluted basic earnings per share:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2016 2015 2015
Profit attributable to ordinary equity holders (GBPm) 268 246 590
Dilution effect on profit relating to share options issued by subsidiaries (GBPm) (2) (5) (7)
Diluted profit attributable to ordinary equity holders (GBPm) 266 241 583
Weighted average number of ordinary shares (millions) C2(a) 4,686 4,598 4,641
Adjustments for share options held by ESOP and similar trusts (millions) 68 36 47
Adjustments for shares held in Black Economic Empowerment trusts (millions) 7 177 91
Weighted average number of ordinary shares used to calculate
diluted basic earnings per share (millions) 4,761 4,811 4,779
Diluted basic earnings per ordinary share (pence) 5.6 5.0 12.2
(c) Adjusted operating earnings per share
The following table presents a reconciliation of profit for the financial period to adjusted operating profit after tax attributable to ordinary equity holders
and summarises the calculation of adjusted operating earnings per share:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2016 2015 2015
Profit for the financial period attributable to equity holders of the parent 284 260 614
Adjusting items C1(a) 117 260 344
Tax on adjusting items (24) (27) (60)
Non-core operations B3 9 (4) 31
Loss from discontinued operations I1 - 21 21
Non-controlling interest on adjusting items (4) (8) (19)
Adjusted operating profit after tax attributable to ordinary equity
holders (GBPm) 382 502 931
Adjusted weighted average number of ordinary shares used to
calculate adjusted operating earnings per share (millions) C2(a) 4,773 4,855 4,813
Adjusted operating earnings per share (pence) 8.0 10.3 19.3
(d) Headline earnings per share
The Group is required to calculate headline earnings per share (HEPS) in accordance with the JSE Limited (JSE) Listing Requirements, determined
by reference to the South African Institute of Chartered Accountants' circular 02/2015 'Headline Earnings'. The table below sets out a reconciliation
of basic EPS and HEPS in accordance with that circular. Disclosure of HEPS is not a requirement of IFRS, but it is a commonly used measure of
earnings in South Africa. The table below reconciles the profit for the financial year attributable to equity holders of the parent to headline
earnings and summarises the calculation of basic HEPS:
Six months ended Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015
Notes Gross Net Gross Net Gross Net
Profit for the financial period attributable to equity holders
of the parent 284 284 260 260 614 614
Dividends paid to holders of perpetual preferred
callable securities (16) (16) (14) (14) (24) (24)
Profit attributable to ordinary equity holders 268 268 246 246 590 590
Adjustments:
Impairments of goodwill and other intangible assets 44 44 94 94 23 23
Loss on disposal of subsidiaries, associated undertakings
and strategic investments (24) (23) (2) (2) 36 35
Realised gains (net of impairments) on available-for-sale
financial assets - - - - (5) (5)
Headline earnings 288 289 338 338 644 643
Dilution effect on earnings relating to share options issued
by subsidiaries (2) (2) (5) (5) (7) (7)
Diluted headline earnings (GBPm) 286 287 333 333 637 636
Weighted average number of ordinary shares (millions) C2(a) 4,686 4,686 4,598 4,598 4,641 4,641
Diluted weighted average number of ordinary shares
(millions) C2(b) 4,761 4,761 4,811 4,811 4,779 4,779
Headline earnings per share (pence) 6.1 6.2 7.4 7.4 13.9 13.9
Diluted headline earnings per share (pence) 6.0 6.0 6.9 6.9 13.3 13.3
C3: Dividends
GBPm
Ordinary Six months Six months Year
dividend ended ended ended
payment 30 June 30 June 31 December
date 2016 2015 2015
2014 Final dividend paid ? 6.25p per 11 3/7p ordinary share 29 May 2015 - 296 296
2015 Interim dividend paid ? 2.65p per 11 3/7p ordinary share 30 October 2015 - - 126
2015 Second interim dividend paid ? 6.25p per 11 3/7p ordinary share 26 April 2016 299 - -
Dividends to ordinary equity holders 299 296 422
Dividends paid to holders of perpetual preferred callable securities 17 17 30
Dividend payments for the period 316 313 452
Final and interim dividends paid to ordinary equity holders are calculated using the number of shares in issue at the record date less own shares held
in ESOP and similar trusts, life funds of Group entities, Black Economic Empowerment trusts and related undertakings.
As a consequence of the exchange control arrangements in place in certain African territories, dividends to ordinary equity holders on the branch
registers of those countries (or, in the case of Namibia, the Namibian section of the principal register) are settled through Dividend Access Trusts
established for that purpose.
An interim dividend of 2.67 pence (or its equivalent in other applicable currencies) per ordinary share in the Company has been recommended by the
directors in relation to the six months ended 30 June 2016. The interim dividend will be paid on 28 October 2016 to shareholders on the registers at
the close of business on 23 September 2016. The Company is not offering a scrip dividend alternative.
In March 2016, GBP17 million was declared and paid to holders of perpetual preferred callable securities (March 2015: GBP17 million; November 2015: GBP13 million).
D: Other income statement notes
D1: Income tax expense
(a) Analysis of total income tax expense
The total income tax expense for the year comprises:
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Current tax
United Kingdom 11 24 33
Overseas tax
- South Africa 182 155 272
- Rest of Africa 4 11 19
- Europe 6 9 17
- Rest of the world 14 18 16
Withholding taxes 4 6 11
Adjustments to current tax in respect of prior years 1 (1) (1)
Total current tax 222 222 367
Deferred tax
Origination and reversal of temporary differences (39) 21 23
Effect on deferred tax of changes in tax rates (1) - (8)
Adjustments to deferred tax in respect of prior years 1 - (8)
Total deferred tax (39) 21 7
Total income tax expense 183 243 374
(b) Reconciliation of total income tax expense
The income tax expense charged to profit or loss differs from the income tax expense that would apply if all of the Group's profits, from the different
tax jurisdictions, had been taxed at the UK standard corporation tax rate. The difference in the effective rate is explained below:
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Profit before tax 608 683 1,319
Tax at UK standard rate of 20% (2015: 20.25%) 122 138 267
Different tax rate or basis on overseas operations 54 60 118
Untaxed and low taxed income (57) (35) (82)
Disallowable expenses 35 47 46
Adjustments to current tax in respect of prior years 1 - (1)
Net movement on deferred tax assets not recognised 7 3 7
Effect on deferred tax of changes in tax rates (1) - (8)
Adjustments to deferred tax in respect of prior years 1 - (8)
Withholding taxes - 2 5
Income tax attributable to policyholder returns 21 28 25
Other - - 5
Total income tax expense 183 243 374
(c) Income tax relating to components of other comprehensive income
The total income tax expense relating to items recognised in other comprehensive income for the year comprises of the following:
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Measurement gains on defined benefit plans - - 1
Property revaluation - - 3
Share-based-payments (6) - -
Income tax on items that will not be reclassified subsequently to profit or loss (6) - 4
Income tax expense relating to components of other comprehensive income (6) - 4
(d) Reconciliation of income tax expense in the IFRS income statement to income tax on adjusted operating profit
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Income tax expense 183 243 374
Tax on adjusting items
Goodwill impairment and impact of acquisition accounting 7 17 20
(Loss)/profit on disposal of subsidiaries, associates and strategic investments (1) - 1
Short-term fluctuations in investment return 11 (2) 22
Tax on dividends declared to holders of perpetual preferred callable securities
recognised in equity (1) (3) (6)
Institutional Asset Management equity plans (1) 7 5
Old Mutual Wealth business transformation costs 9 8 18
Total tax on adjusting items 24 27 60
Income tax attributable to policyholders returns (26) (35) (31)
Income tax on adjusted operating profit 181 235 403
E: Financial assets and liabilities
E1: Categories of financial instruments
The analysis of assets and liabilities into their categories as defined in IAS 39 'Financial Instruments: Recognition and Measurement' is set out in the
following table. Assets and liabilities of a non-financial nature, or financial assets and liabilities that are specifically excluded from the scope of IAS
39, are reflected in the non-financial assets and liabilities category.
All gains and losses on measuring the financial assets and liabilities at each reporting date are included in the determination of profit or loss for the
year, with the exception of unrealised gains or losses on financial assets classified as available for sale, which are recognised in other comprehensive income.
At 30 June 2016 GBPm
Measurement basis Fair value (note E3) Amortised cost
Non-
Available- Financial financial
for-sale Held-to- liabilities assets
Held-for- financial maturity Loans and amortised and
Total trading Designated assets investments receivables cost liabilities
Assets
Mandatory reserve deposits with
central banks 866 - - - - 866 - -
Investments in associated
undertakings and joint ventures(1) 527 - 74 - - - - 453
Reinsurers' share of policyholder
liabilities 3,058 - 2,596 - - 6 - 456
Loans and advances 36,801 1,784 3,482 2 - 31,533 - -
Investments and securities 88,996 1,241 84,085 791 2,879 - - -
Trade, other receivables and
other assets 3,368 282 - - - 1,701 - 1,385
Derivative financial instruments 1,541 1,541 - - - - - -
Cash and cash equivalents 3,978 - - - - 3,978 - -
Total assets that include financial
instruments 139,135 4,848 90,237 793 2,879 38,084 - 2,294
Total other non-financial assets 12,918 - - - - - - 12,918
Total assets 152,053 4,848 90,237 793 2,879 38,084 - 15,212
Liabilities
Long-term business insurance
policyholder liabilities 9,183 - - - - - - 9,183
Investment contract liabilities 69,040 - 60,364 - - - - 8,676
Third-party interest in
consolidation of funds 6,585 - 6,585 - - - - -
Borrowed funds 4,231 - 868 - - - 3,363 -
Trade, other payables and
other liabilities 5,631 823 667 - - - 2,237 1,904
Amounts owed to bank depositors 38,607 5,385 3,300 - - - 29,922 -
Derivative financial instruments 1,584 1,584 - - - - - -
Total liabilities that include
financial instruments 134,861 7,792 71,784 - - - 35,522 19,763
Total other non-financial liabilities 7,305 - - - - - - 7,305
Total liabilities 142,166 7,792 71,784 - - - 35,522 27,068
(1) Investments in associated undertakings and joint ventures classified as non-financial assets and liabilities are equity accounted.
At 30 June 2015 GBPm
Measurement basis Fair value (note E3) Amortised cost
Available- Financial Non-
for-sale Held-to- liabilities financial
Held-for- financial maturity Loans and amortised assets and
Total trading Designated assets investments receivables cost liabilities
Assets
Mandatory reserve deposits with
central banks 808 - - - - 808 - -
Investments in associated
undertakings and joint ventures(1) 470 - 54 - - - - 416
Reinsurers' share of policyholder
liabilities 2,394 - 2,082 - - 5 - 307
Loans and advances 34,655 2,017 3,425 2 - 29,211 - -
Investments and securities 87,033 953 82,866 647 2,512 55 - -
Trade, other receivables and
other assets 2,938 71 288 - - 1,565 - 1,014
Derivative financial instruments 1,161 1,161 - - - - - -
Cash and cash equivalents 5,034 - - - - 5,034 - -
Total assets that include financial
instruments 134,493 4,202 88,715 649 2,512 36,678 - 1,737
Total other non-financial assets 7,648 - - - - - - 7,648
Total assets 142,141 4,202 88,715 649 2,512 36,678 - 9,385
Liabilities
Long-term business insurance
policyholder liabilities 9,851 - - - - - - 9,851
Investment contract liabilities 68,786 - 60,905 - - - - 7,881
Third-party interest in
consolidation of funds 5,678 - 5,678 - - - - -
Borrowed funds 3,566 - 802 - - - 2,764 -
Trade, other payables and
other liabilities 5,173 704 430 - - - 2,395 1,644
Amounts owed to bank depositors 36,000 4,565 2,585 - - - 28,850 -
Derivative financial instruments 1,161 1,161 - - - - - -
Total liabilities that include
financial instruments 130,215 6,430 70,400 - - - 34,009 19,376
Total other non-financial liabilities 2,391 - - - - - - 2,391
Total liabilities 132,606 6,430 70,400 - - - 34,009 21,767
(1) Investments in associated undertakings and joint ventures classified as non-financial assets and liabilities are equity accounted.
At 31 December 2015 GBPm
Measurement basis Fair value (note E3) Amortised cost
Available- Financial Non-
for-sale Held-to- liabilities financial
Held-for- financial maturity Loans and amortised assets and
Total trading Designated assets investments receivables cost liabilities
Assets
Mandatory reserve deposits with
central banks 716 - - - - 716 - -
Investments in associated
undertakings and joint ventures(1) 514 - 51 - - - - 463
Reinsurers' share of policyholder
liabilities 2,661 - 2,328 - - 4 - 329
Loans and advances 30,965 1,491 3,035 2 - 26,437 - -
Investments and securities 82,601 883 78,723 731 2,264 - - -
Trade, other receivables and
other assets 2,007 182 - - - 1,179 - 646
Derivative financial instruments 3,076 3,076 - - - - - -
Cash and cash equivalents 4,520 - - - - 4,520 - -
Total assets that include financial
instruments 127,060 5,632 84,137 733 2,264 32,856 - 1,438
Total other non-financial assets 6,488 - - - - - - 6,488
Total assets 133,548 5,632 84,137 733 2,264 32,856 - 7,926
Liabilities
Long-term business policyholder
liabilities 7,714 - - - - - - 7,714
Investment contract liabilities 67,854 - 60,769 - - - - 7,085
Third-party interest in
consolidation of funds 4,661 - 4,661 - - - - -
Borrowed funds 3,524 - 804 - - - 2,720 -
Trade, other payables and
other liabilities 3,787 547 383 - - - 1,547 1,310
Amounts owed to bank depositors 32,328 4,580 2,885 - - - 24,863 -
Derivative financial instruments 3,317 3,317 - - - - - -
Total liabilities that include
financial
instruments 123,185 8,444 69,502 - - - 29,130 16,109
Total other non-financial liabilities 1,429 - - - - - - 1,429
Total liabilities 124,614 8,444 69,502 - - - 29,130 17,538
(1) Investments in associated undertakings and joint ventures classified as non-financial assets and liabilities are equity accounted.
E2: Fair values of financial assets and liabilities
(a) Determination of fair value
The best evidence of fair value is a quoted price in an active market. In the event that the market for a financial asset or liability is not active, or quoted
prices cannot be obtained without undue effort, another valuation technique is used.
In general, the following inputs are taken into account when evaluating the fair value of financial instruments:
- Assessing whether instruments are trading with sufficient frequency and volume, that they can be considered liquid
- The inclusion of a measure of the counterparties' non-performance risk in the fair-value measurement of loans and advances, which involves the modelling of dynamic credit spreads
- The inclusion of credit valuation adjustment (CVA) and debit valuation adjustment (DVA) in the fair-value measurement of derivative instruments, and
- The inclusion of own credit risk in the calculation of the fair value of financial liabilities.
There have been no significant changes in the valuation techniques applied when valuing financial instruments. The general principles applied to
those instruments measured at fair value are outlined below:
Reinsurers' share of policyholder liabilities
Reinsurers' share of policyholder liabilities are measured on a basis that is consistent with the measurement of the provisions held in respect of the
related insurance contracts.
Loans and advances
Loans and advances include mortgage loans, other asset-based loans, including collateralised debt obligations, and other secured and unsecured loans.
In the absence of an observable market for these instruments, the fair value is determined by using internally developed models that are specific to
the instrument and that incorporate all available observable inputs. These models involve discounting the contractual cash flows by using a credit-
adjusted zero-coupon rate.
Investments and securities
Investments and securities include government and government-guaranteed securities, listed and unlisted debt securities, preference shares and
debentures, listed and unlisted equity securities, listed and unlisted pooled investments (see below), short-term funds and securities treated as
investments and certain other securities.
Pooled investments represent the Group's holdings of shares/units in open-ended investment companies, unit trusts, mutual funds and similar
investment vehicles. Pooled investments are recognised at fair value. The fair values of pooled investments are based on widely published prices
that are regularly updated or models based on the market prices of investments held in the underlying pooled investment funds.
Other investment and securities that are measured at fair value are measured at observable market prices where available. In the absence of
observable market prices, these investments and securities are fair valued utilising one or more of the following techniques: discounted cash flows,
the application of an EBITDA multiple or any other relevant technique.
Investments in associated undertakings and joint ventures
Investments in associated undertakings and joint ventures are valued using appropriate valuation techniques. These may include price earnings
multiples, discounted cash flows or the adjusted value of similar completed transactions.
Derivatives
The fair value of derivatives is determined with reference to the exchange traded prices of the specific instruments. In situations where the derivatives
are traded over the counter the fair value of the instruments is determined by the utilisation of option pricing models.
Investment contract liabilities
The fair value of the investment contract liabilities is determined with reference to the underlying funds that are held by the Group.
Third-party interest in consolidation of funds
Third-party interests in consolidation of funds are measured at the attributable net asset value of each fund.
Amounts owed to bank depositors
The fair values of amounts owed to bank depositors correspond with the carrying amount shown in the statement of financial position, which generally
reflects the amount payable on demand.
Borrowed funds
The fair values of amounts included in borrowed funds are based on quoted market prices at the reporting date where applicable, or by reference to
quoted prices of similar instruments.
Other financial assets and liabilities
The fair values of other financial assets and liabilities (which comprise cash and cash equivalents, cash with central banks, other assets and liabilities)
are reasonably approximated by the carrying amounts reflected in the statement of financial position as they are short-term in nature or re-price to
current market rates frequently.
(b) Fair value hierarchy
Fair values are determined according to the following hierarchy.
Description of hierarchy Types of instruments classified in the respective levels
Level 1 ? quoted market prices: financial assets and liabilities with Listed equity securities, government securities and other listed debt
quoted prices for identical instruments in active markets. securities and similar instruments, actively traded pooled investments,
certain quoted derivative assets and liabilities, listed borrowed funds
and investment contract liabilities directly linked to other Level 1
financial assets.
Level 2 ? valuation techniques using observable inputs: financial Unlisted equity and debt securities where the valuation is based on
assets and liabilities with quoted prices for similar instruments in active models involving no significant unobservable data.
markets or quoted prices for identical or similar instruments in inactive
markets and financial assets and liabilities valued using models where Certain loans and advances, certain privately placed debt instruments,
all significant inputs are observable. third-party interests in consolidated funds and amounts owed to bank
depositors.
Level 3 ? valuation techniques using significant unobservable inputs: Unlisted equity and securities with significant unobservable inputs,
financial assets and liabilities valued using valuation techniques where securities where the market is not considered sufficiently active,
one or more significant inputs are unobservable. including certain inactive pooled investments, and derivatives
embedded in certain portfolios of insurance contracts where the
derivative is not closely related to the host contract and the valuation
contains significant unobservable inputs.
The judgement as to whether a market is active may include, for example, consideration of factors such as the magnitude and frequency of trading
activity, the availability of prices and the size of bid/offer spreads. In inactive markets, obtaining assurance that the transaction price provides evidence
of fair value or determining the adjustments to transaction prices that are necessary to measure the fair value of the asset or liability requires additional
work during the valuation process.
The majority of valuation techniques employ only observable data and so the reliability of the fair value measurement is high. However, certain
financial assets and liabilities are valued on the basis of valuation techniques that feature one or more significant inputs that are unobservable and,
for them, the derivation of fair value is more judgemental. A financial asset or liability in its entirety is classified as valued using significant unobservable
inputs if a significant proportion of that asset or liability's carrying amount is driven by unobservable inputs.
In this context, 'unobservable' means that there is little or no current market data available for which to determine the price at which an arm's length
transaction would be likely to occur. It generally does not mean that there is no market data available at all upon which to base a determination of fair
value. Furthermore, in some cases the majority of the fair value derived from a valuation technique with significant unobservable data may be
attributable to observable inputs. Consequently, the effect of uncertainty in determining unobservable inputs will generally be restricted to uncertainty
about the overall fair value of the asset or liability being measured.
(c) Transfer between fair value hierarchies
The Group deems a transfer to have occurred between Level 1 and Level 2 when an active, traded primary market ceases to exist for that financial
instrument. A transfer between Level 2 and Level 3 occurs when the majority of the significant inputs used to determine fair value of the instrument
become unobservable.
E3: Disclosure of financial assets and liabilities measured at Fair Value
(a) Financial assets and liabilities measured at fair value, classified according to fair value hierarchy
The tables below presents a summary of the Group's financial assets and liabilities that are measured at fair value in the consolidated statement of
financial position according to their IAS 39 classification, as set out in the accounting policies note L1 of the 2015 Annual Report and Accounts and
in terms of the fair value hierarchy described in note E2. The majority of the Group's financial assets are measured utilising market observable inputs
(Level 1) and there has been no significant change compared to the prior year.
Summary
At 30 June 2016 At 30 June 2015 At 31 December 2015
GBPm % GBPm % GBPm %
Financial assets measured at fair value
Level 1 79,373 82.8% 78,172 83.5% 77,722 85.9%
Level 2 14,929 15.6% 13,991 15.0% 11,388 12.6%
Level 3 1,576 1.6% 1,403 1.5% 1,392 1.5%
Total 95,878 100.0% 93,566 100.0% 90,502 100.0%
Financial liabilities measured at fair value
Level 1 48,096 60.4% 46,967 61.1% 48,887 62.7%
Level 2 30,919 38.9% 29,261 38.1% 28,461 36.5%
Level 3 561 0.7% 602 0.8% 598 0.8%
Total 79,576 100.0% 76,830 100.0% 77,946 100.0%
Detail analysis
GBPm
At 30 June 2016 Total Level 1 Level 2 Level 3
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss) 4,848 843 3,985 20
Loans and advances 1,784 - 1,784 -
Investments and securities 1,241 561 680 -
Other financial assets 282 282 - -
Derivative financial instruments ? assets 1,541 - 1,521 20
Designated (fair value through profit or loss) 90,237 78,527 10,154 1,556
Investments in associated undertakings and joint ventures 74 - - 74
Reinsurers' share of policyholder liabilities 2,596 2,596 - -
Loans and advances 3,482 189 3,291 2
Investments and securities 84,085 75,742 6,863 1,480
Available-for-sale financial assets (fair value through equity) 793 3 790 -
Loans and advances 2 2 - -
Investments and securities 791 1 790 -
Total assets measured at fair value 95,878 79,373 14,929 1,576
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss) 7,792 824 6,961 7
Other liabilities 823 812 11 -
Amounts owed to bank depositors 5,385 - 5,385 -
Derivative financial instruments ? liabilities 1,584 12 1,565 7
Designated (fair value through profit or loss) 71,784 47,272 23,958 554
Investment contract liabilities(1) 60,364 46,277 13,533 554
Third-party interests in consolidated funds 6,585 - 6,585 -
Borrowed funds 868 854 14 -
Other liabilities 667 141 526 -
Amounts owed to bank depositors 3,300 - 3,300 -
Total liabilities measured at fair value 79,576 48,096 30,919 561
(1) Investment contract liabilities amount excludes GBP8,676 million discretionary participating investment contracts. These contracts are classified as non-financial liabilities
and are not analysed according to their fair value hierarchy as permitted by IFRS 7 'Financial Instruments: Disclosures'.
GBPm
At 30 June 2015 Total Level 1 Level 2 Level 3
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss) 4,202 239 3,945 18
Loans and advances 2,017 - 2,017 -
Investments and securities 953 167 786 -
Other financial assets 71 71 - -
Derivative financial instruments ? assets 1,161 1 1,142 18
Designated (fair value through profit or loss) 88,715 77,806 9,524 1,385
Investments in associated undertakings and joint ventures 54 - - 54
Reinsurers' share of policyholder liabilities 2,082 2,082 - -
Loans and advances 3,425 175 3,248 2
Investments and securities 82,866 75,261 6,276 1,329
Other financial assets 288 288 - -
Available-for-sale financial assets (fair value through equity) 649 127 522 -
Loans and advances 2 2 - -
Investments and securities 647 125 522 -
Total assets measured at fair value 93,566 78,172 13,991 1,403
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss) 6,430 690 5,739 1
Other liabilities 704 686 18 -
Amounts owed to bank depositors 4,565 - 4,565 -
Derivative financial instruments ? liabilities 1,161 4 1,156 1
Designated (fair value through profit or loss) 70,400 46,277 23,522 601
Investment contract liabilities(1) 60,905 45,507 14,797 601
Third-party interests in consolidated funds 5,678 - 5,678 -
Borrowed funds 802 726 76 -
Other liabilities 430 44 386 -
Amounts owed to bank depositors 2,585 - 2,585 -
Total liabilities measured at fair value 76,830 46,967 29,261 602
(1) Investment contract liabilities amount excludes GBP7,881 million discretionary participating investment contracts. These contracts are classified as non-financial liabilities
and are not analysed according to their fair value hierarchy as permitted by IFRS 7 'Financial Instruments: Disclosures'.
GBPm
At 31 December 2015 Total Level 1 Level 2 Level 3
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss) 5,632 524 5,090 18
Loans and advances 1,491 - 1,491 -
Investments and securities 883 337 546 -
Other financial assets 182 182 - -
Derivative financial instruments ? assets 3,076 5 3,053 18
Designated (fair value through profit or loss) 84,137 77,195 5,568 1,374
Investments in associated undertakings and joint ventures 51 - - 51
Reinsurers' share of policyholder liabilities 2,328 2,328 - -
Loans and advances 3,035 181 2,853 1
Investments and securities 78,723 74,686 2,715 1,322
Other financial assets - - - -
Available-for-sale financial assets (fair value through equity) 733 3 730 -
Loans and advances 2 2 - -
Investments and securities 731 1 730 -
Total assets measured at fair value 90,502 77,722 11,388 1,392
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss) 8,444 545 7,895 4
Other liabilities 547 539 8 -
Amounts owed to bank depositors 4,580 - 4,580 -
Derivative financial instruments ? liabilities 3,317 6 3,307 4
Designated (fair value through profit or loss) 69,502 48,342 20,566 594
Investment contract liabilities(1) 60,769 47,508 12,667 594
Third-party interests in consolidated funds 4,661 - 4,661 -
Borrowed funds 804 794 10 -
Other liabilities 383 40 343 -
Amounts owed to bank depositors 2,885 - 2,885 -
Total liabilities measured at fair value 77,946 48,887 28,461 598
(1) Investment contract liabilities amount excludes GBP7,085 million discretionary participating investment contracts. These contracts are classified as non-financial liabilities
and are not analysed according to their fair value hierarchy as permitted by IFRS 7 'Financial Instruments: Disclosures'.
(b) Level 3 fair value hierarchy disclosure
The tables below reconcile the opening balances of Level 3 financial assets and liabilities to closing balances at the end of the period:
GBPm
Held-for- Designated fair value through profit or loss Total
trading
Investments
in associated
undertakings
and joint Loans and Investments
Six months ended 30 June 2016 Derivatives ventures advances and securities
Level 3 financial assets
At beginning of the period 18 51 1 1,322 1,392
Total net fair value gains recognised in:
- profit or loss - 8 - 48 56
- other comprehensive income - 7 - 1 8
Purchases and issues - - - 73 73
Sales and settlements - (2) - (122) (124)
Transfers in - - - 62 62
Transfers out - - - (46) (46)
Foreign exchange and other 2 10 1 142 155
Total level 3 financial assets 20 74 2 1,480 1,576
Fair value gains relating to assets held at
30 June 2016 recognised in:
- profit or loss - 8 - 41 49
- other comprehensive income - 7 - 1 8
The carrying amount of Level 3 assets at the reporting date principally comprises:
Investments and securities ? designated at fair value through the income statement:
- GBP50 million (December 2015: GBP162 million) of suspended funds, GBP329 million (2015: GBP301 million) of private company shares and unlisted
pooled investments, GBP68 million (2015: GBP36 million) of funds not being actively priced and GBP11 million (December 2015: GBP10 million) of
structured notes held by Old Mutual Wealth. These assets are held by linked funds and are matched exactly by Level 3 investment contract liabilities
- GBP925 million (December 2015: GBP727 million) of private company shares and unlisted pooled investments held by Emerging Markets. Of this
amount, GBP877 million (2015: GBP666 million) is held by policyholder funds for which the bulk of the investment risk is borne by policyholders; and
- GBP63 million (December 2015: GBP55 million) relating to timber and real estate assets held by funds of Old Mutual Asset Management.
Investments in associated undertakings and joint ventures ? designated a fair value through the income statement:
- GBP74 million (December 2015: GBP51 million) of investments held by Nedbank
Derivative assets ? held for trading:
- GBP20 million (December 2015: GBP18 million) held by the Bermuda business in connection with hedging of investment guarantees
Amounts shown as purchases and issues arise principally from the purchase of private company shares and unlisted pooled investments by Old
Mutual Wealth and Emerging Markets.
Amounts shown as sales and settlements arise principally from the sale of private company shares and unlisted pooled investments by Old Mutual
Wealth and Emerging Markets and from distributions received in respect of Old Mutual Wealth's holdings in property funds.
Transfers into Level 3 assets comprise GBP62 million of private company shares held by Old Mutual Wealth that were previously shown within Level 2
and for which price updates have not been received for more than six months.
Transfers out of Level 3 assets comprise GBP36 million of private company shares held by Old Mutual Wealth that were not being repriced and that have
been transferred into Level 2 as they are now actively priced and GBP10 million in Emerging Markets relating to unlisted company shares and private
equity funds which have been reclassified in the current period as non-financial assets.
GBPm
Designated fair
value through
profit or loss -
Held-for- Investment
trading - contract
Six months ended 30 June 2016 Derivatives liabilities Total
Level 3 financial liabilities
At beginning of the period 4 594 598
Total net fair value losses recognised in profit or loss for the period 2 10 12
Purchases and issues - 13 13
Sales and settlements - (101) (101)
Transfers in - 62 62
Transfers out - (36) (36)
Foreign exchange and other 1 12 13
Total level 3 financial liabilities 7 554 561
Fair value losses relating to liabilities held at 30 June 2016 recognised in profit or loss 2 10 12
The carrying amount of Level 3 investment contract liabilities at 30 June 2016 comprises:
- GBP457 million (December 2015: GBP509 million) held within Old Mutual Wealth in linked-funds and which exactly match against Level 3 assets
disclosed above within Investments and securities ? designated fair value through profit or loss; and
- GBP97 million (December 2015: GBP85 million) held by the Bermuda business relating to guarantees given to policyholders.
GBPm
Held-for- Designated at fair value through Available- Total
trading profit or loss for-sale
Investments in
associated
undertakings
and joint Loans and Investments Investments
Six months ended 30 June 2015 Derivatives ventures advances and securities and securities
Level 3 financial assets
At beginning of the period 8 50 2 1,552 1 1,613
Total net fair value gains recognised
in the profit or loss for the period - 2 - 2 - 4
Purchases and issues 11 5 - 143 - 159
Sales and settlements - - - (309) (1) (310)
Transfers in - - - 48 - 48
Transfers out - - - (59) - (59)
Foreign exchange and other (1) (3) - (48) - (52)
Total level 3 financial assets 18 54 2 1,329 - 1,403
Fair value gains/(losses) relating to
assets held at 30 June 2015
recognised in profit or loss - 2 - (14) - (12)
GBPm
Designated fair
value through
profit or loss -
Investment
Held-for-trading contract
Six months ended 30 June 2015 - Derivatives liabilities Total
Level 3 financial liabilities (Designated fair value through profit or loss)
At beginning of the period - 754 754
Total net fair value gains recognised in profit or loss for the period - (38) (38)
Purchases and issues - 65 65
Sales and settlements - (228) (228)
Transfers in 1 48 49
Total level 3 financial liabilities 1 601 602
Fair value gains relating to assets held at 30 June 2015 recognised in profit or loss - (38) (38)
GBPm
Held-for- Designated at fair value through Available- Total
trading profit or loss for-sale
Investments in
associated
undertakings
and joint Loans and Investments Investments
Year ended 31 December 2015 Derivatives ventures advances and securities and securities
Level 3 financial assets
At beginning of the period 8 50 2 1,552 1 1,613
Total net fair value (losses)/gains
recognised in the profit or loss
for the year (5) 5 - 40 - 40
Total gains recognised in other
comprehensive income - - - (1) - (1)
Purchases and issues 14 16 - 288 - 318
Sales and settlements - (7) - (332) (1) (340)
Transfers in - - - 80 - 80
Transfers out - - - (69) - (69)
Foreign exchange and other 1 (13) (1) (236) - (249)
Total level 3 financial assets 18 51 1 1,322 - 1,392
Fair value (losses)/gains relating
to assets held at 31 December 2015
recognised in profit or loss (5) 5 - (25) - (25)
GBPm
Designated fair
value through
profit or loss -
Investment
Held-for-trading contract
Year ended 31 December 2015 - Derivatives liabilities Total
Level 3 financial liabilities
At beginning of the period - 754 754
Total net losses/(gains) recognised in profit or loss for the period 3 (69) (66)
Purchases and issues 1 96 97
Sales and settlements - (188) (188)
Transfers in - 52 52
Transfers out - (55) (55)
Foreign exchange and other - 4 4
Total level 3 financial liabilities 4 594 598
Fair value gains relating to liabilities held at 31 December 2015 recognised in profit or loss 3 (63) (60)
(c) Effect of changes in significant unobservable assumptions to reasonable possible alternatives
Favourable and unfavourable changes are determined on the basis of changes in the value of the financial asset or liability as a result of varying the
levels of the unobservable parameters using statistical techniques. When parameters are not amenable to statistical analysis, quantification of
uncertainty is judgemental.
When the fair value of a financial asset or liability is affected by more than one unobservable assumption, the figures shown reflect the most favourable
or most unfavourable change from varying the assumptions individually.
The valuations of the private equity investments are performed on an asset-by-asset basis using a valuation methodology appropriate to the specific
investment and in line with industry guidelines. In determining the valuation of the investment the principal assumption used is the valuation multiple
applied to the main financial indicators (such as adjusted earnings). The source of this multiple may include multiples for comparable listed companies
which have been adjusted for discounts for non-tradability and valuation multiples earned on transactions in comparable sectors.
The valuations of asset-backed securities are determined by discounted cash flow models that generate the expected value of the asset, incorporating
benchmark information on factors such as prepayment patterns, default rates, loss severities and the historical performance of the underlying assets.
The outputs from the models used are calibrated with reference to similar securities for which external market information is available.
Structured notes and other derivatives are generally valued using option pricing models. For structured notes and other derivatives, principal
assumptions concern the future volatility of asset values and the future correlation between asset values. These principal assumptions used in the
valuation of structured credit notes include credit volatilities and correlations. For such unobservable assumptions, estimates are based on available
market data, which may include the use of a proxy method to derive a volatility or correlation from comparable assets for which market data is more
readily available, and examination of historical levels.
The table below summarises the significant inputs to value instruments categorised as Level 3 hierarchy and their sensitivity to changes in the inputs used.
Types of financial Fair values Fair value measurement sensitivity to
instruments Range of unobservable inputs
estimates for
Significant unobservable
unobservable input inputs
At At At At
30 June 31 December 30 June 31 December
2016 2015 2016 2015
GBPm GBPm GBPm GBPm
Assets
Investments in associated 74 51 Valuation multiples -7% to +8% Favourable: 6 Favourable: 4
undertakings and joint Unfavourable: 7 Unfavourable: 5
ventures
Investments and 1,480 1,322 Valuation multiples Nedbank: Favourable: 188 Favourable: 149
securities Correlations -12% to +10% Unfavourable: 182 Unfavourable: 141
Volatilities Emerging
Credit spreads Markets:
Dividend growth rates -10% to +10%
Internal rates of return, Old Mutual
Cost of capital Wealth:
Inflation rates -10% to +10%
Market adjusted price
(Price of infrequently
traded shares)
Loans and 2 1 Correlations -12% to +10% Favourable: GBPnil Favourable: GBPnil
advances Volatilities Unfavourable: GBPnil Unfavourable: GBPnil
Credit spreads
Derivatives 20 18 Interest rates -10% to +10% Favourable: 7 Favourable: 7
Volatilities Unfavourable: 7 Unfavourable: 7
Liabilities
Investment contract 554 594 Interest rates -10% to 10% Favourable: 47 Favourable: 54
liabilities Volatilities Unfavourable: 50 Unfavourable: 58
Derivatives 7 4 Growth rates -10% to 10% Favourable: 1 Favourable: 2
Cost of equity and price- Unfavourable: 1 Unfavourable: 1
to-book
F: Analysis of financial assets and liabilities
F1: Loans and advances
The Group extends advances to individuals and to the corporate, commercial and public sectors. The majority of loans and advances are in respect
of Nedbank which represent 96.7% (GBP35,574 million) (June 2015: 96.9% (GBP33,572 million); December 2015: 96.5% (GBP29,873 million)) of the Group's
net loans and advances. Nedbank assesses its loan portfolios for impairment at each financial reporting date and manages its exposure to loans and
advances through a documented credit approval processes.
Emerging Markets has lending exposure, net of credit impairment provisions, of GBP1,029 million (June 2015: GBP909 million; December 2015: GBP912 million)
through its non-wholly owned subsidiaries in South Africa, Kenya and Zimbabwe. Credit loss ratios are monitored at each individual business unit level.
(a) Categories of loans and advances
The following table provides an analysis of the categories of loans and advances that are provided by the Group. The amounts presented in this table
are the carrying value of the underlying assets before provisions for impairment losses.
GBPm
At At At
30 June 30 June 31 December
Notes 2016 2015 2015
Home loans 7,555 7,461 6,409
Commercial mortgages 7,411 6,901 6,098
Unsecured retail lending F1(b) 1,845 1,759 1,558
Other term loans 5,276 4,804 3,961
Other loans to clients 6,022 5,412 5,663
Net finance leases and instalment debtors 5,185 5,053 4,377
Deposits placed under reverse purchase agreements 1,018 1,043 884
Overdrafts 968 891 751
Preference shares and debentures 1,082 889 907
Credit cards 753 741 616
Factoring accounts 262 267 234
Policyholder loans 256 243 241
Properties in possession 17 30 16
Remittances in transit 72 15 9
Gross loans and advances 37,722 35,509 31,724
Provisions for impairment (921) (854) (759)
Specific provisions F1(c) (642) (624) (529)
Portfolio provisions F1(c) (279) (230) (230)
Total net loans and advances 36,801 34,655 30,965
(b)(i) Analysis of unsecured retail lending loans and advances
The following table provides an analysis of the Group's unsecured retail lending loans and advances. Further analysis of these amounts will be comparing
balances at 30 June 2016 and 31 December 2015.
GBPm
At At At
30 June 30 June 31 December
2016 2015 2015
Nedbank 942 920 782
Emerging Markets 903 839 776
Old Mutual Finance (Pty) Limited 718 677 602
Central Africa Building Society 97 93 98
Faulu Microfinance Bank Limited 88 69 76
Gross amount of unsecured retail lending 1,845 1,759 1,558
Provisions for impairment (432) (396) (350)
Total net unsecured retail lending 1,413 1,363 1,208
(ii) Credit quality of unsecured retail lending loans and advances
The credit quality of the Group's unsecured retail lending loans and advances is summarised below, by reference to performing, defaulted and long
outstanding balances at 30 June 2016 and 31 December 2015. Old Mutual Finance (Pty) Limited provides for 90% of long outstanding loans. Nedbank,
CABS & Faulu provide for 100% of such loans and derecognise the related receivable.
GBPm
Old Mutual Central Faulu At
Finance (Pty) Africa Building Microfinance 30 June
Nedbank Limited Society Bank Limited 2016
Performing 828 352 92 84 1,356
Non-performing 114 366 5 4 489
Defaulted loans 114 143 5 4 266
Long outstanding loans - 223 - - 223
Gross amount of unsecured retail lending 942 718 97 88 1,845
GBPm
Old Mutual Faulu At
Finance (Pty) Central Africa Microfinance 31 December
Nedbank Limited Building Society Bank Limited 2015
Performing 679 317 93 74 1,163
Non-performing 103 285 5 2 395
Defaulted loans 103 124 5 2 234
Long outstanding loans - 161 - - 161
Gross amount of unsecured retail lending 782 602 98 76 1,558
Loans are considered to be defaulted after three missed payments. Long outstanding loans relate to loans that have been in default for a period of five
months or more.
(iii) Statement of financial position credit impairment provisions of unsecured retail lending loans and advances
Provisions for credit impairments in relation to the Group's unsecured retail lending loans and advances at 30 June 2016 and 31 December 2015
are analysed below:
GBPm
Old Mutual Central Faulu At
Finance (Pty) Africa Building Microfinance 30 June
Nedbank Limited Society Bank Limited 2016
Performing 46 78 3 - 127
Non-performing 73 229 1 2 305
Defaulted loans 73 31 1 2 107
Long outstanding loans - 198 - - 198
Provisions for impairment 119 307 4 2 432
GBPm
Old Mutual Faulu At
Finance (Pty) Central Africa Microfinance 31 December
Nedbank Limited Building Society Bank Limited 2015
Performing 35 18 1 - 54
Non-performing 68 223 4 1 296
Defaulted loans 68 78 4 1 151
Long outstanding loans - 145 - - 145
Provisions for impairment 103 241 5 1 350
(c) Provision for impairments
This section analyses the provisions raised against loans and advances and the movements during the year.
Specific impairments have been raised against those loans identified as impaired. Portfolio impairments are recognised against loans and advances
classified as neither past due nor impaired or past due but not impaired.
(c)(i) Provision for impairments ? analysis of movements
The tables below reconcile the movement in provision for impairments for the six months ended 30 June 2016 and year ended 31 December 2015.
GBPm
Nedbank Emerging Markets Group
Specific Portfolio Total Specific Portfolio Total Total
Six months ended 30 June 2016 impairment impairment impairment impairment impairment impairment impairment
Balance at beginning of the period 292 208 500 237 22 259 759
Credit impairment charge 95 5 100 3 13 16 116
Profit or loss charge 120 5 125 3 13 16 141
Recoveries of amounts previously written off (25) - (25) - - - (25)
Amounts written off against the provision (115) (3) (118) (1) (4) (5) (123)
Foreign exchange and other movements 71 39 110 60 (1) 59 169
Balance at end of the period 343 249 592 299 30 329 921
GBPm
Nedbank Emerging Markets Group
Specific Portfolio Total Specific Portfolio Total Total
Year ended 31 December 2015 impairment impairment impairment impairment impairment impairment impairment
Balance at beginning of the year 379 237 616 217 24 241 857
Credit impairment charge 223 22 245 59 3 62 307
Profit or loss charge 281 22 303 59 3 62 365
Recoveries of amounts previously written off (58) - (58) - - - (58)
Amounts written off against the provision (231) 1 (230) - - - (230)
Foreign exchange and other movements (79) (52) (131) (39) (5) (44) (175)
Balance at end of the year 292 208 500 237 22 259 759
F2: Insurance and investment contracts
The tables below provide a summary of the Group's long-term business insurance policyholder liabilities and investment contract liabilities. Details
of insurance contract accounting for the Group can be found in note G6 of the 2015 Annual Report and Accounts.
GBPm
At 30 June 2016 At 30 June 2015
Gross Reinsurance Net Gross Reinsurance Net
Life assurance policyholder liabilities
Long-term business insurance policyholder
liabilities 9,183 (312) 8,871 9,851 (201) 9,650
Life assurance policyholder liabilities 9,061 (302) 8,759 9,730 (191) 9,539
Outstanding claims 122 (10) 112 121 (10) 111
Investment contract liabilities 69,040 (2,597) 66,443 68,786 (2,079) 66,707
Unit-linked investment contracts and similar contracts 59,537 (2,597) 56,940 60,186 (2,079) 58,107
Other investment contracts 827 - 827 719 - 719
Discretionary participating investment contracts 8,676 - 8,676 7,881 - 7,881
Total life assurance policyholder liabilities 78,223 (2,909) 75,314 78,637 (2,280) 76,357
Property & casualty liabilities
Claims incurred but not reported 59 (8) 51 62 (12) 50
Unearned premiums 142 (61) 81 120 (40) 80
Outstanding claims 224 (80) 144 212 (62) 150
Total property & casualty liabilities 425 (149) 276 394 (114) 280
Total policyholder liabilities 78,648 (3,058) 75,590 79,031 (2,394) 76,637
GBPm
At 31 December 2015
Gross Reinsurance Net
Life assurance policyholder liabilities
Long-term business insurance policyholder
liabilities 7,714 (214) 7,500
Life assurance policyholder liabilities 7,617 (206) 7,411
Outstanding claims 97 (8) 89
Investment contract liabilities 67,854 (2,328) 65,526
Unit-linked investment contracts and similar contracts 60,169 (2,328) 57,841
Other investment contracts 600 - 600
Discretionary participating investment contracts 7,085 - 7,085
Total life assurance policyholder liabilities 75,568 (2,542) 73,026
Property & casualty liabilities
Claims incurred but not reported 38 (10) 28
Unearned premiums 120 (58) 62
Outstanding claims 183 (51) 132
Total property & casualty liabilities 341 (119) 222
Total policyholder liabilities 75,909 (2,661) 73,248
The reinsurers' share of policyholder liabilities relating to investment contracts is where the direct management of assets are ceded to a third party
through a reinsurance arrangement. Due to the nature of the arrangement, there is no transfer of insurance risk.
F3: Borrowed funds
The Group raises funding in the normal course of business. The borrowed funds raised for the banking business support the lending and banking
operations of the Group. Other borrowed funds raised support the general funding needs of the Group and the expense has been recognised as
finance costs.
The table below presents an analysis of the Group's borrowed funds net of any holdings that are principally held by the policyholder funds.
Summary of Borrowed Funds GBPm
Institutional At
Old Mutual Emerging Asset 30 June
Type of securities Notes plc Markets Nedbank Management 2016
Senior debt securities and term loans 112 203 1,941 - 2,256
Floating rate notes F3(a)(i) - - 1,053 - 1,053
Fixed rate notes F3(a(ii) 112 - 888 - 1,000
Term loans F3(a)(iii) - 203 - - 203
Revolving credit facilities F3(b) - - - 38 38
Mortgage-backed securities F3(c) - - 104 - 104
Subordinated debt securities F3(d) 991 302 540 - 1,833
Total Borrowed funds 1,103 505 2,585 38 4,231
Other instruments treated as equity
for accounting purposes
GBP273 million perpetual preferred callable
securities at 6.38%(1) 273 - - - 273
Total book value of Group debt(2) 1,376 505 2,585 38 4,504
(1) Perpetual preferred callable securities of GBP273 million (June 2015: GBP526 million; December 2015: GBP273 million) are classified as non-banking.
(2) The nominal value of non-banking related "Group debt" is GBP1,716 million (June 2015: GBP1,557 million; December 2015: GBP1,710 million).
GBPm
Institutional At
Old Mutual Emerging Asset 30 June
Notes plc Markets Nedbank Management 2015
Senior debt securities and term loans F3(a) 112 123 1,560 - 1,795
Floating rate notes F3(a)(i) - - 722 - 722
Fixed rate notes F3(a(ii) 112 - 838 - 950
Term loans F3(a)(iii) - 123 - - 123
Revolving credit facilities F3(b) - 51 - 92 143
Mortgage-backed securities F3(c) - - 119 - 119
Subordinated debt securities F3(d) 568 315 626 - 1,509
Total Borrowed funds 680 489 2,305 92 3,566
Other instruments treated as equity
for accounting purposes
GBP273 million perpetual preferred callable
securities at 6.38% 273 - - - 273
EUR374 million perpetual preferred callable
securities at 5.00%(1) 253 - - - 253
Total book value of Group debt 1,206 489 2,305 92 4,092
(1) On 4 November 2015, being the First Call Date, the Company redeemed the outstanding EUR374 million (GBP253 million) Upper Tier 2 perpetual notes at their nominal
value, together with accrued and unpaid interest.
GBPm
Institutional At
Old Mutual Emerging Asset 31 December
Type of securities Notes plc Markets Nedbank Management 2015
Senior debt securities and term loans 112 198 1,331 - 1,641
Floating rate notes F3(a)(i) - - 571 - 571
Fixed rate notes F3(a(ii) 112 - 760 - 872
Term loans F3(a)(iii) - 198 - - 198
Revolving credit facilities F3(b) - - - 61 61
Mortgage-backed securities F3(c) - - 97 - 97
Subordinated debt securities F3(d) 986 251 488 - 1,725
Total Borrowed funds 1,098 449 1,916 61 3,524
Other instruments treated as equity
for accounting purposes
GBP273 million perpetual preferred callable
securities at 6.38% 273 - - - 273
Total book value of Group debt 1,371 449 1,916 61 3,797
Total borrowed funds can be further analysed between non-banking and banking as follows:
GBPm
At 30 June 2016 At 30 June 2015
Non- Non-
Type of security banking Banking(1) Total banking Banking(1) Total
Senior debt securities and term loans 147 2,109 2,256 112 1,683 1,795
Revolving credit facilities 38 - 38 92 51 143
Mortgage-backed securities - 104 104 - 119 119
Subordinated debt securities 1,293 540 1,833 883 626 1,509
Total Borrowed funds 1,478 2,753 4,231 1,087 2,479 3,566
GBPm
At 31 December 2015
Non-
Type of security banking Banking(1) Total
Senior debt securities and term loans 160 1,481 1,641
Revolving credit facilities 61 - 61
Mortgage-backed securities - 97 97
Subordinated debt securities 1,237 488 1,725
Total Borrowed funds 1,458 2,066 3,524
(1) Borrowed funds identified as Banking are those which are directly related to the lending and banking businesses in Nedbank and Emerging Markets.
Interest rate profile
The interest rate profiles of the Group's borrowed funds are analysed as follows:
GBPm
Institutional At
Old Mutual Emerging Asset 30 June
plc Markets Nedbank Management 2016
Fixed rate 1,103 251 888 - 2,242
Floating rate - 254 1,697 38 1,989
Total 1,103 505 2,585 38 4,231
GBPm
Institutional At
Old Mutual Emerging Asset 30 June
plc Markets Nedbank Management 2015
Fixed rate 680 282 838 - 1,800
Floating rate - 207 1,467 92 1,766
Total 680 489 2,305 92 3,566
GBPm
Institutional At
Old Mutual Emerging Asset 31 December
plc Markets Nedbank Management 2015
Fixed rate 1,098 218 760 - 2,076
Floating rate - 231 1,156 61 1,448
Total 1,098 449 1,916 61 3,524
Analysis of security types
(a) Senior debt securities and term loans
(i) Floating rate notes (net of Group holdings)
GBPm
At At At
30 June 30 June 31 December
Maturity date 2016 2015 2015
Banking - Nedbank Floating rate unsecured senior debt
R250 million at JIBAR + 1.00% Repaid - 13 -
R1,044 million at JIBAR + 2.20% Repaid - 55 -
R677 million at JIBAR + 1.25% Repaid - 35 30
R3,056 million at JIBAR + 0.80% July 2016 158 161 135
R694 million at JIBAR + 0.75% November 2016 36 37 31
R405 million at JIBAR + 1.30% February 2017 21 21 18
R1,035 million at JIBAR + 0.85% March 2017 53 54 45
R806 million at JIBAR + 0.90% June 2017 41 42 35
R786 million at JIBAR + 1.30% August 2017 37 37 31
R241 million at JIBAR + 1.12% November 2017 13 13 11
R472 million at JIBAR + 1.25% February 2018 24 25 21
R1,427 million at JIBAR + 1.30% June 2018 74 75 63
R927 million at JIBAR + 1.45% February 2019 48 - -
R500 million at JIBAR + 1.45% February 2019 26 - -
R2,484 million at JIBAR + 1.45% May 2019 129 - -
R90 million at JIBAR + 1.45% February 2020 5 5 4
R80 million at JIBAR + 2.15% April 2020 4 4 4
R476 million at JIBAR + 1.55% November 2020 25 - 21
R830 million at JIBAR + 1.80% February 2021 43 - -
R1,468 million at JIBAR + 1.80% May 2021 76 - -
R650 million at JIBAR + 1.30% June 2021 33 34 29
R12 million at JIBAR + 1.55% February 2022 1 1 1
R270 million at JIBAR + 2.00% February 2023 14 - -
R528 million at JIBAR + 2.00% May 2023 27 - -
R1,980 million at JIBAR + 2.00% February 2025 103 105 88
R500 million at JIBAR + 2.10% April 2026 26 27 22
R750 million at JIBAR + 2.25% May 2026 39 - -
1,056 744 589
Less: floating rate notes held by other Group companies (3) (22) (18)
Total floating rate notes 1,053 722 571
All floating rate unsecured senior debt are non-qualifying for the purposes of regulatory tiers of capital.
(ii) Fixed rate notes (net of Group holdings)
GBPm
At At At
30 June 30 June 31 December
Maturity date 2016 2015 2015
Non-banking - Old Mutual plc
GBP112 million at 7.125% October 2016 112 112 112
Total non-banking fixed rate unsecured senior debt 112 112 112
Banking - Nedbank Fixed rate unsecured senior debt
R3,244 million at 10.55% Repaid - 175 -
R1,137 million at 9.36% Repaid - 61 51
R151 million at 6.91% July 2016 8 8 7
R1,273 million at 11.39% September 2019 70 72 60
R380 million at 9.26% June 2020 20 20 17
R1,888 million at 8.92% November 2020 98 100 83
R855 million at 9.38% March 2021 45 46 38
R500 million at 9.29% June 2021 26 26 22
R215 million at 8.79% February 2022 11 12 10
R280 million at 9.64% June 2022 14 15 12
R952 million at 10.07% November 2023 49 - 42
R391 million at 9.73% March 2024 21 21 18
R660 million at zero coupon October 2024 14 14 11
R2,607 million at 9.44% February 2025 138 141 118
R884 million at 10.685% November 2025 46 - 39
R800 million at 9.95% April 2026 42 43 36
R2,000 million at 10.63% July 2027 107 - 92
R1,739 million at 10.36% June 2026 90 92 77
R250 million at 10.66% February 2023 13 - -
R417 million at 10.68% May 2021 22 - -
R360 million at 11.15% May 2026 19 - -
R666 million at 10.935% November 2027 35 - 30
888 846 763
Less: Fixed rate notes held by other Group companies - (8) (3)
Total banking fixed rate unsecured senior debt (net of
Group holdings) 888 838 760
Total fixed rate notes 1,000 950 872
All fixed rate notes are non-qualifying for the purpose of regulatory tiers of capital.
(iii) Term loans
GBPm
At At At
30 June 30 June 31 December
Maturity date 2016 2015 2015
Emerging Markets Floating rate loans
KES550 million at KBRR + 4.87%(1) Repaid - 4 -
$7 million at 3m LIBOR + 7.50%(2) Repaid - - 5
$5 million at 3m LIBOR + 7.50%(2) Repaid - - 3
$5 million at 3m LIBOR + 7.50%(2) Repaid - - 3
R1,500 million at JIBAR + 2.95%(1) August 2017 82 84 70
R800 million at JIBAR + 2.75%(1) July 2018 41 - 35
KES451 million at KBRR + 3.87%(1) March 2019 1 3 3
Emerging Markets Fixed rate loans
KES170 million at 14.00% to 14.75%(1) Repaid - 1 -
KES1,000 million at 12.50%(2) Repaid - - 7
KES175 million at 11.70%(1) Repaid - 1 -
$20 million at 8.75%(2) Repaid - - 11
KES225 million at 11.70%(1) August 2017 - 1 1
KES2,000m at 13.00%(2) July 2017 16 - 13
KES101 million at 13.00%(1) June 2018 1 - -
KES101 million at 13.50%(1) June 2018 1 - -
KES607 million at 12.50%(1) December 2018 5 - -
KES411 million at 11.50%(1) April 2020 3 - 3
KES1,183 million at 9.20%(1) September 2020 7 - 8
KES150 million at 5.00%(1) July 2022 1 1 1
KES466 million at 9.83%(1) July 2022 1 - 2
$6 million at 8.10%(1) August 2017 2 3 3
$19 million at 8.10%(1) September 2017 7 10 9
$10 million at 8.10%(1) May 2020 5 6 5
$19.57 million at 8.75%(2) August 2022 12 - -
$5 million at 11.00%(1) September 2022 3 3 3
$5 million at 6.50%(2) June 2023 3 - 3
$5 million at 6.50%(2) June 2023 4 - 3
$10 million at 10.00%(1) December 2023 7 6 7
$1 million at 5%(1) December 2023 1 - -
Total term loans and other loans 203 123 198
Analysed as:
(1) Banking 168 123 150
(2) Non-banking 35 - 48
Total term loans and other loans 203 123 198
(b) Revolving credit facilities
GBPm
At At At
30 June 30 June 31 December
Maturity date 2016 2015 2015
Non-banking - Institutional Asset Management
$50 million (30 June 2015: $145 million; 31 December 2015: $90
million) drawn of a $350 million facility at USD LIBOR + 1.25% October 2019 38 92 61
Banking - Emerging Markets
R1,200 million facility at 3 month JIBAR + 2.95% Repaid - 25 -
R500 million fully drawn at 3 month JIBAR + 3.10% Repaid - 26 -
- 51 -
Total revolving credit facilities 38 143 61
The Group has access to a GBP800 million multi-currency revolving credit facility available to the Old Mutual plc. GBP727 million of the facility matures in
August 2020 and a GBP73 million facility matures in August 2019. There is an optional further one year extension in August 2016. At 30 June 2016 none
of this facility was drawn.
In December 2015, Emerging Markets obtained access to a R5,250 million revolving credit facility which matures in December 2018 with an option to
renew for a further year. At 30 June 2016, none of this facility was drawn.
(c) Mortgage-backed securities (net of Group holdings)
GBPm
At At At
30 June 30 June 31 December
Tier Maturity date 2016 2015 2015
Banking - Nedbank
R161 million (class A2) at JIBAR + 1.25% Tier 2 October 2039 3 14 7
R900 million (class A3) at JIBAR + 1.54% Tier 2 October 2039 47 48 40
R110 million (class B) at JIBAR + 1.90% Tier 2 October 2039 6 6 5
R558 million at JIBAR + 1.20% Tier 2 February 2042 23 27 24
R100 million at JIBAR + 1.45% Tier 2 February 2042 5 5 4
R680 million at JIBAR + 1.55% Tier 2 February 2042 35 36 30
R80 million at JIBAR + 2.20% Tier 2 February 2042 4 4 4
R65 million at JIBAR + 3.00% Tier 2 February 2042 3 3 3
126 143 117
Less: Mortgage backed securities held by other Group companies (22) (24) (20)
Total mortgage-backed securities 104 119 97
(d) Subordinated debt securities (net of Group holdings)
GBPm
At At At
Maturity 30 June 30 June 31 December
Tier date 2016 2015 2015
Banking - Nedbank
R1,000 million at 10.54% Tier 2 Repaid - 54 -
$100 million at 3 month USD LIBOR Tier 2 (secondary) March 2022 75 64 69
R2,000 million at JIBAR + 0.47% Tier 2 July 2022 104 106 89
R1,800 million at JIBAR + 2.75% Tier 2 July 2023 94 96 80
R1,200 million at JIBAR + 2.55% Tier 2 November 2023 62 63 53
R450 million at JIBAR + 10.49% Tier 2 April 2024 24 24 20
R1,737 million at 3 month JIBAR + 2.55% Tier 2 April 2024 91 93 78
R300 million at JIBAR + 2.75% Tier 2 October 2024 16 16 13
R225 million at JIBAR +2.75% Tier 2 January 2025 12 12 10
R1,624 million at JIBAR + 3.5% Tier 2 July 2025 86 85 73
R407 million at 11.29% Tier 2 July 2025 22 21 19
586 634 504
Less: Banking subordinated debt securities held by other Group companies (46) (8) (16)
Banking subordinated securities 540 626 488
Non-banking - Old Mutual plc
GBP500 million at 8.00% Lower Tier 2 June 2021 543 568 536
GBP450 million at 7.88%(1) Lower Tier 2 November 2025 448 - 450
Non-banking - Emerging Markets(2)
R3,000 million at 8.92% Lower Tier 2 Repaid - 157 -
R300 million at 9.26% Lower Tier 2 November 2024 15 15 12
R700 million at 3 month JIBAR + 2.20% Lower Tier 2 November 2024 36 37 31
R537 million at 3 month JIBAR + 2.30% Lower Tier 2 March 2025 28 28 24
R425 million at 9.76% Lower Tier 2 March 2025 21 22 17
R1,288 million at 3 month JIBAR + 2.25% Lower Tier 2 September 2025 66 - 57
R409 million at 10.32% Lower Tier 2 March 2027 20 21 16
R568 million at 10.90% Lower Tier 2 September 2027 29 - 23
R1,150 million at 10.96% Lower Tier 2 March 2030 56 35 46
R623 million at 11.35% Lower Tier 2 September 2030 31 - 25
302 315 251
(1) On 3 November 2015, Old Mutual plc issued GBP450 million Dated Tier 2 Subordinated Notes under its existing GBP5,000 million Euro Note Programme. The notes have a
maturity date of 3 November 2025 and pay interest semi-annually on 3 May and 3 November at a fixed rate of 7.88% per annum up to and including the maturity date.
(2) All callable subordinated debt securities have a first call date five years before the maturity date.
G: Non-financial assets and liabilities
G1: Goodwill and other intangible assets
Analysis of goodwill and other intangible assets
This note shows the movements in cost, amortisation and impairment of goodwill and other intangible assets for the six months ended 30 June
2016 and year ended 31 December 2015.
GBPm
Present value of
acquired in-force
business Software Other
development development intangible
Goodwill costs costs assets Total
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Cost
Balance at beginning of the period 3,129 2,756 982 1,107 598 669 710 402 5,419 4,934
Acquisitions through business
combinations(1) 3 467 - - - - 3 308 6 775
Purchase price adjustments - 22 - - - - - - 22
Additions - - - - 47 72 - 9 47 81
Disposal of interests in subsidiaries - (41) - (125) - (1) - (4) - (171)
Disposals or retirements - - - - - (8) - (1) - (9)
Transfer to non-current assets
held for sale (132) (29) (76) - - - - - (208) (29)
Foreign exchange and other movements 223 (46) 6 - 96 (134) 14 (4) 339 (184)
Cost at end of the period / year 3,223 3,129 912 982 741 598 727 710 5,603 5,419
Amortisation and impairment losses
Balance at beginning of the period (617) (624) (751) (792) (403) (449) (372) (306) (2,143) (2,171)
Amortisation charge for the period - - (21) (58) (24) (49) (24) (70) (69) (177)
Impairment losses (44) (23) - - - - - - (44) (23)
Disposal of interests in subsidiaries - - - 102 - 1 - - - 103
Disposals or retirements - - - - - 7 - 1 - 8
Transfer to non-current assets
held for sale 44 29 72 - - - - - 116 29
Foreign exchange and other movements (42) 1 (5) (3) (65) 87 (9) 3 (121) 88
Accumulated amortisation and
impairment losses at end of
the period / year (659) (617) (705) (751) (492) (403) (405) (372) (2,261) (2,143)
Carrying amount
Balance at beginning of the period 2,512 2,132 231 315 195 220 338 96 3,276 2,763
Balance at end of the period 2,564 2,512 207 231 249 195 322 338 3,342 3,276
(1) Goodwill acquired through business combinations of GBP3 million relates to the acquisition of AAM Advisory. Refer to note A2 for further information.
The net carrying amount of present value of acquired in-force business at the 30 June 2016 principally comprises GBP204 million (31 December 2015:
GBP227 million) relating to the Skandia business acquired during 2006, which is due to be amortised over a further six to eleven years.
The net carrying amount of other intangible assets at 30 June 2016 principally comprises:
Old Mutual Wealth:
- GBP236 million (December 2015: GBP249 million) relating to distribution channels that will be amortised over a further nine years.
- GBP32 million (December 2015: GBP35 million) relating to mutual fund and asset management relationship assets that will be amortised over a
further seven years.
- GBP11 million (December 2015: GBP13 million) relating to brand that will be amortised over a further four years.
Emerging Markets:
- GBP10 million (December 2015: GBP12 million) relating to the loan book of Old Mutual Finance Ltd that will be amortised over a further 14 months.
- GBP19 million (December 2015: GBP17 million) relating to the UAP brand, which is not being amortised.
Management performed an impairment test on the GBP169 million goodwill recognised as a result of the acquisition of UAP in 2015. The goodwill was
allocated to the Old Mutual Southern and East Africa (OMSEA) cash generating units. The impairment test indicated that the goodwill balance was
not impaired at 30 June 2016. The assumptions used in performing the goodwill impairment test are subjective and include a risk adjusted discount
rate of 19.12%, forecasted and extrapolated cash flows and a terminal rate of 4.5%. The Group will continue to monitor developments and their
possible impact on the value in use of OMSEA and any possible impairment to the carrying value in the second half of 2016.
The recoverability of this goodwill balance is dependent on OMSEA realising the expected synergies from the acquisition of UAP which are embedded
in the forecasted cash flows.
Segmental analysis of goodwill and other intangibles
The following table shows a segmental analysis of the carrying amounts of goodwill and other intangible assets, together with amortisation and
impairment charges, by operating segment at 30 June 2016 and 31 December 2015:
GBPm
Goodwill and
intangible assets
(carrying amount) Amortisation Impairment
2016 2015 2016 2015 2016 2015
Emerging Markets 468 415 9 28 - -
Old Mutual Wealth 1,450 1,620 41 112 44 -
Nedbank 466 378 18 37 - -
Institutional Asset Management 958 863 - - - 23
3,342 3,276 68 177 44 23
H: Other Notes
H1: Contingent liabilities and commitments
The Group, in the ordinary course of business, enters into transactions that expose it to tax, legal and business risks. Provisions are made for known
liabilities that are expected to materialise. Possible obligations and known liabilities where no reliable estimate can be made or it is considered
improbable that an outflow would result are reported as contingent liabilities in accordance with IAS 37: 'Provisions, Contingent Liabilities and
Contingent Assets'.
Contingent liabilities ? tax
The Revenue authorities in the principal jurisdictions in which the Group operates (South Africa, the United Kingdom and the United States) routinely
review historic transactions undertaken and tax law interpretations made by the Group. The Group is committed to conducting its tax affairs in
accordance with the tax legislation of the jurisdictions in which they operate. All interpretations made by management are made with reference to the
specific facts and circumstances of the transaction and the relevant legislation.
There are occasions where the Group's interpretation of tax law may be challenged by the Revenue authorities. The financial statements include
provisions that reflect the Group's assessment of liabilities which might reasonably be expected to materialise as part of their review. The Board is
satisfied that adequate provisions have been made to cater for the resolution of tax uncertainties and that the resources required to fund such potential
settlements are sufficient.
Due to the level of estimation required in determining tax provisions amounts eventually payable may differ from the provision recognised.
Contingent liabilities ? implications of the Managed Separation strategy
The Group routinely monitors and reassesses contingent liabilities arising from matters such as litigation, and warranties and indemnities relating to
past acquisitions and disposals. The announcement of the Managed Separation strategy on 11 March 2016 does not affect the nature of such items,
however it is possible that the Group may seek to resolve certain matters as part of the implementation of the Managed Separation strategy.
Nedbank litigation
There are a number of legal or potential claims against Nedbank Group Ltd and its subsidiary companies, the outcome of which cannot at present be
foreseen.
Consumer protection
Old Mutual is committed to treating customers fairly and supporting its customers in meeting their lifetime goals and treating customers fairly is central
to how our businesses operate. We routinely engage with customers and regulators to ensure that we meet this commitment, but there is the risk of
regulatory intervention across various jurisdictions, giving rise to the potential for customer redress which can result in retrospective changes to
policyholder benefits, penalties or fines. The Group monitors the exposure to these actions and makes provision for the related costs as appropriate.
On 2 March 2016, the Financial Conduct Authority (FCA) notified Old Mutual Wealth that one of its subsidiaries, Old Mutual Wealth Life Assurance
Limited, would be investigated by the Enforcement Division of the FCA. This has arisen following an industry-wide thematic project on "Fair treatment
of long-standing customers of life insurers" by the FCA in 2014, which focused on our UK closed book of insurance products. The appointment of
investigators does not itself mean that the FCA has determined that rule breaches and/or other contraventions or offences have occurred, and at this
stage it is not possible to assess the outcome and, by extension, whether the matter will have financial consequences for Old Mutual Wealth.
H2: Events after the reporting date
Investment in Ecobank Transnational Inc. (ETI)
Subsequent to the reporting date, 30 June 2016, the Nigerian naira continued to depreciate against the dollar and the market value of the Group's
investment in ETI, based on its quoted share price in a thinly traded market, has decreased further. These events are not indicative of conditions that
existed at the reporting date. The Group will continue to monitor developments and their possible impact on the value in use of the investment in ETI
and any possible impairment to the carrying value in the second half of 2016.
OM Asset Management plc Notes Issues
On 27 July 2016, OM Asset Management plc (OMAM) completed the issuance of a combined $400 million of Senior Unsecured Notes in the
Institutional and Retail markets. The debt is comprised of two tranches: OMAM's $275 million 4.80% 10-Year Institutional Debt Issuance and OMAM's
$125 million 5.13% 15-Year (with a call option available after three years) Retail Debt Issuance. Both tranches are registered and will be listed on the
New York Stock Exchange.
Disposal of Old Mutual Wealth Italy
On 9 August 2016, the Group announced that it has agreed to sell Old Mutual Wealth Italy, part of the Old Mutual Wealth business, to ERGO Italia,
owned by Cinven. The consideration for the transaction is EUR278 million in cash, plus interest to completion. The transaction is subject to regulatory
approval and is expected to complete within the next six months.
A goodwill impairment loss of GBP44 million has been recognised in profit or loss as the net asset value of the business disposed of exceed the expected
net proceeds. The related assets and liabilities have been classified as held for sale. Refer to note I2 for more information.
I: Discontinued operations and disposal groups held for sale
I1: Discontinued operations
Income statement from discontinued operations
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Loss on disposal - (21) (21)
Loss before tax from discontinued operations - (21) (21)
Income tax credit - - -
Loss after tax from discontinued operations - (21) (21)
The loss on disposal recognised during the six months ended 30 June 2015 and year ended 31 December 2015 related to the settlement of litigation
arising on the disposal of US Life in 2011, following a court ruling in favour of the plaintiff on the main matter in dispute.
I2: Assets and liabilities held for sale
GBPm
At At At
30 June 30 June 31 December
2016 2015 2015
Assets held for sale
Emerging Markets 17 212 84
Old Mutual Wealth 6,081 902 4
Institutional Asset Management - - 35
Total assets held for sale 6,098 1,114 123
Liabilities held for sale
Old Mutual Wealth 5,853 833 -
Institutional Asset Management - - 12
Total liabilities held for sale 5,853 833 12
Emerging Markets
Current and prior period transactions
Emerging Markets has classified GBP17 million (June 2015: GBP212 million; December 2015: GBP84 million) of investment properties as held for sale. These
transactions are expected to complete in the next 12 months. The investment properties form part of the policyholder assets and therefore have no
impact on profit or loss of the Group.
Old Mutual Wealth
Current period transactions
On 9 August 2016, the Group announced that it has agreed to sell Old Mutual Wealth Italy, part of the Old Mutual Wealth business, to ERGO Italia,
owned by Cinven. The consideration for the transaction is EUR278 million in cash, plus interest to completion. The transaction is subject to regulatory
approval and is expected to complete within the next six months.
A goodwill impairment loss of GBP44 million has been recognised in profit or loss as the net asset value of the business disposed of exceed the expected
net proceeds.
At 30 June 2016, the total value of the assets and liabilities reclassified as held for sale in the consolidated statement of financial position were GBP6,077
million and GBP5,853 million respectively. The principal financial assets and liabilities included as held for sale are investments and securities of GBP5,783
million and investment contract liabilities of GBP5,758 million, both of which are classified as Level 1 in terms of the fair value hierarchy.
Old Mutual Wealth has also identified property, plant and equipment of GBP4 million (June 2015: GBP4 million; December 2015: GBP4 million) as held for sale.
Prior period transactions
At 30 June 2015, Old Mutual Wealth identified total assets of GBP898 million and total liabilities of GBP833 million as held for sale in relation to the disposal
of Skandia Leben AG. This transaction completed on 30 September 2015.
Institutional Asset Management
Prior period transactions
At 31 December 2015, Institutional Asset management identified total assets of GBP35 million and total liabilities of GBP12 million as held for sale in relation
to the disposal of Rogge Global Partners plc. This transaction completed on 31 May 2016.
Sponsor
Merrill Lynch South Africa (Pty) Ltd
Date: 11/08/2016 08:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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