| Mon 20 Jan 2003, 11:05 | | Old Mutual adoption of achieved profits accounting |
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Old Mutual plc
ISIN CODE: GB0007389926
SHARE CODE: OML
ISSUER CODE: OLOML
OLD MUTUAL ADOPTION OF ACHIEVED PROFITS ACCOUNTING
The Association of British Insurers (ABI) issued guidance for Achieved Profits
reporting in December 2001. Old Mutual will adopt Achieved Profits for
supplementary reporting in the 2002 preliminary results, replacing the Embedded
Value information given in previous years. The basis of preparation and
reporting within the primary financial statements and the actuarial assumptions
within the supplementary reporting, for prior periods, remains unchanged.
The implementation of the Achieved Profits guidance has not resulted in any
change to the underlying Embedded Value methodologies adopted by Old Mutual;
therefore the changes will be presentational only. The new format will include
a summary profit and loss account and balance sheet, which is consistent with
the presentation adopted in the primary financial statements.
The schedule below provides half-year comparative figures for 2002 and for the
full year 2001 under the Achieved Profits format in order to facilitate
comparison when the company announces its 2002 preliminary results on 24
February 2003:
Consolidated profit and loss account on an 6 months to 12 months to
Achieved Profits basis 30 Jun 2002 31 Dec 2001
GBPm GBPm
Operating profit before tax 477 1,048
Operating profit after tax and minority interests 281 545
Short term fluctuations in investment return (116) 91
Goodwill amortisation and impairment (51) (620)
Write-down of investment in Dimension Data
Holdings plc (22) (144)
Profit / (loss) on ordinary activities after
tax and minority interests 92 (128)
Earnings per share:
- operating result 7.7p 15.4 p
- basic 2.5p (3.6)p
Consolidated balance sheet on an Achieved 6 months to 12 months to
Profits basis 30 Jun 2002 31 Dec 2001
GBPm GBPm
Shareholders` equity - primary financial
statements 2,684 2,470
Total long term in-force business asset 618 597
Shareholders` equity - achieved profits basis 3,302 3,067
Pro forma adjustment to bring listed
subsidiaries to market value 473 455
Embedded value (as previously reported) 3,775 3,522
Embedded value per share 100p 94p
The Achieved Profits methodology measures the movement in the value of in-force
and the movement in the net assets of the life assurance businesses. Earnings
under the Achieved Profits methodology are recognised earlier in the life
business, as the change in the present value of the future profits of all
policies written will now be included in the result. In addition, an active
investment return is applied to that portion of shareholder capital that
supports the statutory solvency requirement (i.e. encumbered capital). This
impacts operating earnings, with an offsetting adjustment to short term
fluctuations.
One of the key presentational changes is that the Achieved Profits earnings and,
in particular, the Achieved Profits value of new business, are presented on a
gross of tax basis. Previously the presentation was net of effective tax rates
applicable to the various geographical jurisdictions. Details of the tax rates
used will be included in assumptions.
From a balance sheet perspective, Achieved Profits reporting will include the
total long-term in-force business asset, representing the value in force, net of
statutory solvency adjustments. The market value adjustments for the group`s
investment in listed subsidiaries are excluded under Achieved Profits but this
information will continue to be disclosed within the supplementary information
as in prior years.
Rand/sterling exchange rates used to translate the operating results, assets and
liabilities are presented below:
31 Dec 2002 30 Jun 2002 31 Dec 2001
P&L account 15.7878 15.8800 12.3923
(average rate)
Balance sheet 13.8141 15.8451 17.4286
(closing rate)
20 January 2003
Contact details:
Old Mutual plc
James Poole (UK) Tel: +44 20 7569 0100
Nad Pillay/Mike Willis (SA) Tel: + 27 11 881 5783
College Hill
Tony Friend/Gareth David (UK) Tel: +44 20 7457 2020
Nicholas Williams/Robyn Hunt (SA) Tel: +27 11 447 3030
Notes to editors:
Old Mutual plc ("Old Mutual") is a world-class international financial services
company, providing wealth accumulation and protection through its expanding
operations in life assurance, institutional and retail asset management, banking
and general insurance. Following demutualisation, Old Mutual listed on the
London Stock Exchange in July 1999, and also listed on the Johannesburg,
Namibia, Malawi and Zimbabwe stock exchanges. Old Mutual is a member of the FTSE
100 with a market capitalisation of around GBP3.3 bn at 31 December 2002.
Old Mutual owns 53.2% of Nedcor, South Africa`s highest rated bank, and 51% of
the South African general insurance company, Mutual & Federal.
Date: 20/01/2003 11:00:00 AM Produced by the JSE SENS Department
