Old Mutual plc
Annual Report & Accounts
2017
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Emerging
Markets
Our story
Old Mutual plc is an international
investment, savings, insurance,
and banking group. Old Mutual
began in Cape Town in 1845
as South Africa’s first mutual
life insurance company, offering
financial security in uncertain times.
In March 2016, we announced a new strategy
for Old Mutual plc, called ‘managed separation’
which will result in four strong independent
businesses. The strategy aims to unlock and
create significant long-term value for our
shareholders by separating the businesses into
standalone entities. OM Asset Management is
now an independent business. Our remaining
three businesses are Old Mutual Emerging
Markets, Nedbank and Old Mutual Wealth.
Our three focus areas
Since announcing the managed separation
strategy in March 2016, Old Mutual plc
has had three fundamental areas of focus:
1
Executing
a number of
transactions
2
Winding
down the plc
Head Office
3
Ensuring the
businesses are ready
for independent future
We are now running Old Mutual plc as an active portfolio
manager of the underlying businesses.
Contents
Business review
Strategic report
01
02
03
08
KPIs
Chairman’s message
Chief Executive’s review
Review of financial
performance
Old Mutual Emerging
Markets review
Nedbank review
Old Mutual
Wealth review
Risks
26
38
48
58
Governance
70 Board of directors
72 Corporate governance
97
Directors’
Remuneration report
Financials
129 Group financial
statements
330 Financial statements
of the Company
340 Shareholder
information
Emerging
Markets
26–37
www.oldmutual.co.za
38–47
www.nedbank.co.za
48–57
www.oldmutual
wealth.com
‘Group’ refers to all business
interests ultimately owned by
the Old Mutual plc entity.
‘plc’ refers to Old Mutual plc,
the ultimate parent and holding
company of the Group companies.
‘plc Head Office’ collectively refers
to the plc holding company and the
other centre companies of the Group,
which typically own and manage the
investments across the Group.
For the purposes of this report,
references to Old Mutual Emerging
Markets (OMEM) and Old Mutual
Wealth (OMW) relate to the
performance and corporate activity
of those businesses prior to the
date of this report; references to
Old Mutual Limited (OML) and
Quilter plc (Quilter) relate to the
future actions of those respective
independent groups following the
completion of Managed Separation.
Find out more about Old Mutual plc:
Annual Report – www.oldmutualplc.com/reportingcentre
Corporate website – www.oldmutualplc.com
Disclaimer information is noted on the inside back cover of this report.
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Key performance indicators (KPIs)
Key performance indicators (KPIs)
Continued momentum across the businesses
Continued momentum across the businesses
Adjusted operating earnings (AOP) per share1 (p)
Adjusted operating earnings (AOP) per share1 (p)
Adjusted Return on Equity (RoE)2 (%)
Adjusted Return on Equity (RoE)2 (%)
2017
2016
2015
2014
2013
1 Adjusted operating profit (AOP) is an Alternative Performance Measure used
Actual
24.3p
19.4p
19.3p
17.9p
18.4p
Growth
+25%
+1%
+8%
-3%
+5%
1 Adjusted operating profit (AOP) is an Alternative Performance Measure used
alongside IFRS profit to assess underlying business performance. It is a non-IFRS
measure of profitability that reflects the directors’ view of the underlying long-term
performance of the Group. The calculation of AOP adjusts IFRS profit for a number
alongside IFRS profit to assess underlying business performance. It is a non-IFRS
of items as detailed in note C1. The definition of AOP is detailed in the basis of
measure of profitability that reflects the directors’ view of the underlying long-term
preparation on page 145
performance of the Group. The calculation of AOP adjusts IFRS profit for a number
of items as detailed in note C1. The definition of AOP is detailed in the basis of
preparation on page 145
2017
2016
2015
2014
2013
2 Group adjusted RoE is calculated as AOP (post-tax and NCI) divided by average
14.6%
13.3%
14.2%
13.3%
13.6%
ordinary shareholders’ equity (ie excluding the perpetual preferred callable securities).
It excludes non-core operations. The definition of adjusted RoE and basis on which it
is calculated is provided on page 23.
ordinary shareholders’ equity (ie excluding the perpetual preferred callable securities).
It excludes non-core operations. The definition of adjusted RoE and basis on which it
is calculated is provided on page 23.
2 Group adjusted RoE is calculated as AOP (post-tax and NCI) divided by average
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Basic earnings per share (p)
Basic earnings per share (p)
IFRS Return on Equity (%)
IFRS Return on Equity (%)
2017
2016
2015
2014
2013
Actual
19.3p
12.0p
12.7p
12.4p
15.0p
Growth
+61%
-6%
+2%
-17%
-40%
2017
2016
2015
2014
2013
11.3%
7.9%
8.8%
7.9%
9.3%
Adjusted operating profit by business
Adjusted operating profit by business
(Selected Metrics)
Capital strength (£bn)
Capital strength (£bn)
(The 2017 Group Solvency II information has not been audited)
(The 2017 Group Solvency II information has not been audited)
Group
Solvency II
surplus
Group
Solvency II
1.5
surplus
1.2
1.5
1.7
1.2
–
1.7
–
–
–
Group
Solvency II
ratio
Group
Solvency II
123%
ratio
122%
123%
138%
122%
–
138%
–
–
–
20175
20166
20175
2015
20166
2014
2015
2013
2014
5 Based on preliminary estimates. Formal filing due to the PRA by 29 March 2018
2013
6 As reported to the PRA as part of the Annual 2016 Solvency II submission.
Financial
Group
Directive
Financial
surplus
Group
Directive
–
surplus
–
–
1.9
–
2.1
1.9
2.1
2.1
2.1
Financial
Group
Directive
Financial
ratio
Group
Directive
–
ratio
–
–
166%
–
164%
166%
168%
164%
168%
5 Based on preliminary estimates. Formal filing due to the PRA by 29 March 2018
6 As reported to the PRA as part of the Annual 2016 Solvency II submission.
(Selected Metrics)
Old Mutual
Emerging
Markets3
Old Mutual
(Rm)
Emerging
Markets3
13,326
(Rm)
12,731
13,326
12,418
12,731
11,457
12,418
9,621
11,457
9,621
Nedbank
(Rm)
Nedbank
16,522
(Rm)
15,925
16,522
14,729
15,925
13,757
14,729
12,026
13,757
12,026
Old Mutual
Wealth
(£m)
Old Mutual
Wealth
363
(£m)
260
363
307
260
227
307
217
227
217
2017
2016
2017
2015
2016
2014
2015
2013
2014
3 Old Mutual Emerging Markets AOP has been restated to include the long-term
2013
investment return (LTIR) on excess assets previously shown as a separate item
within plc Head Office
3 Old Mutual Emerging Markets AOP has been restated to include the long-term
4 Adjusted operating profit before tax and non-controlling interests. Excludes the
investment return (LTIR) on excess assets previously shown as a separate item
Institutional Asset Management segment that was sold in 2017. Plc Head Office
within plc Head Office
is shown before recharges to the businesses
4 Adjusted operating profit before tax and non-controlling interests. Excludes the
Plc Head
Office4
(£m)
Plc Head
Office4
(134)
(£m)
(191)
(134)
(206)
(191)
(187)
(206)
(170)
(187)
(170)
Institutional Asset Management segment that was sold in 2017. Plc Head Office
is shown before recharges to the businesses
01
Old Mutual plc Annual Report and Accounts 2017Strategic report
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Old Mutual plc
Old Mutual plc
Annual Report and Accounts 2017
Annual Report and Accounts 2017
Chairman’s message
Chairman’s message
To shareholders
To shareholders
Patrick O’Sullivan
Patrick O’Sullivan
Patrick O’Sullivan
Chairman
Chairman
Chairman
Dear Shareholders
Dear Shareholders
When I wrote to you last year, I indicated that readying our four
When I wrote to you last year, I indicated that readying our four
businesses for separation, while enhancing their underlying
businesses for separation, while enhancing their underlying
performance, would demand exceptional commitment and
performance, would demand exceptional commitment and
leadership. I am very pleased to tell you that everyone has
leadership. I am very pleased to tell you that everyone has
risen to the challenge and this is evident, not only in the
risen to the challenge and this is evident, not only in the
significant progress on managed separation, but also in
significant progress on managed separation, but also in
the underlying results of the businesses in challenging markets.
the underlying results of the businesses in challenging markets.
Management has made significant progress: completing the sale
Management has made significant progress: completing the sale
of OMAM, our US asset management business; agreed to sell our
of OMAM, our US asset management business; agreed to sell our
UK single-strategy asset management business to TA Associates;
UK single-strategy asset management business to TA Associates;
and cleared the way, through reducing debt, for the listings of
and cleared the way, through reducing debt, for the listings of
Old Mutual Limited, the South African-based emerging markets
Old Mutual Limited, the South African-based emerging markets
business, and of Quilter plc.
business, and of Quilter plc.
Performance during the year
Performance during the year
Our businesses performed ahead of expectations during 2017.
Our businesses performed ahead of expectations during 2017.
Our adjusted operating earnings per share was 24.3 pence per
Our adjusted operating earnings per share was 24.3 pence per
share, 25% higher than in 2016 (basic earnings per share was
share, 25% higher than in 2016 (basic earnings per share was
19.3 pence per share, 61% higher than 2016). Our Solvency II
19.3 pence per share, 61% higher than 2016). Our Solvency II
capital ratio at the end of 2017 was 123%, which is marginally
capital ratio at the end of 2017 was 123%, which is marginally
higher than in 2016. The solvency capital position of all our
higher than in 2016. The solvency capital position of all our
individual businesses remains robust.
individual businesses remains robust.
Board developments and activity
Board developments and activity
Dr Nkosana Moyo stepped down from the Board on 29 June 2017,
Dr Nkosana Moyo stepped down from the Board on 29 June 2017,
with Dr Alan Gillespie joining the Group Audit Committee in
with Dr Alan Gillespie joining the Group Audit Committee in
his place. Nonkululeko (‘Nku‘) Nyembezi left the Board on
his place. Nonkululeko (‘Nku‘) Nyembezi left the Board on
31 December 2017, having served the Group as a non-executive
31 December 2017, having served the Group as a non-executive
director in various capacities for over seven years. On behalf of
director in various capacities for over seven years. On behalf of
the Board, I would like to express my gratitude for Nkosana’s and
the Board, I would like to express my gratitude for Nkosana’s and
Nku’s valuable contributions to the Group and we wish them well
Nku’s valuable contributions to the Group and we wish them well
for the future.
for the future.
In 2017, the workload of your Board has significantly increased
In 2017, the workload of your Board has significantly increased
as the strategy of Old Mutual has moved forward, and execution
as the strategy of Old Mutual has moved forward, and execution
has happened at pace. All members of the Board have responded
has happened at pace. All members of the Board have responded
with commitment and cohesion.
with commitment and cohesion.
Managed Separation
Managed Separation
During 2017, the Group has continued to make significant progress
During 2017, the Group has continued to make significant progress
towards its goals. In preparation for managed separation, we have
towards its goals. In preparation for managed separation, we have
taken steps to build strong foundations for the businesses to grow
taken steps to build strong foundations for the businesses to grow
in the future and to ensure our businesses have robust, appropriately
in the future and to ensure our businesses have robust, appropriately
capitalised balance sheets and sustainable dividend policies.
capitalised balance sheets and sustainable dividend policies.
At Old Mutual Emerging Markets, Trevor Manuel has been appointed
At Old Mutual Emerging Markets, Trevor Manuel has been appointed
Chairman and, with his support, we have made a number of board
Chairman and, with his support, we have made a number of board
and management team appointments bringing strong operational
and management team appointments bringing strong operational
skills and listed financial services company experience.
skills and listed financial services company experience.
Old Mutual Wealth has also continued to reshape and strengthen
Old Mutual Wealth has also continued to reshape and strengthen
its executive management team and has appointed a new board
its executive management team and has appointed a new board
of directors.
of directors.
The functional capabilities necessary to operate as an independently
The functional capabilities necessary to operate as an independently
listed entity have been put in place for both businesses.
listed entity have been put in place for both businesses.
At the Old Mutual plc head office in London, a key focus has been
At the Old Mutual plc head office in London, a key focus has been
on reducing costs in advance of its eventual closure. We have also
on reducing costs in advance of its eventual closure. We have also
reduced Group exposures by de-risking the group pension scheme
reduced Group exposures by de-risking the group pension scheme
and mitigating various other contingent exposures. Where necessary,
and mitigating various other contingent exposures. Where necessary,
we have engaged with regulators to obtain approvals for the
we have engaged with regulators to obtain approvals for the
finalisation of managed separation.
finalisation of managed separation.
Responsible Business
Responsible Business
We continue to operate as a responsible business during managed
We continue to operate as a responsible business during managed
separation. 2017 sees the requirement for companies to report
separation. 2017 sees the requirement for companies to report
against the EU Non-Financial Reporting Directive, and our response
against the EU Non-Financial Reporting Directive, and our response
can be found in the Governance section of this report on page 94.
can be found in the Governance section of this report on page 94.
The businesses’ approach to material risks are covered in their
The businesses’ approach to material risks are covered in their
sections. As we complete what we expect to be our last responsible
sections. As we complete what we expect to be our last responsible
business reports under the current Group structure, we will
business reports under the current Group structure, we will
reference our response to the Taskforce for Climate Related
reference our response to the Taskforce for Climate Related
Financial Disclosure recommendations. As I have previously
Financial Disclosure recommendations. As I have previously
stated, we are supportive of the aims of the recommendations
stated, we are supportive of the aims of the recommendations
and our businesses are embedding them into their future reporting
and our businesses are embedding them into their future reporting
plans. For more information on our approach please visit the
plans. For more information on our approach please visit the
Old Mutual plc corporate website and the businesses’ websites.
Old Mutual plc corporate website and the businesses’ websites.
Outlook
Outlook
In the nearly 20 years since demutualisation, the Old Mutual Group
In the nearly 20 years since demutualisation, the Old Mutual Group
has witnessed much change and has gained from its international
has witnessed much change and has gained from its international
presence. Continuing shareholders will inherit two strong companies
presence. Continuing shareholders will inherit two strong companies
following the de-listing of Old Mutual plc’s shares – Quilter plc and
following the de-listing of Old Mutual plc’s shares – Quilter plc and
Old Mutual Limited – and then later a direct holding in Nedbank.
Old Mutual Limited – and then later a direct holding in Nedbank.
Your Board is confident that these businesses will benefit greatly
Your Board is confident that these businesses will benefit greatly
from separation as they strive for leadership in their respective
from separation as they strive for leadership in their respective
markets. We thank you for your continued support during the
markets. We thank you for your continued support during the
extensive period of preparation for managed separation. Finally,
extensive period of preparation for managed separation. Finally,
our employees have continued to work exceptionally hard to deliver
our employees have continued to work exceptionally hard to deliver
the new companies for listing. Without this performance, we would
the new companies for listing. Without this performance, we would
not be where we are. On your behalf, the Board is most
not be where we are. On your behalf, the Board is most
appreciative of their effort.
appreciative of their effort.
Patrick O’Sullivan
Patrick O’Sullivan
Chairman
Chairman
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Chief Executive’s
review
Chief Executive’s
review
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For the purposes of this report, references to OMEM and
OMW relate to the performance and corporate activity of those
businesses prior to the date of this report; references to OML and
For the purposes of this report, references to OMEM and
Quilter relate to the future actions of those respective independent
OMW relate to the performance and corporate activity of those
groups following the completion of managed separation.
businesses prior to the date of this report; references to OML and
Quilter relate to the future actions of those respective independent
Business Review
groups following the completion of managed separation.
Challenging macro conditions continued
The challenging macroeconomic conditions in our largest market
Business Review
of South Africa continued throughout 2017, with weakness in
Challenging macro conditions continued
consumer and business confidence creating a tough environment
The challenging macroeconomic conditions in our largest market
for banking, long-term investment and savings. The South African
of South Africa continued throughout 2017, with weakness in
government’s sovereign and local currency credit ratings were
consumer and business confidence creating a tough environment
downgraded in April and November, but markets rallied strongly
for banking, long-term investment and savings. The South African
in the second half. In February 2018, Cyril Ramaphosa was sworn
government’s sovereign and local currency credit ratings were
in as the new President of South Africa. We expect that this will
downgraded in April and November, but markets rallied strongly
lead to a recovery in sentiment and confidence over time despite
in the second half. In February 2018, Cyril Ramaphosa was sworn
stretched public finances and governance challenges. In the
in as the new President of South Africa. We expect that this will
UK the macro-environment was characterised by strong equity
lead to a recovery in sentiment and confidence over time despite
markets but weak currency, considerable political uncertainty
stretched public finances and governance challenges. In the
around Brexit and the general election; and legislative and
UK the macro-environment was characterised by strong equity
regulatory developments impacting financial services. In this
markets but weak currency, considerable political uncertainty
context, our businesses have delivered resilient operational
around Brexit and the general election; and legislative and
performances demonstrating the underlying strength of
regulatory developments impacting financial services. In this
their franchises.
context, our businesses have delivered resilient operational
performances demonstrating the underlying strength of
During the year, the average rand rate was 14% stronger against
their franchises.
sterling compared to 2016, while the average USD rate against
sterling was 5% stronger. The average of the FTSE 100 during the
During the year, the average rand rate was 14% stronger against
year was 14% higher; in the US, the average of the Russell 1000
sterling compared to 2016, while the average USD rate against
Value was 14% higher; and the average of the South African JSE
sterling was 5% stronger. The average of the FTSE 100 during the
All Share was 6% higher.
year was 14% higher; in the US, the average of the Russell 1000
Value was 14% higher; and the average of the South African JSE
Old Mutual’s operating performance was ahead of our
All Share was 6% higher.
expectations. Adjusted Operating Profit (AOP) in reported currency
was up 22% at £2.0 billion, up 7% in constant currency. AOP in
Old Mutual’s operating performance was ahead of our
2016 was impacted by £31 million of MS costs which were not
expectations. Adjusted Operating Profit (AOP) in reported currency
included in 2017. The IFRS pre-tax profit was up 102% at £617
was up 22% at £2.0 billion, up 7% in constant currency. AOP in
million, benefiting from a profit of £164 million from the sale of OM
2016 was impacted by £31 million of MS costs which were not
Asset Management (OMAM) and the joint venture with Kotak in
included in 2017. The IFRS pre-tax profit was up 102% at £617
India. AOP excluding the Institutional Asset Management segment
million, benefiting from a profit of £164 million from the sale of OM
(consolidated for the first four months of the year until it was sold)
Asset Management (OMAM) and the joint venture with Kotak in
was £2.0 billion up 29% on the prior year (£1.5 billion) on a
India. AOP excluding the Institutional Asset Management segment
reported basis and up 12% in constant currency.
(consolidated for the first four months of the year until it was sold)
was £2.0 billion up 29% on the prior year (£1.5 billion) on a
Old Mutual Emerging Markets
reported basis and up 12% in constant currency.
OMEM seeks to become a premium African financial services
group that offers a broad spectrum of financial solutions to retail
Old Mutual Emerging Markets
and corporate customers across key market segments in 17
OMEM seeks to become a premium African financial services
countries. OMEM primarily operates in seven segments and its
group that offers a broad spectrum of financial solutions to retail
lines of business include Life and Savings, Property and Casualty,
and corporate customers across key market segments in 17
Asset Management and Banking and Lending. It distributes
countries. OMEM primarily operates in seven segments and its
products and services to customers through a multi-channel
lines of business include Life and Savings, Property and Casualty,
distribution network spanning tied and independent advisers,
Asset Management and Banking and Lending. It distributes
branches, bancassurance, direct and digital channels, and
products and services to customers through a multi-channel
worksites.
distribution network spanning tied and independent advisers,
branches, bancassurance, direct and digital channels, and
worksites.
Bruce Hemphill
Group Chief Executive
Bruce Hemphill
Group Chief Executive
Group Review and Business Model
Our strategy of managed separation aims to unlock and create
significant long-term value for our shareholders which is currently
Group Review and Business Model
trapped within the Group structure and to remove the costs arising
Our strategy of managed separation aims to unlock and create
from it. This structure inhibits the efficient management and funding
significant long-term value for our shareholders which is currently
of future growth plans for the individual businesses, restricting them
trapped within the Group structure and to remove the costs arising
from reaching their full potential. We intend to unlock value through
from it. This structure inhibits the efficient management and funding
the separation of the three underlying businesses – Old Mutual
of future growth plans for the individual businesses, restricting them
Emerging Markets (OMEM), Nedbank and Old Mutual Wealth
from reaching their full potential. We intend to unlock value through
(OMW), with OM Asset Management having already been
the separation of the three underlying businesses – Old Mutual
separated from the Group.
Emerging Markets (OMEM), Nedbank and Old Mutual Wealth
(OMW), with OM Asset Management having already been
To effect the managed separation, we intend to list two separate
separated from the Group.
entities, on both the London and Johannesburg stock exchanges.
One will consist principally of the OMW operations and on listing
To effect the managed separation, we intend to list two separate
will be called Quilter plc (Quilter). The other will be the new South
entities, on both the London and Johannesburg stock exchanges.
African holding company, Old Mutual Limited (OML), which will
One will consist principally of the OMW operations and on listing
consist of OMEM, the Old Mutual holding in Nedbank and the
will be called Quilter plc (Quilter). The other will be the new South
residual Old Mutual plc.
African holding company, Old Mutual Limited (OML), which will
consist of OMEM, the Old Mutual holding in Nedbank and the
Once the managed separation is complete, each business will:
residual Old Mutual plc.
have its local regulator as its lead regulator; continued delivery of
enhanced performance and allow the market to value it
Once the managed separation is complete, each business will:
appropriately; be accountable directly to its shareholders for its
have its local regulator as its lead regulator; continued delivery of
level of returns and cash generation from capital employed; and
enhanced performance and allow the market to value it
have direct access to its natural shareholder base.
appropriately; be accountable directly to its shareholders for its
level of returns and cash generation from capital employed; and
During the period of managed separation, our business model is to
have direct access to its natural shareholder base.
actively manage the separation of the underlying businesses to
realise their full potential as standalone entities, in a manner that
During the period of managed separation, our business model is to
creates value for shareholders over time. Our focus during this
actively manage the separation of the underlying businesses to
period has been on three areas: ensuring the businesses are ready
realise their full potential as standalone entities, in a manner that
for separation; executing the transactions needed for managed
creates value for shareholders over time. Our focus during this
separation and winding down the plc head office.
period has been on three areas: ensuring the businesses are ready
for separation; executing the transactions needed for managed
separation and winding down the plc head office.
2
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Old Mutual plc Annual Report and Accounts 2017
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Old Mutual plc
Old Mutual plc
Annual Report and Accounts 2017
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Chief Executive’s
Chief Executive’s
review
review
Chief Executive’s
review
Bruce Hemphill
Bruce Hemphill
Group Chief Executive
Group Chief Executive
Bruce Hemphill
Bruce Hemphill
Group Chief Executive
Group Chief Executive
Group Review and Business Model
Group Review and Business Model
Our strategy of managed separation aims to unlock and create
Our strategy of managed separation aims to unlock and create
significant long-term value for our shareholders which is currently
significant long-term value for our shareholders which is currently
Group Review and Business Model
trapped within the Group structure and to remove the costs arising
trapped within the Group structure and to remove the costs arising
Our strategy of managed separation aims to unlock and create
from it. This structure inhibits the efficient management and funding
from it. This structure inhibits the efficient management and funding
significant long-term value for our shareholders which is currently
of future growth plans for the individual businesses, restricting them
of future growth plans for the individual businesses, restricting them
trapped within the Group structure and to remove the costs arising
from reaching their full potential. We intend to unlock value through
from reaching their full potential. We intend to unlock value through
from it. This structure inhibits the efficient management and funding
the separation of the three underlying businesses – Old Mutual
the separation of the three underlying businesses – Old Mutual
of future growth plans for the individual businesses, restricting them
Emerging Markets (OMEM), Nedbank and Old Mutual Wealth
Emerging Markets (OMEM), Nedbank and Old Mutual Wealth
from reaching their full potential. We intend to unlock value through
(OMW), with OM Asset Management having already been
(OMW), with OM Asset Management having already been
the separation of the three underlying businesses – Old Mutual
separated from the Group.
separated from the Group.
Emerging Markets (OMEM), Nedbank and Old Mutual Wealth
(OMW), with OM Asset Management having already been
To effect the managed separation, we intend to list two separate
To effect the managed separation, we intend to list two separate
separated from the Group.
entities, on both the London and Johannesburg stock exchanges.
entities, on both the London and Johannesburg stock exchanges.
One will consist principally of the OMW operations and on listing
One will consist principally of the OMW operations and on listing
To effect the managed separation, we intend to list two separate
will be called Quilter plc (Quilter). The other will be the new South
will be called Quilter plc (Quilter). The other will be the new South
entities, on both the London and Johannesburg stock exchanges.
African holding company, Old Mutual Limited (OML), which will
African holding company, Old Mutual Limited (OML), which will
One will consist principally of the OMW operations and on listing
consist of OMEM, the Old Mutual holding in Nedbank and the
consist of OMEM, the Old Mutual holding in Nedbank and the
will be called Quilter plc (Quilter). The other will be the new South
residual Old Mutual plc.
residual Old Mutual plc.
African holding company, Old Mutual Limited (OML), which will
consist of OMEM, the Old Mutual holding in Nedbank and the
Once the managed separation is complete, each business will:
Once the managed separation is complete, each business will:
residual Old Mutual plc.
have its local regulator as its lead regulator; continued delivery of
have its local regulator as its lead regulator; continued delivery of
enhanced performance and allow the market to value it
enhanced performance and allow the market to value it
Once the managed separation is complete, each business will:
appropriately; be accountable directly to its shareholders for its
appropriately; be accountable directly to its shareholders for its
have its local regulator as its lead regulator; continued delivery of
level of returns and cash generation from capital employed; and
level of returns and cash generation from capital employed; and
enhanced performance and allow the market to value it
have direct access to its natural shareholder base.
have direct access to its natural shareholder base.
appropriately; be accountable directly to its shareholders for its
level of returns and cash generation from capital employed; and
During the period of managed separation, our business model is to
During the period of managed separation, our business model is to
have direct access to its natural shareholder base.
actively manage the separation of the underlying businesses to
actively manage the separation of the underlying businesses to
realise their full potential as standalone entities, in a manner that
realise their full potential as standalone entities, in a manner that
During the period of managed separation, our business model is to
creates value for shareholders over time. Our focus during this
creates value for shareholders over time. Our focus during this
actively manage the separation of the underlying businesses to
period has been on three areas: ensuring the businesses are ready
period has been on three areas: ensuring the businesses are ready
realise their full potential as standalone entities, in a manner that
for separation; executing the transactions needed for managed
for separation; executing the transactions needed for managed
creates value for shareholders over time. Our focus during this
separation and winding down the plc head office.
separation and winding down the plc head office.
period has been on three areas: ensuring the businesses are ready
for separation; executing the transactions needed for managed
separation and winding down the plc head office.
For the purposes of this report, references to OMEM and
For the purposes of this report, references to OMEM and
OMW relate to the performance and corporate activity of those
OMW relate to the performance and corporate activity of those
businesses prior to the date of this report; references to OML and
businesses prior to the date of this report; references to OML and
For the purposes of this report, references to OMEM and
Quilter relate to the future actions of those respective independent
Quilter relate to the future actions of those respective independent
OMW relate to the performance and corporate activity of those
groups following the completion of managed separation.
groups following the completion of managed separation.
businesses prior to the date of this report; references to OML and
Quilter relate to the future actions of those respective independent
Business Review
Business Review
groups following the completion of managed separation.
Challenging macro conditions continued
Challenging macro conditions continued
The challenging macroeconomic conditions in our largest market
The challenging macroeconomic conditions in our largest market
Business Review
of South Africa continued throughout 2017, with weakness in
of South Africa continued throughout 2017, with weakness in
Challenging macro conditions continued
consumer and business confidence creating a tough environment
consumer and business confidence creating a tough environment
The challenging macroeconomic conditions in our largest market
for banking, long-term investment and savings. The South African
for banking, long-term investment and savings. The South African
of South Africa continued throughout 2017, with weakness in
government’s sovereign and local currency credit ratings were
government’s sovereign and local currency credit ratings were
consumer and business confidence creating a tough environment
downgraded in April and November, but markets rallied strongly
downgraded in April and November, but markets rallied strongly
for banking, long-term investment and savings. The South African
in the second half. In February 2018, Cyril Ramaphosa was sworn
in the second half. In February 2018, Cyril Ramaphosa was sworn
government’s sovereign and local currency credit ratings were
in as the new President of South Africa. We expect that this will
in as the new President of South Africa. We expect that this will
downgraded in April and November, but markets rallied strongly
lead to a recovery in sentiment and confidence over time despite
lead to a recovery in sentiment and confidence over time despite
in the second half. In February 2018, Cyril Ramaphosa was sworn
stretched public finances and governance challenges. In the
stretched public finances and governance challenges. In the
in as the new President of South Africa. We expect that this will
UK the macro-environment was characterised by strong equity
UK the macro-environment was characterised by strong equity
lead to a recovery in sentiment and confidence over time despite
markets but weak currency, considerable political uncertainty
markets but weak currency, considerable political uncertainty
stretched public finances and governance challenges. In the
around Brexit and the general election; and legislative and
around Brexit and the general election; and legislative and
UK the macro-environment was characterised by strong equity
regulatory developments impacting financial services. In this
regulatory developments impacting financial services. In this
markets but weak currency, considerable political uncertainty
context, our businesses have delivered resilient operational
context, our businesses have delivered resilient operational
around Brexit and the general election; and legislative and
performances demonstrating the underlying strength of
performances demonstrating the underlying strength of
regulatory developments impacting financial services. In this
their franchises.
their franchises.
context, our businesses have delivered resilient operational
performances demonstrating the underlying strength of
During the year, the average rand rate was 14% stronger against
During the year, the average rand rate was 14% stronger against
their franchises.
sterling compared to 2016, while the average USD rate against
sterling compared to 2016, while the average USD rate against
sterling was 5% stronger. The average of the FTSE 100 during the
sterling was 5% stronger. The average of the FTSE 100 during the
During the year, the average rand rate was 14% stronger against
year was 14% higher; in the US, the average of the Russell 1000
year was 14% higher; in the US, the average of the Russell 1000
sterling compared to 2016, while the average USD rate against
Value was 14% higher; and the average of the South African JSE
Value was 14% higher; and the average of the South African JSE
sterling was 5% stronger. The average of the FTSE 100 during the
All Share was 6% higher.
All Share was 6% higher.
year was 14% higher; in the US, the average of the Russell 1000
Value was 14% higher; and the average of the South African JSE
Old Mutual’s operating performance was ahead of our
Old Mutual’s operating performance was ahead of our
All Share was 6% higher.
expectations. Adjusted Operating Profit (AOP) in reported currency
expectations. Adjusted Operating Profit (AOP) in reported currency
was up 22% at £2.0 billion, up 7% in constant currency. AOP in
was up 22% at £2.0 billion, up 7% in constant currency. AOP in
Old Mutual’s operating performance was ahead of our
2016 was impacted by £31 million of MS costs which were not
2016 was impacted by £31 million of MS costs which were not
expectations. Adjusted Operating Profit (AOP) in reported currency
included in 2017. The IFRS pre-tax profit was up 102% at £617
included in 2017. The IFRS pre-tax profit was up 102% at £617
was up 22% at £2.0 billion, up 7% in constant currency. AOP in
million, benefiting from a profit of £164 million from the sale of OM
million, benefiting from a profit of £164 million from the sale of OM
2016 was impacted by £31 million of MS costs which were not
Asset Management (OMAM) and the joint venture with Kotak in
Asset Management (OMAM) and the joint venture with Kotak in
included in 2017. The IFRS pre-tax profit was up 102% at £617
India. AOP excluding the Institutional Asset Management segment
India. AOP excluding the Institutional Asset Management segment
million, benefiting from a profit of £164 million from the sale of OM
(consolidated for the first four months of the year until it was sold)
(consolidated for the first four months of the year until it was sold)
Asset Management (OMAM) and the joint venture with Kotak in
was £2.0 billion up 29% on the prior year (£1.5 billion) on a
was £2.0 billion up 29% on the prior year (£1.5 billion) on a
India. AOP excluding the Institutional Asset Management segment
reported basis and up 12% in constant currency.
reported basis and up 12% in constant currency.
(consolidated for the first four months of the year until it was sold)
was £2.0 billion up 29% on the prior year (£1.5 billion) on a
Old Mutual Emerging Markets
Old Mutual Emerging Markets
reported basis and up 12% in constant currency.
OMEM seeks to become a premium African financial services
OMEM seeks to become a premium African financial services
group that offers a broad spectrum of financial solutions to retail
group that offers a broad spectrum of financial solutions to retail
Old Mutual Emerging Markets
and corporate customers across key market segments in 17
and corporate customers across key market segments in 17
OMEM seeks to become a premium African financial services
countries. OMEM primarily operates in seven segments and its
countries. OMEM primarily operates in seven segments and its
group that offers a broad spectrum of financial solutions to retail
lines of business include Life and Savings, Property and Casualty,
lines of business include Life and Savings, Property and Casualty,
and corporate customers across key market segments in 17
Asset Management and Banking and Lending. It distributes
Asset Management and Banking and Lending. It distributes
countries. OMEM primarily operates in seven segments and its
products and services to customers through a multi-channel
products and services to customers through a multi-channel
lines of business include Life and Savings, Property and Casualty,
distribution network spanning tied and independent advisers,
distribution network spanning tied and independent advisers,
Asset Management and Banking and Lending. It distributes
branches, bancassurance, direct and digital channels, and
branches, bancassurance, direct and digital channels, and
products and services to customers through a multi-channel
worksites.
worksites.
distribution network spanning tied and independent advisers,
branches, bancassurance, direct and digital channels, and
worksites.
3
3
03
3
Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Chief Executive’s review
continued
Chief Executive’s review
continued
IFRS profit after tax of R10.2 billion increased by 46% from R7.0
billion in the prior year. This was driven primarily by higher actual
investment returns in South Africa and Zimbabwe. In the context of
IFRS profit after tax of R10.2 billion increased by 46% from R7.0
a tough economic and political landscape across several of
billion in the prior year. This was driven primarily by higher actual
OMEM’s key markets for much of the year, including South Africa,
investment returns in South Africa and Zimbabwe. In the context of
Zimbabwe and Kenya, the business delivered resilient financial
a tough economic and political landscape across several of
results with pre-tax AOP of R13.3 billion, up 5% on the prior year.
OMEM’s key markets for much of the year, including South Africa,
The improvement in AOP was driven by good progress at Old
Zimbabwe and Kenya, the business delivered resilient financial
Mutual Insure and Rest of Africa, reflecting signs of a turnaround.
results with pre-tax AOP of R13.3 billion, up 5% on the prior year.
The improvement in AOP was driven by good progress at Old
Key adjusting items of AOP to IFRS profit include higher short-term
Mutual Insure and Rest of Africa, reflecting signs of a turnaround.
fluctuations on the long-term investment return of R2.2 billion
(2016: negative R550 million) driven by Zimbabwe’s equity market
Key adjusting items of AOP to IFRS profit include higher short-term
performance and the profit on disposal of our joint venture in India
fluctuations on the long-term investment return of R2.2 billion
of R1.4 billion. This was partly offset by the one-off managed
(2016: negative R550 million) driven by Zimbabwe’s equity market
separation and standalone costs totalling R237 million (2016: Rnil);
performance and the profit on disposal of our joint venture in India
and goodwill impairments of R1.5 billion (2016: R1.3 billion) relating
of R1.4 billion. This was partly offset by the one-off managed
to East Africa and AIVA in Latin America.
separation and standalone costs totalling R237 million (2016: Rnil);
and goodwill impairments of R1.5 billion (2016: R1.3 billion) relating
OMEM’s underlying IFRS operating and administration expenses
to East Africa and AIVA in Latin America.
of R18.8 billion were up 4% on the prior year below SA inflation in
2017.
OMEM’s underlying IFRS operating and administration expenses
of R18.8 billion were up 4% on the prior year below SA inflation in
Gross flows of R214.4 billion were flat against the prior year, with
2017.
growth in the Mass and Foundation Cluster and in Wealth and
Investments. Life APE sales of R13.1 billion were 3% behind the
Gross flows of R214.4 billion were flat against the prior year, with
prior year, mainly due to lower group assurance and annuity sales
growth in the Mass and Foundation Cluster and in Wealth and
in Corporate. This was offset by strong corporate flows in the
Investments. Life APE sales of R13.1 billion were 3% behind the
Malawi business.
prior year, mainly due to lower group assurance and annuity sales
in Corporate. This was offset by strong corporate flows in the
Net client cash flow (NCCF) of R14.5 billion was R2.5 billion below
Malawi business.
the prior year, with a significant non-life outflow in Corporate as well
as a R3.3 billion outflow from the Namibian government pension
Net client cash flow (NCCF) of R14.5 billion was R2.5 billion below
fund. NCCF in 2017 benefited from R3.0 billion of the Old Mutual
the prior year, with a significant non-life outflow in Corporate as well
International flows that were previously reported in OMW and
as a R3.3 billion outflow from the Namibian government pension
comparatives have not been restated. Funds under Management
fund. NCCF in 2017 benefited from R3.0 billion of the Old Mutual
increased to R1.2 trillion, up 10% against the prior year.
International flows that were previously reported in OMW and
comparatives have not been restated. Funds under Management
The Property & Casualty underwriting margin of 2.5% improved
increased to R1.2 trillion, up 10% against the prior year.
from 1.5% in the prior year. This was driven by a turnaround in OM
Insure’s underwriting result following an improvement in claims
The Property & Casualty underwriting margin of 2.5% improved
experience despite catastrophe losses as well as an improvement
from 1.5% in the prior year. This was driven by a turnaround in OM
in the claims environment in East Africa following the remediation of
Insure’s underwriting result following an improvement in claims
the loss-making business.
experience despite catastrophe losses as well as an improvement
in the claims environment in East Africa following the remediation of
the loss-making business.
Nedbank
Nedbank ranks as a top-5 bank by capital on the African continent
and Ecobank, in which Nedbank maintains a 21.2% shareholding,
Nedbank
ranks within the top-10 banks by assets on the African continent.
Nedbank ranks as a top-5 bank by capital on the African continent
Nedbank is South Africa's fourth-largest bank by market
and Ecobank, in which Nedbank maintains a 21.2% shareholding,
capitalisation, total assets and headline earnings. It is also a
ranks within the top-10 banks by assets on the African continent.
leading corporate bank and a market leader in commercial property
Nedbank is South Africa's fourth-largest bank by market
and renewable energy finance and has a strong position in
capitalisation, total assets and headline earnings. It is also a
household motor finance, household deposits and card acquiring.
leading corporate bank and a market leader in commercial property
It operates a unique asset management model as part of an
and renewable energy finance and has a strong position in
integrated wealth management business. Through its own
household motor finance, household deposits and card acquiring.
operations in SADC and Rest of Africa, and through its pan-African
It operates a unique asset management model as part of an
banking alliance with Ecobank, Nedbank provides the Group’s
integrated wealth management business. Through its own
customers access to Africa's largest banking network.
operations in SADC and Rest of Africa, and through its pan-African
banking alliance with Ecobank, Nedbank provides the Group’s
Nedbank produced a solid performance in a macro and political
customers access to Africa's largest banking network.
environment that has proved volatile and challenging. Headline
earnings, including losses in associate income from ETI of R744
Nedbank produced a solid performance in a macro and political
million, increased by 2.8% to R11.8 billion. This translated into an
environment that has proved volatile and challenging. Headline
increase in DHEPS of 2.4% to 2,406 cents and an increase in
earnings, including losses in associate income from ETI of R744
HEPS of 2.2% to 2,452 cents.
million, increased by 2.8% to R11.8 billion. This translated into an
increase in DHEPS of 2.4% to 2,406 cents and an increase in
As in prior periods, results are highlighted both including and
HEPS of 2.2% to 2,452 cents.
excluding ETI (referred to as managed operations) to provide a
better understanding of the performance of the business given the
As in prior periods, results are highlighted both including and
volatility in ETI’s results in 2016 and 2017. Managed operations
excluding ETI (referred to as managed operations) to provide a
produced headline earnings growth of 7.8% to R12.8 billion, with
better understanding of the performance of the business given the
slower than expected revenue growth, more than offset by reduced
volatility in ETI’s results in 2016 and 2017. Managed operations
impairments and good cost management.
produced headline earnings growth of 7.8% to R12.8 billion, with
slower than expected revenue growth, more than offset by reduced
ROE (excluding goodwill) and ROE remained flat at 16.4% and
impairments and good cost management.
15.3%, respectively. ROE in managed operations (excluding
goodwill and ETI) also remained stable at 18.1%. ROA decreased
ROE (excluding goodwill) and ROE remained flat at 16.4% and
0.01% to 1.22% and excluding ETI, ROA in managed operations
15.3%, respectively. ROE in managed operations (excluding
improved from 1.29% to 1.33%. Return on RWA increased from
goodwill and ETI) also remained stable at 18.1%. ROA decreased
2.23% to 2.30%.
0.01% to 1.22% and excluding ETI, ROA in managed operations
improved from 1.29% to 1.33%. Return on RWA increased from
Nedbank’s CET1 and Tier 1 capital ratios of 12.6% and 13.4%
2.23% to 2.30%.
respectively, average LCR for the fourth quarter of 116.2% and
an NSFR of above 100%, are all Basel III compliant and are a
Nedbank’s CET1 and Tier 1 capital ratios of 12.6% and 13.4%
reflection of a strong balance sheet. On the back of solid earnings
respectively, average LCR for the fourth quarter of 116.2% and
growth in managed operations and a strong capital position, a final
an NSFR of above 100%, are all Basel III compliant and are a
dividend of 675 cents was declared, an increase of 7.1%. The total
reflection of a strong balance sheet. On the back of solid earnings
dividend per share increased 7.1% to 1,285 cents, ahead of HEPS
growth in managed operations and a strong capital position, a final
growth of 2.2%.
dividend of 675 cents was declared, an increase of 7.1%. The total
dividend per share increased 7.1% to 1,285 cents, ahead of HEPS
growth of 2.2%.
04
4
4
Old Mutual plc Annual Report and Accounts 2017 Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Chief Executive’s review
continued
IFRS profit after tax of R10.2 billion increased by 46% from R7.0
billion in the prior year. This was driven primarily by higher actual
investment returns in South Africa and Zimbabwe. In the context of
a tough economic and political landscape across several of
OMEM’s key markets for much of the year, including South Africa,
Zimbabwe and Kenya, the business delivered resilient financial
results with pre-tax AOP of R13.3 billion, up 5% on the prior year.
The improvement in AOP was driven by good progress at Old
Mutual Insure and Rest of Africa, reflecting signs of a turnaround.
Key adjusting items of AOP to IFRS profit include higher short-term
fluctuations on the long-term investment return of R2.2 billion
(2016: negative R550 million) driven by Zimbabwe’s equity market
performance and the profit on disposal of our joint venture in India
of R1.4 billion. This was partly offset by the one-off managed
separation and standalone costs totalling R237 million (2016: Rnil);
and goodwill impairments of R1.5 billion (2016: R1.3 billion) relating
to East Africa and AIVA in Latin America.
OMEM’s underlying IFRS operating and administration expenses
of R18.8 billion were up 4% on the prior year below SA inflation in
2017.
Gross flows of R214.4 billion were flat against the prior year, with
growth in the Mass and Foundation Cluster and in Wealth and
Investments. Life APE sales of R13.1 billion were 3% behind the
prior year, mainly due to lower group assurance and annuity sales
in Corporate. This was offset by strong corporate flows in the
Malawi business.
Net client cash flow (NCCF) of R14.5 billion was R2.5 billion below
the prior year, with a significant non-life outflow in Corporate as well
as a R3.3 billion outflow from the Namibian government pension
fund. NCCF in 2017 benefited from R3.0 billion of the Old Mutual
International flows that were previously reported in OMW and
comparatives have not been restated. Funds under Management
increased to R1.2 trillion, up 10% against the prior year.
The Property & Casualty underwriting margin of 2.5% improved
from 1.5% in the prior year. This was driven by a turnaround in OM
Insure’s underwriting result following an improvement in claims
experience despite catastrophe losses as well as an improvement
in the claims environment in East Africa following the remediation of
the loss-making business.
Nedbank
Nedbank ranks as a top-5 bank by capital on the African continent
and Ecobank, in which Nedbank maintains a 21.2% shareholding,
ranks within the top-10 banks by assets on the African continent.
Nedbank is South Africa's fourth-largest bank by market
capitalisation, total assets and headline earnings. It is also a
leading corporate bank and a market leader in commercial property
and renewable energy finance and has a strong position in
household motor finance, household deposits and card acquiring.
It operates a unique asset management model as part of an
integrated wealth management business. Through its own
operations in SADC and Rest of Africa, and through its pan-African
banking alliance with Ecobank, Nedbank provides the Group’s
customers access to Africa's largest banking network.
Nedbank produced a solid performance in a macro and political
environment that has proved volatile and challenging. Headline
earnings, including losses in associate income from ETI of R744
million, increased by 2.8% to R11.8 billion. This translated into an
increase in DHEPS of 2.4% to 2,406 cents and an increase in
HEPS of 2.2% to 2,452 cents.
As in prior periods, results are highlighted both including and
excluding ETI (referred to as managed operations) to provide a
better understanding of the performance of the business given the
volatility in ETI’s results in 2016 and 2017. Managed operations
produced headline earnings growth of 7.8% to R12.8 billion, with
slower than expected revenue growth, more than offset by reduced
impairments and good cost management.
ROE (excluding goodwill) and ROE remained flat at 16.4% and
15.3%, respectively. ROE in managed operations (excluding
goodwill and ETI) also remained stable at 18.1%. ROA decreased
0.01% to 1.22% and excluding ETI, ROA in managed operations
improved from 1.29% to 1.33%. Return on RWA increased from
2.23% to 2.30%.
Nedbank’s CET1 and Tier 1 capital ratios of 12.6% and 13.4%
respectively, average LCR for the fourth quarter of 116.2% and
an NSFR of above 100%, are all Basel III compliant and are a
reflection of a strong balance sheet. On the back of solid earnings
growth in managed operations and a strong capital position, a final
dividend of 675 cents was declared, an increase of 7.1%. The total
dividend per share increased 7.1% to 1,285 cents, ahead of HEPS
growth of 2.2%.
Old Mutual Wealth
Old Mutual Wealth is a leader in the UK and in selected offshore
markets in wealth management, providing advice-led investment
solutions and investment platforms to over 900,000 customers,
principally in the affluent market segment. At the core of its
proposition is a multi-channel wealth offering driving Integrated
NCCF with leading advice and investment solutions.
Managed Separation
Delivery on schedule
When we unveiled the managed separation strategy in March
2016, we said that we aimed for it to be materially complete by
the end of 2018. Subject to addressing the remaining issues,
we are on track to deliver the managed separation as planned.
OMW‘s IFRS post-tax profit was £99 million for 2017, compared to
a loss of £4 million in 2016, principally due to the exceptional net
performance fees in Single Strategy.
As part of the listing of Quilter, we intend to hold a secondary
offering of up to 9.6% with the proceeds to be retained by Old
Mutual plc and its subsidiaries.
Reported OMW AOP of £363 million for 2017 was 40% higher than
prior year (2016: £260 million), and includes net performance fees
of £101 million in 2017 (2016: £26 million). Pre-tax AOP on a
standalone basis (reflecting the perimeter of the business post-
listing which excludes the results from the Single Strategy
business) was up 18% to £209 million (2016: £177 million, which
included a £27 million charge for restructuring Heritage fees).
Key reconciling items between the IFRS profit and pre-tax Adjusted
Operating Profit (AOP) were UK Platform transformation costs of
£74 million (2016: £102 million), one-off costs in 2017 relating to
Managed Separation of £32 million (in 2016, these one-off costs
were included within AOP), costs of £69 million associated with
voluntary customer remediation in legacy products, the combined
effects of goodwill amortisation and the impact of acquisition
accounting totalling £103 million (2016: £140 million), and
movements in policyholder tax.
Reported NCCF performance was strong at £10.9 billion, up 110%
on prior year (2016: £5.2 billion) driven by buoyant market
conditions and robust investor confidence. Excluding the flows for
the Single Strategy business, the NCCF for the standalone
business was also strong, increasing 91% to £6.3 billion (2016:
£3.3 billion).
Reported Assets under Management/Administration (AuMA) was
£138.5 billion, up 20% from the end of 2016 (31 December 2016:
£115.3 billion excluding our divested Italian business (£6.2 billion)
and South African branches (£2.0 billion) which have been
transferred to OMEM). Of the 20% increase in AuMA, 10%
(£11.0 billion) is due to positive market performance, 9%
(£10.9 billion) resulted from positive NCCF and 1% (£1.3 billion)
came from the acquisition of Caerus and Attivo.
The unaudited 31 December 2017 Solvency II ratio was 155%.
Adjusting for the £200m subordinated debt security issued in
February 2018 and the new term loan would result in a pro forma
Solvency II ratio of 171% at 31 December 2017 (before any impact
of the sale of Single Strategy).
We believe this includes sufficient free cash to complete all
committed strategic investments (including the UK Platform
Transformation Programme) and to allow for any further potential
costs associated with the FCA’s Thematic Review, including for
any potential fine which may be levied by the FCA, in respect of
which no provision has yet been made. The impact of this prudent
policy is that Quilter expects to maintain a solvency position in
excess of its policy in the near-term.
Work to wind-down the plc head office and remove circa £95
million of central costs is on track and progressing well. We
continue to expect managed separation one-off costs to remain
in line with our previous guidance. The quality of NAV has been
materially improved as we have converted uncertainties within
the assets into certain cash and continue to manage contingent
liabilities and unwind complex arrangements which existed within
the Group structure. Subject to addressing the remaining issues
we have estimated a cash cost of £130 million for this work.
Progress
The managed separation of the Group is complex. However, the
process has gained momentum and we achieved significant further
progress in the second half of 2017 through the conclusion of
numerous transactions and other actions to reduce the Group’s
liabilities and exposures. Since reporting our 2017 interim results,
we have achieved a number of meaningful steps:
In October 2017, the sale of the Indian joint venture with Kotak
Mahindra was completed for net proceeds of £138 million
In November 2017, we sold the second tranche of shares
of OMAM to HNA Capital and the remaining 5.5% stake for
combined proceeds of $345 million
In November 2017, we reduced holding company debt by a
further £548 million
In December 2017, we agreed the sale of Old Mutual Wealth’s
UK Single Strategy Asset Management business to TA
Associates and Single Strategy management for a consideration
of c. £600 million
In January 2018, we received approval from the Competition
Tribunal for OML to acquire Old Mutual plc – one of the key
regulatory approvals for the process to be successful
We have spent much of the past two years preparing the
underlying businesses for independence and working with the
management teams on improving the business performance.
We have taken steps to build strong foundations for the future
OML and Quilter entities and both of these businesses have good
momentum, competitive strategies and excellent future growth
prospects. New governance structures fit for listed companies
have been established at both businesses.
Their standalone balance sheets have now been finalised so as to
ensure both businesses are well capitalised to fund growth plans
and sustainable future dividend policies.
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
The functions needed for the business to be operating as a
standalone listed entity are now fully functional.
The functions needed for the business to be operating as a
We are prepared for the final wind-down of the plc head office
standalone listed entity are now fully functional.
in London. As part of this process, we expect around half of the
remaining c.130 head office staff to leave by the end of June,
We are prepared for the final wind-down of the plc head office
with a further 40 by September and a skeleton staff remaining
in London. As part of this process, we expect around half of the
into 2019. We are on track to achieve the stated operational cost
remaining c.130 head office staff to leave by the end of June,
savings of c. £95 million per annum by the end of 2018. We have
with a further 40 by September and a skeleton staff remaining
also reduced Group exposures by de-risking the group pension
into 2019. We are on track to achieve the stated operational cost
scheme, mitigating various contingent exposures and converting
savings of c. £95 million per annum by the end of 2018. We have
assets to cash. Following the demerger, Old Mutual plc will become
also reduced Group exposures by de-risking the group pension
a subsidiary of Old Mutual Limited alongside other operating
scheme, mitigating various contingent exposures and converting
subsidiaries. Old Mutual plc will need to satisfy the UK Court that
assets to cash. Following the demerger, Old Mutual plc will become
it will continue to hold sufficient liquid, high quality assets to meet
a subsidiary of Old Mutual Limited alongside other operating
its liabilities and deal with any contingencies, plus adequate
subsidiaries. Old Mutual plc will need to satisfy the UK Court that
headroom, taking into account relevant insurances.
it will continue to hold sufficient liquid, high quality assets to meet
its liabilities and deal with any contingencies, plus adequate
Next steps
headroom, taking into account relevant insurances.
After addressing the remaining issues, we expect that the legal
process of separation will include, inter alia, the issuance of
Next steps
shareholder documentation in relation to managed separation
After addressing the remaining issues, we expect that the legal
a UK Court approved scheme of arrangement process – which
process of separation will include, inter alia, the issuance of
will facilitate the demerger of Quilter, the creation of Old Mutual
shareholder documentation in relation to managed separation
Limited as the holding company of Old Mutual plc, including its
a UK Court approved scheme of arrangement process – which
residual assets and liabilities, and a reduction in the capital of
will facilitate the demerger of Quilter, the creation of Old Mutual
Old Mutual plc. Old Mutual plc will become a subsidiary of OML,
Limited as the holding company of Old Mutual plc, including its
alongside the operating businesses. Quilter and OML will also
residual assets and liabilities, and a reduction in the capital of
hold capital markets events.
Old Mutual plc. Old Mutual plc will become a subsidiary of OML,
alongside the operating businesses. Quilter and OML will also
The final step of the managed separation will be the anticipated
hold capital markets events.
distribution of the majority of OML’s holding in Nedbank Group to
its shareholders. The timing of the distribution will be determined
The final step of the managed separation will be the anticipated
by the OML Board but it is expected to be within approximately
distribution of the majority of OML’s holding in Nedbank Group to
six months of the listing of OML. OML will maintain a holding of
its shareholders. The timing of the distribution will be determined
19.9% in Nedbank, forming part of Old Mutual Life Assurance
by the OML Board but it is expected to be within approximately
Company of South Africa’s capital base. The 19.9% shareholding
six months of the listing of OML. OML will maintain a holding of
was determined through negotiations with Nedbank and
19.9% in Nedbank, forming part of Old Mutual Life Assurance
discussions with the South African Reserve Bank in order to
Company of South Africa’s capital base. The 19.9% shareholding
provide stability to the broader financial system and the Nedbank
was determined through negotiations with Nedbank and
and OML investor base during managed separation, whilst also
discussions with the South African Reserve Bank in order to
supporting our ongoing commercial arrangements.
provide stability to the broader financial system and the Nedbank
and OML investor base during managed separation, whilst also
OML is committed to being a significant holder of Nedbank while
supporting our ongoing commercial arrangements.
retaining a right to review its precise holding as appropriate from
time to time, in accordance with the terms outlined in a new
OML is committed to being a significant holder of Nedbank while
Nedbank Relationship Agreement, which is expected to be finalised
retaining a right to review its precise holding as appropriate from
and executed in the coming weeks.
time to time, in accordance with the terms outlined in a new
Nedbank Relationship Agreement, which is expected to be finalised
and executed in the coming weeks.
Chief Executive’s review
continued
Chief Executive’s review
continued
A strong Board has been formed for OML, under the Chairmanship
of Trevor Manuel. Eight new appointments have been made to
complement members of the OMEM and Old Mutual Group
A strong Board has been formed for OML, under the Chairmanship
Holdings Board (the holding company for OMEM and Nedbank
of Trevor Manuel. Eight new appointments have been made to
which will be replaced by OML) who will also serve on the OML
complement members of the OMEM and Old Mutual Group
Board. The OML Board will bring a range of operational skills and
Holdings Board (the holding company for OMEM and Nedbank
listed financial services company experience that will be invaluable
which will be replaced by OML) who will also serve on the OML
once the business is listed. We appointed a new Chief Executive,
Board. The OML Board will bring a range of operational skills and
Peter Moyo, in June 2017 and the new Finance Director (and OML
listed financial services company experience that will be invaluable
Finance Director designate), Casper Troskie, will take up his role
once the business is listed. We appointed a new Chief Executive,
on 1 April 2018. Until Casper Troskie joins, Ingrid Johnson, Group
Peter Moyo, in June 2017 and the new Finance Director (and OML
Finance Director, has also been acting as interim Chief Financial
Finance Director designate), Casper Troskie, will take up his role
Officer of OMEM (and acting OML Finance Director designate). We
on 1 April 2018. Until Casper Troskie joins, Ingrid Johnson, Group
have improved the governance structures of the business and
Finance Director, has also been acting as interim Chief Financial
worked with the business to ensure it has appropriate functions to
Officer of OMEM (and acting OML Finance Director designate). We
operate as an independently listed entity.
have improved the governance structures of the business and
worked with the business to ensure it has appropriate functions to
OMEM conducted a review of its business strategy and
operate as an independently listed entity.
geographical footprint. It now has a much more focused strategy.
Going forward, OML has committed to improving the sustainable
OMEM conducted a review of its business strategy and
returns from its cash generative businesses in sub-Saharan Africa
geographical footprint. It now has a much more focused strategy.
and creating value from its recently deployed capital in East and
Going forward, OML has committed to improving the sustainable
West Africa. The new management team’s initial focus will be on
returns from its cash generative businesses in sub-Saharan Africa
three areas: consolidating and growing its positions in the South
and creating value from its recently deployed capital in East and
African segments where it is already a leader; improving the
West Africa. The new management team’s initial focus will be on
underperforming businesses of Old Mutual Insure, East Africa and
three areas: consolidating and growing its positions in the South
the Wealth and Investment cluster in South Africa; and building a
African segments where it is already a leader; improving the
long term competitive advantage through winning the war for talent,
underperforming businesses of Old Mutual Insure, East Africa and
refreshing its technology offering and becoming a cost leader.
the Wealth and Investment cluster in South Africa; and building a
There has been good progress on these three areas already and
long term competitive advantage through winning the war for talent,
OML is committing to deliver R1 billion of pre-tax run rate cost
refreshing its technology offering and becoming a cost leader.
savings by the end of 2019, net of costs to achieve this.
There has been good progress on these three areas already and
OML is committing to deliver R1 billion of pre-tax run rate cost
In respect of Quilter, the executive management team and Board
savings by the end of 2019, net of costs to achieve this.
have been reshaped and strengthened in preparation for life as a
listed standalone entity. Tim Tookey was appointed as Chief
In respect of Quilter, the executive management team and Board
Financial Officer in May 2017, Mark Satchel was appointed as
have been reshaped and strengthened in preparation for life as a
Corporate Finance Director in May 2017, and new appointments
listed standalone entity. Tim Tookey was appointed as Chief
were made in 2016 and 2017 to the roles of Chief Operating
Financial Officer in May 2017, Mark Satchel was appointed as
Officer, Chief Risk Officer, Chief Information Officer and a new HR
Corporate Finance Director in May 2017, and new appointments
Director. Glyn Jones was appointed Chairman of the Board in 2016
were made in 2016 and 2017 to the roles of Chief Operating
and a further six new non-executive directors have also been
Officer, Chief Risk Officer, Chief Information Officer and a new HR
appointed during late 2016 and 2017.
Director. Glyn Jones was appointed Chairman of the Board in 2016
and a further six new non-executive directors have also been
Quilter’s business model is to be a modern, integrated wealth
appointed during late 2016 and 2017.
manager. In September 2017, operations were restructured to
create a separate distinct multi-asset capability at the core of the
Quilter’s business model is to be a modern, integrated wealth
offering. In December 2017, agreement was reached to sell its
manager. In September 2017, operations were restructured to
Single Strategy asset management business to the Single Strategy
create a separate distinct multi-asset capability at the core of the
management team and funds managed by TA Associates for
offering. In December 2017, agreement was reached to sell its
approximately £600 million. This value is subject to a number of
Single Strategy asset management business to the Single Strategy
potential price adjustments depending on the net asset value of
management team and funds managed by TA Associates for
the business and a number of other factors at the disposal date.
approximately £600 million. This value is subject to a number of
This transaction is expected to close in the second half of 2018.
potential price adjustments depending on the net asset value of
Following completion of the disposal of the Single Strategy
the business and a number of other factors at the disposal date.
business, Quilter will consider a distribution from the surplus
This transaction is expected to close in the second half of 2018.
proceeds to its shareholders.
Following completion of the disposal of the Single Strategy
business, Quilter will consider a distribution from the surplus
proceeds to its shareholders.
06
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Annual Report and Accounts 2017
Capital management policy
In March 2016 we announced a new capital management policy for
the period of the managed separation. This policy has provided the
flexibility to balance the requirements of our multiple stakeholders
and our businesses as they prepare for managed separation by
enabling them to both continue to invest in order to drive enhanced
performance and strengthen their balance sheets in preparation
for being standalone businesses. In line with this policy we have
today announced a second interim dividend of 3.57p, the rand
equivalent is 66.50 cents. This will be paid on 30 April 2018.
The total full year dividend for 2017 is 7.10p (2016: 6.06p).
The proposed future Capital Management Policy of the
independent Old Mutual Limited and Quilter businesses are
presented in their respective Business Reviews on pages 26
and 48.
The capital management policy is intended to remain in place
until Old Mutual plc shares are no longer listed.
Adjusted plc NAV per ordinary share
The Adjusted Net Asset Value (ANAV) of Old Mutual plc was
£11,952 million at 31 December 2017 (31 December 2016:
£11,271 million), equivalent to 242.3 pence per share
(31 December 2016: 228.6 pence per share). The increase in
the ANAV per share largely reflects the OMEM covered business
MCEV earnings (12.8p); the impact of the constant currency
change in the share price of Nedbank (5.6p), reduced by the
Old Mutual plc cash dividends paid in the year (-6.9p).
Board changes
On 29 June 2017, we announced that Dr Nkosana Moyo was
stepping down from the Board of Old Mutual plc in order to pursue
his political interests. As a result, Dr Alan Gillespie, the Senior
Independent Director, joined the Group Audit Committee with effect
from 1 August 2017. Nonkululeko Nyembezi stepped down from
the Old Mutual plc Board on 31 December 2017. Ms Nyembezi
joined the Old Mutual plc Board in 2012 and had also served on
the Board Risk and Nomination and Governance Committees
since 2013.
Following the finalisation of the managed separation, including
approval by shareholders and the court, the Boards of OML and
Quilter will have the primary responsibility for the governance of
their respective groups. Accordingly, the current governance
structure of Old Mutual plc will be replaced and the Board will have
fewer members. Until the managed separation transactions are
completed, the current Board will continue as presently constituted,
with the appropriate resolutions regarding the Directors’ annual
reappointment being proposed at the Company’s AGM.
Outlook
The global economy is recovering which provides a positive
backdrop for all of our businesses. In our key market of South
Africa, we expect sentiment and confidence to improve following
the appointment of the new South African president and we expect
improved GDP growth in the coming year. In the UK, while there
remains uncertainty over the outcome of the Brexit negotiations,
the economy continues to grow. Global markets have performed
strongly which combined with geopolitical developments means
that there are downside risks to our businesses.
Full outlooks for the three underlying businesses are given in their
respective business review sections of the annual report and
accounts. The following are extracts of current trading
commentaries from each:
OML’s outlook: The OML Group’s continuing operations have
started the year on a positive note. Results from operations are
trading in line with expectations since the 2017 year end. Nedbank
reported its annual results on Friday 2 March 2018, and further
details are available on its website.
Quilter: Quilter has continued to trade in line with expectations
since the year end. Overall, we continue to remain confident in
Quilter’s prospects and it is anticipated that the next trading update
will be for the first quarter of 2018, which is expected to be
published in April 2018.
The managed separation process has already delivered significant
value through the reduction in plc debt and in central costs. We
believe that further value will be delivered once the managed
separation is completed through the following developments:
The removal of the conglomerate discount
c.£95 million of savings in central costs
Continued improvement in the performance of underlying
businesses
Each business accessing its natural shareholder base and
achieving appropriate valuations
Each business accountable to its shareholders for returns and
cash generation from capital employed
And will have its local regulator as its lead regulator
Old Mutual plc’s next update will be at our Annual General Meeting
on 30 April 2018.
Bruce Hemphill
Group Chief Executive
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Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Old Mutual plc
Annual Report and Accounts 2017
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Review of financial performance
Review of financial performance
Review of financial performance
Review of financial performance
The Group Finance Director’s review includes a reconciliation
between AOP and IFRS profit for each of the Group’s businesses.
Further details of the adjusting items between IFRS and AOP
The Group Finance Director’s review includes a reconciliation
The Group Finance Director’s review includes a reconciliation
are provided in the basis of preparation and Note C1 of the
between AOP and IFRS profit for each of the Group’s businesses.
between AOP and IFRS profit for each of the Group’s businesses.
The Group Finance Director’s review includes a reconciliation
Old Mutual plc Financial Statements.
Further details of the adjusting items between IFRS and AOP
Further details of the adjusting items between IFRS and AOP
between AOP and IFRS profit for each of the Group’s businesses.
are provided in the basis of preparation and Note C1 of the
are provided in the basis of preparation and Note C1 of the
Further details of the adjusting items between IFRS and AOP
2017 AOP Results
Old Mutual plc Financial Statements.
Old Mutual plc Financial Statements.
are provided in the basis of preparation and Note C1 of the
The 2017 pre-tax AOP for the year of £2,037 million was 22%
Old Mutual plc Financial Statements.
2017 AOP Results
above the prior year (2016: £1,667 million).
2017 AOP Results
The 2017 pre-tax AOP for the year of £2,037 million was 22%
2017 AOP Results
The 2017 pre-tax AOP for the year of £2,037 million was 22%
The weakness in sterling during the year was responsible for
above the prior year (2016: £1,667 million).
above the prior year (2016: £1,667 million).
The 2017 pre-tax AOP for the year of £2,037 million was 22%
£241 million of this increase. During 2017 the average sterling to
above the prior year (2016: £1,667 million).
rand exchange rate reduced to R17.15 (2016: R19.93). This had
The weakness in sterling during the year was responsible for
The weakness in sterling during the year was responsible for
the effect of increasing the sterling reported results of both OMEM
£241 million of this increase. During 2017 the average sterling to
£241 million of this increase. During 2017 the average sterling to
The weakness in sterling during the year was responsible for
and Nedbank, which source the majority of their earnings from
rand exchange rate reduced to R17.15 (2016: R19.93). This had
rand exchange rate reduced to R17.15 (2016: R19.93). This had
£241 million of this increase. During 2017 the average sterling to
South Africa.
the effect of increasing the sterling reported results of both OMEM
the effect of increasing the sterling reported results of both OMEM
rand exchange rate reduced to R17.15 (2016: R19.93). This had
and Nedbank, which source the majority of their earnings from
and Nedbank, which source the majority of their earnings from
the effect of increasing the sterling reported results of both OMEM
During 2017, Old Mutual plc sold its shareholding in OMAM. As a
South Africa.
South Africa.
and Nedbank, which source the majority of their earnings from
result, OMAM was consolidated in the Group’s results for only four
South Africa.
months of 2017 (2016: consolidated for 12 months). Accordingly
During 2017, Old Mutual plc sold its shareholding in OMAM. As a
During 2017, Old Mutual plc sold its shareholding in OMAM. As a
the AOP of the Institutional Asset Management segment, which
result, OMAM was consolidated in the Group’s results for only four
result, OMAM was consolidated in the Group’s results for only four
During 2017, Old Mutual plc sold its shareholding in OMAM. As a
included OMAM, reduced from £141 million in 2016 to £64 million
months of 2017 (2016: consolidated for 12 months). Accordingly
months of 2017 (2016: consolidated for 12 months). Accordingly
result, OMAM was consolidated in the Group’s results for only four
in 2017.
the AOP of the Institutional Asset Management segment, which
the AOP of the Institutional Asset Management segment, which
months of 2017 (2016: consolidated for 12 months). Accordingly
included OMAM, reduced from £141 million in 2016 to £64 million
included OMAM, reduced from £141 million in 2016 to £64 million
the AOP of the Institutional Asset Management segment, which
Excluding Institutional Asset Management and the impact of the
in 2017.
in 2017.
included OMAM, reduced from £141 million in 2016 to £64 million
weakness in sterling, pre-tax AOP was 12% higher than 2016.
This compares favourably with the nominal GDP growth of 6.6%1
in 2017.
Excluding Institutional Asset Management and the impact of the
Excluding Institutional Asset Management and the impact of the
in South Africa and 4.4%2 in the UK.
weakness in sterling, pre-tax AOP was 12% higher than 2016.
weakness in sterling, pre-tax AOP was 12% higher than 2016.
Excluding Institutional Asset Management and the impact of the
This compares favourably with the nominal GDP growth of 6.6%1
This compares favourably with the nominal GDP growth of 6.6%1
weakness in sterling, pre-tax AOP was 12% higher than 2016.
Changes to the presentation
in South Africa and 4.4%2 in the UK.
in South Africa and 4.4%2 in the UK.
This compares favourably with the nominal GDP growth of 6.6%1
between segments of AOP
in South Africa and 4.4%2 in the UK.
Changes to the presentation
The following changes have been made in 2017 to the presentation
Changes to the presentation
between segments of AOP
within AOP.
Changes to the presentation
between segments of AOP
The following changes have been made in 2017 to the presentation
between segments of AOP
The following changes have been made in 2017 to the presentation
2017 OMEM AOP now includes the long-term investment
within AOP.
within AOP.
The following changes have been made in 2017 to the presentation
return (LTIR) on excess assets previously shown as a
within AOP.
separate item within plc Head Office AOP. The LTIR on
2017 OMEM AOP now includes the long-term investment
2017 OMEM AOP now includes the long-term investment
excess assets was £20 million in 2017 (2016: £20 million)
return (LTIR) on excess assets previously shown as a
return (LTIR) on excess assets previously shown as a
2017 OMEM AOP now includes the long-term investment
Corporate costs are now shown before recharges to the
separate item within plc Head Office AOP. The LTIR on
separate item within plc Head Office AOP. The LTIR on
return (LTIR) on excess assets previously shown as a
businesses, with the recharges included within other net
excess assets was £20 million in 2017 (2016: £20 million)
excess assets was £20 million in 2017 (2016: £20 million)
separate item within plc Head Office AOP. The LTIR on
shareholders income/expenses (OSIE). The recharge in
Corporate costs are now shown before recharges to the
Corporate costs are now shown before recharges to the
excess assets was £20 million in 2017 (2016: £20 million)
2017 was £4 million (2016: £19 million).
businesses, with the recharges included within other net
businesses, with the recharges included within other net
Corporate costs are now shown before recharges to the
shareholders income/expenses (OSIE). The recharge in
shareholders income/expenses (OSIE). The recharge in
businesses, with the recharges included within other net
Comparative information has been re-presented to be consistent
2017 was £4 million (2016: £19 million).
2017 was £4 million (2016: £19 million).
shareholders income/expenses (OSIE). The recharge in
with the treatment of the items described above and does not alter
2017 was £4 million (2016: £19 million).
the consolidated AOP result as previously reported.
Comparative information has been re-presented to be consistent
Comparative information has been re-presented to be consistent
with the treatment of the items described above and does not alter
with the treatment of the items described above and does not alter
Comparative information has been re-presented to be consistent
Old Mutual Wealth, Nedbank and Institutional Asset Management
the consolidated AOP result as previously reported.
the consolidated AOP result as previously reported.
with the treatment of the items described above and does not alter
are classified as core operations in determining the Group’s AOP.
the consolidated AOP result as previously reported.
For the IFRS consolidated income statement these businesses are
Old Mutual Wealth, Nedbank and Institutional Asset Management
Old Mutual Wealth, Nedbank and Institutional Asset Management
classified as discontinued operations, and are therefore excluded
are classified as core operations in determining the Group’s AOP.
are classified as core operations in determining the Group’s AOP.
Old Mutual Wealth, Nedbank and Institutional Asset Management
from IFRS profit before tax.
For the IFRS consolidated income statement these businesses are
For the IFRS consolidated income statement these businesses are
are classified as core operations in determining the Group’s AOP.
classified as discontinued operations, and are therefore excluded
classified as discontinued operations, and are therefore excluded
For the IFRS consolidated income statement these businesses are
from IFRS profit before tax.
from IFRS profit before tax.
classified as discontinued operations, and are therefore excluded
from IFRS profit before tax.
Ingrid Johnson
Group Finance Director
Ingrid Johnson
Ingrid Johnson
Ingrid Johnson
Group Finance Director
Group Finance Director
Ingrid Johnson
Group Finance Director
Group Finance Director
Analysis of performance for the year
ended 31 December 2017
Analysis of performance for the year
2017 IFRS results
Analysis of performance for the year
ended 31 December 2017
IFRS profit after tax attributable to equity holders was £909 million
Analysis of performance for the year
ended 31 December 2017
in 2017 compared to £570 million in 2016. This result includes the
2017 IFRS results
ended 31 December 2017
2017 IFRS results
£107 million benefit from the weakness in sterling compared to the
IFRS profit after tax attributable to equity holders was £909 million
2017 IFRS results
IFRS profit after tax attributable to equity holders was £909 million
prior year. Excluding this impact, the IFRS profit attributable to
in 2017 compared to £570 million in 2016. This result includes the
in 2017 compared to £570 million in 2016. This result includes the
IFRS profit after tax attributable to equity holders was £909 million
ordinary equity holders is up 34% reflecting higher profits in Old
£107 million benefit from the weakness in sterling compared to the
£107 million benefit from the weakness in sterling compared to the
in 2017 compared to £570 million in 2016. This result includes the
Mutual Wealth, as a result of exceptional net performance fees
prior year. Excluding this impact, the IFRS profit attributable to
prior year. Excluding this impact, the IFRS profit attributable to
£107 million benefit from the weakness in sterling compared to the
in its Single Strategy business and higher investment returns in
ordinary equity holders is up 34% reflecting higher profits in Old
ordinary equity holders is up 34% reflecting higher profits in Old
prior year. Excluding this impact, the IFRS profit attributable to
OMEM due to Zimbabwe’s significant equity market performance.
Mutual Wealth, as a result of exceptional net performance fees
Mutual Wealth, as a result of exceptional net performance fees
ordinary equity holders is up 34% reflecting higher profits in Old
Zimbabwean equity markets have fallen by more than 10% in the
in its Single Strategy business and higher investment returns in
in its Single Strategy business and higher investment returns in
Mutual Wealth, as a result of exceptional net performance fees
first two months of 2018.
OMEM due to Zimbabwe’s significant equity market performance.
OMEM due to Zimbabwe’s significant equity market performance.
in its Single Strategy business and higher investment returns in
Zimbabwean equity markets have fallen by more than 10% in the
Zimbabwean equity markets have fallen by more than 10% in the
OMEM due to Zimbabwe’s significant equity market performance.
An overview of the financial performance of Old Mutual Emerging
first two months of 2018.
first two months of 2018.
Zimbabwean equity markets have fallen by more than 10% in the
Markets (OMEM), Nedbank and Old Mutual Wealth (OMW) is set
first two months of 2018.
out in the Chief Executive Review. Detailed financial reviews of
An overview of the financial performance of Old Mutual Emerging
An overview of the financial performance of Old Mutual Emerging
these businesses are set out later in this document and an
Markets (OMEM), Nedbank and Old Mutual Wealth (OMW) is set
Markets (OMEM), Nedbank and Old Mutual Wealth (OMW) is set
An overview of the financial performance of Old Mutual Emerging
overview of plc Head Office, taxation and non-controlling interests
out in the Chief Executive Review. Detailed financial reviews of
out in the Chief Executive Review. Detailed financial reviews of
Markets (OMEM), Nedbank and Old Mutual Wealth (OMW) is set
(NCI) is included on page 12.
these businesses are set out later in this document and an
these businesses are set out later in this document and an
out in the Chief Executive Review. Detailed financial reviews of
overview of plc Head Office, taxation and non-controlling interests
overview of plc Head Office, taxation and non-controlling interests
these businesses are set out later in this document and an
Alternative performance measures
(NCI) is included on page 12.
(NCI) is included on page 12.
overview of plc Head Office, taxation and non-controlling interests
In addition to IFRS profit, the consolidated Group uses a number
(NCI) is included on page 12.
of Alternative Performance Measures (APMs) to assess the
Alternative performance measures
Alternative performance measures
performance of the business. Some are applicable to the Group as
In addition to IFRS profit, the consolidated Group uses a number
Alternative performance measures
In addition to IFRS profit, the consolidated Group uses a number
a whole, such as Adjusted Operating Profit (AOP). Others are more
of Alternative Performance Measures (APMs) to assess the
of Alternative Performance Measures (APMs) to assess the
In addition to IFRS profit, the consolidated Group uses a number
specific to the business lines within the component businesses, for
performance of the business. Some are applicable to the Group as
performance of the business. Some are applicable to the Group as
of Alternative Performance Measures (APMs) to assess the
example Net Client Cash Flows (NCCF) and Covered APE Sales.
a whole, such as Adjusted Operating Profit (AOP). Others are more
a whole, such as Adjusted Operating Profit (AOP). Others are more
performance of the business. Some are applicable to the Group as
specific to the business lines within the component businesses, for
specific to the business lines within the component businesses, for
a whole, such as Adjusted Operating Profit (AOP). Others are more
Definitions of the principal APMs, explanations of why they are
example Net Client Cash Flows (NCCF) and Covered APE Sales.
example Net Client Cash Flows (NCCF) and Covered APE Sales.
specific to the business lines within the component businesses, for
relevant, and details of the basis for calculating each measure are
example Net Client Cash Flows (NCCF) and Covered APE Sales.
included on pages 23 to 25.
Definitions of the principal APMs, explanations of why they are
Definitions of the principal APMs, explanations of why they are
relevant, and details of the basis for calculating each measure are
relevant, and details of the basis for calculating each measure are
Definitions of the principal APMs, explanations of why they are
included on pages 23 to 25.
included on pages 23 to 25.
relevant, and details of the basis for calculating each measure are
included on pages 23 to 25.
1 The South Africa nominal GDP rate is calculated as the average Consumer Price Index rate of inflation during 2017 of 5.3% plus the 2017 real GDP growth rate in
South Africa of 1.3%.
2 The UK nominal GDP rate is calculated as the average Consumer Price Index rate of inflation during 2017 of 2.7% plus the 2017 real GDP growth rate in the UK of 1.7%.
1 The South Africa nominal GDP rate is calculated as the average Consumer Price Index rate of inflation during 2017 of 5.3% plus the 2017 real GDP growth rate in
1 The South Africa nominal GDP rate is calculated as the average Consumer Price Index rate of inflation during 2017 of 5.3% plus the 2017 real GDP growth rate in
2 The UK nominal GDP rate is calculated as the average Consumer Price Index rate of inflation during 2017 of 2.7% plus the 2017 real GDP growth rate in the UK of 1.7%.
1 The South Africa nominal GDP rate is calculated as the average Consumer Price Index rate of inflation during 2017 of 5.3% plus the 2017 real GDP growth rate in
2 The UK nominal GDP rate is calculated as the average Consumer Price Index rate of inflation during 2017 of 2.7% plus the 2017 real GDP growth rate in the UK of 1.7%.
South Africa of 1.3%.
South Africa of 1.3%.
South Africa of 1.3%.
2 The UK nominal GDP rate is calculated as the average Consumer Price Index rate of inflation during 2017 of 2.7% plus the 2017 real GDP growth rate in the UK of 1.7%.
08
34
34
34
34
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Review of financial performance
The Group Finance Director’s review includes a reconciliation
between AOP and IFRS profit for each of the Group’s businesses.
Further details of the adjusting items between IFRS and AOP
are provided in the basis of preparation and Note C1 of the
Old Mutual plc Financial Statements.
2017 AOP Results
The 2017 pre-tax AOP for the year of £2,037 million was 22%
above the prior year (2016: £1,667 million).
The weakness in sterling during the year was responsible for
£241 million of this increase. During 2017 the average sterling to
rand exchange rate reduced to R17.15 (2016: R19.93). This had
the effect of increasing the sterling reported results of both OMEM
and Nedbank, which source the majority of their earnings from
South Africa.
During 2017, Old Mutual plc sold its shareholding in OMAM. As a
result, OMAM was consolidated in the Group’s results for only four
months of 2017 (2016: consolidated for 12 months). Accordingly
the AOP of the Institutional Asset Management segment, which
included OMAM, reduced from £141 million in 2016 to £64 million
in 2017.
Excluding Institutional Asset Management and the impact of the
weakness in sterling, pre-tax AOP was 12% higher than 2016.
This compares favourably with the nominal GDP growth of 6.6%1
in South Africa and 4.4%2 in the UK.
Changes to the presentation
between segments of AOP
within AOP.
2017 OMEM AOP now includes the long-term investment
return (LTIR) on excess assets previously shown as a
separate item within plc Head Office AOP. The LTIR on
Corporate costs are now shown before recharges to the
businesses, with the recharges included within other net
shareholders income/expenses (OSIE). The recharge in
2017 was £4 million (2016: £19 million).
Comparative information has been re-presented to be consistent
with the treatment of the items described above and does not alter
the consolidated AOP result as previously reported.
Old Mutual Wealth, Nedbank and Institutional Asset Management
are classified as core operations in determining the Group’s AOP.
For the IFRS consolidated income statement these businesses are
classified as discontinued operations, and are therefore excluded
from IFRS profit before tax.
Ingrid Johnson
Group Finance Director
Analysis of performance for the year
ended 31 December 2017
2017 IFRS results
IFRS profit after tax attributable to equity holders was £909 million
in 2017 compared to £570 million in 2016. This result includes the
£107 million benefit from the weakness in sterling compared to the
prior year. Excluding this impact, the IFRS profit attributable to
ordinary equity holders is up 34% reflecting higher profits in Old
Mutual Wealth, as a result of exceptional net performance fees
in its Single Strategy business and higher investment returns in
OMEM due to Zimbabwe’s significant equity market performance.
Zimbabwean equity markets have fallen by more than 10% in the
An overview of the financial performance of Old Mutual Emerging
Markets (OMEM), Nedbank and Old Mutual Wealth (OMW) is set
out in the Chief Executive Review. Detailed financial reviews of
these businesses are set out later in this document and an
(NCI) is included on page 12.
Alternative performance measures
In addition to IFRS profit, the consolidated Group uses a number
of Alternative Performance Measures (APMs) to assess the
performance of the business. Some are applicable to the Group as
a whole, such as Adjusted Operating Profit (AOP). Others are more
specific to the business lines within the component businesses, for
example Net Client Cash Flows (NCCF) and Covered APE Sales.
Definitions of the principal APMs, explanations of why they are
relevant, and details of the basis for calculating each measure are
included on pages 23 to 25.
first two months of 2018.
The following changes have been made in 2017 to the presentation
1 The South Africa nominal GDP rate is calculated as the average Consumer Price Index rate of inflation during 2017 of 5.3% plus the 2017 real GDP growth rate in
South Africa of 1.3%.
2 The UK nominal GDP rate is calculated as the average Consumer Price Index rate of inflation during 2017 of 2.7% plus the 2017 real GDP growth rate in the UK of 1.7%.
Old Mutual plc
Annual Report and Accounts 2017
The tables below summarise the AOP and IFRS results of the Group in 2017 and 2016:
AOP analysis (£m)
Old Mutual Emerging Markets
Nedbank
Old Mutual Wealth
Institutional Asset Management (OMAM and Rogge)
plc Head Office2:
Old Mutual plc finance costs
Corporate costs (before recharges)
Other net shareholder income/(expenses) (OSIE)
Adjusted operating profit before tax
Tax on adjusted operating profit
Adjusted operating profit after tax
Non-controlling interests – ordinary shares
Non-controlling interests – preferred securities
Adjusted operating profit after tax attributable to ordinary equity holders of the parent
Adjusted weighted average number of shares (millions)
Adjusted operating earnings per share (pence)
IFRS profit analysis (£m)
Core operations:
Old Mutual Emerging Markets
Nedbank
Old Mutual Wealth
Institutional Asset Management (OMAM and Rogge)
plc Head Office2
Non-core operations
Consolidation adjustments
Discontinued operations excluded from profit before tax3
IFRS profit from continuing items before tax
Income tax expense
IFRS profit from continuing operations after tax
IFRS profit from discontinued operations after tax
IFRS profit after tax for the financial year
Attributable to:
Equity holders of the parent
Non-controlling interests
Dividends paid to holders of perpetual preferred callable securities, net of tax credits
Profit after tax for the financial year
Weighted average number of shares (millions)
Basic earnings per share (pence)
2016
Re-presented1
639
799
260
1,698
141
% change
22%
21%
40%
24%
(55%)
(88)
(79)
(5)
1,667
(398)
1,269
(319)
(22)
928
4,773
19.4
25%
27%
(20%)
22%
(20%)
23%
(14%)
(55%)
25%
−
25%
2017
777
963
363
2,103
64
(66)
(58)
(6)
2,037
(477)
1,560
(364)
(34)
1,162
4,776
24.3
2016
Re-presented3
2017
% change
909
967
173
2,049
29
(242)
26
(24)
(1,221)
617
(240)
377
881
1,258
909
315
34
1,258
4,633
19.3
547
737
113
1,398
133
(176)
(5)
−
(1,043)
306
(142)
164
681
845
570
253
22
845
4,635
12.0
66%
31%
53%
47%
(78%)
(38%)
620%
n/a
(17%)
102%
(69%)
130%
29%
49%
59%
25%
55%
49%
−
61%
overview of plc Head Office, taxation and non-controlling interests
excess assets was £20 million in 2017 (2016: £20 million)
1 AOP has been re-presented to report LTIR on excess assets, which was previously reported as a separate item in plc Head Office, within OMEM. In addition, corporate costs are
now shown before recharges to the businesses, with the recharges included within other net shareholders income/expenses (OSIE).
2 Plc Head Office includes the Old Mutual plc parent company and other centre companies.
3 Old Mutual Wealth, Nedbank and Institutional Asset Management are classified as core operations in determining the Group’s adjusted operating profit. For the IFRS consolidated
income statement these businesses are classified as discontinued operations, and are therefore excluded from IFRS profit before tax.
34
09
35
Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Review of financial performance
Review of financial performance
continued
continued
Reconciliation of AOP to IFRS profit attributable to equity holders of the parent:
Reconciliation of AOP to IFRS profit attributable to equity holders of the parent:
IAM
64
IAM
(2)
64
−
(2)
−
−
−
−
(33)
−
−
(33)
−
−
−
−
−
−
−
−
−
−
(35)
−
−
(35)
−
−
−
−
29
−
29
(18)
12
(18)
−
12
−
23
(20)
23
9
(20)
−
9
12
−
12
777
(88)
777
81
(88)
127
81
(55)
127
−
(55)
−
−
−
−
(14)
−
(14)
−
−
−
−
−
51
−
−
51
81
−
−
81
909
−
909
(214)
(19)
(214)
(81)
(19)
−
(81)
595
−
(27)
595
26
(27)
−
26
594
−
594
963
7
963
−
7
−
−
−
−
−
−
−
−
−
−
(3)
−
(3)
−
−
−
−
−
4
−
−
4
−
−
−
−
967
−
967
(244)
(2)
(244)
−
(2)
−
−
720
−
(351)
720
5
(351)
−
5
375
−
375
Non-
core
Non-
−
core
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
26
−
−
26
−
−
26
−
26
−
−
−
−
−
(2)
−
24
(2)
−
24
−
−
−
−
24
−
24
plc
Head
plc
Office
Head
(130)
Office
−
(130)
92
−
−
92
−
−
−
−
2
−
(128)
2
(51)
(128)
(51)
(27)
−
(27)
−
−
(112)
−
−
(112)
−
−
−
−
(242)
−
(242)
43
19
43
−
19
−
−
(180)
−
−
(180)
9
−
−
9
(171)
−
(171)
Dis-
continued2
Total
Dis-
2,037
−
continued2
Total
−
(186)
2,037
−
−
197
−
(186)
−
125
−
197
−
(79)
−
125
−
(33)
−
(79)
−
2
−
(33)
−
(128)
−
2
−
(100)
−
(128)
−
(100)
−
(27)
−
(74)
−
(27)
−
(69)
−
(74)
−
(372)
−
(69)
−
26
−
(372)
−
147
−
26
(1,221) (1,221)
−
147
617
(1,221)
(1,221) (1,221)
617
(1,221)
−
(477)
−
46
−
(477)
−
(147)
−
46
340
338
−
(147)
377
(881)
340
338
−
(398)
377
(881)
−
49
−
(398)
881
881
−
49
909
−
881
881
909
−
OMEM Nedbank OMW
363
OMEM Nedbank OMW
(103)
363
24
(103)
(2)
24
−
(2)
−
−
−
−
−
−
(32)
−
(32)
−
(74)
−
(69)
(74)
(256)
(69)
−
(256)
66
−
−
66
173
−
173
(44)
36
(44)
(66)
36
−
(66)
99
−
−
99
−
−
−
−
99
−
99
Year ended December 2017 (£m)
Adjusted operating profit before tax
Year ended December 2017 (£m)
Goodwill, intangible and associate charges
Adjusted operating profit before tax
Profit on business disposals
Goodwill, intangible and associate charges
Short-term fluctuations in investment return
Profit on business disposals
Returns on own debt and equity
Short-term fluctuations in investment return
Institutional Asset Management equity plans
Returns on own debt and equity
Dividends on preferred securities
Institutional Asset Management equity plans
Credit-related fair value losses on Group debt
Dividends on preferred securities
One-off managed separation and business
Credit-related fair value losses on Group debt
standalone costs
One-off managed separation and business
Resolution of plc pre-existing items
standalone costs
OMW UK Platform transformation costs
Resolution of plc pre-existing items
Voluntary customer remediation provision
OMW UK Platform transformation costs
Total adjusting items
Voluntary customer remediation provision
Non-core operations
Total adjusting items
Income tax attributable to policyholder returns
Non-core operations
Discontinued operations included in AOP2
Income tax attributable to policyholder returns
IFRS profit from continuing operations before
Discontinued operations included in AOP2
tax
IFRS profit from continuing operations before
Tax on adjusted operating profit
tax
Tax on adjusting items
Tax on adjusted operating profit
Income tax attributable to policyholder returns
Tax on adjusting items
Tax on discontinued and non-core operations1
Income tax attributable to policyholder returns
IFRS profit from continuing operations after tax
Tax on discontinued and non-core operations1
NCI in adjusted operating profit
IFRS profit from continuing operations after tax
NCI in adjusting items
NCI in adjusted operating profit
Discontinued operations1
NCI in adjusting items
IFRS profit attributable to equity holders after tax
Discontinued operations1
IFRS profit attributable to equity holders after tax
Con-
solidation
adjustments1
Con-
solidation
-
adjustments1
-
-
-
-
-
-
(24)
-
-
(24)
-
-
-
-
-
-
-
-
-
-
-
-
(24)
-
-
(24)
-
-
-
-
(24)
-
(24)
-
-
-
-
-
-
-
(24)
-
-
(24)
-
-
-
-
(24)
-
(24)
Consolidation
adjustments1 Discontinued2
Total
OMEM Nedbank
Year ended December 2016 (£m)
Consolidation
1,667
−
-
799
639
Adjusted operating profit before tax
adjustments1 Discontinued2
Total
OMEM Nedbank
Year ended December 2016 (£m)
(278)
−
-
(50)
(75)
Goodwill, intangible and associate charges
1,667
−
-
799
639
Adjusted operating profit before tax
19
−
-
(12)
3
Profit on business disposals
(278)
−
-
(50)
(75)
Goodwill, intangible and associate charges
(26)
−
-
−
(27)
Short-term fluctuations in investment return
19
−
-
(12)
3
Profit on business disposals
(43)
−
-
−
(43)
Returns on own debt and equity
(26)
−
-
−
(27)
Short-term fluctuations in investment return
(20)
−
-
−
−
Institutional Asset Management equity plans
(43)
−
-
−
(43)
Returns on own debt and equity
17
−
-
−
−
Dividends on preferred securities
(20)
−
-
−
−
Institutional Asset Management equity plans
(24)
−
-
−
−
Credit-related fair value losses on Group debt
17
−
-
−
−
Dividends on preferred securities
(102)
−
-
−
−
OMW UK Platform transformation costs
(24)
−
-
−
−
Credit-related fair value losses on Group debt
(457)
−
-
(62)
(142)
Total adjusting items
(102)
−
-
−
−
OMW UK Platform transformation costs
(5)
−
-
−
−
Non-core operations
-
(62)
(142)
Total adjusting items
(457)
−
144
−
-
−
50
Income tax attributable to policyholder returns
(5)
−
-
−
−
Non-core operations
Discontinued operations included in AOP2
(1,043) (1,043)
-
−
−
144
-
−
−
50
Income tax attributable to policyholder returns
306
(1,043)
-
737
547
IFRS profit from continuing operations before tax
Discontinued operations included in AOP2
(1,043) (1,043)
-
−
−
(398)
−
-
(199)
(170)
Tax on adjusted operating profit
306
(1,043)
-
737
547
IFRS profit from continuing operations before tax
38
−
-
−
13
Tax on adjusting items
(398)
−
-
(199)
(170)
Tax on adjusted operating profit
(144)
−
-
−
(50)
Income tax attributable to policyholder returns
38
−
-
−
13
Tax on adjusting items
Tax on discontinued operations1
362
362
-
−
−
(144)
−
-
−
(50)
Income tax attributable to policyholder returns
164
(681)
-
538
340
IFRS profit from continuing operations after tax
Tax on discontinued operations1
362
362
-
−
−
(341)
−
-
(288)
(17)
NCI in adjusted operating profit
164
(681)
-
538
340
IFRS profit from continuing operations after tax
66
−
-
32
30
NCI in adjusting items
(341)
−
-
(288)
(17)
NCI in adjusted operating profit
Discontinued operations1
681
681
-
−
−
66
−
-
32
30
NCI in adjusting items
570
−
-
282
353
IFRS profit attributable to equity holders after tax
Discontinued operations1
681
681
-
−
−
1 Consolidation adjustments reflects Old Mutual plc shares held by consolidated investment funds, which are treated as treasury shares within IFRS.
IFRS profit attributable to equity holders after tax
570
−
-
282
353
2 Discontinued operations relate to Nedbank, OMW and Institutional Asset Management earnings included within AOP; but reported as discontinued operations within IFRS.
1 Consolidation adjustments reflects Old Mutual plc shares held by consolidated investment funds, which are treated as treasury shares within IFRS.
2 Discontinued operations relate to Nedbank, OMW and Institutional Asset Management earnings included within AOP; but reported as discontinued operations within IFRS.
Office Non-core
plc Head
−
(172)
Office Non-core
−
(7)
−
(172)
−
10
−
(7)
−
−
−
10
−
−
−
−
−
−
−
−
−
17
−
−
−
(24)
−
17
−
−
−
(24)
−
(4)
−
−
(5)
−
−
(4)
−
−
(5)
−
−
−
−
−
(5)
(176)
−
−
−
54
(5)
(176)
−
(4)
−
54
−
−
−
(4)
−
−
−
−
(5)
(126)
−
−
−
−
(5)
(126)
−
−
−
−
−
−
−
−
(5)
(126)
−
−
(5)
(126)
OMW
260
OMW
(140)
260
−
(140)
1
−
−
1
−
−
−
−
−
−
(102)
−
(241)
(102)
−
(241)
94
−
−
94
113
−
(47)
113
24
(47)
(94)
24
−
(94)
(4)
−
−
(4)
−
−
−
−
(4)
−
(4)
IAM
141
IAM
(6)
141
18
(6)
−
18
−
−
(20)
−
−
(20)
−
−
−
−
(8)
−
−
(8)
−
−
−
−
133
−
(36)
133
5
(36)
−
5
−
−
102
−
(36)
102
4
(36)
−
4
70
−
70
plc Head
10
36
36
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Explanation of adjusting items
between AOP and IFRS
In determining the AOP of the Group for core operations, certain
adjustments are made to IFRS profit before tax to reflect the
Directors’ view of the Group’s long-term performance. Details of
these adjustments are provided in Note C1 of the Consolidated
Financial Statements, and in respect of tax in note D1. A summary
of significant adjustments is provided below.
Goodwill, intangible and associate charges were £186 million in
2017 (2016: £278 million). In OMEM the charges for 2017 include
goodwill impairment of £71 million recognised in the first half of
2017 relating to the UAP-Old Mutual Group entity in East Africa.
This followed the simplification of the operating structure of the
Rest of Africa portfolio and the consequential alignment of the
routine goodwill valuation review in accordance with accounting
requirements. A further goodwill impairment of £14 million was
recognised in the second half of the year relating to the AIVA
business in Uruguay, as a result of weaker than anticipated
performance at the time of the impairment review.
In OMW, goodwill, intangible and associate charges were
£103 million (2016: £140 million). The charge was lower due to
an additional £46 million impairment of goodwill and intangibles
in 2016 as a result of the anticipated sale of OMW Italy.
Profit on business disposals includes a £81 million profit in OMEM
on disposal of Kotak Mahindra Old Mutual Life Insurance Limited
(Kotak) and a £24 million profit in OMW on disposal of OMW Italy.
In the plc Head Office, the £92 million profit on disposal results
largely from the sale of our holding in OMAM.
Within AOP the investment return on shareholder funds is
calculated using a Long Term Investment Return (LTIR) rate.
Any short-term fluctuations between the LTIR in AOP and actual
returns are included in adjusting items. In 2017, the actual
investment return was higher than the LTIR assumed in AOP by
£125 million (2016: £26 million lower). This reflects the impact of
the significant growth in Zimbabwe’s equity markets which resulted
in a short term fluctuation of positive £106 million. Following recent
political developments in Zimbabwe, the current macro-economic
situation remains fluid, and the market reaction remains volatile.
Zimbabwean equity markets have fallen by more than 10% in the
first two months of 2018.
Adjusting items include a £33 million expense (2016: £20 million)
due to the revaluation of Institutional Asset Management equity
plans held by Affiliate key employees, and Landmark acquisition
related expenses.
Credit-related fair value losses on Group debt were £128 million in
2017 (2016: £24 million loss). In 2017 this includes £102 million to
reflect the difference between the cash paid to repurchase and
redeem debt securities during the year and the IFRS book value
of those debt securities at the date of repurchase.
In 2017, OMW UK Platform transformation costs were £74 million
(2016: £102 million). These costs relate to both the closure of the
previous programme and costs associated with the new proposition
supplied by FNZ.
New adjusting items between AOP and IFRS 2017
An expense of £27 million related to the resolution of plc Head
Office pre-existing items includes expenses of £20 million for
insuring and de-risking certain indemnities associated with
businesses previously owned by the Group. In addition costs
of £7 million were incurred in disposing of the Group’s captive
insurance entity which covered plc Head Office and subsidiary
companies. Further details of costs related to addressing plc
Head Office pre-existing items is provided on page 18.
One-off managed separation and business standalone costs were
£100 million in 2017. In 2016 these costs, which were included
within AOP, totalled £31 million. If the 2016 costs were excluded
from AOP, the growth in AOP pre-tax would reduce from 22%
to 20%.
As part of OMW’s ongoing work to promote fair customer
outcomes, product reviews consistent with the recommendations
from the FCA’s thematic feedback and the FCA’s guidance
‘FG16/8 Fair Treatment of long-standing customers in the life
insurance sector’ have been conducted. Following these reviews,
it has been decided to commence voluntary remediation to
customers in certain legacy products within the Heritage book.
As part of this, OMW have decided to cap early encashment
charges at 5% for pension customers under 55, to refund all
early encashment charges over 5% on pensions products applied
since 1 January 2009 and to refund certain paid-up charges also
since 1 January 2009.
A provision of £69 million has been made within the 2017 results
for the aggregate of these remediation costs, and this has been
reported outside of AOP because it does not reflect the 2017
operating performance of Old Mutual Wealth and reflects
operations in the past.
In 2016 the AOP of Old Mutual Wealth included a £27 million
charge for the restructuring of Heritage fees. This was largely
related to changes to future charges for certain continuing
customers of the Heritage business. On the basis of the forward
looking nature of these charges the 2016 AOP was not adjusted
for this impact.
Discontinued and non-core operations
For IFRS reporting the results of Nedbank, Old Mutual Wealth
and Institutional Asset Management are discontinued operations
because they have been classified as held for distribution. These
businesses remain within AOP in 2017 reflecting our continued
management of these businesses, their contribution to the Group
result for the year and to aid comparability.
Non-core operations relates to Old Mutual Bermuda IFRS pre-tax
profit of £26 million (2016: £5 million loss). The increase in profit
largely reflects the favourable developments in the run-off of this
closed book of business.
11
37
Old Mutual plc Annual Report and Accounts 2017Strategic report Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Review of financial performance
continued
Review of financial performance
continued
(130)
2017
(66)
(58)
2017
(6)
(66)
(58)
(130)
(6)
Plc Head Office AOP
The plc Head Office represents the plc Parent Company and the
other centre companies of the Group, which typically own and
Plc Head Office AOP
manage the Group’s interests. The AOP of the plc Head Office is
The plc Head Office represents the plc Parent Company and the
detailed below:
other centre companies of the Group, which typically own and
manage the Group’s interests. The AOP of the plc Head Office is
2016
Plc Head Office (£m)
detailed below:
(88)
Old Mutual plc finance costs
(79)
Corporate costs (before recharges)
2016
Plc Head Office (£m)
(5)
Other net shareholder income/
Old Mutual plc finance costs
(88)
(expenses) (OSIE)
(79)
Corporate costs (before recharges)
(172)
Total plc Head Office AOP
Other net shareholder income/
(5)
(expenses) (OSIE)
Old Mutual plc finance costs
(172)
Total plc Head Office AOP
Old Mutual plc finance costs reduced from £88 million in 2016 to
£66 million in 2017, in-line with the guidance communicated at our
Old Mutual plc finance costs
2016 Preliminary Results. The reduction in finance costs largely
Old Mutual plc finance costs reduced from £88 million in 2016 to
reflects the repayment of £112 million of senior debt in October
£66 million in 2017, in-line with the guidance communicated at our
2016 and the repurchase and redemption of £273 million of
2016 Preliminary Results. The reduction in finance costs largely
perpetual preferred callable securities in February 2017.
reflects the repayment of £112 million of senior debt in October
2016 and the repurchase and redemption of £273 million of
Corporate costs before recharges
perpetual preferred callable securities in February 2017.
Corporate costs before recharges of £58 million in 2017 are
£21 million below the prior period (2016: £79 million).
Corporate costs before recharges
Corporate costs before recharges of £58 million in 2017 are
The reduction in corporate costs reflects savings of £11 million
£21 million below the prior period (2016: £79 million).
as a result of retrenchment activity in 2016 and 2017 and wider
repurposing of the plc Head Office, including an over 50%
The reduction in corporate costs reflects savings of £11 million
reduction in headcount compared with January 2016. These
as a result of retrenchment activity in 2016 and 2017 and wider
reductions are in-line with our guidance provided at the 2016
repurposing of the plc Head Office, including an over 50%
Preliminary Results announcement.
reduction in headcount compared with January 2016. These
reductions are in-line with our guidance provided at the 2016
The reduction in corporate costs also includes the impact of
Preliminary Results announcement.
property and insurance costs of £10 million which were previously
incurred by plc, and therefore reflected in corporate costs, but
The reduction in corporate costs also includes the impact of
which are now directly incurred by the businesses.
property and insurance costs of £10 million which were previously
incurred by plc, and therefore reflected in corporate costs, but
Other net shareholder income / (expenses) (OSIE)
which are now directly incurred by the businesses.
The table below sets out other net shareholder expenses of £6
million in 2017 (2016: £5 million):
Other net shareholder income / (expenses) (OSIE)
The table below sets out other net shareholder expenses of £6
OSIE (£m)
million in 2017 (2016: £5 million):
Share based payment charges
Solvency II costs and other projects
OSIE (£m)
Brand costs
Share based payment charges
Other net expenses
Solvency II costs and other projects
Recharge of plc Head Office costs
Brand costs
OSIE, excluding fx, seed capital
Other net expenses
gains and one-off MS cost
Recharge of plc Head Office costs
One-off managed separation costs
OSIE, excluding fx, seed capital
FX (losses)/gains
gains and one-off MS cost
Seed capital gains
One-off managed separation costs
Total other net shareholder
FX (losses)/gains
income/(expenses) (OSIE)
Seed capital gains
Total other net shareholder
income/(expenses) (OSIE)
2017
(9)
−
2017
−
(9)
(7)
−
4
−
(12)
(7)
4
−
(12)
(1)
7
−
(6)
(1)
7
(6)
2016
(10)
(5)
2016
(8)
(10)
(7)
(5)
19
(8)
(11)
(7)
19
(22)
(11)
20
8
(22)
(5)
20
8
(5)
In 2017 OSIE includes expenses related to share based payment
charges of £9 million (2016: £10 million). In 2016 Solvency II and
other project costs of £5 million and OMW brand costs of £8 million
In 2017 OSIE includes expenses related to share based payment
were also incurred. The on-going brand costs are now incurred
charges of £9 million (2016: £10 million). In 2016 Solvency II and
directly by OMW. The recharge of plc Head Office costs has
other project costs of £5 million and OMW brand costs of £8 million
reduced significantly to £4 million (2016: £19 million) as costs
were also incurred. The on-going brand costs are now incurred
previously incurred by the plc and recharged to OMEM and OMW
directly by OMW. The recharge of plc Head Office costs has
are now incurred directly by these businesses.
reduced significantly to £4 million (2016: £19 million) as costs
previously incurred by the plc and recharged to OMEM and OMW
One-off plc Head Office costs of managed separation were £22
are now incurred directly by these businesses.
million in 2016. These costs have been excluded from AOP in
2017. Foreign exchange losses in 2017 of £1 million (2016: £20
One-off plc Head Office costs of managed separation were £22
million gain) were incurred on US dollar denominated cash and
million in 2016. These costs have been excluded from AOP in
seed investments.
2017. Foreign exchange losses in 2017 of £1 million (2016: £20
million gain) were incurred on US dollar denominated cash and
In 2017 seed capital gains were £7 million (2016: £8 million),
seed investments.
largely on funds managed by OMAM. The plc Head Office has
substantially reduced its seed portfolio as part of the managed
In 2017 seed capital gains were £7 million (2016: £8 million),
separation. At 31 December 2017 the plc Head Office held seed
largely on funds managed by OMAM. The plc Head Office has
investments of £6 million (31 December 2016: £148 million).
substantially reduced its seed portfolio as part of the managed
separation. At 31 December 2017 the plc Head Office held seed
Tax
investments of £6 million (31 December 2016: £148 million).
The AOP effective tax rate (ETR) for the Group is 23% (2016:
24%). The IFRS ETR is more volatile due to the inclusion of
Tax
policyholder tax, and one-off items which are typically not taxed at
The AOP effective tax rate (ETR) for the Group is 23% (2016:
the statutory rate. Analysis of the ETR in relation to AOP therefore
24%). The IFRS ETR is more volatile due to the inclusion of
gives a more consistent means of understanding the Group tax
policyholder tax, and one-off items which are typically not taxed at
charge over the longer term. As the majority of the Group’s profits
the statutory rate. Analysis of the ETR in relation to AOP therefore
arise in OMEM and Nedbank, the tax borne by these businesses
gives a more consistent means of understanding the Group tax
has a significant impact on the Group ETR.
charge over the longer term. As the majority of the Group’s profits
arise in OMEM and Nedbank, the tax borne by these businesses
The AOP ETR for OMEM, calculated in sterling, has increased
has a significant impact on the Group ETR.
slightly to the statutory rate of 28% (2016: 27%). The Nedbank
AOP ETR remained constant at 25%.
The AOP ETR for OMEM, calculated in sterling, has increased
slightly to the statutory rate of 28% (2016: 27%). The Nedbank
The ETR for the Old Mutual Wealth business is generally lower
AOP ETR remained constant at 25%.
than in the African businesses given lower headline corporate tax
rates in the UK and other markets in which its business operates.
The ETR for the Old Mutual Wealth business is generally lower
Interest payments and corporate costs incurred by plc Head Office
than in the African businesses given lower headline corporate tax
in the UK are available to be offset against profits in the Old Mutual
rates in the UK and other markets in which its business operates.
Wealth business.
Interest payments and corporate costs incurred by plc Head Office
in the UK are available to be offset against profits in the Old Mutual
Non-controlling interests
Wealth business.
AOP attributable to non-controlling interests increased from £341
million to £398 million. The proportion of Group AOP attributable to
Non-controlling interests
non-controlling interests has reduced from 27% in 2016 to 26% in
AOP attributable to non-controlling interests increased from £341
2017. This reflects the sell-down of OMAM during 2017.
million to £398 million. The proportion of Group AOP attributable to
non-controlling interests has reduced from 27% in 2016 to 26% in
2017. This reflects the sell-down of OMAM during 2017.
12
38
38
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Managed separation and business standalone one-off and incremental recurring costs
The section below summarises the one-off and recurring costs associated with managed separation and includes forward looking
estimates of these costs. These estimates are sensitive to how we execute the managed separation, including the timing of execution
and are subject to stakeholder and market dependencies. By their nature, forward-looking estimates involve risk and uncertainty because
they relate to future events and circumstances which may be beyond Old Mutual plc’s control. Following the managed separation each
business may adopt cost definitions different from the Group-wide definition that is currently applied.
The tables below include the one-off costs related to plc wind-down and business standalone costs and advisory costs. They
compare the costs incurred to date against the original estimates. Costs are likely to be at the upper end of our estimates leaving
limited contingency remaining.
Removal and transition of plc Head Office operational costs
The managed separation will lead to the eventual closure of the plc Head Office and elimination of its operational costs, which totalled
£123 million before recharges in 2015, the year before the managed separation began. The table below shows the evolution of these plc
Head Office operating costs since 2015:
Plc Head Office operational costs before recharges1 (£m)
Corporate costs before plc recharge
OSIE before plc recharge
2015
80
43
123
2016
79
242
103
2017
58
10
68
Estimated
by 2019
−
−
−
1. Plc Head Office operational costs are stated before recharges of £23 million in 2015; £19 million in 2016 and £4 million in 2017.
2. One-off plc wind down costs of £8 million and transaction advisory costs of £14 million are included in AOP in 2016. From 2017 these costs have been excluded from AOP.
An estimated £29 million per annum of plc Head Office operational costs previously incurred by the plc Head Office will ultimately be borne
directly by OMEM and OMW. Given the 2015 cost base of £123 million set out above, this will result in an estimated net saving of £94
million per annum. The table below shows the development in the costs of OMW and OMEM as they begin to incur the plc Head Office
operational costs directly:
Plc Head Office operational costs absorbed by OMW and OMEM (£m)
Costs previously recharged and listing related costs now incurred directly by OMEM
Costs previously recharged now incurred directly by OMW
Listing related costs not recharged now incurred directly by OMW
Brand costs not recharged now incurred directly by OMW
2016
−
−
−
−
−
2017
4
6
1
7
18
Estimated
after MS
7
7
7
8
29
Incremental recurring business standalone costs
In addition to the £29 million above, we estimate OMW and OMEM will incur a combined incremental cost of £20 million per annum as a
result of being standalone businesses. The table below illustrates the costs incurred to date.
Recurring business standalone costs (£m)
Old Mutual Emerging Markets
Old Mutual Wealth
Estimated
after MS
(annualised)
8
12
20
2017
4
8
12
2016
−
−
−
One-off plc wind down and business standalone costs
As communicated at the 2016 Preliminary Results announcement, we estimate the one-off costs to unlock the £94 million of plc Head
Office run-rate savings to be in the region of £130 million. This includes costs at the plc Head Office, which we expect to be at the upper
end of our £50 million to £65 million range, with the balance to be incurred by OMEM and OMW. The table below sets out the one-off
costs that have been incurred to date:
One-off plc wind down and business standalone costs1 (£m)
Plc Head Office
Old Mutual Emerging Markets
Old Mutual Wealth
2016
8
1
4
13
2017
31
12
20
63
Total to date
39
13
24
76
Total
estimated
over MS
130
1. One-off plc wind down and business standalone costs are included in AOP in 2016. From 2017 these costs have been excluded from AOP. Comparatives have not been restated.
13
39
Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Review of financial performance
Review of financial performance
continued
continued
One-off advisory costs
We estimate one-off advisory costs of at least £100 million during the period of implementing the managed separation. This estimate is
One-off advisory costs
sensitive to how we execute the managed separation and subject to stakeholder and market dependencies. These costs will facilitate
We estimate one-off advisory costs of at least £100 million during the period of implementing the managed separation. This estimate is
unlocking the current conglomerate discount to the Group’s value. The table below sets out the one-off advisory costs that have been
sensitive to how we execute the managed separation and subject to stakeholder and market dependencies. These costs will facilitate
incurred to date:
unlocking the current conglomerate discount to the Group’s value. The table below sets out the one-off advisory costs that have been
incurred to date:
2016
14
2016
1
14
3
1
−
3
18
−
18
One-off advisory costs1 (£m)
Plc Head Office2
One-off advisory costs1 (£m)
Old Mutual Emerging Markets
Plc Head Office2
Old Mutual Wealth
Old Mutual Emerging Markets
Nedbank
Old Mutual Wealth
Nedbank
1. One-off advisory costs were included in AOP in 2016. From 2017 these costs have been excluded from AOP. Comparatives have not been restated.
2. Includes costs related to Old Mutual Limited.
1. One-off advisory costs were included in AOP in 2016. From 2017 these costs have been excluded from AOP. Comparatives have not been restated.
One-off transaction costs
2. Includes costs related to Old Mutual Limited.
Transaction costs incurred as at 31 December totalled £19 million. This includes £16 million of costs related to the sell-down of OMAM
One-off transaction costs
during 2016 and 2017, which were deducted from proceeds in line with accounting policies and costs which were not deductible from
Transaction costs incurred as at 31 December totalled £19 million. This includes £16 million of costs related to the sell-down of OMAM
proceeds related to OMEM (£1 million); OMW (£1 million) and plc Head Office (£1 million). Further transaction costs of £20 million to £25
during 2016 and 2017, which were deducted from proceeds in line with accounting policies and costs which were not deductible from
million are estimated to be incurred by the plc Head Office and the businesses, excluding any costs associated with the intended
proceeds related to OMEM (£1 million); OMW (£1 million) and plc Head Office (£1 million). Further transaction costs of £20 million to £25
secondary offering of Quilter.
million are estimated to be incurred by the plc Head Office and the businesses, excluding any costs associated with the intended
secondary offering of Quilter.
Return on Equity (ROE)
Return on Equity (ROE)
Total to date
33
Total to date
2
33
14
2
3
14
52 at least 100
3
2017
19
2017
1
19
11
1
3
11
34
3
34
52 at least 100
Total
estimated
Total
over MS
estimated
over MS
2017 (£m)
Adjusted ROE2:
2017 (£m)
Old Mutual Emerging Markets
Adjusted ROE2:
Nedbank
Old Mutual Emerging Markets
Old Mutual Wealth3
Nedbank
Old Mutual Wealth3
Residual plc4
Adjusted ROE
Residual plc4
Adjusted ROE
IFRS ROE
IFRS ROE
2016 (£m)
Adjusted ROE2:
2016 (£m)
Old Mutual Emerging Markets6
Adjusted ROE2:
Nedbank
Old Mutual Emerging Markets6
Old Mutual Wealth3
Nedbank
Old Mutual Wealth3
Residual plc4
Adjusted ROE
Residual plc4
Adjusted ROE
IFRS ROE
Average
shareholder equity
Average
excl.
shareholder equity
intangibles1
excl.
intangibles1
2,293
2,222
2,293
990
2,222
5,505
990
2,4301,5
5,505
7,935
2,4301,5
7,935
Return on
shareholder
Return on
equity excl.
shareholder
intangibles
equity excl.
intangibles
23.4%
16.6%
23.4%
32.2%
16.6%
22.2%
32.2%
n/a
22.2%
14.6%
n/a
14.6%
AOP
(post-
AOP
tax & NCI)
(post-
tax & NCI)
536
368
536
319
368
1,223
319
(61)
1,223
1,162
(61)
1,162
909
909
AOP
(post-
AOP
tax & NCI)
(post-
tax & NCI)
452
312
452
213
312
977
213
(49)
977
928
(49)
928
570
Average
shareholder
Average
equity excl.
shareholder
intangibles1
equity excl.
intangibles1
1,805
1,834
1,805
974
1,834
4,613
974
2,3741,5
4,613
6,987
2,3741,5
6,987
Return on
shareholder
Return on
equity excl.
shareholder
intangibles
equity excl.
intangibles
25.0%
17.0%
25.0%
21.9%
17.0%
21.2%
21.9%
n/a
21.2%
13.3%
n/a
13.3%
Average
shareholder
Average
equity incl.
shareholder
intangibles
equity incl.
intangibles
2,639
2,558
2,639
2,414
2,558
7,611
2,414
324
7,611
7,935
324
7,935
8,019
Return on
shareholder
Return on
equity incl.
shareholder
intangibles
equity incl.
intangibles
20.3%
14.4%
20.3%
13.2%
14.4%
16.1%
13.2%
n/a
16.1%
14.6%
n/a
14.6%
11.3%
8,019
11.3%
Average
shareholder
Average
equity incl.
shareholder
intangibles
equity incl.
intangibles
2,150
2,094
2,150
2,475
2,094
6,719
2,475
268
6,719
6,987
268
6,987
7,237
Return on
shareholder
Return on
equity incl.
shareholder
intangibles
equity incl.
intangibles
21.0%
14.9%
21.0%
8.6%
14.9%
14.5%
8.6%
n/a
14.5%
13.3%
n/a
13.3%
7.9%
callable securities, non-core operations and the decrease in value of equity due to treasury shares held within consolidated investment funds.
IFRS ROE
1 The businesses figures exclude the plc share of 'Goodwill and other intangible assets' as reported in the segmental balance sheet; and these assets are included in Residual plc
2 Group Adjusted ROE is calculated as AOP (post-tax and NCI) divided by average ordinary shareholders equity. Ordinary shareholders equity excludes the perpetual preferred
1 The businesses figures exclude the plc share of 'Goodwill and other intangible assets' as reported in the segmental balance sheet; and these assets are included in Residual plc
2 Group Adjusted ROE is calculated as AOP (post-tax and NCI) divided by average ordinary shareholders equity. Ordinary shareholders equity excludes the perpetual preferred
3 The intercompany loan of £566 million provided to Old Mutual Wealth to acquire Quilter Cheviot has been equitised for the purposes of calculating the average equity of Old Mutual
callable securities, non-core operations and the decrease in value of equity due to treasury shares held within consolidated investment funds.
Wealth. The average shareholders equity including intangibles includes £0.7 billion of goodwill on the acquisition of Skandia which is allocated to Old Mutual Wealth. Excluding this
3 The intercompany loan of £566 million provided to Old Mutual Wealth to acquire Quilter Cheviot has been equitised for the purposes of calculating the average equity of Old Mutual
goodwill the return on equity of Old Mutual Wealth is 19%.
Wealth. The average shareholders equity including intangibles includes £0.7 billion of goodwill on the acquisition of Skandia which is allocated to Old Mutual Wealth. Excluding this
4 Residual plc includes the plc Head Office and the Institutional Asset Management segments.
goodwill the return on equity of Old Mutual Wealth is 19%.
5 Includes plc portion of 'Goodwill and other intangible assets' and excludes the perpetual preferred callable securities (31 December 2017: nil; 31 December 2016: £273 million) that
4 Residual plc includes the plc Head Office and the Institutional Asset Management segments.
were repurchased and redeemed in February 2017 and non-core operations (31 December 2017: £124 million; 31 December 2016: £68 million).
5 Includes plc portion of 'Goodwill and other intangible assets' and excludes the perpetual preferred callable securities (31 December 2017: nil; 31 December 2016: £273 million) that
6 2016 OMEM AOP (post-tax and NCI) now includes the LTIR on excess assets previously reported within the plc Head Office.
7,237
570
7.9%
were repurchased and redeemed in February 2017 and non-core operations (31 December 2017: £124 million; 31 December 2016: £68 million).
6 2016 OMEM AOP (post-tax and NCI) now includes the LTIR on excess assets previously reported within the plc Head Office.
14
40
40
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Review of financial performance
continued
We estimate one-off advisory costs of at least £100 million during the period of implementing the managed separation. This estimate is
sensitive to how we execute the managed separation and subject to stakeholder and market dependencies. These costs will facilitate
unlocking the current conglomerate discount to the Group’s value. The table below sets out the one-off advisory costs that have been
2017
Total to date
Total
estimated
over MS
19
1
11
3
34
33
2
14
3
52 at least 100
2016
14
1
3
−
18
1. One-off advisory costs were included in AOP in 2016. From 2017 these costs have been excluded from AOP. Comparatives have not been restated.
Transaction costs incurred as at 31 December totalled £19 million. This includes £16 million of costs related to the sell-down of OMAM
during 2016 and 2017, which were deducted from proceeds in line with accounting policies and costs which were not deductible from
proceeds related to OMEM (£1 million); OMW (£1 million) and plc Head Office (£1 million). Further transaction costs of £20 million to £25
million are estimated to be incurred by the plc Head Office and the businesses, excluding any costs associated with the intended
Average
Return on
Average
Return on
AOP
shareholder equity
shareholder
shareholder
shareholder
(post-
tax & NCI)
excl.
intangibles1
equity excl.
intangibles
equity incl.
intangibles
equity incl.
intangibles
536
368
319
1,223
(61)
1,162
909
2,293
2,222
990
5,505
2,4301,5
7,935
23.4%
16.6%
32.2%
22.2%
n/a
14.6%
2,639
2,558
2,414
7,611
324
7,935
20.3%
14.4%
13.2%
16.1%
n/a
14.6%
8,019
11.3%
AOP
(post-
tax & NCI)
Average
shareholder
equity excl.
intangibles1
Return on
Average
Return on
shareholder
shareholder
shareholder
equity excl.
intangibles
equity incl.
intangibles
equity incl.
intangibles
452
312
213
977
(49)
928
570
1,805
1,834
974
4,613
2,3741,5
6,987
25.0%
17.0%
21.9%
21.2%
n/a
13.3%
2,150
2,094
2,475
6,719
268
6,987
21.0%
14.9%
8.6%
14.5%
n/a
13.3%
7,237
7.9%
One-off advisory costs
incurred to date:
One-off advisory costs1 (£m)
Plc Head Office2
Old Mutual Emerging Markets
Old Mutual Wealth
Nedbank
2. Includes costs related to Old Mutual Limited.
One-off transaction costs
secondary offering of Quilter.
Return on Equity (ROE)
2017 (£m)
Adjusted ROE2:
Old Mutual Emerging Markets
Nedbank
Old Mutual Wealth3
Residual plc4
Adjusted ROE
IFRS ROE
2016 (£m)
Adjusted ROE2:
Old Mutual Emerging Markets6
Nedbank
Old Mutual Wealth3
Residual plc4
Adjusted ROE
IFRS ROE
Old Mutual plc
Annual Report and Accounts 2017
Adjusted ROE by business has been calculated in sterling in order to give a shareholder view of returns in the reported currency.
Old Mutual plc adjusted ROE increased from 13.3% in 2016 to 14.6% in 2017. This largely reflects a higher ROE in OMW, which benefited
from exceptional net performance fees in the Single Strategy business in 2017.
The IFRS ROE of 11.3% (2016: 7.9%) has increased as a result of the significant increase in IFRS profit attributable to equity holders
which benefited from higher profits in Old Mutual Wealth, as a result of exceptional net performance fees in the Single Strategy business
and higher investment returns in OMEM due to Zimbabwe’s significant equity market performance.
Plc cash flows and liquidity
The plc Head Office cash position was £540 million as at 31 December 2017 (£743 million as at 31 December 2016). This is invested in
cash and near cash instruments, including money market funds. The plc Head Office also has access to an undrawn committed facility of
£800 million (as at 31 December 2016: £800 million).
The table below summarises plc Head Office cash flows in 2017 and 2016:
Plc cash flows (£m)
Opening cash and liquid assets at holding company at 1 January
2017
743
2016
750
Operational flows
Operational receipts from OMAM and OMW
Impact of foreign currency hedging
Operational receipts from OMAM and OMW after hedging
Operational receipts from OMEM and Nedbank
Impact of foreign currency hedging
Operational receipts from OMEM and Nedbank after hedging
Corporate costs before recharges
Other operational flows
Total operational flows
Servicing of capital
Interest paid
Preference dividends
Ordinary cash dividends
Paid to northern hemisphere shareholders
Paid to southern hemisphere shareholders
Total servicing of capital
Capital movements
Debt repaid in the period
Capital contribution to OMW
Net proceeds from the sell-down of OMAM1
Net proceeds from the sale of OMW Italy1
Net proceeds from the sale of Kotak1
Return of seed capital
Resolution of plc Head Office pre-existing items
Plc wind-down and advisory costs
Other capital movements
Total capital movements
Closing cash and liquid assets at holding company at 31 December
1 Proceeds from the sell-down of OMAM and sales of OMW Italy and Kotak are stated net of costs and foreign currency hedging
74
(3)
71
345
(14)
331
(58)
34
378
(64)
(15)
(339)
(128)
(211)
(418)
(955)
(200)
664
210
138
69
(62)
(26)
(1)
(163)
540
84
(6)
78
410
(37)
373
(79)
(27)
345
(72)
(17)
(451)
(160)
(291)
(540)
(112)
−
230
−
−
31
−
(9)
48
188
743
1 The businesses figures exclude the plc share of 'Goodwill and other intangible assets' as reported in the segmental balance sheet; and these assets are included in Residual plc
2 Group Adjusted ROE is calculated as AOP (post-tax and NCI) divided by average ordinary shareholders equity. Ordinary shareholders equity excludes the perpetual preferred
callable securities, non-core operations and the decrease in value of equity due to treasury shares held within consolidated investment funds.
3 The intercompany loan of £566 million provided to Old Mutual Wealth to acquire Quilter Cheviot has been equitised for the purposes of calculating the average equity of Old Mutual
Wealth. The average shareholders equity including intangibles includes £0.7 billion of goodwill on the acquisition of Skandia which is allocated to Old Mutual Wealth. Excluding this
goodwill the return on equity of Old Mutual Wealth is 19%.
4 Residual plc includes the plc Head Office and the Institutional Asset Management segments.
5 Includes plc portion of 'Goodwill and other intangible assets' and excludes the perpetual preferred callable securities (31 December 2017: nil; 31 December 2016: £273 million) that
were repurchased and redeemed in February 2017 and non-core operations (31 December 2017: £124 million; 31 December 2016: £68 million).
6 2016 OMEM AOP (post-tax and NCI) now includes the LTIR on excess assets previously reported within the plc Head Office.
40
15
41
Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Review of financial performance
Review of financial performance
continued
continued
Operational flows
Our conservative capital management policy has provided the
Operational flows
flexibility to pay an appropriate dividend to shareholders during the
Our conservative capital management policy has provided the
managed separation and enabled the unlisted OMEM and OMW
flexibility to pay an appropriate dividend to shareholders during the
businesses to prepare for independence with strong standalone
managed separation and enabled the unlisted OMEM and OMW
balance sheets, improved quality of capital and future dividend
businesses to prepare for independence with strong standalone
paying capacity.
balance sheets, improved quality of capital and future dividend
paying capacity.
Operational receipts from OMW and OMAM, after foreign currency
hedging, were £71 million in 2017 (2016: £78 million). For OMAM,
Operational receipts from OMW and OMAM, after foreign currency
remittances of £7 million were received in 2017 (2016: £19 million)
hedging, were £71 million in 2017 (2016: £78 million). For OMAM,
and payments of £35 million were received pursuant to the
remittances of £7 million were received in 2017 (2016: £19 million)
Deferred Tax Asset Agreement (2016: £32 million).
and payments of £35 million were received pursuant to the
Deferred Tax Asset Agreement (2016: £32 million).
OMEM and Nedbank dividend receipts are available to meet the
plc dividend, consistent with the original terms of demutualisation
OMEM and Nedbank dividend receipts are available to meet the
and in line with plc’s capital management policy.
plc dividend, consistent with the original terms of demutualisation
and in line with plc’s capital management policy.
Other operational flows in 2017 include the impact of collateral
movements on foreign currency hedging of both operational and
Other operational flows in 2017 include the impact of collateral
capital inflows of £29 million (2016: £28 million outflow).
movements on foreign currency hedging of both operational and
capital inflows of £29 million (2016: £28 million outflow).
Servicing of capital
Dividend payments to ordinary shareholders of £339 million
Servicing of capital
(2016: £451 million) have been made in the year in relation to the
Dividend payments to ordinary shareholders of £339 million
second interim dividend for 2016 of 3.39 pence per share (second
(2016: £451 million) have been made in the year in relation to the
interim dividend for 2015: 6.25 pence per share) and first interim
second interim dividend for 2016 of 3.39 pence per share (second
dividend for 2017 of 3.53 pence per share (first interim dividend
interim dividend for 2015: 6.25 pence per share) and first interim
for 2016: 2.67 pence per share). Of this, £211 million was paid to
dividend for 2017 of 3.53 pence per share (first interim dividend
shareholders on the South African and other African registers
for 2016: 2.67 pence per share). Of this, £211 million was paid to
(2016: £291 million).
shareholders on the South African and other African registers
(2016: £291 million).
Preference dividend payments in 2017 reflect interest on the
£273 million of perpetual preferred callable securities, which were
Preference dividend payments in 2017 reflect interest on the
repurchased and fully redeemed on 3 February 2017. The payment
£273 million of perpetual preferred callable securities, which were
represents 11 months of the interest accrued up to the point the
repurchased and fully redeemed on 3 February 2017. The payment
security was redeemed.
represents 11 months of the interest accrued up to the point the
security was redeemed.
Interest paid in 2017 was £8 million lower than 2016, due largely
to the repayment of £112 million of senior debt in October 2016.
Interest paid in 2017 was £8 million lower than 2016, due largely
to the repayment of £112 million of senior debt in October 2016.
Capital movements
Debt repaid in 2017 includes £273 million of perpetual preferred
Capital movements
callable securities that were repurchased and fully redeemed at
Debt repaid in 2017 includes £273 million of perpetual preferred
a cost of £288 million in February 2017. In addition, in November
callable securities that were repurchased and fully redeemed at
2017 we repurchased and redeemed £389 million of Tier 2
a cost of £288 million in February 2017. In addition, in November
subordinated 2025 securities, and £159 million nominal of Tier 2
2017 we repurchased and redeemed £389 million of Tier 2
subordinated 2021 securities for a total cost of £667 million, net of
subordinated 2025 securities, and £159 million nominal of Tier 2
interest rate hedging.
subordinated 2021 securities for a total cost of £667 million, net of
interest rate hedging.
Old Mutual Wealth received £200 million of capital in May 2017
from Old Mutual plc with a consequential reduction in the RCF
Old Mutual Wealth received £200 million of capital in May 2017
provided by Old Mutual plc to Old Mutual Wealth from £200 million
from Old Mutual plc with a consequential reduction in the RCF
to £70 million.
provided by Old Mutual plc to Old Mutual Wealth from £200 million
to £70 million.
Cash flows from corporate activity in 2017 include proceeds net of
costs and foreign currency hedging of £664 million from the sell-
Cash flows from corporate activity in 2017 include proceeds net of
down of OMAM during the period, £210 million from the sale of
costs and foreign currency hedging of £664 million from the sell-
Old Mutual Wealth Italy and £138 million from the sale of Kotak.
down of OMAM during the period, £210 million from the sale of
Old Mutual Wealth Italy and £138 million from the sale of Kotak.
Costs to address plc Head Office pre-existing items largely reflects
£27 million paid into two legacy defined benefit pension schemes
Costs to address plc Head Office pre-existing items largely reflects
to effect the buy-out of the benefits of the two schemes and
£27 million paid into two legacy defined benefit pension schemes
£20 million related to the costs of insuring and de-risking certain
to effect the buy-out of the benefits of the two schemes and
indemnities associated with businesses previously owned by the
£20 million related to the costs of insuring and de-risking certain
Group. In addition cash of £12 million to fund contingent liabilities in
indemnities associated with businesses previously owned by the
the businesses; which was held on deposit at the plc Head Office,
Group. In addition cash of £12 million to fund contingent liabilities in
was returned.
the businesses; which was held on deposit at the plc Head Office,
was returned.
During 2017 £69 million (2016: £31 million) of seed capital was
returned to the plc, primarily from Rogge and OMAM.
During 2017 £69 million (2016: £31 million) of seed capital was
returned to the plc, primarily from Rogge and OMAM.
Plc wind-down and advisory costs of £26 million were paid in 2017
(2016: £9 million). The amounts included within the IFRS income
Plc wind-down and advisory costs of £26 million were paid in 2017
statement also include accruals and provisions primarily related to
(2016: £9 million). The amounts included within the IFRS income
the wind-down of the plc Head Office.
statement also include accruals and provisions primarily related to
the wind-down of the plc Head Office.
IFRS balance sheet review
The analysis below summarises how equity attributable to ordinary
IFRS balance sheet review
shareholders of the parent is invested in the net assets of the
The analysis below summarises how equity attributable to ordinary
component businesses including the plc Head Office. It also sets
shareholders of the parent is invested in the net assets of the
out the composition of plc Head Office net assets. The information
component businesses including the plc Head Office. It also sets
is sourced from segmental analysis of the Group’s IFRS Balance
out the composition of plc Head Office net assets. The information
Sheet in note B4 of the financial statements.
is sourced from segmental analysis of the Group’s IFRS Balance
Sheet in note B4 of the financial statements.
2017
2016
Restated1
2016
7,909
Restated1
7,909
(273)
(273)
7,636
8,128
2017
8,128
8,128
−
−
8,128
(£m)
Equity attributable to
(£m)
equity holders of the parent
Equity attributable to
Plc perpetual preferred
equity holders of the parent
callable securities
Plc perpetual preferred
Equity attributable to ordinary
callable securities
shareholders of the parent
Equity attributable to ordinary
shareholders of the parent
OMEM
Nedbank
OMEM
OMW
Nedbank
Total operating businesses
OMW
Residual plc NAV:
Total operating businesses
OMAM
Residual plc NAV:
OM Bermuda
OMAM
plc Head Office
OM Bermuda
Total Residual plc NAV
plc Head Office
Consolidation adjustments1
Total Residual plc NAV
Equity attributable to ordinary
Consolidation adjustments1
shareholders of the parent
Equity attributable to ordinary
shareholders of the parent
1 Consolidation adjustments reflects Old Mutual plc shares held by consolidated
2,768
2,679
2,768
1,818
2,679
7,265
1,818
7,265
−
124
−
902
124
1,026
902
(163)
1,026
8,128
(163)
8,128
7,636
2,484
2,476
2,484
1,868
2,476
6,828
1,868
6,828
527
68
527
358
68
953
358
(145)
953
7,636
(145)
7,636
1 Consolidation adjustments reflects Old Mutual plc shares held by consolidated
investment funds, which are treated as treasury shares within IFRS. Comparative
information in the consolidated statement of financial position has been restated for
investment funds, which are treated as treasury shares within IFRS. Comparative
this treatment.
information in the consolidated statement of financial position has been restated for
this treatment.
At 31 December 2017 equity attributable to ordinary shareholders
of the parent was £8,128 million (2016: £7,636 million). The £492
At 31 December 2017 equity attributable to ordinary shareholders
million increase in equity attributable to ordinary shareholders of
of the parent was £8,128 million (2016: £7,636 million). The £492
the parent is principally due to £894 million of IFRS profit after tax
million increase in equity attributable to ordinary shareholders of
attributable to ordinary equity holders, offset by dividends paid of
the parent is principally due to £894 million of IFRS profit after tax
£330 million and the impact of translating the Group’s non-UK
attributable to ordinary equity holders, offset by dividends paid of
operations to sterling of £87 million.
£330 million and the impact of translating the Group’s non-UK
operations to sterling of £87 million.
16
42
42
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
At 31 December 2017, of the total equity attributable to ordinary
shareholders, the equity of Old Mutual plc as a stand-alone
company was £6,509 million (2016: £5,369 million), of which
distributable reserves were £2,943 million (2016: £2,059 million).
The Group is required to adopt two new accounting standards with
effect from 1 January 2018, IFRS 9: Financial Instruments (‘IFRS
9’) and IFRS 15: Revenue from Contracts with Customers (IFRS
15). The estimated impact on the Groups’ opening reserves (after
tax) of adopting IFRS 9 is £203 million, principally due to impact of
the adoption of the expected credit loss for impairments of £176
million and other items relating to classification and measurement.
IFRS 15 principally impacts the timing of the recognition of revenue
and the current estimated impact on opening reserves is expected
to be immaterial. All of these estimates represents managements
best estimate of the potential impact of adopting the standards and
this could change when the standards are implemented by the
Group. Further details are provided in Note A7 of the Old Mutual
plc Financial Statements.
Equity invested in OMEM, Nedbank and OMW
Over 80% of the Group’s equity is invested in OMEM, Nedbank
and OMW. Under managed separation these businesses are
expected to be largely distributed to shareholders. This IFRS equity
is shown after deduction of intercompany funding of £782 million to
OMW from the plc Head Office.
Within OMEM, as at 31 December 2017, there was R5.9 billion
(2016: R9.7 billion) of outstanding intercompany indebtedness
between OMLAC(SA), Old Mutual Group Holdings (OMGH) and its
subsidiary Old Mutual Portfolio Holdings (OMPH). During the year,
R3.8 billion of this intercompany indebtedness was repaid to
OMLAC(SA), funded through greater cash retention.
We anticipate that the settlement of the remaining intercompany
indebtedness will largely be repaid with the transfer of Nedbank
shares to OMLAC(SA) up to the desired shareholding of 19.9%.
Any residual indebtedness will be settled in cash.
Residual plc NAV
Residual plc NAV consists of OM Bermuda, plc Head Office and
until its sale in November 2017, the value of its remaining shares
in OMAM. The Residual plc NAV has increased to £1,026 million in
2017 (2016: £953 million).
As part of the process of managed separation we have converted
Residual plc into certain cash, reduced contingent liabilities and
unwound complex arrangements which existed within the Group
structure.
Details of the component parts of the Residual plc NAV are
discussed below.
OMAM
The process of reducing our stake in OMAM completed in
November 2017, following a number of market sell-downs and the
sale of a 24.95% stake to HNA Capital. The gross proceeds from
these share sales totalled $879 million. Net of costs of £16 million
and a £3 million loss on foreign currency hedging, the proceeds
were £664 million.
OM Bermuda
OM Bermuda continues to execute its run-off strategy.
Approximately 50% of its Guaranteed Minimum Accumulation
Benefit (GMAB) reinsurance obligations matured in 2017 and
the bulk of the remaining maturities take place during H1 2018.
Downside risk associated with guarantee top-up payments is
managed using a put option programme. This was restructured
to lock in market gains to the end of October 2017 and therefore
further reduce downside market risks. Residual risks include
basis risk and a small portion of market and currency risks that
remain unhedged.
The reinsurance business remains well capitalised, with a statutory
capital coverage ratio of 6.2 times (31 December 2016: 1.8 times).
IFRS NAV increased to £124 million ($168 million) at 31 December
2017 (31 December 2016: £68 million), benefiting from the
£71 million ($92 million) reduction in GMAB reserves largely as a
result of favourable global equity market and currency movements
and the run-off of GMAB obligations over the period. This is partly
offset by the establishment of a liquidation provision of £13 million
($18 million) to capitalise all anticipated future operational losses
as the business is no longer considered a going concern.
Within the 31 December 2017 OM Bermuda IFRS NAV are
£23 million ($31 million) of loan notes outstanding from the plc
Head Office to OM Bermuda.
Old Mutual plc Head Office
We continue to make progress with the financial wind down and
de-risking of the plc Head Office. The crystallisation of plc Head
Office NAV into cash allows us to maintain appropriate buffers to
manage risks and obligations during the period as a result of the
execution of managed separation and the wind down of the plc
Head Office. However, there are still actual and potential demands
on our cash and liquidity during this period. Cash utilisation will
continue not only as a result of the current plc structure, but also
to manage the resolution of and meet the remaining managed
separation and business standalone costs across the plc Head
Office and the underlying businesses.
The table below shows the composition of the plc Head
Office NAV:
plc Head Office NAV (£m)
Cash
Seed investments
Net intercompany funding
Third party debt1
Net sundry debtors/(creditors)
plc Head Office NAV
2017
540
6
759
(461)
58
902
2016
743
148
816
(1,290)
(59)
358
1 Includes plc preferred perpetual callable securities of £273 million in 2016.
Cash
The plc Head Office had cash balances of £540 million at
31 December 2017 (31 December 2016: £743 million).
At our 2016 preliminary results in March 2017, we highlighted that
we hold cash and liquidity buffers centrally to support the plc under
both normal and stressed conditions. These liquidity buffers and
cash will transition from plc Head Office where appropriate as
part of the preparations for the independence of the relevant
subsidiaries as part of managed separation. In an initial step
in preparing OMW’s capital structure and in light of regulatory
changes, we contributed £200 million of capital into OMW with
a consequential reduction in plc's liquidity support and centrally
held liquidity buffers for OMW of £130 million to £70 million.
The plc early warning liquidity threshold (“EWT”) is set dynamically,
in line with our underlying obligations to ensure adequate liquidity
resources are maintained and stood at circa £330 million at
31 December 2017 (31 December 2016: circa £520 million).
17
43
Old Mutual plc Annual Report and Accounts 2017Strategic report Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Review of financial performance
continued
Review of financial performance
continued
The lower EWT reflects the reduction in plc's liquidity support
for OMW and lower levels of plc Head Office debt.
The lower EWT reflects the reduction in plc's liquidity support
Seed investments
for OMW and lower levels of plc Head Office debt.
At 31 December 2017 the plc Head Office held seed investments
of £6 million (31 December 2016: £148 million).
Seed investments
At 31 December 2017 the plc Head Office held seed investments
The plc Head Office has substantially reduced its seed portfolio as
of £6 million (31 December 2016: £148 million).
part of the managed separation. During 2017 the plc redeemed its
remaining funds in OMAM and Rogge. The remaining seed
The plc Head Office has substantially reduced its seed portfolio as
investments are held in OMEM funds.
part of the managed separation. During 2017 the plc redeemed its
remaining funds in OMAM and Rogge. The remaining seed
Net intercompany funding
investments are held in OMEM funds.
Other non-cash plc Head office assets includes net intercompany
funding of £759 million (31 December 2016: £816 million).
Net intercompany funding
Intercompany funding to OMW is £782 million (31 December
Other non-cash plc Head office assets includes net intercompany
2016: £785 million), most of which was provided to support
funding of £759 million (31 December 2016: £816 million).
the acquisitions of Quilter Cheviot and Intrinsic. Intragroup
Intercompany funding to OMW is £782 million (31 December
payables represent £23 million of loan notes outstanding at
2016: £785 million), most of which was provided to support
31 December 2017 from Old Mutual plc to OM Bermuda
the acquisitions of Quilter Cheviot and Intrinsic. Intragroup
(31 December 2016: £58 million).
payables represent £23 million of loan notes outstanding at
31 December 2017 from Old Mutual plc to OM Bermuda
Intercompany funding in 2016 also included £85 million due
(31 December 2016: £58 million).
from OMAM, principally relating to the Deferred Tax Asset Deed.
Following cash receipts in 2017 and the uncertainty arising from
Intercompany funding in 2016 also included £85 million due
US tax reform the Deferred Tax Asset Deed is now a provision
from OMAM, principally relating to the Deferred Tax Asset Deed.
of £9 million. As a result of the sale of OMAM during 2017 this
Following cash receipts in 2017 and the uncertainty arising from
provision is included in net sundry debtors and creditors.
US tax reform the Deferred Tax Asset Deed is now a provision
of £9 million. As a result of the sale of OMAM during 2017 this
Plc debt
provision is included in net sundry debtors and creditors.
The total IFRS book value of debt (excluding banking related debt)
of £903 million comprises plc holding company debt of £461 million
Plc debt
and emerging markets non-banking debt of £442 million.
The total IFRS book value of debt (excluding banking related debt)
of £903 million comprises plc holding company debt of £461 million
Plc debt summary 1
and emerging markets non-banking debt of £442 million.
Total gearing (gross of holding
company cash) – IFRS basis4
Plc debt summary 1
plc holding company book value
Total gearing (gross of holding
of debt – IFRS basis (£m)
company cash) – IFRS basis4
Subsidiary book value of debt
plc holding company book value
(non-banking)2 – IFRS basis (£m)
of debt – IFRS basis (£m)
Total book value of debt −
Subsidiary book value of debt
IFRS basis (£m)
(non-banking)2 – IFRS basis (£m)
Total interest cover3
Total book value of debt −
Hard interest cover3
IFRS basis (£m)
Total interest cover3
1 Excludes all banking-related debt
2 For the purposes of calculating gearing, subsidiary debt includes OMAM debt classified
Hard interest cover3
as non-current liabilities held for sale (31 December 2017: nil; 31 December 2016:
£319 million) and non-banking inter-company borrowings (31 December 2017:
£23 million; 31 December 2016: £25 million)
1 Excludes all banking-related debt
2 For the purposes of calculating gearing, subsidiary debt includes OMAM debt classified
3 Interest cover is calculated based on the number of times AOP before finance costs
as non-current liabilities held for sale (31 December 2017: nil; 31 December 2016:
and tax covers finance costs
£319 million) and non-banking inter-company borrowings (31 December 2017:
4 2016 gearing has been recalculated to include the restatement of Group equity
£23 million; 31 December 2016: £25 million)
15.0 times
4.5 times
15.0 times
903
4.5 times
11.1 times
3.4 times
11.1 times
2,091
3.4 times
2016
16.1%
2016
1,290
16.1%
2017
7.4%
2017
461
7.4%
801
1,290
2,091
801
442
461
903
442
and tax covers finance costs
3 Interest cover is calculated based on the number of times AOP before finance costs
As at 31 December 2017, Old Mutual plc holding company debt
comprised of £341 million of Tier 2 debt maturing in June 2021 and
4 2016 gearing has been recalculated to include the restatement of Group equity
£61 million of Tier 2 debt maturing in November 2025. The IFRS
As at 31 December 2017, Old Mutual plc holding company debt
book value of these was £400 million and £61 million respectively
comprised of £341 million of Tier 2 debt maturing in June 2021 and
leading to an aggregate IFRS value of Old Mutual plc debt of
£61 million of Tier 2 debt maturing in November 2025. The IFRS
£461 million. This excludes a derivative asset of £33 million,
book value of these was £400 million and £61 million respectively
related to the remaining £341 million of Tier 2 debt issued in
leading to an aggregate IFRS value of Old Mutual plc debt of
June 2011.
£461 million. This excludes a derivative asset of £33 million,
related to the remaining £341 million of Tier 2 debt issued in
June 2011.
The aggregate IFRS value of Old Mutual plc debt at 31 December
2017 is £829 million lower than at 31 December 2016 due to the
repurchase and redemption of the £273 million Preferred Callable
The aggregate IFRS value of Old Mutual plc debt at 31 December
Securities on 3 February 2017. In addition £389 million of the Tier 2
2017 is £829 million lower than at 31 December 2016 due to the
subordinated 2025 securities and £159 million nominal of the Tier 2
repurchase and redemption of the £273 million Preferred Callable
subordinated 2021 securities were repurchased and redeemed on
Securities on 3 February 2017. In addition £389 million of the Tier 2
24 November 2017. Fair value movements account for the
subordinated 2025 securities and £159 million nominal of the Tier 2
remaining difference.
subordinated 2021 securities were repurchased and redeemed on
24 November 2017. Fair value movements account for the
Gearing as at 31 December 2017
remaining difference.
Gross gearing is based on non-banking debt of £870 million
(2016: £2,060 million), which is the IFRS book value of non-
Gearing as at 31 December 2017
banking debt net of the derivative asset of £33 million (2016:
Gross gearing is based on non-banking debt of £870 million
£31 million) referred to above. Gross gearing of 7.4% is calculated
(2016: £2,060 million), which is the IFRS book value of non-
as the percentage of non-banking debt (£870 million) over total
banking debt net of the derivative asset of £33 million (2016:
Group equity plus non-banking debt (£11,817 million). This has
£31 million) referred to above. Gross gearing of 7.4% is calculated
reduced since 31 December 2016, due largely to a decrease in
as the percentage of non-banking debt (£870 million) over total
total debt arising principally from the sale of OMAM, the repurchase
Group equity plus non-banking debt (£11,817 million). This has
and redemption of the plc £273 million Preferred Perpetual Callable
reduced since 31 December 2016, due largely to a decrease in
Securities, £389 million of Tier 2 subordinated 2025 securities
total debt arising principally from the sale of OMAM, the repurchase
and £159 million of nominal of Tier 2 subordinated 2021 securities.
and redemption of the plc £273 million Preferred Perpetual Callable
This has been partially offset by the issue of R500 million of
Securities, £389 million of Tier 2 subordinated 2025 securities
Subordinated securities by Old Mutual Insure in November 2017.
and £159 million of nominal of Tier 2 subordinated 2021 securities.
Net gearing reduces to 2.8% when taking into account cash at the
This has been partially offset by the issue of R500 million of
holding company.
Subordinated securities by Old Mutual Insure in November 2017.
Net gearing reduces to 2.8% when taking into account cash at the
Net sundry debtors / (creditors)
holding company.
Net sundry debtors and creditors include both third party and
intercompany debtors and creditors that are not related to long term
Net sundry debtors / (creditors)
funding. At 31 December 2017 net sundry debtors were £58 million
Net sundry debtors and creditors include both third party and
(31 December 2006: £59 million creditor). The movement is due
intercompany debtors and creditors that are not related to long term
mainly to the reduction in intercompany creditors in preparation for
funding. At 31 December 2017 net sundry debtors were £58 million
the finalisation of managed separation.
(31 December 2006: £59 million creditor). The movement is due
mainly to the reduction in intercompany creditors in preparation for
Costs to resolve plc Head Office pre-existing
the finalisation of managed separation.
items
At the 2016 Preliminary results announcement we estimated £130
Costs to resolve plc Head Office pre-existing
million would be incurred to accelerate the resolution of pre-existing
items
Head Office items over the duration of the managed separation.
At the 2016 Preliminary results announcement we estimated £130
This estimate is subject to addressing any remaining issues.
million would be incurred to accelerate the resolution of pre-existing
Head Office items over the duration of the managed separation.
During the period, bulk annuity arrangements for two legacy
This estimate is subject to addressing any remaining issues.
defined benefit schemes, the Old Mutual Staff Pension Fund and
the G&N Retirement Benefits Scheme, were agreed with Legal &
During the period, bulk annuity arrangements for two legacy
General Assurance Society Limited. The agreements resulted in
defined benefit schemes, the Old Mutual Staff Pension Fund and
the full buy-out of the schemes into individual annuity policies in
the G&N Retirement Benefits Scheme, were agreed with Legal &
October and wind-up of both schemes completed on 30 November
General Assurance Society Limited. The agreements resulted in
2017. Old Mutual plc no longer has any liability in respect of these
the full buy-out of the schemes into individual annuity policies in
two schemes, including administration and funding. Old Mutual plc
October and wind-up of both schemes completed on 30 November
had previously been contributing £7 million of cash annually to fund
2017. Old Mutual plc no longer has any liability in respect of these
the two schemes.
two schemes, including administration and funding. Old Mutual plc
had previously been contributing £7 million of cash annually to fund
In order to effect the transaction, Old Mutual plc made a one-off
the two schemes.
contribution of £27 million into the two schemes. In addition the
IAS 19 surplus for the schemes of £24 million was written off
In order to effect the transaction, Old Mutual plc made a one-off
during the year and is recognised in the consolidated statement
contribution of £27 million into the two schemes. In addition the
of changes in equity.
IAS 19 surplus for the schemes of £24 million was written off
during the year and is recognised in the consolidated statement
of changes in equity.
18
44
44
Old Mutual plc Annual Report and Accounts 2017 Old Mutual plc
Annual Report and Accounts 2017
Expenses of £20 million were incurred for the costs of insuring and de-risking certain indemnities associated with businesses
previously owned by the Group. In addition cash of £12 million to fund contingent liabilities in the businesses, which was held
on deposit at the plc Head Office, was returned.
Costs of £7 million were incurred in disposing of the Group’s captive insurance entity which covered plc Head Office and
subsidiary companies.
Adjusted Net Asset Value
Adjusted Net Asset Value (ANAV) provides an alternative measure to indicate the value of Old Mutual plc. The ANAV of Old Mutual plc
was £11,952 million at 31 December 2017 (31 December 2016: £11,271 million), equivalent to 242.3 pence per share (31 December
2016: 228.6 pence per share). The increase in ANAV per share largely reflects the OMEM covered business MCEV earnings (12.8 pence)
and the impact of the constant currency change in the share price of Nedbank (5.6 pence), offset by the Old Mutual plc cash dividends
paid in the year (6.9 pence).
The ANAV uses an MCEV valuation basis for OMEM covered business and the UK Heritage business in OMW as well as the market
value of listed subsidiaries and plc Head Office debt. Other businesses and other assets are generally included at IFRS net asset value.
A reconciliation of the IFRS NAV to ANAV is provided in the tables below:
2017 (£m)
IFRS equity attributable to equity
holders of the parent
Life Fund investments in OM plc3
MV adjustments for listed
businesses and quoted debt4
Uplift for excess shares held in
Trust, ESOP and BEE schemes5
Life Insurance – MCEV uplift6
Other adjustments
Intercompany transfers7
Adjusted Group NAV attributable
to ordinary shareholders
Adjusted Group NAV
per share (pence)
OMEM Nedbank
2,679
2,768
Old Mutual
Wealth
1,8181
270
−
−
1,268
−
−
−
−
−
1,921
(16)
−
4,943
−
−
−
3,947
146
−
566
2,530
100.2
80.0
51.3
Residual plc NAV
IAM
−
plc Head
Office
902
OM
Bermuda
124
Other2
(163)
Total
8,128
−
−
−
−
−
−
−
−
−
(15)
−
−
−
(566)
321
−
−
−
163
−
433
1,253
86
86
−
1
−
125
−
−
−
86
2,067
(15)
−
11,952
6.5
2.5
1.8
242.3
2016 (£m) Re-presented 2,8
IFRS equity attributable to
equity holders of the parent
Perpetual preferred
callable securities9
Life Fund investments in OM plc3
Market value adjustments for listed
businesses and quoted debt4
Uplift for excess shares held in
Trust, ESOP and BEE schemes5
Life Insurance – MCEV uplift6
Other adjustments
Intercompany transfers7
Adjusted Group NAV attributable
to ordinary shareholders
Adjusted Group NAV
per share (pence)
OMEM8
2,484
Nedbank
2,476
Old Mutual
Wealth8
1,868
−
−
258
−
−
1,151
−
−
−
−
−
1,780
(19)
−
4,503
−
−
−
3,627
146
−
566
2,580
Residual plc NAV
plc Head
Office
631
IAM
527
OM
Bermuda
68
−
−
158
−
−
−
−
685
(273)
−
(60)
−
−
−
(641)
(343)
−
−
−
−
−
(25)
75
118
91.3
73.6
52.3
13.9
(6.9)
2.4
Other2
(145)
Total
7,909
-
(273)
145
-
101
−
−
−
101
2.0
403
1,249
101
1,926
(44)
−
11,271
228.6
1 The Old Mutual Wealth IFRS equity of £1,818 million includes goodwill of £663 million, held by Old Mutual plc and associated with the Old Mutual Wealth business. This will cease to
be recognised on the de-merger of Old Mutual Wealth from the Old Mutual plc Group.
2 Reduction to IFRS NAV of £163 million at 31 December 2017 and a corresponding restatement of £145 million at 31 December 2016, on identification in 2017 of Old Mutual plc
shares held by consolidated investment funds. These are treated as treasury shares and eliminated on consolidation in IFRS
3 Inclusion of group equity and debt instruments held in the life funds (not included in IFRS equity)
4 Adjustment from IFRS to market value for listed subsidiaries and listed debt
5 An uplift related to excess Old Mutual plc shares held in Trusts, ESOP and BEE schemes in OMEM which are eliminated on consolidation in IFRS
6 Remaining adjustment from an IFRS to MCEV basis for the Life covered business
7 Intercompany loan of £566 million provided to Old Mutual Wealth to acquire Quilter Cheviot
8 £29 million of net assets previously reported in the Old Mutual Wealth segment have been re-presented within Emerging Markets to reflect the transfer of management of Old Mutual
Life Assurance Company (South Africa) Limited offshore branches and OMI-Guernsey to Emerging Markets
9 Deduct the book value of the perpetual preferred callable securities.
45
19
Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Review of financial performance
continued
Review of financial performance
continued
Capital management policy
In March 2016 we announced a new capital management policy for
the period of the managed separation. This policy has provided the
Capital management policy
flexibility to balance the requirements of our multiple stakeholders and
In March 2016 we announced a new capital management policy for
our businesses as they prepare for managed separation by enabling
the period of the managed separation. This policy has provided the
them to both continue to invest in order to drive enhanced performance
flexibility to balance the requirements of our multiple stakeholders and
and strengthen their balance sheets in preparation for being standalone
our businesses as they prepare for managed separation by enabling
businesses. In line with this policy we have today announced a second
them to both continue to invest in order to drive enhanced performance
interim dividend for the second half of 2017 of 3.57p, the rand
and strengthen their balance sheets in preparation for being standalone
equivalent is 66.50 cents. This will be paid on 30 April 2018.
businesses. In line with this policy we have today announced a second
The total full year dividend for 2017 is 7.10p (2016: 6.06p).
interim dividend for the second half of 2017 of 3.57p, the rand
equivalent is 66.50 cents. This will be paid on 30 April 2018.
The 2017 second interim dividend will be the final dividend paid by
The total full year dividend for 2017 is 7.10p (2016: 6.06p).
plc if the Managed Separation is delivered in line with our expected
timetable. The proposed future Capital Management Policy of
The 2017 second interim dividend will be the final dividend paid by
the independent Old Mutual Limited and Quilter businesses are
plc if the Managed Separation is delivered in line with our expected
presented in their respective Business Reviews on pages 36 and 57.
timetable. The proposed future Capital Management Policy of
the independent Old Mutual Limited and Quilter businesses are
The capital management policy is intended to remain in place
presented in their respective Business Reviews on pages 36 and 57.
until Old Mutual plc shares are no longer listed.
The capital management policy is intended to remain in place
Capital
until Old Mutual plc shares are no longer listed.
Regulatory capital in accordance with
Capital
Solvency II rules
Regulatory capital in accordance with
The Group Solvency II surplus is £1.45 billion at 31 December
Solvency II rules
2017 (31 December 2016: £1.25 billion as reported to the
Prudential Regulation Authority (PRA)), representing a Solvency II
The Group Solvency II surplus is £1.45 billion at 31 December
ratio of 123% (31 December 2016: 122%) calculated under the
2017 (31 December 2016: £1.25 billion as reported to the
standard formula.
Prudential Regulation Authority (PRA)), representing a Solvency II
ratio of 123% (31 December 2016: 122%) calculated under the
The Group Solvency II ratio continues to be resilient as the Group
standard formula.
surplus excludes £1.6 billion of surplus from the South African
businesses (that remains available for local loss absorption).
The Group Solvency II ratio continues to be resilient as the Group
The Solvency II information in this preliminary results disclosure
surplus excludes £1.6 billion of surplus from the South African
has not been audited.
businesses (that remains available for local loss absorption).
The Solvency II information in this preliminary results disclosure
has not been audited.
Group regulatory capital (£bn)
Own funds
Group regulatory capital (£bn)
Solvency capital requirements (SCR)
Solvency II surplus
Own funds
Group Solvency II ratio
Solvency capital requirements (SCR)
Solvency II surplus
1 Based on preliminary estimates. Formal filing due to the PRA by 29 March 2018
Group Solvency II ratio
2 As reported to the PRA as part of the Annual 2016 Solvency II submission.
31 December
20171
Solvency II
7.67
31 December
6.22
20171
1.45
7.67
123%
6.22
1.45
123%
31 December
20162
6.84
31 December
5.59
20162
1.25
6.84
122%
5.59
1.25
122%
Solvency II
1 Based on preliminary estimates. Formal filing due to the PRA by 29 March 2018
During the year the Group Solvency II ratio increased due to the
2 As reported to the PRA as part of the Annual 2016 Solvency II submission.
impact of corporate activity, in particular the sale of OM Wealth Italy
(+2pps), OMAM (+14pps) and Kotak (+3pps), and reduced due to
During the year the Group Solvency II ratio increased due to the
the redemption and repayment of qualifying debt during the year
impact of corporate activity, in particular the sale of OM Wealth Italy
(-13pps). Increased capital requirements in the South African
(+2pps), OMAM (+14pps) and Kotak (+3pps), and reduced due to
businesses and Old Mutual Wealth, including the impact of the
the redemption and repayment of qualifying debt during the year
rating agency downgrade of South African sovereign debt during
(-13pps). Increased capital requirements in the South African
the year reduced the Group Solvency II ratio. Other impacts were
businesses and Old Mutual Wealth, including the impact of the
largely offsetting and included the receipt of South African
rating agency downgrade of South African sovereign debt during
remittances in lieu of the payments of the 2016 second interim
the year reduced the Group Solvency II ratio. Other impacts were
dividend and 2017 first interim dividend payments to UK
largely offsetting and included the receipt of South African
shareholders.
remittances in lieu of the payments of the 2016 second interim
dividend and 2017 first interim dividend payments to UK
As we have previously guided, we will continue to manage the
shareholders.
Group regulatory capital position in line with our solvency risk
As we have previously guided, we will continue to manage the
Group regulatory capital position in line with our solvency risk
31 December
2017
7.3
31 December
0.4
2017
7.7
7.3
0.4
7.7
appetite, recognising that there is a trade-off to be considered
where we could accept the possibility of going below our early
warning threshold of 120% on a Solvency II basis as a result
appetite, recognising that there is a trade-off to be considered
of cash and capital demands arising from the plc wind down.
where we could accept the possibility of going below our early
warning threshold of 120% on a Solvency II basis as a result
Composition of qualifying Solvency II capital
of cash and capital demands arising from the plc wind down.
The Group own funds for Solvency II purposes reflect the
Composition of qualifying Solvency II capital
resources of the underlying businesses after excluding the
restricted surplus (mainly relating to the South African businesses).
The Group own funds for Solvency II purposes reflect the
The Group own funds include the Old Mutual plc issued
resources of the underlying businesses after excluding the
subordinated debt instruments that qualify as capital under
restricted surplus (mainly relating to the South African businesses).
Solvency II. The composition of own funds by tier is presented
The Group own funds include the Old Mutual plc issued
in the table below.
subordinated debt instruments that qualify as capital under
Solvency II. The composition of own funds by tier is presented
31 December
Old Mutual Group
in the table below.
20161
Solvency II own funds (£bn)
Tier 12
5.7
31 December
Old Mutual Group
Tier 23
1.1
20161
Solvency II own funds (£bn)
6.8
Total Group Solvency II own funds
Tier 12
5.7
Tier 23
1.1
1 As reported to the PRA as part of the Annual 2016 Solvency II submission.
6.8
Total Group Solvency II own funds
2 All Tier 1 capital is unrestricted for tiering purposes
3 Comprises subordinated debt grandfathered under Solvency II and, at 31 December
1 As reported to the PRA as part of the Annual 2016 Solvency II submission.
2016, Solvency II compliant subordinated debt.
2 All Tier 1 capital is unrestricted for tiering purposes
3 Comprises subordinated debt grandfathered under Solvency II and, at 31 December
The Group SCR is covered by Tier 1 capital, which represents
117% of the Group SCR of £6.2 billion. Tier 1 capital represents
95% of Group Solvency II own funds. Tier 2 capital, comprising plc
The Group SCR is covered by Tier 1 capital, which represents
holding company debt, represents 5% of Group Solvency II own
117% of the Group SCR of £6.2 billion. Tier 1 capital represents
funds and 26% of Group surplus.
95% of Group Solvency II own funds. Tier 2 capital, comprising plc
holding company debt, represents 5% of Group Solvency II own
Solvency II capital in comparison to IFRS equity
funds and 26% of Group surplus.
The table below presents the reconciliation of differences between
Solvency II capital in comparison to IFRS equity
IFRS equity net of NCI and Solvency II own funds (post restriction).
The table below presents the reconciliation of differences between
31 December
IFRS compared to Solvency II own
IFRS equity net of NCI and Solvency II own funds (post restriction).
2016
funds (£bn)
7.9
IFRS equity attributable to equity
31 December
IFRS compared to Solvency II own
holders of the parent1
2016
funds (£bn)
Removal of goodwill and other
7.9
IFRS equity attributable to equity
intangibles (net of NCI)2
(2.9)
holders of the parent1
Restatement of technical provisions3
2.6
Removal of goodwill and other
Inclusion of Old Mutual plc
intangibles (net of NCI)2
(2.9)
subordinated debt4
1.1
Restatement of technical provisions3
2.6
Other5
(0.1)
Inclusion of Old Mutual plc
Fungibility restriction6
(1.8)
subordinated debt4
1.1
6.8
Total Group Solvency II own funds
Other5
(0.1)
Fungibility restriction6
(1.8)
1 Refer to note 2 on page 19.
6.8
Total Group Solvency II own funds
2 Goodwill and other intangibles are recognised under IFRS, however, they are deemed
31 December
2017
8.1
31 December
2017
8.1
(2.2)
2.7
(2.2)
0.4
2.7
0.3
(1.6)
0.4
7.7
0.3
(1.6)
7.7
2016, Solvency II compliant subordinated debt.
inadmissible for regulatory purposes.
1 Refer to note 2 on page 19.
3 Solvency II uses a best estimate liability basis to measure insurance liabilities which
2 Goodwill and other intangibles are recognised under IFRS, however, they are deemed
recognises future earnings within the liabilities and results in an increase in own funds.
inadmissible for regulatory purposes.
This is partially offset by the recognition of the risk margin which replaces prudential
3 Solvency II uses a best estimate liability basis to measure insurance liabilities which
margins allowed for in IFRS insurance liabilities and deferred tax adjustments.
recognises future earnings within the liabilities and results in an increase in own funds.
4 Old Mutual plc subordinated debt comprises Tier 2 debt instruments in Old Mutual plc
This is partially offset by the recognition of the risk margin which replaces prudential
that qualify towards the Group’s Solvency II capital position.
margins allowed for in IFRS insurance liabilities and deferred tax adjustments.
5 Includes removal of IFRS deferred acquisition costs and deferred revenue, sectoral
4 Old Mutual plc subordinated debt comprises Tier 2 debt instruments in Old Mutual plc
adjustments for non-insurance entities, out of scope entity adjustments and inclusion
that qualify towards the Group’s Solvency II capital position.
of OMEM subordinated debt and Old Mutual plc shares held on behalf of policyholder
5 Includes removal of IFRS deferred acquisition costs and deferred revenue, sectoral
funds. At 31 December 2016 includes the de-recognition of the Perpetual Preferred
adjustments for non-insurance entities, out of scope entity adjustments and inclusion
Callable Securities.
of OMEM subordinated debt and Old Mutual plc shares held on behalf of policyholder
6 Restriction of Nedbank and OMEM’s surplus when applying Solvency II fungibility and
funds. At 31 December 2016 includes the de-recognition of the Perpetual Preferred
transferability rules, restricting entirely the surplus available from these businesses as a
Callable Securities.
result of the exchange controls and demutualisation agreement that apply to remitting
6 Restriction of Nedbank and OMEM’s surplus when applying Solvency II fungibility and
capital from South Africa, plus small amounts relating to OMW and OMB. There has
transferability rules, restricting entirely the surplus available from these businesses as a
been a presentation change relating to the OMW asset management entities at 31
result of the exchange controls and demutualisation agreement that apply to remitting
December 2017, with the previous fungibility restriction now incorporated in the SCR.
capital from South Africa, plus small amounts relating to OMW and OMB. There has
been a presentation change relating to the OMW asset management entities at 31
December 2017, with the previous fungibility restriction now incorporated in the SCR.
20
46
46
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Solvency II sensitivities
The table below presents the estimated sensitivity of the Group Solvency II ratio under certain standard financial stresses, which are
defined by reasonably possible individual movements in key market parameters, while keeping all other parameters constant. The effects
impact both the own funds and capital requirements and consequently the Group Solvency II ratio. In addition we have included a non-
financial stress assuming 10% of our insurance business lapses immediately.
Group Solvency II capital ratio at 31 December 2017 (£bn)
Base Solvency II position
Equity markets fall by 25%
Impact of 10% of business lapsing immediately1
Interest rates rise by 100 basis points
Credit spreads increase by 100 basis points
ZAR:GBP exchange rate increases by 30% (R22:£1)
ZAR:GBP exchange rate decreases by 10% (R15:£1)
1 Insurance business lapse sensitivity for OMW and OMEM only.
Capital
Requirements
6.2
6.0
6.0
6.2
6.2
5.1
6.8
Surplus Group ratio
123%
124%
123%
123%
123%
129%
121%
1.5
1.4
1.4
1.4
1.4
1.5
1.5
Restricted
surplus
1.6
1.4
1.6
1.6
1.5
1.3
1.8
Solvency of individual businesses
Our individual businesses retain strong and resilient local statutory cover and have sufficient capital to support normal trading operations
and withstand regulatory and internal stress scenarios. The balance sheets, including action undertaken after 31 December 2017, will
deliver appropriately capitalised standalone businesses to the market. The individual entity balance sheets are described in their
respective Business Reviews.
Post year end transactions and development of Residual plc
The narrative within this section includes forward looking estimates of the Residual plc and future potential developments of other Group
companies. These estimates are based on assumptions regarding the steps employed for and timing of the managed separation strategy
which may change in the future. By their nature, forward-looking estimates involve risk and uncertainty because they relate to future
events and circumstances which may be beyond Old Mutual plc’s control.
When we unveiled the managed separation strategy in March 2016, we said that we aimed for it to be materially complete by the end of
2018. We are on track to deliver the managed separation as planned. These processes are, by their nature, unpredictable and therefore
the outcome and timing cannot be guaranteed.
On 13 March 2018, Old Mutual plc announced that The Travelers Companies Inc. and St Pauls Fire and Marine Insurance Company have
lodged a claim in the United States District Court for the Southern District of New York in relation to pre-existing plc Head Office legacy
items relating to previously disposed businesses.
The Group believes that this action is without merit and it will be resisted accordingly.
Details of events after the reporting date are provided in Note J8 of the Old Mutual plc Financial Statements.
Proforma 31 December 2017 Residual plc IFRS Net Asset Value
As part of the allocation of assets and liabilities of the current Old Mutual plc holding company a number of transactions have taken place
since 31 December 2017.
On 31 January 2018 Old Mutual Wealth acquired the Skandia UK Ltd group of entities from Old Mutual plc. As part of this transaction
£566 million of intercompany indebtedness between Old Mutual Wealth and Old Mutual plc has been equitised.
On 28 February 2018, £200 million of intercompany indebtedness between Old Mutual Wealth and Old Mutual plc was repaid from new
financing arrangements from Old Mutual Wealth. On the same date, the existing £70 million revolving credit facility provided by Old Mutual
plc to Old Mutual Wealth was cancelled.
Outstanding Old Mutual plc Discount Notes held by Old Mutual Bermuda at 31 December 2017 of £23 million ($31 million) were cancelled
on the 28 February 2018. In addition, cash of £44 million ($60 million) was repatriated from the business on the 7 March 2018 following
approval from the Bermuda Monetary Authority.
21
47
Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Review of financial performance
continued
Review of financial performance
continued
The table below illustrates the impact of these transactions on the 31 December 2017 IFRS net asset value:
Acquisition
of Skandia
UK Ltd by
Acquisition
OMW and
of Skandia
equitizing
UK Ltd by
i/co loan
OMW and
(11)
equitizing
i/co loan
(582)
(11)
The table below illustrates the impact of these transactions on the 31 December 2017 IFRS net asset value:
Proforma
31
December
Proforma
2017
31
773
December
6
2017
−
773
(461)
6
77
−
395
(461)
57
77
452
395
57
452
Repayment of
£200m OMW
intercompany
Repayment of
loan
£200m OMW
200
intercompany
loan
(200)
200
Distribution
of OM
Bermuda
Distribution
surplus
of OM
44
Bermuda
surplus
23
44
−
−
−
(574)
(200)
−
19
(574)
(574)
19
(582)
(574)
23
67
(67)
−
67
(67)
−
31 December
2017
540
31 December
6
2017
759
540
(461)
6
58
759
902
(461)
124
58
1,026
902
124
1,026
(£m)
Cash
Seed investments
(£m)
Net intercompany funding
Cash
Third party debt
Seed investments
Net sundry debtors
Net intercompany funding
Plc Head Office NAV
Third party debt
OM Bermuda
Net sundry debtors
Residual plc NAV
Plc Head Office NAV
OM Bermuda
Residual plc NAV
Impact of managed separation on Residual plc
As part of the managed separation it is proposed that certain remaining operating subsidiaries of Old Mutual plc are transferred to a new
South African holding company of the group, Old Mutual Limited. The steps implementing this transfer are anticipated to include a court
Impact of managed separation on Residual plc
approved reduction in capital of Old Mutual plc which will augment distributable reserves for Old Mutual plc. After these steps Old Mutual
As part of the managed separation it is proposed that certain remaining operating subsidiaries of Old Mutual plc are transferred to a new
plc will have no on-going businesses and none of the operating companies in the current Old Mutual group will be direct or indirect
South African holding company of the group, Old Mutual Limited. The steps implementing this transfer are anticipated to include a court
subsidiaries. Old Mutual plc will need to satisfy the court that it will continue to hold sufficient high quality liquid assets to meet its liabilities
approved reduction in capital of Old Mutual plc which will augment distributable reserves for Old Mutual plc. After these steps Old Mutual
and deal with any contingencies, plus adequate headroom, taking into account relevant insurances. The assets within Old Mutual plc are
plc will have no on-going businesses and none of the operating companies in the current Old Mutual group will be direct or indirect
expected to largely consist of sterling denominated high quality fixed income securities and cash or near cash instruments to match the
subsidiaries. Old Mutual plc will need to satisfy the court that it will continue to hold sufficient high quality liquid assets to meet its liabilities
maturity profile of the debt obligations. The speed of release of any surplus from Old Mutual plc is anticipated to be at the discretion of the
and deal with any contingencies, plus adequate headroom, taking into account relevant insurances. The assets within Old Mutual plc are
UK court in the context of the reduction of capital.
expected to largely consist of sterling denominated high quality fixed income securities and cash or near cash instruments to match the
maturity profile of the debt obligations. The speed of release of any surplus from Old Mutual plc is anticipated to be at the discretion of the
The separation of Quilter is expected to involve the listing and the distribution of 86.6% of the total issued share capital of Quilter to
UK court in the context of the reduction of capital.
Old Mutual plc Shareholders, as well as the expected divestment of up to 9.6% of its total issued share capital. The remaining 3.8% of
the total issued share capital of Quilter is held by a JSOP Trustee and will continue to be held by a JSOP Trustee after such distribution.
The separation of Quilter is expected to involve the listing and the distribution of 86.6% of the total issued share capital of Quilter to
The proceeds from the expected divestment, or residual shares owned if any, would be retained within Residual plc.
Old Mutual plc Shareholders, as well as the expected divestment of up to 9.6% of its total issued share capital. The remaining 3.8% of
the total issued share capital of Quilter is held by a JSOP Trustee and will continue to be held by a JSOP Trustee after such distribution.
Future Development of Residual plc NAV
The proceeds from the expected divestment, or residual shares owned if any, would be retained within Residual plc.
As part of the managed separation the Residual plc, which had an IFRS net asset value of £452 million on a proforma basis at 31 December
2017, will become a subsidiary of Old Mutual Limited.
Future Development of Residual plc NAV
As part of the managed separation the Residual plc, which had an IFRS net asset value of £452 million on a proforma basis at 31 December
As at 31 December 2017 the Old Mutual plc holding company debt obligations comprised two fixed interest debt instruments. The first is a
2017, will become a subsidiary of Old Mutual Limited.
Tier 2 debt maturing in June 2021 paying a coupon of 8%, with an IFRS book value of £400 million and nominal value of £341 million. The
coupon on the debt is circa £27 million per annum on the current outstanding amount. The second is Tier 2 debt maturing in November
As at 31 December 2017 the Old Mutual plc holding company debt obligations comprised two fixed interest debt instruments. The first is a
2025 paying a coupon of 7.875%, with an IFRS book value and nominal value of £61 million. The coupon on the debt is circa £5 million
Tier 2 debt maturing in June 2021 paying a coupon of 8%, with an IFRS book value of £400 million and nominal value of £341 million. The
per annum on the current outstanding amount. On the adoption of IFRS 9, effective from 1 January 2018, the Group has elected to
coupon on the debt is circa £27 million per annum on the current outstanding amount. The second is Tier 2 debt maturing in November
designate this bond as Fair Value through Profit and Loss.
2025 paying a coupon of 7.875%, with an IFRS book value and nominal value of £61 million. The coupon on the debt is circa £5 million
per annum on the current outstanding amount. On the adoption of IFRS 9, effective from 1 January 2018, the Group has elected to
We will continue to evaluate the merits of repurchasing and redeeming outstanding Old Mutual plc debt, taking account of our risk
designate this bond as Fair Value through Profit and Loss.
appetite, regulatory constraints and other stakeholders.
We will continue to evaluate the merits of repurchasing and redeeming outstanding Old Mutual plc debt, taking account of our risk
Old Mutual plc will continue to incur corporate costs in 2018 until the existing plc Head Office closes. Corporate costs before recharges are
appetite, regulatory constraints and other stakeholders.
estimated to be circa £50 million in 2018. Significantly reduced recurring plc Head Office corporate costs are anticipated beyond 2018,
on the basis that the majority of plc Head Office operations are expected to have ceased by December 2018.
Old Mutual plc will continue to incur corporate costs in 2018 until the existing plc Head Office closes. Corporate costs before recharges are
estimated to be circa £50 million in 2018. Significantly reduced recurring plc Head Office corporate costs are anticipated beyond 2018,
The total one-off costs associated with the wind-down of the plc Head Office are expected to be at the upper end of the £50 million to £65
on the basis that the majority of plc Head Office operations are expected to have ceased by December 2018.
million range that we originally estimated in the 2016 Preliminary Results announcement. At 31 December 2017 the plc Head Office had
incurred £39 million of these wind down costs. We expect the majority of the remaining costs to be incurred in 2018.
The total one-off costs associated with the wind-down of the plc Head Office are expected to be at the upper end of the £50 million to £65
million range that we originally estimated in the 2016 Preliminary Results announcement. At 31 December 2017 the plc Head Office had
incurred £39 million of these wind down costs. We expect the majority of the remaining costs to be incurred in 2018.
22
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Total one-off advisory costs are estimated to be at least £100 million, as communicated at the 2016 Preliminary Results. Total costs
incurred as at 31 December 2017 were £52 million. Of the estimated £48 million still to be incurred, approximately £40 million will be
incurred by the plc Head Office, largely during 2018.
In addition to the wind-down and advisory costs referred to above, one-off transaction costs will be incurred by the plc Head Office in
relation to the managed separation. We estimate these costs to be in the range of £15 million to £20 million, excluding any additional costs
associated with the intended secondary offering of Quilter. Transaction costs will be deducted from proceeds, where possible, in line with
accounting policies and past practices.
At the 2016 Preliminary Results announcement we estimated £130 million would be incurred to accelerate the resolution of pre-existing
Head Office items over the duration of the managed separation. This estimate is subject to addressing any remaining issues. As at
31 December 2017 £90 million had been incurred.
The obligations of OM Bermuda are running off, with the majority of the policies underlying the reinsurance obligations due to mature in
the first half of 2018. The business will wind-up activities during 2018 with the remittance of surplus to Old Mutual plc, subject to the
relevant regulatory approvals.
The second interim dividend of 3.57 pence per share will be paid on 30 April 2018. The cost of this dividend will be £175 million, of which
circa £120 million will be funded from dividends received from OMEM and Nedbank during 2018, net of our hedging activities.
Performance measures
In line with statutory reporting requirements we report profits assessed on an IFRS basis. Consistent with last year, we complement IFRS
reporting with additional disclosure on various alternative performance measures (APMs).
APMs are not defined by the relevant financial reporting framework (which for the Group is IFRS), but we use them to provide greater
insight to the financial performance, financial positions and cash flows of the Group and the way it is managed.
Old Mutual plc
Summary information about the key APMs used by the consolidated Group in our financial review is provided in the following table.
APM
Adjusted Operating
Profit (AOP)
Definition
AOP is a normalised profit measure to reflect the underlying operating profit of the Group. It
therefore adjusts IFRS profit for the impact of acquisitions and disposals; short-term fluctuations and
IFRS accounting treatments that do not fairly reflect the economics of our operations. In addition,
AOP excludes the results of non-core operations.
The calculation of AOP adjusts the IFRS profit for a number of items as detailed in note C1 in the
financial statements.
Due to the nature of the Group’s businesses, AOP is an appropriate alternative basis by which to
assess the underlying operating results. It enhances the comparability and understanding of the
financial performance of the Group.
Adjusted Operating
Earnings per Share (EPS)
Adjusted Operating EPS is calculated as post-tax adjusted operating profit divided by the adjusted
weighted average number of shares (WANS) held by our investors.
The calculation of Adjusted EPS is detailed in note C2 in the financial statements.
Adjusted Operating EPS is an indicator of our profitability that measures how much we earn for each
share held.
Adjusted Return on
Equity (ROE)
Adjusted ROE is calculated as AOP (post-tax and NCI) divided by average ordinary shareholders'
equity excluding the perpetual preferred callable securities, non-core operations and the decrease
in value of equity due to treasury shares held within consolidated investment funds.
It is a measure of the return generated for shareholders over the reporting period.
Adjusted Plc NAV per
ordinary share (ANAV)
The ANAV uses a MCEV valuation basis for OMEM covered business and the UK Heritage
business in OMW as well as the market value of listed subsidiaries and plc Head Office debt.
Other businesses and other assets are generally included at IFRS net asset value.
ANAV provides an alternative measure to indicate the value of Old Mutual plc.
Constant currency
Constant currency figures are calculated by translating local currency prior-period figures at the
prevailing exchange rates for the period under review.
The exchange rates used to translate the operating results, assets and liabilities of key foreign
business segments to pounds sterling are provided in note A1 in the financial statement.
This measure eliminates the effects of exchange rate fluctuations when calculating financial
performance numbers for various periods.
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Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Review of financial performance
continued
Review of financial performance
continued
Old Mutual Emerging Markets
The following APMs are used by OMEM to provide greater insight into the financial performance, financial position and cash flows of the
Group and the way it is managed. Metrics to be used by Old Mutual Limited following the completion of the managed separation are
Old Mutual Emerging Markets
detailed in the OMEM business review.
The following APMs are used by OMEM to provide greater insight into the financial performance, financial position and cash flows of the
Group and the way it is managed. Metrics to be used by Old Mutual Limited following the completion of the managed separation are
APM
detailed in the OMEM business review.
Free surplus generation
Definition
OMEM’s free surplus generation provides additional information on the cash generation of the
business that is available for reinvestment or distribution to shareholders. It is calculated in respect of
Definition
covered business using the free surplus component of MCEV earnings and for non-covered business
OMEM’s free surplus generation provides additional information on the cash generation of the
as AOP post-tax and NCI adjusted for short-term fluctuations in investment return and movements in
business that is available for reinvestment or distribution to shareholders. It is calculated in respect of
required capital for Property and Casualty business.
covered business using the free surplus component of MCEV earnings and for non-covered business
Gross cash flows received from customers during the period by Group businesses engaged in Life
as AOP post-tax and NCI adjusted for short-term fluctuations in investment return and movements in
and Savings and Asset Management.
required capital for Property and Casualty business.
The sum of new business recurring premiums (annualised) and 10% of the new single premiums
Gross cash flows received from customers during the period by Group businesses engaged in Life
written in an annual reporting period. It is a standardised measure of the volume of new life insurance
and Savings and Asset Management.
business written.
The sum of new business recurring premiums (annualised) and 10% of the new single premiums
The difference between gross flows and cash returned to customers (e.g. claims, surrenders,
written in an annual reporting period. It is a standardised measure of the volume of new life insurance
maturities) during the period.
business written.
APM
Free surplus generation
Gross flows
Life APE sales
Gross flows
Life APE sales
Net client cash flows (NCCF)
Funds Under Management
Net client cash flows (NCCF)
VNB
Funds Under Management
The total market value of funds managed by OMEM at the point at which funds flow into OMEM.
The difference between gross flows and cash returned to customers (e.g. claims, surrenders,
maturities) during the period.
The discounted value of expected future profits arising from new life insurance business sold in the
reporting period.
The total market value of funds managed by OMEM at the point at which funds flow into OMEM.
VNB margin
VNB margin
VNB
VNB divided by present value of new business premiums ("PVNBP"), where PVNBP is the discounted
The discounted value of expected future profits arising from new life insurance business sold in the
value of expected future life insurance premiums from new recurring premium business, plus 100% of
reporting period.
new single premiums. It reflects how much future profit is expected from each future life insurance
VNB divided by present value of new business premiums ("PVNBP"), where PVNBP is the discounted
premium and therefore measures the profitability of new business sold.
value of expected future life insurance premiums from new recurring premium business, plus 100% of
Gross written premiums (GWP) The value of premiums that a property and casualty insurer is entitled to receive from its insurance
new single premiums. It reflects how much future profit is expected from each future life insurance
business in a period before adjustments for reinsurance premiums. It is a measure of sales
premium and therefore measures the profitability of new business sold.
performance in Group businesses engaged in Property and Casualty
Gross written premiums (GWP) The value of premiums that a property and casualty insurer is entitled to receive from its insurance
Underwriting margin
Underwriting result as a percentage of net premiums earned. It is calculated for the property and
business in a period before adjustments for reinsurance premiums. It is a measure of sales
casualty insurance businesses across OMEM.
performance in Group businesses engaged in Property and Casualty
Loans and advances
Underwriting margin
Net lending margin
Loans and advances
Net lending margin
The balance of gross loans and advances for Group businesses engaged in Banking and Lending.
Underwriting result as a percentage of net premiums earned. It is calculated for the property and
The amounts are gross of impairments on all performing, arrears and default loans.
casualty insurance businesses across OMEM.
Net interest income plus non-interest revenue minus credit losses, as a percentage of average loans
The balance of gross loans and advances for Group businesses engaged in Banking and Lending.
and advances over the period
The amounts are gross of impairments on all performing, arrears and default loans.
Net interest income plus non-interest revenue minus credit losses, as a percentage of average loans
and advances over the period
24
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Nedbank
The key APMs used by Nedbank within their business review are detailed below:
APM
Headline Earnings per
Share (HEPS)
Definition
Headline Earnings is calculated with reference to Circular 2/2015 issued by the South African
Institute
of Chartered Accountants. Headline earnings is a way of dividing the IFRS reported profit between
re-measurements that are more closely aligned to the operating/trading activities of the entity, and
the platform used to create those results.
Headline Earnings is an earnings measure that is required by the South African listing authorities.
It provides a basis to compare South African listed peers.
Efficiency Ratio
Calculated as total expenses divided by the sum of net interest income and non-interest revenue.
The Efficiency Ratio measures the expense efficiency of the business.
Liquidity Coverage Ratio
The Liquidity Coverage Ratio (LCR) aims to ensure that a bank holds adequate unencumbered
High Quality Liquid Assets to cover total net cash outflows over a 30-day period under a
prescribed stress scenario.
It provides a view of the short-term resilience of the liquidity risk profile of banks.
Economic Profit
Calculated as headline earnings less the cost of equity. The cost of equity is calculated as the
average ordinary shareholders equity (excluding goodwill) multiplied by the cost of equity.
It is a measure of the entity’s ability to generate earnings in excess of the economic cost of the
capital contributed.
Detail on Nedbank’s results and their APMs are available on the website: www.nedbankgroup.co.za
Old Mutual Wealth
The key APMs used by Old Mutual Wealth within the financial review are:
Normalised operating
profit pre-tax
The difference between total income and total operating costs. Excludes non-operational items,
such as one-off gains or losses from the sale of assets or acquisition costs as per Operating profit
with additional normalisation adjustments.
Revenue Margin
Operating margin
It is used to provide users of the financial statements greater insight into the long-term earning
ability of the OMW current business on a comparable basis.
Represents net management fee, including policyholder tax divided by average Assets under
Management & Administration (AUMA).
Represents reported operating profit from continuing operations divided by total revenue, including
policyholder tax and adviser fees. Operating margin excludes financing costs.
An efficiency measure that allows users of our financial statements to assess what percentage of
net revenues that become operating profit.
Net Client Cash Flows (NCCF)
The difference between money received from and returned to customers during the relevant
period for the Group (excluding Quilter Life Assurance) or for the business indicated.
This measure is a lead indicator of reported net revenue.
Integrated net inflows
Total NCCF that has flowed through two or more segments within OMW.
It is a lead indicator of revenue generation driven by an integrated business model.
Assets under Management
& Administration (AUMA)
Represents the total market value of all financial assets managed and administered on behalf of
customers as at 31 December of the financial year.
Average AuMA
Represents the average total market value of all financial assets managed and administrated on
behalf of customers during the financial year ended 31 December. Average AuMA is calculated
using a 13-point average of monthly closing AuMA.
Net Management Fee
Consists of revenue generated from AuMA, fixed fee revenues and policyholder tax contributions,
netted off by trail commissions payable.
Other Revenue
Represents revenue not directly linked to AuMA (e.g. encashment charges, risk result, adviser
initial fees and adviser fees linked to AuMA in Quilter Financial Planning (recurring fees)).
25
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Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Old Mutual plc
Annual Report and Accounts 2017
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Emerging Markets review
Old Mutual Emerging Markets review
Old Mutual Emerging Markets review
Our business remains highly cash generative, with a robust
Our business remains highly cash generative, with a robust
balance sheet and liquidity position, as well as a high quality capital
balance sheet and liquidity position, as well as a high quality capital
base. The estimated OMLAC(SA) SAM solvency ratio for 2017 was
base. The estimated OMLAC(SA) SAM solvency ratio for 2017 was
Our business remains highly cash generative, with a robust
strong at 243%, subject to regulatory approval. We are well-
strong at 243%, subject to regulatory approval. We are well-
balance sheet and liquidity position, as well as a high quality capital
positioned in the right markets to drive added value from our
positioned in the right markets to drive added value from our
base. The estimated OMLAC(SA) SAM solvency ratio for 2017 was
franchises, deliver sustainable profit growth and returns for our
franchises, deliver sustainable profit growth and returns for our
strong at 243%, subject to regulatory approval. We are well-
shareholders as well as creating economic value for all our
shareholders as well as creating economic value for all our
positioned in the right markets to drive added value from our
stakeholders.
stakeholders.
franchises, deliver sustainable profit growth and returns for our
shareholders as well as creating economic value for all our
It has been a busy period as we prepare for the listing of Old
It has been a busy period as we prepare for the listing of Old
stakeholders.
Mutual Limited (OML). As it relates to Nedbank, we have agreed
Mutual Limited (OML). As it relates to Nedbank, we have agreed
the heads of terms in the new relationship agreement with
the heads of terms in the new relationship agreement with
It has been a busy period as we prepare for the listing of Old
Nedbank, which is expected to be finalised and executed in the
Nedbank, which is expected to be finalised and executed in the
Mutual Limited (OML). As it relates to Nedbank, we have agreed
coming weeks. OML will be retaining a shareholding of 19.9% in
coming weeks. OML will be retaining a shareholding of 19.9% in
the heads of terms in the new relationship agreement with
its shareholder funds, and it intends to distribute the remaining
its shareholder funds, and it intends to distribute the remaining
Nedbank, which is expected to be finalised and executed in the
shareholding in Nedbank to its future OML shareholders within
shareholding in Nedbank to its future OML shareholders within
coming weeks. OML will be retaining a shareholding of 19.9% in
approximately six months of the listing. We also reached
approximately six months of the listing. We also reached
its shareholder funds, and it intends to distribute the remaining
agreement with the Economic Development Department regarding
agreement with the Economic Development Department regarding
shareholding in Nedbank to its future OML shareholders within
three critical public interest issues: enterprise and supplier
three critical public interest issues: enterprise and supplier
approximately six months of the listing. We also reached
development, employment within our ecosystem and BEE
development, employment within our ecosystem and BEE
agreement with the Economic Development Department regarding
ownership.
ownership.
three critical public interest issues: enterprise and supplier
development, employment within our ecosystem and BEE
Our Pre-Listing Statement will provide more information about the
Our Pre-Listing Statement will provide more information about the
ownership.
OML Group, including its investment case, historic performance
OML Group, including its investment case, historic performance
and associated risks.
and associated risks.
Our Pre-Listing Statement will provide more information about the
OML Group, including its investment case, historic performance
OML will be targeting compounded annual growth (CAGR) in our
OML will be targeting compounded annual growth (CAGR) in our
and associated risks.
Results from Operations of Nominal GDP + 2% over the three
Results from Operations of Nominal GDP + 2% over the three
years to 2020 and a sustainable Return on Net Asset Value at our
years to 2020 and a sustainable Return on Net Asset Value at our
OML will be targeting compounded annual growth (CAGR) in our
average cost of equity (CoE) + 4%. To support this, we have also
average cost of equity (CoE) + 4%. To support this, we have also
Results from Operations of Nominal GDP + 2% over the three
launched a cost efficiency leadership programme designed to
launched a cost efficiency leadership programme designed to
years to 2020 and a sustainable Return on Net Asset Value at our
deliver R1.0 billion of pre-tax run-rate cost savings by the end of
deliver R1.0 billion of pre-tax run-rate cost savings by the end of
average cost of equity (CoE) + 4%. To support this, we have also
2019, net of costs to achieve this.
2019, net of costs to achieve this.
launched a cost efficiency leadership programme designed to
deliver R1.0 billion of pre-tax run-rate cost savings by the end of
Exciting opportunities lie ahead for us as an independently listed
Exciting opportunities lie ahead for us as an independently listed
2019, net of costs to achieve this.
business and we look forward to contributing to the societies in
business and we look forward to contributing to the societies in
which we operate.
which we operate.
Exciting opportunities lie ahead for us as an independently listed
business and we look forward to contributing to the societies in
Peter Moyo
Peter Moyo
which we operate.
OMEM CEO, and OML CEO-designate
OMEM CEO, and OML CEO-designate
March 2018
March 2018
Peter Moyo
OMEM CEO, and OML CEO-designate
March 2018
Peter Moyo
Peter Moyo
OMEM CEO, and OML CEO-designate
OMEM CEO, and OML CEO-designate
Peter Moyo
Peter Moyo
OMEM CEO, and OML CEO-designate
OMEM CEO, and OML CEO-designate
A resilient performance in a tough environment
A resilient performance in a tough environment
I am very pleased with how well our business has performed
I am very pleased with how well our business has performed
despite the tough economic and political environment. Consumer
despite the tough economic and political environment. Consumer
A resilient performance in a tough environment
spending in South Africa has been constrained by both modest
spending in South Africa has been constrained by both modest
I am very pleased with how well our business has performed
increases in disposable income and consumer efforts to address
increases in disposable income and consumer efforts to address
despite the tough economic and political environment. Consumer
their level of indebtedness. Further, business confidence was
their level of indebtedness. Further, business confidence was
spending in South Africa has been constrained by both modest
dampened by the foreign and local currency credit rating
dampened by the foreign and local currency credit rating
increases in disposable income and consumer efforts to address
downgrade and political uncertainty.
downgrade and political uncertainty.
their level of indebtedness. Further, business confidence was
dampened by the foreign and local currency credit rating
Over the year, we focused on executing on our strategic priorities
Over the year, we focused on executing on our strategic priorities
downgrade and political uncertainty.
and on the eight battlegrounds underpinning them to drive
and on the eight battlegrounds underpinning them to drive
sustainable profit growth and tight management of our expenses.
sustainable profit growth and tight management of our expenses.
Over the year, we focused on executing on our strategic priorities
We are also re-engineering our businesses to meet changing
We are also re-engineering our businesses to meet changing
and on the eight battlegrounds underpinning them to drive
customer demands and developing new forms of distribution.
customer demands and developing new forms of distribution.
sustainable profit growth and tight management of our expenses.
We are also re-engineering our businesses to meet changing
We delivered pre-tax AOP of R13.3 billion, up 5% on the prior year,
We delivered pre-tax AOP of R13.3 billion, up 5% on the prior year,
customer demands and developing new forms of distribution.
following exceptional growth in Old Mutual Insure and our Rest of
following exceptional growth in Old Mutual Insure and our Rest of
Africa segment. IFRS profits (post-tax and non-controlling interest)
Africa segment. IFRS profits (post-tax and non-controlling interest)
We delivered pre-tax AOP of R13.3 billion, up 5% on the prior year,
of R10.2 billion were up 46% due to profits arising from the disposal
of R10.2 billion were up 46% due to profits arising from the disposal
following exceptional growth in Old Mutual Insure and our Rest of
of our joint venture with Kotak Mahindra Bank in India of R1.4
of our joint venture with Kotak Mahindra Bank in India of R1.4
Africa segment. IFRS profits (post-tax and non-controlling interest)
billion and higher actual investment returns of R5.2 billion (2016:
billion and higher actual investment returns of R5.2 billion (2016:
of R10.2 billion were up 46% due to profits arising from the disposal
R2.4 billion) mainly in South Africa and Zimbabwe. Zimbabwean
R2.4 billion) mainly in South Africa and Zimbabwe. Zimbabwean
of our joint venture with Kotak Mahindra Bank in India of R1.4
equity markets remain volatile, having fallen by more than 10% in
equity markets remain volatile, having fallen by more than 10% in
billion and higher actual investment returns of R5.2 billion (2016:
the first two months of 2018.
the first two months of 2018.
R2.4 billion) mainly in South Africa and Zimbabwe. Zimbabwean
equity markets remain volatile, having fallen by more than 10% in
The 2017 financial year was a tale of two halves for our business,
The 2017 financial year was a tale of two halves for our business,
the first two months of 2018.
with good growth in gross flows in the Mass and Foundation
with good growth in gross flows in the Mass and Foundation
Cluster, Wealth and Investments and in Latin America during the
Cluster, Wealth and Investments and in Latin America during the
The 2017 financial year was a tale of two halves for our business,
second half of 2017. We delivered full year NCCF of R14.5 billion.
second half of 2017. We delivered full year NCCF of R14.5 billion.
with good growth in gross flows in the Mass and Foundation
Particularly pleasing was the Wealth and Investments NCCF of
Particularly pleasing was the Wealth and Investments NCCF of
Cluster, Wealth and Investments and in Latin America during the
R14.1 billion, compared to R1.8 billion at the half year. This
R14.1 billion, compared to R1.8 billion at the half year. This
second half of 2017. We delivered full year NCCF of R14.5 billion.
contributed to our funds under management closing at an
contributed to our funds under management closing at an
Particularly pleasing was the Wealth and Investments NCCF of
impressive R1.2 trillion.
impressive R1.2 trillion.
R14.1 billion, compared to R1.8 billion at the half year. This
contributed to our funds under management closing at an
impressive R1.2 trillion.
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Old Mutual plc Annual Report and Accounts 2017
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Old Mutual plc
Annual Report and Accounts 2017
Key financial indicators (Rm)
IFRS profit (post-tax and NCI)1
AOP (pre-tax and NCI)1
Adjusted Return on Equity (%)2
Free surplus conversion (%)3
OMLAC(SA) SAM solvency ratio
(%)4
2016
2017
10,210
13,326
20.6%
74%
Restated % change
46%
5%
(1.0%)
18%
6,999
12,731
21.6%
56%
243%
n/a
−
1 IFRS profit and AOP for 2016 were restated to include the actual and long-term
investment return (LTIR) on shareholder assets above the capital requirement
previously reflected in the Old Mutual plc. The impacts on AOP and IFRS profit
were R398 million and R173 million respectively
2 Adjusted return on equity is AOP (post-tax and NCI) divided by average IFRS
shareholder equity
3 Free surplus conversion is free surplus generated divided by AOP (post tax and NCI).
Free surplus generated now reflects changes in the capital requirements of non-
insurance businesses as well as fungibility considerations. Comparatives have
therefore been restated
4 Pro-forma at 31 December 2017. The Standard Formula allows for, subject to
regulatory approval, certain methodology elections to be made. The estimated SAM
solvency positions are presented on the basis of the Group’s preferred methodology
which will, once the SAM framework is implemented, be formally presented for
Regulatory approval. This is based on our current shareholding in Nedbank.
The new operating model and fundamental multi-year transformation
of the finance function will commence with the introduction of new
cost, customer and capital allocation methodologies from 2018.
We believe that this will better reflect the economics of each of
the operational segments going forward. However, year-on-year
comparability of segmental performance in 2018 and 2019 will
be affected, albeit with no impact on the overall Group results.
We also announced the appointment of Casper Troskie as the
Finance Director of OMEM (and Finance Director-designate of
OML) effective 1 April 2018. His broad financial services expertise
and experience in the listed environment will be crucial to the
business as we prepare for the listing of OML.
During the year, a new Wealth & Investments segment was
established. This segment comprises Old Mutual Investment
Group and Old Mutual Wealth (South Africa), which previously
formed part of the Retail Affluent segment. Personal Finance,
which was the other part of Retail Affluent, is now managed
as a standalone segment.
Strategic overview
Our vision is to become our customers' most trusted partner and to
help them reach their financial goals. This is underpinned by our
ambition to become a premium financial services group in sub-
Saharan Africa.
We completed the sale of the 26% shareholding in Kotak Mahindra
Old Mutual Life Insurance in India, for net proceeds to Old Mutual
plc of circa.R2.4 billion (£138 million). We also completed the
transfer of the international branches of OMLAC(SA) that were
previously reported in Old Mutual Wealth (United Kingdom) to align
the reporting with the ownership structure.
To deliver value in the medium term, our priorities are focused
on consolidating and growing our position in markets in which we
operate; improving key underperforming businesses; and building
long-term competitive advantage. These priorities are defined
through our eight battlegrounds:
Defend South African market share in mass market and corporate
Defend and grow in the South African personal finance market
Improve the competitiveness of Wealth and Investments
Continued turnaround of Old Mutual Insure
Turnaround East African business and improve returns across
the Rest of Africa
Win the war for talent
Refresh the technology offering
Cost efficiency leadership
OMEM operates through seven operational segments that
collaborate to serve our customers. We also manage a number
of central activities, assets and liabilities, collectively referred
to as “Other Group Activities”.
We are well-positioned in key sub-Saharan African geographies
across multiple lines of business. Our business has an extensive
product and service offering delivered through our multi-channel
distribution network, with the largest reach compared to our
traditional South African peers.
Key business developments
We have commenced our journey in fundamentally shifting from
being a product-led business to becoming a customer-driven
organisation. To support this change, we have restructured our
leadership and reporting lines by ensuring that all customer-facing
managing directors form part of the Executive Committee. This has
sharpened our operational focus as we improve our customer
service and experience to meet their evolving needs.
We successfully completed our collaboration work with Nedbank
to unlock synergies in excess of R1.0 billion by the end of 2017.
Of this, circa.R0.6 billion accrued to OMEM, and we are fully
committed to working with Nedbank in delivering ongoing
synergistic benefits on an arm’s length basis. Future synergies
will be underpinned by OML’s 19.9% shareholding in Nedbank.
Performance highlights
OMEM delivered resilient earnings growth of 5% in pre-tax
adjusted operating profit (AOP) of R13,326 million. This result
reflects the momentum over the second half of the year as we
continued to make progress on our battlegrounds, despite the
tough macroeconomic environment.
Operating segments contributed R10,974 million to AOP, up 6%
on the prior year. This was driven by the significant improvement
in the underwriting result at Old Mutual Insure (up 290%) and
growth in the Rest of Africa (up 33%). We continued to allocate
central operating costs directly to the segments, such that only
costs incurred for the holding company would be reported centrally.
This resulted in R229 million being allocated directly to the
segments. Consequently, year-on-year segmental performance
is not comparable.
We delivered adjusted Return on Equity (RoE) of 20.6% compared
to 21.6% in the prior year. The decline largely reflects a 10%
increase in the IFRS shareholders’ equity to R46.4 billion following
higher actual investment gains in South Africa and Zimbabwe, and
the profit on disposal of our 26% stake in Kotak. This was partially
offset by the higher income tax expense in the current period. The
OMEM AOP effective tax rate of 27.4% was marginally higher than
26.4% in the prior year, mainly due to an increase in non-deductible
expenditure incurred. This contributed to AOP (post-tax and NCI)
of R9,199 million, which was 2% above the prior year.
27
9
Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Emerging Markets review
continued
Old Mutual Emerging Markets review
continued
Cost efficiency leadership
We continue to focus our efforts on cost optimisation initiatives
across the business. A cost base review was undertaken in the
Cost efficiency leadership
second half of 2017 in order to identify opportunities that enable the
We continue to focus our efforts on cost optimisation initiatives
business to run more efficiently. We are therefore targeting pre-tax
across the business. A cost base review was undertaken in the
run-rate cost savings of R1.0 billion by the end of 2019, net of costs
second half of 2017 in order to identify opportunities that enable the
to achieve this. This will be based on the 2017 underlying IFRS
business to run more efficiently. We are therefore targeting pre-tax
run-rate cost base, and adjusted for inflation and foreign exchange
run-rate cost savings of R1.0 billion by the end of 2019, net of costs
movements over 2018 and 2019.
to achieve this. This will be based on the 2017 underlying IFRS
run-rate cost base, and adjusted for inflation and foreign exchange
The 2017 underlying run-rate cost base of R18.4 billion, is
movements over 2018 and 2019.
adjusted for one-off project costs (e.g. regulatory and IFRS-related
projects) and recurring standalone and listing costs. Below is
The 2017 underlying run-rate cost base of R18.4 billion, is
the reconciliation from underlying IFRS operating and
adjusted for one-off project costs (e.g. regulatory and IFRS-related
administrative expenses:
projects) and recurring standalone and listing costs. Below is
the reconciliation from underlying IFRS operating and
Rbn
administrative expenses:
Underlying IFRS operating and administrative expenses1
One-off project costs (e.g. regulatory, IFRS-related, etc.)
Incremental recurring standalone and listing costs
Rbn
Underlying IFRS operating and administrative expenses1
Underlying IFRS operating and administrative
One-off project costs (e.g. regulatory, IFRS-related, etc.)
expenses on a run-rate basis
Incremental recurring standalone and listing costs
2017
18.8
(0.3)
2017
(0.1)
18.8
(0.3)
18.4
(0.1)
1 Refer to Note D9 of the Old Mutual plc Group Financial Statements for further detail.
Underlying IFRS operating and administrative
expenses on a run-rate basis
18.4
OMEM’s underlying IFRS operating and administrative expenses
1 Refer to Note D9 of the Old Mutual plc Group Financial Statements for further detail.
of R18.8 billion were up 4% on the prior year, below South African
inflation. The growth in expenses largely reflects higher operating
OMEM’s underlying IFRS operating and administrative expenses
costs associated with the expansion of MFCs branch footprint and
of R18.8 billion were up 4% on the prior year, below South African
higher remuneration costs in Old Mutual Insure off a low base in
inflation. The growth in expenses largely reflects higher operating
the prior year. This was partially offset by the tight cost
costs associated with the expansion of MFCs branch footprint and
management initiatives across the business.
higher remuneration costs in Old Mutual Insure off a low base in
the prior year. This was partially offset by the tight cost
As previously indicated, we expect to spend up to R100 million per
management initiatives across the business.
annum in incremental recurring listing costs and between R100
million and R180 million per annum on other incremental recurring
As previously indicated, we expect to spend up to R100 million per
standalone costs. During the year, we incurred R142 million of
annum in incremental recurring listing costs and between R100
recurring standalone and listing costs, including corporate
million and R180 million per annum on other incremental recurring
insurance and costs associated with setting up capabilities for
standalone costs. During the year, we incurred R142 million of
a listed company that previously did not exist, such as Investor
recurring standalone and listing costs, including corporate
Relations. The reported 2017 level of costs do not yet fully reflect
insurance and costs associated with setting up capabilities for
the run-rate of these costs.
a listed company that previously did not exist, such as Investor
Relations. The reported 2017 level of costs do not yet fully reflect
Win the war for talent
the run-rate of these costs.
Our people strategy is focused on attracting, developing and
retaining the best talent available in the market. Our commitment
Win the war for talent
to ensuring diversity and inclusion across the workplace is partly
Our people strategy is focused on attracting, developing and
evidenced through having the most transformed executive
retaining the best talent available in the market. Our commitment
leadership team in South Africa’s insurance industry in terms
to ensuring diversity and inclusion across the workplace is partly
of gender and race.
evidenced through having the most transformed executive
leadership team in South Africa’s insurance industry in terms
Our efforts to establish OMEM as the employer of choice were
of gender and race.
recognised by the Top Employers Institute. OMEM was awarded
the accolade of Number 1 Top Employer in South Africa and
Our efforts to establish OMEM as the employer of choice were
Ghana, and the industry leader in financial services and insurance
recognised by the Top Employers Institute. OMEM was awarded
for the seventh consecutive year in South Africa. Our businesses
the accolade of Number 1 Top Employer in South Africa and
in all thirteen countries in which we operate throughout sub-
Ghana, and the industry leader in financial services and insurance
Saharan Africa were also certified as a Top Employer.
for the seventh consecutive year in South Africa. Our businesses
in all thirteen countries in which we operate throughout sub-
Saharan Africa were also certified as a Top Employer.
Refresh the technology offering
We are continually investing in our technology platforms so as
to maintain the relevance of our customer propositions and to
Refresh the technology offering
continue to meet evolving customer’s needs. The primary focus
We are continually investing in our technology platforms so as
of recent initiatives has been on building protection solutions in
to maintain the relevance of our customer propositions and to
the Mass and Foundation Cluster (MFC) and Personal Finance
continue to meet evolving customer’s needs. The primary focus
segments which are expected to be activated during 2019.
of recent initiatives has been on building protection solutions in
the Mass and Foundation Cluster (MFC) and Personal Finance
To date R1.9 billion has been spent on these initiatives; the
segments which are expected to be activated during 2019.
incremental income statement expense has been in the region of
R300 million per annum, and the remainder has been capitalised.
To date R1.9 billion has been spent on these initiatives; the
incremental income statement expense has been in the region of
As this technology comes on line in 2019, the commencement of
R300 million per annum, and the remainder has been capitalised.
depreciation charges, together with continued IT investment in
further enhancing customer value propositions and developing
As this technology comes on line in 2019, the commencement of
digital and analytics capability, is expected to lead to an increase
depreciation charges, together with continued IT investment in
in the incremental recurring income statement expense. This will
further enhancing customer value propositions and developing
however be tightly managed consistent with our targeted growth
digital and analytics capability, is expected to lead to an increase
and RoNAV objectives.
in the incremental recurring income statement expense. This will
however be tightly managed consistent with our targeted growth
Operating environment
and RoNAV objectives.
Global markets continued on their recovery in 2017, with the US
Federal Reserve signalling its intention to tighten monetary policy
Operating environment
and a weakening of the US dollar. Emerging markets continued
Global markets continued on their recovery in 2017, with the US
to grow faster than developed markets despite economic and
Federal Reserve signalling its intention to tighten monetary policy
political challenges.
and a weakening of the US dollar. Emerging markets continued
to grow faster than developed markets despite economic and
In South Africa, political uncertainty throughout the year contributed
political challenges.
to weaker business and consumer confidence. In November,
Standard & Poor’s downgraded South Africa’s local government
In South Africa, political uncertainty throughout the year contributed
bonds to sub-investment grade following the Medium-Term Budget
to weaker business and consumer confidence. In November,
Policy Statement. However, the year ended on an optimistic note
Standard & Poor’s downgraded South Africa’s local government
following the election of a new ANC president at the December
bonds to sub-investment grade following the Medium-Term Budget
elective conference.
Policy Statement. However, the year ended on an optimistic note
following the election of a new ANC president at the December
Equity markets rallied in the second half of the year, having been
elective conference.
relatively flat in the first half, with the JSE SWIX closing 17.7%
ahead of 2016 at 13,292. Average JSE SWIX market levels were
Equity markets rallied in the second half of the year, having been
up 5.7% on the prior year. The rand closed the year 9.8% up
relatively flat in the first half, with the JSE SWIX closing 17.7%
against the dollar at 12.39, while bond yields eased back to below
ahead of 2016 at 13,292. Average JSE SWIX market levels were
9.2%, albeit above 8.5% before the medium-term budget review.
up 5.7% on the prior year. The rand closed the year 9.8% up
In this context, our customers remain under significant financial
against the dollar at 12.39, while bond yields eased back to below
strain, which has constrained our top-line growth.
9.2%, albeit above 8.5% before the medium-term budget review.
In this context, our customers remain under significant financial
In our other key markets, economic growth was also adversely
strain, which has constrained our top-line growth.
impacted by political instability. In Zimbabwe, this culminated in
a change in government with Robert Mugabe stepping down as
In our other key markets, economic growth was also adversely
president. Following an increase in cash shortages, the Zimbabwe
impacted by political instability. In Zimbabwe, this culminated in
Stock Exchange closed 130.4% ahead of the prior year as a result
a change in government with Robert Mugabe stepping down as
of investors moving funds into the equity market as an investment
president. Following an increase in cash shortages, the Zimbabwe
alternative. The current macroeconomic situation in Zimbabwe
Stock Exchange closed 130.4% ahead of the prior year as a result
continued to be fluid, and the market reaction remains volatile.
of investors moving funds into the equity market as an investment
During the first two months of 2018, Zimbabwe’s equity markets
alternative. The current macroeconomic situation in Zimbabwe
had declined by more than 10% since the 2017 year-end position.
continued to be fluid, and the market reaction remains volatile.
During the first two months of 2018, Zimbabwe’s equity markets
On 9 March 2018, the Zimbabwean Government published its
had declined by more than 10% since the 2017 year-end position.
report on the inquiry into the loss in value for certain policyholders
and beneficiaries upon the conversion of pension and insurance
On 9 March 2018, the Zimbabwean Government published its
benefits after the dollarisation of the economy in 2009. This is
report on the inquiry into the loss in value for certain policyholders
subject to review by the president and cabinet.
and beneficiaries upon the conversion of pension and insurance
benefits after the dollarisation of the economy in 2009. This is
subject to review by the president and cabinet.
28
10
10
Old Mutual plc Annual Report and Accounts 2017 Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Emerging Markets review
Old Mutual Emerging Markets review
continued
continued
Cost efficiency leadership
Refresh the technology offering
We continue to focus our efforts on cost optimisation initiatives
We are continually investing in our technology platforms so as
across the business. A cost base review was undertaken in the
Cost efficiency leadership
second half of 2017 in order to identify opportunities that enable the
We continue to focus our efforts on cost optimisation initiatives
business to run more efficiently. We are therefore targeting pre-tax
across the business. A cost base review was undertaken in the
run-rate cost savings of R1.0 billion by the end of 2019, net of costs
second half of 2017 in order to identify opportunities that enable the
to achieve this. This will be based on the 2017 underlying IFRS
business to run more efficiently. We are therefore targeting pre-tax
run-rate cost base, and adjusted for inflation and foreign exchange
run-rate cost savings of R1.0 billion by the end of 2019, net of costs
movements over 2018 and 2019.
to achieve this. This will be based on the 2017 underlying IFRS
run-rate cost base, and adjusted for inflation and foreign exchange
The 2017 underlying run-rate cost base of R18.4 billion, is
movements over 2018 and 2019.
adjusted for one-off project costs (e.g. regulatory and IFRS-related
projects) and recurring standalone and listing costs. Below is
The 2017 underlying run-rate cost base of R18.4 billion, is
the reconciliation from underlying IFRS operating and
adjusted for one-off project costs (e.g. regulatory and IFRS-related
administrative expenses:
projects) and recurring standalone and listing costs. Below is
2017
18.8
(0.3)
2017
(0.1)
18.8
(0.3)
18.4
(0.1)
18.4
Rbn
Rbn
the reconciliation from underlying IFRS operating and
administrative expenses:
Underlying IFRS operating and administrative expenses1
One-off project costs (e.g. regulatory, IFRS-related, etc.)
Incremental recurring standalone and listing costs
Underlying IFRS operating and administrative expenses1
Underlying IFRS operating and administrative
One-off project costs (e.g. regulatory, IFRS-related, etc.)
expenses on a run-rate basis
Incremental recurring standalone and listing costs
1 Refer to Note D9 of the Old Mutual plc Group Financial Statements for further detail.
Underlying IFRS operating and administrative
expenses on a run-rate basis
OMEM’s underlying IFRS operating and administrative expenses
1 Refer to Note D9 of the Old Mutual plc Group Financial Statements for further detail.
of R18.8 billion were up 4% on the prior year, below South African
inflation. The growth in expenses largely reflects higher operating
OMEM’s underlying IFRS operating and administrative expenses
costs associated with the expansion of MFCs branch footprint and
of R18.8 billion were up 4% on the prior year, below South African
higher remuneration costs in Old Mutual Insure off a low base in
inflation. The growth in expenses largely reflects higher operating
the prior year. This was partially offset by the tight cost
costs associated with the expansion of MFCs branch footprint and
management initiatives across the business.
higher remuneration costs in Old Mutual Insure off a low base in
the prior year. This was partially offset by the tight cost
As previously indicated, we expect to spend up to R100 million per
management initiatives across the business.
annum in incremental recurring listing costs and between R100
million and R180 million per annum on other incremental recurring
As previously indicated, we expect to spend up to R100 million per
standalone costs. During the year, we incurred R142 million of
annum in incremental recurring listing costs and between R100
recurring standalone and listing costs, including corporate
million and R180 million per annum on other incremental recurring
insurance and costs associated with setting up capabilities for
standalone costs. During the year, we incurred R142 million of
a listed company that previously did not exist, such as Investor
recurring standalone and listing costs, including corporate
Relations. The reported 2017 level of costs do not yet fully reflect
insurance and costs associated with setting up capabilities for
the run-rate of these costs.
a listed company that previously did not exist, such as Investor
Relations. The reported 2017 level of costs do not yet fully reflect
Win the war for talent
the run-rate of these costs.
Our people strategy is focused on attracting, developing and
retaining the best talent available in the market. Our commitment
Win the war for talent
to ensuring diversity and inclusion across the workplace is partly
Our people strategy is focused on attracting, developing and
evidenced through having the most transformed executive
retaining the best talent available in the market. Our commitment
leadership team in South Africa’s insurance industry in terms
to ensuring diversity and inclusion across the workplace is partly
of gender and race.
evidenced through having the most transformed executive
leadership team in South Africa’s insurance industry in terms
Our efforts to establish OMEM as the employer of choice were
of gender and race.
recognised by the Top Employers Institute. OMEM was awarded
the accolade of Number 1 Top Employer in South Africa and
Our efforts to establish OMEM as the employer of choice were
Ghana, and the industry leader in financial services and insurance
recognised by the Top Employers Institute. OMEM was awarded
for the seventh consecutive year in South Africa. Our businesses
the accolade of Number 1 Top Employer in South Africa and
in all thirteen countries in which we operate throughout sub-
Ghana, and the industry leader in financial services and insurance
Saharan Africa were also certified as a Top Employer.
for the seventh consecutive year in South Africa. Our businesses
in all thirteen countries in which we operate throughout sub-
Saharan Africa were also certified as a Top Employer.
to maintain the relevance of our customer propositions and to
Refresh the technology offering
continue to meet evolving customer’s needs. The primary focus
We are continually investing in our technology platforms so as
of recent initiatives has been on building protection solutions in
to maintain the relevance of our customer propositions and to
the Mass and Foundation Cluster (MFC) and Personal Finance
continue to meet evolving customer’s needs. The primary focus
segments which are expected to be activated during 2019.
of recent initiatives has been on building protection solutions in
the Mass and Foundation Cluster (MFC) and Personal Finance
To date R1.9 billion has been spent on these initiatives; the
segments which are expected to be activated during 2019.
incremental income statement expense has been in the region of
R300 million per annum, and the remainder has been capitalised.
To date R1.9 billion has been spent on these initiatives; the
incremental income statement expense has been in the region of
As this technology comes on line in 2019, the commencement of
R300 million per annum, and the remainder has been capitalised.
depreciation charges, together with continued IT investment in
further enhancing customer value propositions and developing
As this technology comes on line in 2019, the commencement of
digital and analytics capability, is expected to lead to an increase
depreciation charges, together with continued IT investment in
in the incremental recurring income statement expense. This will
further enhancing customer value propositions and developing
however be tightly managed consistent with our targeted growth
digital and analytics capability, is expected to lead to an increase
and RoNAV objectives.
in the incremental recurring income statement expense. This will
however be tightly managed consistent with our targeted growth
Operating environment
and RoNAV objectives.
Global markets continued on their recovery in 2017, with the US
Federal Reserve signalling its intention to tighten monetary policy
Operating environment
and a weakening of the US dollar. Emerging markets continued
Global markets continued on their recovery in 2017, with the US
to grow faster than developed markets despite economic and
Federal Reserve signalling its intention to tighten monetary policy
political challenges.
and a weakening of the US dollar. Emerging markets continued
to grow faster than developed markets despite economic and
In South Africa, political uncertainty throughout the year contributed
political challenges.
to weaker business and consumer confidence. In November,
Standard & Poor’s downgraded South Africa’s local government
In South Africa, political uncertainty throughout the year contributed
bonds to sub-investment grade following the Medium-Term Budget
to weaker business and consumer confidence. In November,
Policy Statement. However, the year ended on an optimistic note
Standard & Poor’s downgraded South Africa’s local government
following the election of a new ANC president at the December
bonds to sub-investment grade following the Medium-Term Budget
elective conference.
Policy Statement. However, the year ended on an optimistic note
following the election of a new ANC president at the December
Equity markets rallied in the second half of the year, having been
elective conference.
relatively flat in the first half, with the JSE SWIX closing 17.7%
ahead of 2016 at 13,292. Average JSE SWIX market levels were
Equity markets rallied in the second half of the year, having been
up 5.7% on the prior year. The rand closed the year 9.8% up
relatively flat in the first half, with the JSE SWIX closing 17.7%
against the dollar at 12.39, while bond yields eased back to below
ahead of 2016 at 13,292. Average JSE SWIX market levels were
9.2%, albeit above 8.5% before the medium-term budget review.
up 5.7% on the prior year. The rand closed the year 9.8% up
In this context, our customers remain under significant financial
against the dollar at 12.39, while bond yields eased back to below
strain, which has constrained our top-line growth.
9.2%, albeit above 8.5% before the medium-term budget review.
In this context, our customers remain under significant financial
In our other key markets, economic growth was also adversely
strain, which has constrained our top-line growth.
impacted by political instability. In Zimbabwe, this culminated in
a change in government with Robert Mugabe stepping down as
In our other key markets, economic growth was also adversely
president. Following an increase in cash shortages, the Zimbabwe
impacted by political instability. In Zimbabwe, this culminated in
Stock Exchange closed 130.4% ahead of the prior year as a result
a change in government with Robert Mugabe stepping down as
of investors moving funds into the equity market as an investment
president. Following an increase in cash shortages, the Zimbabwe
alternative. The current macroeconomic situation in Zimbabwe
Stock Exchange closed 130.4% ahead of the prior year as a result
continued to be fluid, and the market reaction remains volatile.
of investors moving funds into the equity market as an investment
During the first two months of 2018, Zimbabwe’s equity markets
alternative. The current macroeconomic situation in Zimbabwe
had declined by more than 10% since the 2017 year-end position.
continued to be fluid, and the market reaction remains volatile.
During the first two months of 2018, Zimbabwe’s equity markets
On 9 March 2018, the Zimbabwean Government published its
had declined by more than 10% since the 2017 year-end position.
report on the inquiry into the loss in value for certain policyholders
and beneficiaries upon the conversion of pension and insurance
On 9 March 2018, the Zimbabwean Government published its
benefits after the dollarisation of the economy in 2009. This is
report on the inquiry into the loss in value for certain policyholders
subject to review by the president and cabinet.
and beneficiaries upon the conversion of pension and insurance
benefits after the dollarisation of the economy in 2009. This is
subject to review by the president and cabinet.
Old Mutual plc
Annual Report and Accounts 2017
We are reviewing the full report and its recommendations,
and we remain committed to treating our customers fairly.
We are preparing a preliminary evaluation of the potential impact
on our operations. However we are not yet able to establish
whether the commission's findings will have any impact on
Old Mutual Zimbabwe.
In Kenya, economic growth was impacted by the protracted
presidential elections and drought conditions. However,
economic growth in 2017 remained strong at 5.0%.
IFRS profit (post-tax)
Reconciliation of AOP to IFRS
(Rm)
AOP (pre-tax and NCI)
Total adjusting items
Goodwill, intangible and
associate charges
Profit on business disposals
Short-term fluctuations in
investment return
Returns on own debt and equity
Managed separation and
standalone costs
Income tax attributable to
policyholder returns
IFRS profit (pre-tax and NCI)
Income tax expense
Non-controlling interests
IFRS profit attributable to
equity holders after tax1
2016
2017
13,326
892
Restated % change
5%
12,731
131%
(2,855)
(1,502)
1,390
(1,504)
63
2,176
(935)
(550)
(864)
(237)
−
1,391
15,609
(5,377)
(22)
1,005
10,881
(4,133)
251
38%
43%
(30%)
(109%)
10,210
6,999
46%
1 IFRS profit for 2016 was restated to include R173 million of the actual investment
return on shareholder assets above the capital requirement previously reflected in the
Old Mutual plc.
IFRS profit after tax of R10,210 million increased by 46% from
R6,999 million in the prior year. Key adjusting items of AOP to
IFRS profit include positive short-term fluctuations on LTIR of
R2,176 million (2016: negative R550 million). These were largely
driven by the significant growth in Zimbabwe’s equity markets
which resulted in positive short-term fluctuations of R1,815 million
(2016: R312 million).
Profit on business disposals of R1,390 million relates to the
disposal of our 26% stake in Kotak Mahindra Old Mutual Life
Insurance Limited, which completed in October 2017.
In line with previous guidance, we expect to incur total one-off
costs of up to R300 million in 2017 and 2018 to establish local
standalone capabilities. During the year, we incurred R211 million
of one-off standalone costs. Further, we incurred R26 million
of one-off advisory and transaction costs.
‘Goodwill, intangible and associate charges’ includes goodwill
impairments of R1.5 billion (2016: R1.3 billion) relating to East
Africa and AIVA within LatAm & Asia. In the first half of 2017,
a goodwill impairment of R1.2 billion was recognised relating
to UAP-Old Mutual Group in East Africa. This followed the
simplification of the operating structure of the Rest of Africa
portfolio and the consequential change in operating segment.
This resulted in a change in the cash generating units to which
goodwill is allocated to and monitored for valuation purposes.
Further, a goodwill impairment of R0.3 billion was recognised in the
second half of the year relating to the AIVA business in Uruguay,
as a result of the tough business environment and the exit by
Old Mutual Wealth (UK) from the single strategy business.
Segmental performance
Adjusted operating profit
(pre-tax, Rm)
Mass and Foundation
Cluster (MFC)
Personal Finance
Wealth and Investments1
Old Mutual Corporate
Old Mutual Insure
Rest of Africa
LatAm and Asia2
Central expenses and
administration costs
AOP (pre-LTIR and
finance costs)
LTIR3
Finance costs
Total AOP (pre-tax and NCI)
2016
2017
Restated % change
3,165
3,151
1,623
1,576
312
1,074
609
3,058
3,421
1,592
1,403
80
806
611
3%
(8%)
2%
12%
290%
33%
−
(536)
(662)
19%
10,974
2,974
(622)
13,326
10,309
2,951
(529)
12,731
6%
1%
(18%)
5%
1 From 2017, Wealth and Investments AOP includes Old Mutual International AOP of
R60 million, previously reported in Old Mutual Wealth (UK). Comparatives have not
been restated
2 LatAm & Asia AOP includes India profits of R181 million (2016: R177 million). India
was sold during the 2017 financial year, and included in the results for nine months
to 30 September 2017
3 LTIR on assets in excess of regulatory required capital is now reported in OMEM,
previously reported in Old Mutual plc. Comparatives have been restated
(2016: R398 million).
Mass and Foundation Cluster
MFC continues to retain its leading position in the South African
mass market. We remain focused on evolving our customer value
proposition by investing in growing the branch network, enhancing
Money Account (our transactional offering), and rolling out ATMs,
whilst we also improve the efficiency of the channels.
AOP of R3,165 million was 3% up on the prior year primarily driven
by higher new business profits, better cost management and a
more favourable product mix towards risk business. This was partly
offset by lower net positive actuarial provision releases compared
to the prior year.
Old Mutual Finance (OMF) AOP of R828 million was up 3% on
the prior year. This was due to growth in loan sales supported
by an increase in the number of branches, and better collections
experience as a result of an improvement in the risk profile of the
loan book.
Life APE sales grew by 3% to R4,091 million, which contributed to
good NCCF of R6.1 billion, which was up 9%. This was driven by
the growth in risk sales from higher adviser manpower and better
productivity in the second half of the year. The branch network now
contributes 29% to total MFC life APE sales (2016: 28%). VNB of
R1,236 million was up 17% following pricing reviews on risk
business, which led to a VNB margin of 10.6% (2016: 9.4%).
MFC grew its branch footprint by 31 to 323 branches and rolled out
22 pilot ATMs. Free Wi-Fi was rolled out to all branches allowing
customers access to data connectivity, which has increased the
level of activation for Money Account holders. The branch network,
which remains key to providing seamless customer experience,
continues to deliver better persistency experience and higher
productivity than other channels.
10
10
29
11
S
i
t
r
a
t
e
g
c
r
e
p
o
r
t
Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Emerging Markets review
continued
Old Mutual Emerging Markets review
continued
Loans and advances of R12.1 billion declined by 20%, following
the write-off of long outstanding loans deemed to have low
recoverability (net of balance sheet impairment provisions),
Loans and advances of R12.1 billion declined by 20%, following
in line with management’s decision to review the credit quality
the write-off of long outstanding loans deemed to have low
assessment used for calculating provisions within OMF.
recoverability (net of balance sheet impairment provisions),
This now takes into account recent payment behaviour in
in line with management’s decision to review the credit quality
preparation for IFRS 9 – Financial Instruments, effective for
assessment used for calculating provisions within OMF.
annual periods beginning on or after 1 January 2018.
This now takes into account recent payment behaviour in
preparation for IFRS 9 – Financial Instruments, effective for
This was partly offset by the reclassification of loans where
annual periods beginning on or after 1 January 2018.
payment behaviour had improved. This treatment is in line with
the principles of the SARB directive 7/2015 and has resulted in a
This was partly offset by the reclassification of loans where
net positive AOP impact of R113 million. This further contributed
payment behaviour had improved. This treatment is in line with
to a lower net lending margin of 16.2% compared to 16.6% in the
the principles of the SARB directive 7/2015 and has resulted in a
prior year.
net positive AOP impact of R113 million. This further contributed
to a lower net lending margin of 16.2% compared to 16.6% in the
We allocated R470 million in additional funeral cover to our existing
prior year.
MFC customers, at no extra cost to them. This was the remainder
of the R624 million that we had set aside for customers from our
We allocated R470 million in additional funeral cover to our existing
2014 mortality reserve release, to be allocated over a 5-year
MFC customers, at no extra cost to them. This was the remainder
period. The release followed consistent positive mortality
of the R624 million that we had set aside for customers from our
experience, mainly due to effective anti-retroviral roll-out by the
2014 mortality reserve release, to be allocated over a 5-year
South African government. Accelerating the remaining allocation
period. The release followed consistent positive mortality
had a R20 million cost impact on MFC’s 2017 AOP, while
experience, mainly due to effective anti-retroviral roll-out by the
improving the value to customers.
South African government. Accelerating the remaining allocation
had a R20 million cost impact on MFC’s 2017 AOP, while
Personal Finance
improving the value to customers.
Personal Finance remains focused on strengthening its position
in the middle income market, and driving growth through digitally-
Personal Finance
enabled and innovative customer propositions. In particular, we
Personal Finance remains focused on strengthening its position
are targeting the black middle income markets and refocusing our
in the middle income market, and driving growth through digitally-
adviser footprint towards the Gauteng region. We also continued
enabled and innovative customer propositions. In particular, we
to invest in alternative distribution channels over the current period
are targeting the black middle income markets and refocusing our
to meet evolving customer needs.
adviser footprint towards the Gauteng region. We also continued
to invest in alternative distribution channels over the current period
AOP of R3,151 million declined by 8% relative to the prior year,
to meet evolving customer needs.
with the legacy book contributing circa.38% (2016: 20%). The
decline in AOP was due primarily to significantly lower net positive
AOP of R3,151 million declined by 8% relative to the prior year,
provision releases compared to the prior year.
with the legacy book contributing circa.38% (2016: 20%). The
decline in AOP was due primarily to significantly lower net positive
Life APE sales of R2,502 million were 4% behind the prior year
provision releases compared to the prior year.
largely due to lower Greenlight and conventional annuity sales.
VNB grew significantly by 35% to R366 million. This was
Life APE sales of R2,502 million were 4% behind the prior year
attributable to the change in methodology relating to the allocation
largely due to lower Greenlight and conventional annuity sales.
of distribution costs to life products and the annual rate increases
VNB grew significantly by 35% to R366 million. This was
in Greenlight. As a result, the VNB margin improved to 2.4% (2016:
attributable to the change in methodology relating to the allocation
1.7%).
of distribution costs to life products and the annual rate increases
in Greenlight. As a result, the VNB margin improved to 2.4% (2016:
Personal Finance’s open book recorded positive NCCF of R6.6
1.7%).
billion, offset by net outflows of R(9.4) billion from the legacy book.
Total NCCF of R(2.8) billion was R0.3 billion better than the prior
Personal Finance’s open book recorded positive NCCF of R6.6
year due to lower maturities and disinvestments than experienced
billion, offset by net outflows of R(9.4) billion from the legacy book.
in the prior period.
Total NCCF of R(2.8) billion was R0.3 billion better than the prior
year due to lower maturities and disinvestments than experienced
in the prior period.
We expanded our digital offering through the successful launch
of iWYZE life, a direct channel providing underwritten life cover.
We also increased the number of digital offerings that are available
We expanded our digital offering through the successful launch
on the Old Mutual website, such as funeral cover, stockbroking and
of iWYZE life, a direct channel providing underwritten life cover.
retirement annuities. This resulted in an increased contribution from
We also increased the number of digital offerings that are available
these alternative channels to Personal Finance’s life APE sales
on the Old Mutual website, such as funeral cover, stockbroking and
from 6% to 9% in 2017.
retirement annuities. This resulted in an increased contribution from
these alternative channels to Personal Finance’s life APE sales
In response to the level of indebtedness of middle income customers,
from 6% to 9% in 2017.
we continued to develop our online financial education tool,
Moneyversity, which helps users make the most of their money.
In response to the level of indebtedness of middle income customers,
We also launched Find-an-Adviser, which helps customers in
we continued to develop our online financial education tool,
finding a nearby adviser that is best placed to meet their investment
Moneyversity, which helps users make the most of their money.
needs, using their geo-location. As at the year-end, over 700
We also launched Find-an-Adviser, which helps customers in
advisers had registered on the platform.
finding a nearby adviser that is best placed to meet their investment
needs, using their geo-location. As at the year-end, over 700
In collaboration with OMF, there was a significant increase in the
advisers had registered on the platform.
take up of Money Accounts and debt consolidations. We have also
started working with Corporate to offer Home Solutions to Personal
In collaboration with OMF, there was a significant increase in the
Finance customers, resulting in a wider range of the customers’
take up of Money Accounts and debt consolidations. We have also
needs being met.
started working with Corporate to offer Home Solutions to Personal
Finance customers, resulting in a wider range of the customers’
Wealth and Investments
needs being met.
Wealth and Investments continues to capitalise on its focus in
the asset management boutique model, in accelerating global
Wealth and Investments
capabilities and margin, leveraging the OMSFIN proprietary risk
Wealth and Investments continues to capitalise on its focus in
and investment capability, and building an African alternatives
the asset management boutique model, in accelerating global
mega-manager in the unlisted space. It also seeks to maximise its
capabilities and margin, leveraging the OMSFIN proprietary risk
market leading capabilities in future fit areas of passive, smart beta,
and investment capability, and building an African alternatives
alternatives and liability driven investments. Core to the strategy
mega-manager in the unlisted space. It also seeks to maximise its
is to refocus on the retail Independent Financial Adviser market,
market leading capabilities in future fit areas of passive, smart beta,
growing in the wealth market, and further enhancing Old Mutual’s
alternatives and liability driven investments. Core to the strategy
presence in the high net worth market.
is to refocus on the retail Independent Financial Adviser market,
growing in the wealth market, and further enhancing Old Mutual’s
In the context of relatively flat markets in the first half of 2017, the
presence in the high net worth market.
segment recorded 2% growth in AOP to R1,623 million. The growth
was largely attributable to base fee income on higher assets under
In the context of relatively flat markets in the first half of 2017, the
management, positive investment returns in Alternatives, and the
segment recorded 2% growth in AOP to R1,623 million. The growth
first time inclusion of profits from Old Mutual International of R60
was largely attributable to base fee income on higher assets under
million. This was partly offset by lower origination income and deal
management, positive investment returns in Alternatives, and the
flow activity in both the specialised finance and the renewables
first time inclusion of profits from Old Mutual International of R60
businesses, as well as higher operating expenses in the asset
million. This was partly offset by lower origination income and deal
management business.
flow activity in both the specialised finance and the renewables
businesses, as well as higher operating expenses in the asset
The strong growth in gross flows in the second half of 2017
management business.
contributed to the NCCF of R14.1 billion for the year, which was
significantly up from R1.8 billion in H1 2017. This was due to strong
The strong growth in gross flows in the second half of 2017
inflows into Wealth (SA), the Liability Driven Investment boutique
contributed to the NCCF of R14.1 billion for the year, which was
and a large mandate into the Alternatives boutique in Q4 2017.
significantly up from R1.8 billion in H1 2017. This was due to strong
inflows into Wealth (SA), the Liability Driven Investment boutique
Assets under management (AuM) grew 17% to R736.6 billion,
and a large mandate into the Alternatives boutique in Q4 2017.
supported by better market performance in the second half of 2017
and the first time inclusion of R39 billion previously reported in
Assets under management (AuM) grew 17% to R736.6 billion,
OMAM, which was sold by Old Mutual plc during the year. Included
supported by better market performance in the second half of 2017
in Wealth and Investment’s AuM is R340.4 billion of funds that are
and the first time inclusion of R39 billion previously reported in
managed on behalf of other OMEM group entities.
OMAM, which was sold by Old Mutual plc during the year. Included
in Wealth and Investment’s AuM is R340.4 billion of funds that are
managed on behalf of other OMEM group entities.
30
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Old Mutual plc Annual Report and Accounts 2017 Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Emerging Markets review
continued
Old Mutual Emerging Markets review
continued
Loans and advances of R12.1 billion declined by 20%, following
We expanded our digital offering through the successful launch
the write-off of long outstanding loans deemed to have low
of iWYZE life, a direct channel providing underwritten life cover.
recoverability (net of balance sheet impairment provisions),
Loans and advances of R12.1 billion declined by 20%, following
in line with management’s decision to review the credit quality
the write-off of long outstanding loans deemed to have low
assessment used for calculating provisions within OMF.
recoverability (net of balance sheet impairment provisions),
This now takes into account recent payment behaviour in
in line with management’s decision to review the credit quality
preparation for IFRS 9 – Financial Instruments, effective for
assessment used for calculating provisions within OMF.
annual periods beginning on or after 1 January 2018.
This now takes into account recent payment behaviour in
preparation for IFRS 9 – Financial Instruments, effective for
This was partly offset by the reclassification of loans where
annual periods beginning on or after 1 January 2018.
payment behaviour had improved. This treatment is in line with
the principles of the SARB directive 7/2015 and has resulted in a
This was partly offset by the reclassification of loans where
net positive AOP impact of R113 million. This further contributed
payment behaviour had improved. This treatment is in line with
to a lower net lending margin of 16.2% compared to 16.6% in the
the principles of the SARB directive 7/2015 and has resulted in a
net positive AOP impact of R113 million. This further contributed
prior year.
prior year.
to a lower net lending margin of 16.2% compared to 16.6% in the
We allocated R470 million in additional funeral cover to our existing
MFC customers, at no extra cost to them. This was the remainder
of the R624 million that we had set aside for customers from our
We allocated R470 million in additional funeral cover to our existing
2014 mortality reserve release, to be allocated over a 5-year
MFC customers, at no extra cost to them. This was the remainder
period. The release followed consistent positive mortality
of the R624 million that we had set aside for customers from our
experience, mainly due to effective anti-retroviral roll-out by the
2014 mortality reserve release, to be allocated over a 5-year
South African government. Accelerating the remaining allocation
period. The release followed consistent positive mortality
had a R20 million cost impact on MFC’s 2017 AOP, while
experience, mainly due to effective anti-retroviral roll-out by the
improving the value to customers.
South African government. Accelerating the remaining allocation
had a R20 million cost impact on MFC’s 2017 AOP, while
Personal Finance
improving the value to customers.
Personal Finance remains focused on strengthening its position
in the middle income market, and driving growth through digitally-
Personal Finance
enabled and innovative customer propositions. In particular, we
Personal Finance remains focused on strengthening its position
are targeting the black middle income markets and refocusing our
in the middle income market, and driving growth through digitally-
adviser footprint towards the Gauteng region. We also continued
enabled and innovative customer propositions. In particular, we
to invest in alternative distribution channels over the current period
are targeting the black middle income markets and refocusing our
to meet evolving customer needs.
adviser footprint towards the Gauteng region. We also continued
to invest in alternative distribution channels over the current period
AOP of R3,151 million declined by 8% relative to the prior year,
to meet evolving customer needs.
with the legacy book contributing circa.38% (2016: 20%). The
decline in AOP was due primarily to significantly lower net positive
AOP of R3,151 million declined by 8% relative to the prior year,
provision releases compared to the prior year.
with the legacy book contributing circa.38% (2016: 20%). The
decline in AOP was due primarily to significantly lower net positive
Life APE sales of R2,502 million were 4% behind the prior year
provision releases compared to the prior year.
largely due to lower Greenlight and conventional annuity sales.
VNB grew significantly by 35% to R366 million. This was
Life APE sales of R2,502 million were 4% behind the prior year
attributable to the change in methodology relating to the allocation
largely due to lower Greenlight and conventional annuity sales.
of distribution costs to life products and the annual rate increases
VNB grew significantly by 35% to R366 million. This was
in Greenlight. As a result, the VNB margin improved to 2.4% (2016:
attributable to the change in methodology relating to the allocation
of distribution costs to life products and the annual rate increases
in Greenlight. As a result, the VNB margin improved to 2.4% (2016:
Personal Finance’s open book recorded positive NCCF of R6.6
1.7%).
billion, offset by net outflows of R(9.4) billion from the legacy book.
Total NCCF of R(2.8) billion was R0.3 billion better than the prior
Personal Finance’s open book recorded positive NCCF of R6.6
year due to lower maturities and disinvestments than experienced
billion, offset by net outflows of R(9.4) billion from the legacy book.
Total NCCF of R(2.8) billion was R0.3 billion better than the prior
year due to lower maturities and disinvestments than experienced
in the prior period.
1.7%).
in the prior period.
We also increased the number of digital offerings that are available
We expanded our digital offering through the successful launch
on the Old Mutual website, such as funeral cover, stockbroking and
of iWYZE life, a direct channel providing underwritten life cover.
retirement annuities. This resulted in an increased contribution from
We also increased the number of digital offerings that are available
these alternative channels to Personal Finance’s life APE sales
on the Old Mutual website, such as funeral cover, stockbroking and
from 6% to 9% in 2017.
retirement annuities. This resulted in an increased contribution from
these alternative channels to Personal Finance’s life APE sales
In response to the level of indebtedness of middle income customers,
from 6% to 9% in 2017.
we continued to develop our online financial education tool,
Moneyversity, which helps users make the most of their money.
In response to the level of indebtedness of middle income customers,
We also launched Find-an-Adviser, which helps customers in
we continued to develop our online financial education tool,
finding a nearby adviser that is best placed to meet their investment
Moneyversity, which helps users make the most of their money.
needs, using their geo-location. As at the year-end, over 700
We also launched Find-an-Adviser, which helps customers in
advisers had registered on the platform.
finding a nearby adviser that is best placed to meet their investment
needs, using their geo-location. As at the year-end, over 700
In collaboration with OMF, there was a significant increase in the
advisers had registered on the platform.
take up of Money Accounts and debt consolidations. We have also
started working with Corporate to offer Home Solutions to Personal
In collaboration with OMF, there was a significant increase in the
Finance customers, resulting in a wider range of the customers’
take up of Money Accounts and debt consolidations. We have also
started working with Corporate to offer Home Solutions to Personal
needs being met.
Finance customers, resulting in a wider range of the customers’
Wealth and Investments
needs being met.
Wealth and Investments continues to capitalise on its focus in
the asset management boutique model, in accelerating global
Wealth and Investments
capabilities and margin, leveraging the OMSFIN proprietary risk
Wealth and Investments continues to capitalise on its focus in
and investment capability, and building an African alternatives
the asset management boutique model, in accelerating global
mega-manager in the unlisted space. It also seeks to maximise its
capabilities and margin, leveraging the OMSFIN proprietary risk
market leading capabilities in future fit areas of passive, smart beta,
and investment capability, and building an African alternatives
alternatives and liability driven investments. Core to the strategy
mega-manager in the unlisted space. It also seeks to maximise its
is to refocus on the retail Independent Financial Adviser market,
market leading capabilities in future fit areas of passive, smart beta,
growing in the wealth market, and further enhancing Old Mutual’s
alternatives and liability driven investments. Core to the strategy
presence in the high net worth market.
is to refocus on the retail Independent Financial Adviser market,
growing in the wealth market, and further enhancing Old Mutual’s
In the context of relatively flat markets in the first half of 2017, the
presence in the high net worth market.
segment recorded 2% growth in AOP to R1,623 million. The growth
was largely attributable to base fee income on higher assets under
In the context of relatively flat markets in the first half of 2017, the
management, positive investment returns in Alternatives, and the
segment recorded 2% growth in AOP to R1,623 million. The growth
first time inclusion of profits from Old Mutual International of R60
was largely attributable to base fee income on higher assets under
million. This was partly offset by lower origination income and deal
management, positive investment returns in Alternatives, and the
flow activity in both the specialised finance and the renewables
first time inclusion of profits from Old Mutual International of R60
businesses, as well as higher operating expenses in the asset
million. This was partly offset by lower origination income and deal
management business.
flow activity in both the specialised finance and the renewables
businesses, as well as higher operating expenses in the asset
The strong growth in gross flows in the second half of 2017
management business.
contributed to the NCCF of R14.1 billion for the year, which was
significantly up from R1.8 billion in H1 2017. This was due to strong
The strong growth in gross flows in the second half of 2017
inflows into Wealth (SA), the Liability Driven Investment boutique
contributed to the NCCF of R14.1 billion for the year, which was
and a large mandate into the Alternatives boutique in Q4 2017.
significantly up from R1.8 billion in H1 2017. This was due to strong
inflows into Wealth (SA), the Liability Driven Investment boutique
Assets under management (AuM) grew 17% to R736.6 billion,
and a large mandate into the Alternatives boutique in Q4 2017.
supported by better market performance in the second half of 2017
and the first time inclusion of R39 billion previously reported in
Assets under management (AuM) grew 17% to R736.6 billion,
OMAM, which was sold by Old Mutual plc during the year. Included
supported by better market performance in the second half of 2017
in Wealth and Investment’s AuM is R340.4 billion of funds that are
and the first time inclusion of R39 billion previously reported in
managed on behalf of other OMEM group entities.
OMAM, which was sold by Old Mutual plc during the year. Included
in Wealth and Investment’s AuM is R340.4 billion of funds that are
managed on behalf of other OMEM group entities.
Old Mutual plc
Annual Report and Accounts 2017
OM Insure (previously Mutual & Federal)
OM Insure’s turnaround strategy has been focused on the
commercial business. The turnaround of the retail business has
now been completed and we have made considerable progress
in restoring the quality of the commercial lines book. This was
achieved through the strengthening of skills to support disciplined
underwriting and claims management. Significant progress has
also been made to deliver on the growth strategy in iWYZE.
As a result, we recorded exceptional growth in the underwriting
result of R312 million, a 290% improvement, in a year of
unprecedented catastrophe events. The underwriting margin of
3.7% (2016: 0.9%), reflects favourable claims experience (net of
reinsurance) in the Commercial and Personal Lines businesses
and the growth in iWYZE, which delivered underwriting profit
of R20 million (2016: loss of R39 million). We continue to target
an underwriting margin of 4% − 6% in the near term.
P&C gross written premiums (GWP) of R12,481 million were 3%
ahead of the prior year. The constrained growth was attributable to
stricter underwriting criteria, lower policy volume growth following
the continued remediation of loss making business, whilst
generating strong premium growth of 15% in iWYZE. Net earned
premiums of R8,409 million were down 2% against the prior year
primarily due to changes in the reinsurance agreements at Credit
Guarantee Insurance Corporation (CGIC) in 2017.
The business strengthened its senior management team following
several key appointments during the year, including Nokuthula
Manyoha as Finance Director, Franklin Sibanda as Rest of Africa
General Insurance Executive, and Thabile Nyaba as Chief Risk
Officer. Further, Old Mutual Insure completed the sale of a 25%
equity interest in CGIC, the specialist corporate credit insurer,
to Atradius.
Rest of Africa
Our Rest of Africa operations span 12 countries across three
regions. The SADC region remains the largest contributor to
Rest of Africa profits, where the business seeks to retain its
leading market positions while capitalising on pockets of growth.
In East Africa, encouraging progress has been made in the
P&C turnaround, whilst further work remains in respect of the
property portfolio to alleviate the impact on adjusted RoE.
In West Africa, we continue to pursue a capital light strategy
leveraging our bancassurance partnerships. However, delays in
bancassurance regulations in Nigeria have adversely impacted
our growth ambitions.
The Rest of Africa segment delivered AOP (pre-LTIR) of
R1,074 million which was 33% above the prior year (up 38%
in constant currency). This excellent result was primarily driven
by higher profits in Zimbabwe, East Africa, and Malawi.
The asset management business recorded strong investment
performance in 2017. In our core retail range, seven out of our
ten funds were top quartile over one year, with the flagship retail
Balanced Fund now top quartile over one, three, and five years,
and all four of the core retail Multi-asset funds attained 4-star
Morningstar ratings. The multi-manager multi asset funds are
top quartile over one, three, five, seven and ten years. The asset
management business remains focused on achieving long-term
investment growth for its clients.
In January 2018, Khaya Gobodo was appointed as the Managing
Director of the Asset Management business. Khaya brings a broad
depth of investment experience in running an independent
investment boutique as well as his global investment experience
and perspectives on aligning asset management, platforms and
distribution in South Africa.
During the year, a major Flexcube platform upgrade was completed
on time and within budget, with no material disruptions to the
Wealth business. The upgrade resulted in significant improvement
in the administrative capability, which is necessary to enhance
adviser and customer experience.
Old Mutual Corporate
Corporate remains well-positioned to retain its position as industry
leader in South Africa as it improves customer and intermediary
experience, continues to innovate its offering and delivers
sustainable growth.
AOP of R1,576 million was 12% ahead of the prior year largely
due to growth in asset-based fees and improved investment
performance. Group risk underwriting experience deteriorated in
the second half of 2017, despite the price remediation and process
improvements that took place throughout the year. Management
continues to drive actions to deliver improved group risk
underwriting experience.
Life APE sales of R2,719 million were 10% down on prior year
mainly due to lower group risk assurance, retail platform and
annuity sales. VNB of R254 million was lower than the prior year
as a result of expense allocation changes and lower sales
volumes. As a result, the VNB margin declined by 80 bps to 1.0%.
Negative NCCF of R(7.1) billion, R10.8 billion lower than the prior
year, was driven by higher outflows which included a significant
non-life outflow during the fourth quarter, albeit at a low margin.
During the year, we launched the SuperFund annuity, underpinned
by member education, advice and communication. We also
launched the Nucleus Index Fund range on SuperFund, an
enhancement to the passive investment offering to provide
increased investment choice to customers. Further, we
successfully completed the Compass upgrade, which will
provide us with improved stability of our administration platform.
Corporate continued to drive its collaboration initiatives with
the retail segments. We established adviser presence at 65
additional worksites during the year, whilst retail segments acquired
circa.23,000 customers through the corporate worksites. This is a
key lever in order to improve retention of benefits and funds under
management as well as to provide cross-sell opportunities for the
retail channels.
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Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Emerging Markets review
continued
Old Mutual Emerging Markets review
continued
Faulu loans and advances of R2.1 billion declined by 6% in
constant currency, largely reflecting stricter lending criteria following
the introduction of interest rate caps in 2016. The net lending
Faulu loans and advances of R2.1 billion declined by 6% in
margin improved marginally to 12.8% (2016: 12.6%) due to a
constant currency, largely reflecting stricter lending criteria following
reduction in funding costs. During the year, a new Faulu core
the introduction of interest rate caps in 2016. The net lending
banking platform was implemented which is expected to improve
margin improved marginally to 12.8% (2016: 12.6%) due to a
business transactional capabilities.
reduction in funding costs. During the year, a new Faulu core
banking platform was implemented which is expected to improve
West Africa
business transactional capabilities.
The reported AOP loss (pre-LTIR) of R182 million, was broadly in
line with the prior year. In Ghana, growth was driven by increased
West Africa
sales volumes, better retention and new corporate business. This
The reported AOP loss (pre-LTIR) of R182 million, was broadly in
was offset by higher reinsurance costs in the P&C business and
line with the prior year. In Ghana, growth was driven by increased
weaker life underwriting experience in Nigeria.
sales volumes, better retention and new corporate business. This
was offset by higher reinsurance costs in the P&C business and
Life APE sales of R116 million were up 7% on the prior year driven
weaker life underwriting experience in Nigeria.
by better corporate sales in Nigeria and good new business growth
in Ghana.
Life APE sales of R116 million were up 7% on the prior year driven
by better corporate sales in Nigeria and good new business growth
LatAm and Asia
in Ghana.
LatAm AOP of R469 million was 1% lower than the prior year.
In constant currency, AOP was up 6% largely driven by higher
LatAm and Asia
investment returns in Colombia.
LatAm AOP of R469 million was 1% lower than the prior year.
In constant currency, AOP was up 6% largely driven by higher
Despite the goodwill impairment in AIVA due to the overall
investment returns in Colombia.
underperformance, AIVA is making good progress in its
transformation from regular premium business to private wealth
Despite the goodwill impairment in AIVA due to the overall
management and is already delivering good sales.
underperformance, AIVA is making good progress in its
transformation from regular premium business to private wealth
Life APE sales of R570 million were 5% above the prior year in
management and is already delivering good sales.
constant currency mainly due to higher Crea Patrimonio sales in
Colombia. Funds under management grew 7% to R126.6 billion
Life APE sales of R570 million were 5% above the prior year in
during the period.
constant currency mainly due to higher Crea Patrimonio sales in
Colombia. Funds under management grew 7% to R126.6 billion
NCCF of R24.9 billion was R15.3 billion higher than the prior year
during the period.
due to a few large Private Wealth flows towards the end of the
year, and good Old Mutual Global Investors flows through AIVA.
NCCF of R24.9 billion was R15.3 billion higher than the prior year
These are eliminated at an OMEM level as they are reported by
due to a few large Private Wealth flows towards the end of the
Old Mutual Wealth (UK) at an Old Mutual plc Group level.
year, and good Old Mutual Global Investors flows through AIVA.
These are eliminated at an OMEM level as they are reported by
In China, our joint venture is focused on distributing higher margin
Old Mutual Wealth (UK) at an Old Mutual plc Group level.
risk products, which have lower regulatory capital requirements
following regulatory changes. As a result, life APE sales of
In China, our joint venture is focused on distributing higher margin
R300 million declined by 50%. Negative NCCF of R(1.3) billion,
risk products, which have lower regulatory capital requirements
was R1.0 billion better than the prior year due to lower surrenders
following regulatory changes. As a result, life APE sales of
from the Universal Life products.
R300 million declined by 50%. Negative NCCF of R(1.3) billion,
was R1.0 billion better than the prior year due to lower surrenders
from the Universal Life products.
SADC
AOP (pre-LTIR) of R1,520 million grew 6% against the prior period
(up 14% in constant currency). This was driven by higher asset
SADC
based fee income in Zimbabwe due to equity market performance,
AOP (pre-LTIR) of R1,520 million grew 6% against the prior period
growth in Malawi’s group life underwriting results, as well as good
(up 14% in constant currency). This was driven by higher asset
investment contract profits in Namibia.
based fee income in Zimbabwe due to equity market performance,
growth in Malawi’s group life underwriting results, as well as good
Gross flows of R17.3 billion were up 11% driven by good
investment contract profits in Namibia.
non-life sales in Zimbabwe and Namibia, whilst Malawi recorded
exceptional growth in the group life sales of its corporate business,
Gross flows of R17.3 billion were up 11% driven by good
albeit off a low base. NCCF of R1.0 billion, was adversely impacted
non-life sales in Zimbabwe and Namibia, whilst Malawi recorded
by a R3.3 billion outflow from the government pension fund in
exceptional growth in the group life sales of its corporate business,
Namibia due to regulatory rebalancing requirements.
albeit off a low base. NCCF of R1.0 billion, was adversely impacted
by a R3.3 billion outflow from the government pension fund in
The P&C underwriting margin of 7.2% (2016: 12.5%) declined
Namibia due to regulatory rebalancing requirements.
primarily as a result of higher weather-related claims in the
region and the impact of higher central cost allocations. P&C
The P&C underwriting margin of 7.2% (2016: 12.5%) declined
GWP increased by 1% in constant currency to R1,361 million
primarily as a result of higher weather-related claims in the
driven by growth in new business in Zimbabwe, despite
region and the impact of higher central cost allocations. P&C
clients reducing the sums they have insured in the current
GWP increased by 1% in constant currency to R1,361 million
macroeconomic environment.
driven by growth in new business in Zimbabwe, despite
clients reducing the sums they have insured in the current
Loans and advances of R9.2 billion, were up 23% in constant
macroeconomic environment.
currency, reflecting growth in the mortgage and business loans
books in CABS (Zimbabwe). OMF (Namibia) loans and advances
Loans and advances of R9.2 billion, were up 23% in constant
of R0.6 billion were consolidated into the results the first time
currency, reflecting growth in the mortgage and business loans
during the year. The lending margin of 11% declined by 55bps
books in CABS (Zimbabwe). OMF (Namibia) loans and advances
and was further impacted by the introduction of interest rate caps
of R0.6 billion were consolidated into the results the first time
in Zimbabwe.
during the year. The lending margin of 11% declined by 55bps
and was further impacted by the introduction of interest rate caps
East Africa
in Zimbabwe.
Whilst we reported a loss (pre-LTIR) of R61 million, this was a
significant improvement from a loss (pre-LTIR) of R167 million in
East Africa
the prior year. It followed good mortality experience on the Group
Whilst we reported a loss (pre-LTIR) of R61 million, this was a
Life Assurance book and an improvement in the underwriting
significant improvement from a loss (pre-LTIR) of R167 million in
experience in the P&C business.
the prior year. It followed good mortality experience on the Group
Life Assurance book and an improvement in the underwriting
Occupancy levels in our property portfolio continue to be low given
experience in the P&C business.
the political environment in both Kenya and South Sudan.
Consequently, property income remains under pressure in these
Occupancy levels in our property portfolio continue to be low given
markets. However, management is focused on initiatives to
the political environment in both Kenya and South Sudan.
improve the occupancy levels.
Consequently, property income remains under pressure in these
markets. However, management is focused on initiatives to
The P&C underwriting margin (excluding the impact central cost
improve the occupancy levels.
allocations) improved 320 bps to 4.4% following the remediation on
loss-making business and better claims experience. P&C GWP
The P&C underwriting margin (excluding the impact central cost
declined by 31% in constant currency to R2,145 million, as a result
allocations) improved 320 bps to 4.4% following the remediation on
of our decision to exit loss making accounts in the health business
loss-making business and better claims experience. P&C GWP
and a loss of government schemes in Tanzania following regulatory
declined by 31% in constant currency to R2,145 million, as a result
changes.
of our decision to exit loss making accounts in the health business
and a loss of government schemes in Tanzania following regulatory
Life APE sales of R100 million were 14% below the prior year in
changes.
constant currency as a result of the non-renewal of a few corporate
schemes, a slowdown of sales due to reduced manpower and
Life APE sales of R100 million were 14% below the prior year in
lower new business during the election period in Kenya.
constant currency as a result of the non-renewal of a few corporate
schemes, a slowdown of sales due to reduced manpower and
lower new business during the election period in Kenya.
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Emerging Markets review
Old Mutual Emerging Markets review
continued
continued
SADC
Faulu loans and advances of R2.1 billion declined by 6% in
constant currency, largely reflecting stricter lending criteria following
the introduction of interest rate caps in 2016. The net lending
Faulu loans and advances of R2.1 billion declined by 6% in
margin improved marginally to 12.8% (2016: 12.6%) due to a
constant currency, largely reflecting stricter lending criteria following
reduction in funding costs. During the year, a new Faulu core
the introduction of interest rate caps in 2016. The net lending
banking platform was implemented which is expected to improve
margin improved marginally to 12.8% (2016: 12.6%) due to a
business transactional capabilities.
reduction in funding costs. During the year, a new Faulu core
banking platform was implemented which is expected to improve
West Africa
business transactional capabilities.
West Africa
The reported AOP loss (pre-LTIR) of R182 million, was broadly in
line with the prior year. In Ghana, growth was driven by increased
sales volumes, better retention and new corporate business. This
The reported AOP loss (pre-LTIR) of R182 million, was broadly in
was offset by higher reinsurance costs in the P&C business and
line with the prior year. In Ghana, growth was driven by increased
weaker life underwriting experience in Nigeria.
sales volumes, better retention and new corporate business. This
was offset by higher reinsurance costs in the P&C business and
Life APE sales of R116 million were up 7% on the prior year driven
weaker life underwriting experience in Nigeria.
by better corporate sales in Nigeria and good new business growth
in Ghana.
Life APE sales of R116 million were up 7% on the prior year driven
by better corporate sales in Nigeria and good new business growth
LatAm and Asia
in Ghana.
LatAm AOP of R469 million was 1% lower than the prior year.
In constant currency, AOP was up 6% largely driven by higher
LatAm and Asia
investment returns in Colombia.
LatAm AOP of R469 million was 1% lower than the prior year.
In constant currency, AOP was up 6% largely driven by higher
Despite the goodwill impairment in AIVA due to the overall
investment returns in Colombia.
underperformance, AIVA is making good progress in its
transformation from regular premium business to private wealth
Despite the goodwill impairment in AIVA due to the overall
management and is already delivering good sales.
underperformance, AIVA is making good progress in its
transformation from regular premium business to private wealth
Life APE sales of R570 million were 5% above the prior year in
management and is already delivering good sales.
constant currency mainly due to higher Crea Patrimonio sales in
Colombia. Funds under management grew 7% to R126.6 billion
Life APE sales of R570 million were 5% above the prior year in
during the period.
constant currency mainly due to higher Crea Patrimonio sales in
Colombia. Funds under management grew 7% to R126.6 billion
NCCF of R24.9 billion was R15.3 billion higher than the prior year
during the period.
due to a few large Private Wealth flows towards the end of the
year, and good Old Mutual Global Investors flows through AIVA.
NCCF of R24.9 billion was R15.3 billion higher than the prior year
These are eliminated at an OMEM level as they are reported by
due to a few large Private Wealth flows towards the end of the
Old Mutual Wealth (UK) at an Old Mutual plc Group level.
year, and good Old Mutual Global Investors flows through AIVA.
These are eliminated at an OMEM level as they are reported by
In China, our joint venture is focused on distributing higher margin
Old Mutual Wealth (UK) at an Old Mutual plc Group level.
risk products, which have lower regulatory capital requirements
following regulatory changes. As a result, life APE sales of
In China, our joint venture is focused on distributing higher margin
R300 million declined by 50%. Negative NCCF of R(1.3) billion,
risk products, which have lower regulatory capital requirements
was R1.0 billion better than the prior year due to lower surrenders
following regulatory changes. As a result, life APE sales of
from the Universal Life products.
R300 million declined by 50%. Negative NCCF of R(1.3) billion,
was R1.0 billion better than the prior year due to lower surrenders
from the Universal Life products.
AOP (pre-LTIR) of R1,520 million grew 6% against the prior period
SADC
(up 14% in constant currency). This was driven by higher asset
based fee income in Zimbabwe due to equity market performance,
AOP (pre-LTIR) of R1,520 million grew 6% against the prior period
growth in Malawi’s group life underwriting results, as well as good
(up 14% in constant currency). This was driven by higher asset
investment contract profits in Namibia.
based fee income in Zimbabwe due to equity market performance,
growth in Malawi’s group life underwriting results, as well as good
Gross flows of R17.3 billion were up 11% driven by good
investment contract profits in Namibia.
non-life sales in Zimbabwe and Namibia, whilst Malawi recorded
exceptional growth in the group life sales of its corporate business,
Gross flows of R17.3 billion were up 11% driven by good
albeit off a low base. NCCF of R1.0 billion, was adversely impacted
non-life sales in Zimbabwe and Namibia, whilst Malawi recorded
by a R3.3 billion outflow from the government pension fund in
exceptional growth in the group life sales of its corporate business,
Namibia due to regulatory rebalancing requirements.
albeit off a low base. NCCF of R1.0 billion, was adversely impacted
by a R3.3 billion outflow from the government pension fund in
The P&C underwriting margin of 7.2% (2016: 12.5%) declined
Namibia due to regulatory rebalancing requirements.
primarily as a result of higher weather-related claims in the
region and the impact of higher central cost allocations. P&C
The P&C underwriting margin of 7.2% (2016: 12.5%) declined
GWP increased by 1% in constant currency to R1,361 million
primarily as a result of higher weather-related claims in the
driven by growth in new business in Zimbabwe, despite
region and the impact of higher central cost allocations. P&C
clients reducing the sums they have insured in the current
GWP increased by 1% in constant currency to R1,361 million
macroeconomic environment.
driven by growth in new business in Zimbabwe, despite
clients reducing the sums they have insured in the current
Loans and advances of R9.2 billion, were up 23% in constant
macroeconomic environment.
currency, reflecting growth in the mortgage and business loans
books in CABS (Zimbabwe). OMF (Namibia) loans and advances
Loans and advances of R9.2 billion, were up 23% in constant
of R0.6 billion were consolidated into the results the first time
currency, reflecting growth in the mortgage and business loans
during the year. The lending margin of 11% declined by 55bps
books in CABS (Zimbabwe). OMF (Namibia) loans and advances
and was further impacted by the introduction of interest rate caps
of R0.6 billion were consolidated into the results the first time
in Zimbabwe.
during the year. The lending margin of 11% declined by 55bps
and was further impacted by the introduction of interest rate caps
East Africa
in Zimbabwe.
Whilst we reported a loss (pre-LTIR) of R61 million, this was a
East Africa
significant improvement from a loss (pre-LTIR) of R167 million in
the prior year. It followed good mortality experience on the Group
Whilst we reported a loss (pre-LTIR) of R61 million, this was a
Life Assurance book and an improvement in the underwriting
significant improvement from a loss (pre-LTIR) of R167 million in
experience in the P&C business.
the prior year. It followed good mortality experience on the Group
Life Assurance book and an improvement in the underwriting
Occupancy levels in our property portfolio continue to be low given
experience in the P&C business.
the political environment in both Kenya and South Sudan.
Consequently, property income remains under pressure in these
Occupancy levels in our property portfolio continue to be low given
markets. However, management is focused on initiatives to
the political environment in both Kenya and South Sudan.
improve the occupancy levels.
Consequently, property income remains under pressure in these
markets. However, management is focused on initiatives to
The P&C underwriting margin (excluding the impact central cost
improve the occupancy levels.
allocations) improved 320 bps to 4.4% following the remediation on
loss-making business and better claims experience. P&C GWP
The P&C underwriting margin (excluding the impact central cost
declined by 31% in constant currency to R2,145 million, as a result
allocations) improved 320 bps to 4.4% following the remediation on
of our decision to exit loss making accounts in the health business
loss-making business and better claims experience. P&C GWP
and a loss of government schemes in Tanzania following regulatory
declined by 31% in constant currency to R2,145 million, as a result
of our decision to exit loss making accounts in the health business
changes.
and a loss of government schemes in Tanzania following regulatory
Life APE sales of R100 million were 14% below the prior year in
changes.
constant currency as a result of the non-renewal of a few corporate
schemes, a slowdown of sales due to reduced manpower and
Life APE sales of R100 million were 14% below the prior year in
lower new business during the election period in Kenya.
constant currency as a result of the non-renewal of a few corporate
schemes, a slowdown of sales due to reduced manpower and
lower new business during the election period in Kenya.
Old Mutual plc
Annual Report and Accounts 2017
Central expenses and Other Group Activities
Central expenses and administration costs of R536 million were
19% better than the prior year. This was largely driven by the
impact of the ongoing refinement of the expense allocation
methodology to segments, mainly impacting the life operations
in the retail and corporate segments.
LTIR of R2,974 million was up 1% on the prior year. Rest of Africa
LTIR of R996 million, up 17%, was driven by a higher shareholder
asset base following exceptional equity market performance in
Zimbabwe. This was offset by a 7% decline in OMLAC(SA)’s LTIR
to R1,573 million due to a reduced shareholder asset base. This
followed the alignment of the Statutory Valuation Methodology for
investment contracts to the IFRS basis.
Finance costs of R622 million were up 18% on the prior year. This
follows the higher overall interest rates experienced in South Africa
over the last twelve months, given OMLAC(SA) has both fixed rate
and floating rate bonds in issue. The sovereign downgrade of
South Africa’s credit ratings by Standard & Poor’s, which occurred
late in 2017, did not have a material impact on finance costs.
Embedded Value
OMEM reported a slight improvement in the VNB margin to 3.3%
(2016: 3.2%), despite a 3% decline in life APE sales. VNB
increased by 4% to R2,256 million mainly as a result of a more
profitable mix of business and the pricing reviews of the Personal
Finance and MFC protection books.
Boosted by the strong VNB, the Return on Embedded Value
remained strong at 13.8%. MCEV operating earnings (post-tax)
declined by 3% on the prior year to R8,133 million, mainly due
to the positive one-off impact of the elective transfer of the South
African protection book to the new tax fund in South Africa in the
prior year.
Experience variances remained positive at R146 million driven by
expense and risk experience, albeit lower than R452 million in the
prior year. Expense profits reflect tighter expense management
across the business in response to the challenging economic
environment. Lower experience profits on the prior year were
due to adverse persistency experience driven by higher benefit
payments in Corporate, which is indicative of the financial strain
currently faced by these customers.
Investment returns were higher than expected, particularly in
Zimbabwe, following the significant increase in the equity market
levels. The steepening of the South African bond curve over the
period had a further positive impact on earnings.
Cash and capital
OMEM adopts a disciplined approach to capital allocation decisions
and manages risks within its financial management framework and
related risk appetite. We continue to be a highly cash generative
business, with high solvency and a strong, well-diversified and
resilient balance sheet that is able to withstand a number of
economic shocks.
Free surplus generation and utilisation
Free surplus generated represents the available cash, after allowing
for capital invested into the business.
As we prepare for the implementation of SAM, we have undertaken
a review of the methodology used in calculating the free surplus
generation. Below is a reconciliation of the free surplus generated:
Free surplus generation (Rbn)
OMEM free surplus − as
previously calculated
Capital requirements of non-
insurance business and other1
Fungibility constraints
OMEM free surplus − restated
2017
8.9
(0.1)
(2.0)
6.8
2016 % change
6.3
41%
(0.4)
(75)%
(0.9)
5.0
(122)%
36%
1 Other adjustments include the removal of Kotak and adjustments relating to the shift
from AOP to Adjusted Headline Earnings.
The OMEM free surplus generation calculation now reflects
changes in the capital requirements of non-insurance businesses
as well as fungibility considerations where there are constraints
in remitting profits to the holding company. Local free surplus
generated reflects the cash available prior to fungibility
considerations
During the year, OMEM generated free surplus of R6.8 billion
(2016: R5.0 billion), after any fungibility considerations. This
represents a conversion rate of 74% of post-tax AOP (2016: 56%).
This was largely attributable to higher investment returns particularly
in South Africa and the significant improvement in Old Mutual
Insure’s underwriting result together with the lower capital
requirements from a reduction in net earned premiums.
Currently, fungibility constraints primarily impact our Zimbabwean
operations, where profits are retained and reinvested to grow the
local businesses. The increase reflects abnormally high investment
returns particularly in Zimbabwe during the year. Equity market
performance in Zimbabwe remains volatile and as such we do
not expect to sustain the current level of returns.
The mature life business in South Africa, which has traditionally
generated strong returns, is the main contributor to the strong free
surplus generation. OMEM currently reinvests circa.25% of the free
surplus generation into new business initiatives, the majority of
which relate to the life business in South Africa. We see this as
sound investment in a market where we have continued to
demonstrate good returns and robust VNB margins.
During the 2017 financial year, OMEM remitted R2.7 billion of
the free surplus generated to its shareholder (2016: R4.7 billion).
The lower dividend compared to the prior year enabled the
business to further strengthen its liquidity and solvency position
in preparation for Solvency Assessment and Management (SAM)
and standalone capital requirements as well as the repayment
of intercompany debt.
As at 31 December 2017, there was R5.9 billion (2016: R9.7 billion)
of outstanding intercompany indebtedness between OMLAC(SA),
Old Mutual Group Holdings (OMGH) and its subsidiary Old Mutual
Portfolio Holdings (OMPH). During the year, R3.8 billion of this
intercompany indebtedness was repaid to OMLAC(SA), funded
through greater cash retention as mentioned above.
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Annual Report and Accounts 2017
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Annual Report and Accounts 2017
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Old Mutual Emerging Markets review
continued
We anticipate that the remaining intercompany indebtedness will
largely be repaid with the transfer of Nedbank shares to OMLAC(SA)
up to the desired shareholding of 19.9%. Any residual indebtedness
We anticipate that the remaining intercompany indebtedness will
will be settled in cash.
largely be repaid with the transfer of Nedbank shares to OMLAC(SA)
up to the desired shareholding of 19.9%. Any residual indebtedness
OMLAC(SA) solvency position
will be settled in cash.
OMEM discloses solvency capital under the current regulatory
capital rules (South African statutory valuation method). As at
OMLAC(SA) solvency position
31 December 2017, OMLAC(SA)’s capital coverage was 3.0 times
OMEM discloses solvency capital under the current regulatory
(2016: 3.2 times). The decline in the OMLAC(SA) solvency position
capital rules (South African statutory valuation method). As at
was largely driven by the increase in statutory capital requirement
31 December 2017, OMLAC(SA)’s capital coverage was 3.0 times
as a result of new business book growth and year-end assumption
(2016: 3.2 times). The decline in the OMLAC(SA) solvency position
changes relating to expenses and morbidity.
was largely driven by the increase in statutory capital requirement
as a result of new business book growth and year-end assumption
We have adopted the provisional SAM basis for how we manage
changes relating to expenses and morbidity.
capital, which is expected to become effective in mid-2018, upon
the implementation of the Insurance Act. It will impose more
We have adopted the provisional SAM basis for how we manage
stringent regulatory requirements on both long-term and short-term
capital, which is expected to become effective in mid-2018, upon
insurers, requiring them to maintain adequate solvency capital
the implementation of the Insurance Act. It will impose more
based on risks faced on a day-to-day basis. Based on our preferred
stringent regulatory requirements on both long-term and short-term
methodology which will be formally presented for regulatory
insurers, requiring them to maintain adequate solvency capital
approval once the SAM framework is implemented, the
based on risks faced on a day-to-day basis. Based on our preferred
OMLAC(SA) SAM solvency ratio for 2017 was estimated at 243%.
methodology which will be formally presented for regulatory
approval once the SAM framework is implemented, the
Debt as part of the capital structure
OMLAC(SA) SAM solvency ratio for 2017 was estimated at 243%.
OMLAC(SA) has R3,475 million in fixed rate Tier 2 bonds and
R2,525 million in floating rate Tier 2 bonds. The fixed rate bonds
Debt as part of the capital structure
have first calls in 2019, 2020, 2022 and 2025, while the floating
OMLAC(SA) has R3,475 million in fixed rate Tier 2 bonds and
rate bonds have first calls in 2019 and 2020. The Revolving Credit
R2,525 million in floating rate Tier 2 bonds. The fixed rate bonds
Facility of R5,250 million was undrawn at the year-end. The facility
have first calls in 2019, 2020, 2022 and 2025, while the floating
term runs until mid-2020, and we intend to negotiate a roll-over
rate bonds have first calls in 2019 and 2020. The Revolving Credit
of the facility leading up to the maturity date.
Facility of R5,250 million was undrawn at the year-end. The facility
term runs until mid-2020, and we intend to negotiate a roll-over
In November 2017, Old Mutual Insure issued a R500 million in
of the facility leading up to the maturity date.
floating rate Tier 2 bonds, with a coupon rate of 9.157% (JIBAR +
2.09%). The first call date is 2022. The issuance will provide the
In November 2017, Old Mutual Insure issued a R500 million in
segment with an enhanced regulatory solvency position while also
floating rate Tier 2 bonds, with a coupon rate of 9.157% (JIBAR +
producing economic benefits that will help the continued turnaround
2.09%). The first call date is 2022. The issuance will provide the
of the segment.
segment with an enhanced regulatory solvency position while also
producing economic benefits that will help the continued turnaround
Following Standard and Poor’s rating action on the South
of the segment.
Africa local currency credit rating, effective 30 November 2017,
OMLAC(SA)’s Global Scale Rating was lowered to ‘BB+ Stable’
Following Standard and Poor’s rating action on the South
from ‘BBB- Negative’ and its long-term South African National
Africa local currency credit rating, effective 30 November 2017,
Scale Rating was lowered to ‘zaAA+’ from ‘zaAAA’. Its short-term
OMLAC(SA)’s Global Scale Rating was lowered to ‘BB+ Stable’
rating was affirmed at ‘zaA-1+’ whilst its Issuer Credit Rating
from ‘BBB- Negative’ and its long-term South African National
on the Subordinated Deferrable Debt was lowered to ‘zaA’
Scale Rating was lowered to ‘zaAA+’ from ‘zaAAA’. Its short-term
from ‘zaAA’.
rating was affirmed at ‘zaA-1+’ whilst its Issuer Credit Rating
on the Subordinated Deferrable Debt was lowered to ‘zaA’
from ‘zaAA’.
Managed Separation update
We have made good progress to date on the managed separation
process and we remain on track for independence in 2018.
Managed Separation update
We have made good progress to date on the managed separation
Since the appointment of Trevor Manuel as the Chairman of
process and we remain on track for independence in 2018.
OMGH (and Chairman-designate of OML), the governance
structures above senior management have been strengthened.
Since the appointment of Trevor Manuel as the Chairman of
The non-executive membership of the reconstituted OMGH Board
OMGH (and Chairman-designate of OML), the governance
comprises nine directors from the board of directors of OMEM and
structures above senior management have been strengthened.
seven new non-executive directors. This repositioning of the board
The non-executive membership of the reconstituted OMGH Board
has brought together strong operational skills and listed financial
comprises nine directors from the board of directors of OMEM and
services company experience.
seven new non-executive directors. This repositioning of the board
has brought together strong operational skills and listed financial
As a key step in the preparation for the listing of OML, we will be
services company experience.
publishing a Pre-Listing Statement. The Pre-Listing Statement will
include more detailed information in relation to the OML Group,
As a key step in the preparation for the listing of OML, we will be
including its strengths, strategy and outlook. It will also contain
publishing a Pre-Listing Statement. The Pre-Listing Statement will
detailed risk factors and other key information relevant to
include more detailed information in relation to the OML Group,
the business.
including its strengths, strategy and outlook. It will also contain
detailed risk factors and other key information relevant to
In line with our vision, and in accordance with our Responsible
the business.
Business principles, BEE ownership remains a priority as part of
our broader commitment to transformation. Under the Amended
In line with our vision, and in accordance with our Responsible
Financial Services Charter (FSC), OMEM reported a Level 3
Business principles, BEE ownership remains a priority as part of
B-BBEE contributor status and a reduced B-BBEE shareholding
our broader commitment to transformation. Under the Amended
of 21.5% as at 31 December 2017, due to a change in the
Financial Services Charter (FSC), OMEM reported a Level 3
methodology used to determine the value of the South African
B-BBEE contributor status and a reduced B-BBEE shareholding
businesses. Subsequent to the implementation of the Managed
of 21.5% as at 31 December 2017, due to a change in the
Separation, we anticipate an increase in the effective B-BBEE
methodology used to determine the value of the South African
shareholding (which will be measured for the first time as at
businesses. Subsequent to the implementation of the Managed
31 December 2018), but may be marginally below the current
Separation, we anticipate an increase in the effective B-BBEE
Amended FSC target of 25%. We will have greater clarity on
shareholding (which will be measured for the first time as at
this once the OML Group’s share register has settled.
31 December 2018), but may be marginally below the current
Amended FSC target of 25%. We will have greater clarity on
On 9 January 2018, we entered into a Framework Agreement with
this once the OML Group’s share register has settled.
the South African Economic Development Department in relation
to the South African aspects of the Managed Separation. Under
On 9 January 2018, we entered into a Framework Agreement with
this agreement, we have committed to restore the B-BBEE
the South African Economic Development Department in relation
shareholding, if required, to at least 25% in 3 years from the listing
to the South African aspects of the Managed Separation. Under
date and to be best in class when measured against comparable
this agreement, we have committed to restore the B-BBEE
competitors within 5 years (measured on the listing date). OML
shareholding, if required, to at least 25% in 3 years from the listing
will consider the form and extent of any appropriate B-BBEE
date and to be best in class when measured against comparable
transactions, should they be required, to achieve these targets.
competitors within 5 years (measured on the listing date). OML
will consider the form and extent of any appropriate B-BBEE
We have also undertaken to allocate an incremental amount of
transactions, should they be required, to achieve these targets.
R500 million to a ring-fenced Enterprise Supplier Development
Fund. It is envisaged that the fund will provide loan funding to small
We have also undertaken to allocate an incremental amount of
enterprises on behalf of OML to promote enterprise and supplier
R500 million to a ring-fenced Enterprise Supplier Development
development, with the principal aim of creating additional jobs in
Fund. It is envisaged that the fund will provide loan funding to small
the OML ecosystem.
enterprises on behalf of OML to promote enterprise and supplier
development, with the principal aim of creating additional jobs in
the OML ecosystem.
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Emerging Markets review
continued
Old Mutual Emerging Markets review
continued
We anticipate that the remaining intercompany indebtedness will
largely be repaid with the transfer of Nedbank shares to OMLAC(SA)
up to the desired shareholding of 19.9%. Any residual indebtedness
We anticipate that the remaining intercompany indebtedness will
will be settled in cash.
largely be repaid with the transfer of Nedbank shares to OMLAC(SA)
up to the desired shareholding of 19.9%. Any residual indebtedness
OMLAC(SA) solvency position
will be settled in cash.
OMEM discloses solvency capital under the current regulatory
capital rules (South African statutory valuation method). As at
OMLAC(SA) solvency position
31 December 2017, OMLAC(SA)’s capital coverage was 3.0 times
OMEM discloses solvency capital under the current regulatory
(2016: 3.2 times). The decline in the OMLAC(SA) solvency position
capital rules (South African statutory valuation method). As at
was largely driven by the increase in statutory capital requirement
31 December 2017, OMLAC(SA)’s capital coverage was 3.0 times
as a result of new business book growth and year-end assumption
(2016: 3.2 times). The decline in the OMLAC(SA) solvency position
changes relating to expenses and morbidity.
was largely driven by the increase in statutory capital requirement
as a result of new business book growth and year-end assumption
We have adopted the provisional SAM basis for how we manage
changes relating to expenses and morbidity.
capital, which is expected to become effective in mid-2018, upon
the implementation of the Insurance Act. It will impose more
We have adopted the provisional SAM basis for how we manage
stringent regulatory requirements on both long-term and short-term
capital, which is expected to become effective in mid-2018, upon
insurers, requiring them to maintain adequate solvency capital
the implementation of the Insurance Act. It will impose more
based on risks faced on a day-to-day basis. Based on our preferred
stringent regulatory requirements on both long-term and short-term
methodology which will be formally presented for regulatory
insurers, requiring them to maintain adequate solvency capital
approval once the SAM framework is implemented, the
based on risks faced on a day-to-day basis. Based on our preferred
OMLAC(SA) SAM solvency ratio for 2017 was estimated at 243%.
methodology which will be formally presented for regulatory
approval once the SAM framework is implemented, the
Debt as part of the capital structure
OMLAC(SA) SAM solvency ratio for 2017 was estimated at 243%.
OMLAC(SA) has R3,475 million in fixed rate Tier 2 bonds and
R2,525 million in floating rate Tier 2 bonds. The fixed rate bonds
Debt as part of the capital structure
have first calls in 2019, 2020, 2022 and 2025, while the floating
OMLAC(SA) has R3,475 million in fixed rate Tier 2 bonds and
rate bonds have first calls in 2019 and 2020. The Revolving Credit
R2,525 million in floating rate Tier 2 bonds. The fixed rate bonds
Facility of R5,250 million was undrawn at the year-end. The facility
have first calls in 2019, 2020, 2022 and 2025, while the floating
term runs until mid-2020, and we intend to negotiate a roll-over
rate bonds have first calls in 2019 and 2020. The Revolving Credit
of the facility leading up to the maturity date.
Facility of R5,250 million was undrawn at the year-end. The facility
term runs until mid-2020, and we intend to negotiate a roll-over
In November 2017, Old Mutual Insure issued a R500 million in
of the facility leading up to the maturity date.
floating rate Tier 2 bonds, with a coupon rate of 9.157% (JIBAR +
2.09%). The first call date is 2022. The issuance will provide the
In November 2017, Old Mutual Insure issued a R500 million in
segment with an enhanced regulatory solvency position while also
floating rate Tier 2 bonds, with a coupon rate of 9.157% (JIBAR +
producing economic benefits that will help the continued turnaround
2.09%). The first call date is 2022. The issuance will provide the
segment with an enhanced regulatory solvency position while also
of the segment.
producing economic benefits that will help the continued turnaround
Following Standard and Poor’s rating action on the South
of the segment.
Africa local currency credit rating, effective 30 November 2017,
OMLAC(SA)’s Global Scale Rating was lowered to ‘BB+ Stable’
Following Standard and Poor’s rating action on the South
from ‘BBB- Negative’ and its long-term South African National
Africa local currency credit rating, effective 30 November 2017,
Scale Rating was lowered to ‘zaAA+’ from ‘zaAAA’. Its short-term
OMLAC(SA)’s Global Scale Rating was lowered to ‘BB+ Stable’
rating was affirmed at ‘zaA-1+’ whilst its Issuer Credit Rating
from ‘BBB- Negative’ and its long-term South African National
on the Subordinated Deferrable Debt was lowered to ‘zaA’
Scale Rating was lowered to ‘zaAA+’ from ‘zaAAA’. Its short-term
from ‘zaAA’.
rating was affirmed at ‘zaA-1+’ whilst its Issuer Credit Rating
on the Subordinated Deferrable Debt was lowered to ‘zaA’
from ‘zaAA’.
Managed Separation update
We have made good progress to date on the managed separation
process and we remain on track for independence in 2018.
Managed Separation update
We have made good progress to date on the managed separation
Since the appointment of Trevor Manuel as the Chairman of
process and we remain on track for independence in 2018.
OMGH (and Chairman-designate of OML), the governance
structures above senior management have been strengthened.
Since the appointment of Trevor Manuel as the Chairman of
The non-executive membership of the reconstituted OMGH Board
OMGH (and Chairman-designate of OML), the governance
comprises nine directors from the board of directors of OMEM and
structures above senior management have been strengthened.
seven new non-executive directors. This repositioning of the board
The non-executive membership of the reconstituted OMGH Board
has brought together strong operational skills and listed financial
comprises nine directors from the board of directors of OMEM and
services company experience.
seven new non-executive directors. This repositioning of the board
has brought together strong operational skills and listed financial
As a key step in the preparation for the listing of OML, we will be
services company experience.
publishing a Pre-Listing Statement. The Pre-Listing Statement will
include more detailed information in relation to the OML Group,
As a key step in the preparation for the listing of OML, we will be
including its strengths, strategy and outlook. It will also contain
publishing a Pre-Listing Statement. The Pre-Listing Statement will
detailed risk factors and other key information relevant to
include more detailed information in relation to the OML Group,
the business.
including its strengths, strategy and outlook. It will also contain
detailed risk factors and other key information relevant to
In line with our vision, and in accordance with our Responsible
the business.
Business principles, BEE ownership remains a priority as part of
our broader commitment to transformation. Under the Amended
In line with our vision, and in accordance with our Responsible
Financial Services Charter (FSC), OMEM reported a Level 3
Business principles, BEE ownership remains a priority as part of
B-BBEE contributor status and a reduced B-BBEE shareholding
our broader commitment to transformation. Under the Amended
of 21.5% as at 31 December 2017, due to a change in the
Financial Services Charter (FSC), OMEM reported a Level 3
methodology used to determine the value of the South African
B-BBEE contributor status and a reduced B-BBEE shareholding
businesses. Subsequent to the implementation of the Managed
of 21.5% as at 31 December 2017, due to a change in the
Separation, we anticipate an increase in the effective B-BBEE
methodology used to determine the value of the South African
shareholding (which will be measured for the first time as at
businesses. Subsequent to the implementation of the Managed
31 December 2018), but may be marginally below the current
Separation, we anticipate an increase in the effective B-BBEE
Amended FSC target of 25%. We will have greater clarity on
shareholding (which will be measured for the first time as at
this once the OML Group’s share register has settled.
31 December 2018), but may be marginally below the current
Amended FSC target of 25%. We will have greater clarity on
On 9 January 2018, we entered into a Framework Agreement with
this once the OML Group’s share register has settled.
the South African Economic Development Department in relation
to the South African aspects of the Managed Separation. Under
On 9 January 2018, we entered into a Framework Agreement with
this agreement, we have committed to restore the B-BBEE
the South African Economic Development Department in relation
shareholding, if required, to at least 25% in 3 years from the listing
to the South African aspects of the Managed Separation. Under
date and to be best in class when measured against comparable
this agreement, we have committed to restore the B-BBEE
competitors within 5 years (measured on the listing date). OML
shareholding, if required, to at least 25% in 3 years from the listing
will consider the form and extent of any appropriate B-BBEE
date and to be best in class when measured against comparable
transactions, should they be required, to achieve these targets.
competitors within 5 years (measured on the listing date). OML
will consider the form and extent of any appropriate B-BBEE
We have also undertaken to allocate an incremental amount of
transactions, should they be required, to achieve these targets.
R500 million to a ring-fenced Enterprise Supplier Development
Fund. It is envisaged that the fund will provide loan funding to small
We have also undertaken to allocate an incremental amount of
enterprises on behalf of OML to promote enterprise and supplier
R500 million to a ring-fenced Enterprise Supplier Development
development, with the principal aim of creating additional jobs in
Fund. It is envisaged that the fund will provide loan funding to small
the OML ecosystem.
enterprises on behalf of OML to promote enterprise and supplier
development, with the principal aim of creating additional jobs in
the OML ecosystem.
Old Mutual plc
Annual Report and Accounts 2017
In January 2018, the Competition Tribunal in South Africa approved
the acquisition of Old Mutual plc by the newly incorporated OML,
subject to the commitments that OMGH has made in the
Framework Agreement.
Post the anticipated unbundling of Nedbank (within approximately
6 months of listing), the OML Group will principally consist of
OMEM and a 19.9% shareholding in Nedbank. The 19.9%
shareholding was determined through negotiations with Nedbank
and discussions with the South African Reserve Bank in order to
provide stability to the broader financial system and the Nedbank
and OML investor base during managed separation, whilst also
supporting our ongoing commercial arrangements.
OML is committed to being a significant holder of Nedbank while
retaining a right to review its precise holding as appropriate from
time to time, in accordance with the heads of terms outlined in the
new Nedbank Relationship Agreement, which is expected to be
finalised and executed in the coming weeks.
Other group activities of the OML Group will include the positive net
asset value Residual of Old Mutual plc, which largely comprise the
wind down of the plc Head Office and the remaining operations in
Bermuda that are expected to run off by mid-2018.
OML as a standalone business
This section summarises certain information on OML’s operations,
including certain forward looking statements in relation to operating
performance expectations and targets. These should be read in
conjunction with all the information in the Pre-Listing Statement
when it is published.
Key financial indicators (Rm)
Adjusted Headline Earnings
Return on Net Asset Value (%)
Free surplus conversion (%)
SAM solvency ratio (%)1
2016
2017
13,409
22.3%
60%
167%
Restated % change
25%
10,765
3.4%
18.9%
3%
57%
−
n/a
1 Pro-forma at 31 December 2017. The Standard Formula allows for, subject to
regulatory approval, certain methodology elections to be made. The estimated SAM
solvency positions are presented on the basis of the Group’s preferred methodology
which will, once the SAM framework is implemented, be formally presented for
regulatory approval.
Pro-forma Adjusted Headline Earnings
Going forward, the OML Group’s primary profit measure will be
Adjusted Headline Earnings. Results from Operations will be the
primary performance measure of the OML Group’s operating
segments, which represents the segments’ contribution to the OML
Group’s results. Adjusted Headline Earnings excludes Residual plc
and discontinued operations.
Adjusted Headline Earnings is calculated as Headline Earnings
as defined by the SAICA Circular 2/2015 adjusted for items that
are not reflective of the economic performance of the OML Group.
“Results from Operations” is calculated as Adjusted Headline
Earnings before shareholder tax and minority interest, excluding
net investment return on shareholder assets.
Below is a reconciliation of AOP, Old Mutual plc’s primary profit
measure, to Adjusted Headline Earnings, the future profit measure:
Adjusted Headline Earnings (Rm)
AOP (pre-LTIR and finance
costs)
Investment return on
insurance funds
Amortisation of acquired
intangible assets and
acquisition costs
Impairment of intangible and
fixed assets
Results from Operations
Shareholder investment return
Finance costs
Income from associates
(19.9% of Nedbank)
Adjusted Headline Earnings
(pre-tax and NCI)
Shareholder tax
Non-controlling interest
Adjusted Headline Earnings
2017
2016 % change
10,974
10,309
6%
200
170
18%
(221)
(351)
37%
23
10,976
4,920
(622)
67
10,195
2,205
(529)
(66%)
8%
123%
(18%)
2,346
2,282
3%
17,620
(3,723)
(488)
13,409
14,153
(3,148)
(240)
10,765
24%
(18%)
(103%)
25%
Investment return on insurance funds of R200 million (2016: R180
million), previously reported as part of LTIR, is now reported in
Old Mutual Insure’s Results from Operations.
Amortisation of acquired intangible assets and acquisition costs of
R221 million (2016: R351 million) relates primarily to intangibles
following the acquisition of a controlling stake in OMF in 2014 and
African Infrastructure Investment Managers in 2016.
Shareholder investment returns are no longer smoothed.
The increase in actual investment returns was driven by both
South Africa and Zimbabwe’s equity market performance as
mentioned earlier.
Detail on Nedbank’s results is available on the website:
www.nedbankgroup.co.za
Below is a reconciliation of Adjusted Headline Earnings to post-tax
IFRS profit:
IFRS profit (post tax and NCI) (Rm)
Adjusted Headline Earnings
Investment return for Group
equity and debt instruments
in life funds
Impact of restructuring
Discontinued operations
Income from associates
Residual plc
Headline earnings
Impairment of goodwill and
other intangibles
Impairment of investments
in associates
Profit/(loss) on disposal of
subsidiaries, associated
undertakings and strategic
investments
Profit after tax for the financial
year attributable to ordinary
equity holders of the parent
Dividends on preferred securities
Profit after tax for the financial
year attributable to equity
holders of the parent
2017
13,409
2016 % change
25%
10,765
(1,355)
(54)
8,002
(2,346)
(4,512)
13,144
(864)
124
8,333
(2,282)
(3,062)
13,014
(57%)
(144%)
(4%)
(3%)
(47%)
1%
(1,106)
(1,783)
38%
2,081
(557)
474%
−
399
−
14,119
253
11,073
278
28%
(9%)
14,372
11,351
27%
16
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Emerging Markets review
continued
Old Mutual Emerging Markets review
continued
Investment return for Group equity and debt instruments in life
funds relates to investment returns on policyholder investments
in group equity and debt instruments held by the OML Group's
Investment return for Group equity and debt instruments in life
life funds.
funds relates to investment returns on policyholder investments
in group equity and debt instruments held by the OML Group's
Restructuring costs represents the elimination of material non-
life funds.
recurring expenses, specifically related to business restructuring
costs such as Managed Separation costs, the costs or income
Restructuring costs represents the elimination of material non-
associated with completed acquisitions and the release of
recurring expenses, specifically related to business restructuring
acquisition date provisions. The 2016 financial year includes the
costs such as Managed Separation costs, the costs or income
release of an acquisition reserve in MFC.
associated with completed acquisitions and the release of
acquisition date provisions. The 2016 financial year includes the
Consistent with our proposed 19.9% shareholding in Nedbank
release of an acquisition reserve in MFC.
following the anticipated unbundling of Nedbank, income from
associates reflects the proportionate headline earnings that would
Consistent with our proposed 19.9% shareholding in Nedbank
have been earned from the investment in Nedbank. In accordance
following the anticipated unbundling of Nedbank, income from
with IFRS, the Nedbank shareholding of approximately 55% will be
associates reflects the proportionate headline earnings that would
classified as held for distribution.
have been earned from the investment in Nedbank. In accordance
with IFRS, the Nedbank shareholding of approximately 55% will be
Return on Net Asset Value (RoNAV)
classified as held for distribution.
The OML Group RoNAV is defined as Adjusted Headline Earnings
divided by average Adjusted IFRS equity. Adjusted IFRS Equity is
Return on Net Asset Value (RoNAV)
calculated as total Group equity attributable to ordinary equity
The OML Group RoNAV is defined as Adjusted Headline Earnings
shareholders before adjustments related to consolidation of funds.
divided by average Adjusted IFRS equity. Adjusted IFRS Equity is
It excludes Residual plc and discontinued operations, and is further
calculated as total Group equity attributable to ordinary equity
adjusted to recognise the equity attributable to the retained 19.9%
shareholders before adjustments related to consolidation of funds.
shareholding in Nedbank. From the time of the anticipated
It excludes Residual plc and discontinued operations, and is further
unbundling of Nedbank the equity attributable to Nedbank will be
adjusted to recognise the equity attributable to the retained 19.9%
adjusted to remove the one-off fair value adjustment required under
shareholding in Nedbank. From the time of the anticipated
IFRS at the time of unbundling and the same adjustment will be
unbundling of Nedbank the equity attributable to Nedbank will be
applied when calculating RoNAV on an ongoing basis.
adjusted to remove the one-off fair value adjustment required under
IFRS at the time of unbundling and the same adjustment will be
As a result, the pro-forma OML RoNAV was 22.3% (2016: 18.9%).
applied when calculating RoNAV on an ongoing basis.
This was due primarily to higher actual investment returns in South
Africa with abnormally high growth in Zimbabwe, which contributed
As a result, the pro-forma OML RoNAV was 22.3% (2016: 18.9%).
to a 25% increase in Adjusted Headline Earnings and a
This was due primarily to higher actual investment returns in South
corresponding increase of 5% in average Adjusted IFRS equity
Africa with abnormally high growth in Zimbabwe, which contributed
over the period.
to a 25% increase in Adjusted Headline Earnings and a
corresponding increase of 5% in average Adjusted IFRS equity
Capital management
over the period.
The OML Group seeks to maintain a strong solvency and liquidity
position through disciplined management of capital resources and
Capital management
risks. The backing of a financially sound group is important given
The OML Group seeks to maintain a strong solvency and liquidity
the security and peace of mind that it affords customers, advisors
position through disciplined management of capital resources and
and regulators.
risks. The backing of a financially sound group is important given
the security and peace of mind that it affords customers, advisors
Scenario analysis is undertaken regularly to ensure the regulatory
and regulators.
balance sheet could withstand severe and prolonged periods of
stress. Our solvency position remains resilient under these stresses.
Scenario analysis is undertaken regularly to ensure the regulatory
balance sheet could withstand severe and prolonged periods of
stress. Our solvency position remains resilient under these stresses.
Solvency Assessment and Management (SAM)
The OML Group solvency position is calculated by aggregating the
results of the solvency calculations under SAM across the entities
Solvency Assessment and Management (SAM)
that make up the Group. The estimated SAM solvency positions
The OML Group solvency position is calculated by aggregating the
are presented on the basis of the Group’s preferred methodology
results of the solvency calculations under SAM across the entities
which will, once the SAM framework is implemented, be formally
that make up the Group. The estimated SAM solvency positions
presented for regulatory approval. This is based on our current
are presented on the basis of the Group’s preferred methodology
Nedbank shareholding.
which will, once the SAM framework is implemented, be formally
presented for regulatory approval. This is based on our current
The material South African insurance entities are aggregated using
Nedbank shareholding.
the accounting consolidation approach which applies the SAM
Standard Formula, where capital requirements are calculated
The material South African insurance entities are aggregated using
assuming a 1-in-200 year event over a one year timeline, to the
the accounting consolidation approach which applies the SAM
consolidated balance sheet of these entities.
Standard Formula, where capital requirements are calculated
assuming a 1-in-200 year event over a one year timeline, to the
The remainder of the entities are aggregated using the deduction
consolidated balance sheet of these entities.
and aggregation approach which sums the solvency position for
each entity after elimination of intercompany positions, with the
The remainder of the entities are aggregated using the deduction
basis of inclusion depending on the nature of the entity:
and aggregation approach which sums the solvency position for
Other insurance businesses are included using the
each entity after elimination of intercompany positions, with the
basis of inclusion depending on the nature of the entity:
Banks and other financial entities are included on a
Other insurance businesses are included using the
Other unregulated entities are included at their IFRS NAV.
Banks and other financial entities are included on a
Basel III basis.
SAM Standard Formula.
SAM Standard Formula.
Basel III basis.
In the OML Group calculation, the own funds in certain entities,
Other unregulated entities are included at their IFRS NAV.
such as Zimbabwe, are restricted to the solvency capital
requirement of that entity (calculated on a SAM basis) due
In the OML Group calculation, the own funds in certain entities,
to fungibility and transferability restrictions.
such as Zimbabwe, are restricted to the solvency capital
requirement of that entity (calculated on a SAM basis) due
Currently, any benefit from Residual plc positive NAV is assumed
to fungibility and transferability restrictions.
not to be fungible and therefore the surplus is excluded from the
SAM solvency ratio. Further detail on Old Mutual plc NAV is
Currently, any benefit from Residual plc positive NAV is assumed
provided in the Old Mutual plc Group Finance Director’s report.
not to be fungible and therefore the surplus is excluded from the
SAM solvency ratio. Further detail on Old Mutual plc NAV is
Based on the latest draft SAM prudential standards, it is expected
provided in the Old Mutual plc Group Finance Director’s report.
that the regulatory solvency will remain strong, with appropriate
capitalisation. As at 31 December 2017, the pro-forma OML Group
Based on the latest draft SAM prudential standards, it is expected
SAM solvency ratio is estimated to be 167%.
that the regulatory solvency will remain strong, with appropriate
capitalisation. As at 31 December 2017, the pro-forma OML Group
The lower 2017 solvency cover ratio at an OML Group level
SAM solvency ratio is estimated to be 167%.
compared to OMLAC(SA)’s regulatory SAM solvency ratio is
mostly a function of the elimination from OMLAC(SA)’s regulatory
The lower 2017 solvency cover ratio at an OML Group level
SAM solvency ratio of the contribution made by Nedbank to
compared to OMLAC(SA)’s regulatory SAM solvency ratio is
OMLAC(SA)s capital on a solo basis as it is included on a Basel III
mostly a function of the elimination from OMLAC(SA)’s regulatory
basis at the OML Group level. In addition, banking and short term
SAM solvency ratio of the contribution made by Nedbank to
insurance entities, in common with the industry tend to operate at
OMLAC(SA)s capital on a solo basis as it is included on a Basel III
lower regulatory solvency levels compared to life insurers.
basis at the OML Group level. In addition, banking and short term
insurance entities, in common with the industry tend to operate at
We expect the capital ratios to remain within their target ranges
lower regulatory solvency levels compared to life insurers.
under normal economic conditions for both OML and OMLAC(SA).
We expect the capital ratios to remain within their target ranges
under normal economic conditions for both OML and OMLAC(SA).
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We therefore anticipate a boost in both business and consumer
confidence over the medium-term as the rand strengthens,
unemployment rates improve and the inflation rate remains within
the South African Reserve Bank target range of 3-6%.
In light of this, our targets for the OML Group are as follows:
Returns
RoNAV of average cost of equity + 4%: OML will develop a 12 month
weighted average CoE and referenced to where the capital is
allocated on a weighted basis. The COE will be published as part of
OML’s public reporting cycle.
Growth
Results from Operations to grow at a CAGR of Nominal GDP + 2%
over the three years to 2020. Nominal GDP growth is defined with
reference to South Africa.
Cost efficiencies
R1.0 billion of pre-tax run-rate cost savings by end 2019, net of
costs to achieve this. This will be based on the 2017 IFRS
administrative cost base (as defined), and adjusted for inflation and
foreign exchange movements over 2018 and 2019.
Capital strength
SAM solvency for OML: 155% − 175% post the anticipated
unbundling of Nedbank
SAM solvency for OMLAC(SA): greater than 200%
OMLAC(SA) Insurance Business solvency ratio: 180% − 210%
Dividend policy
We target full year ordinary dividends that are covered by Adjusted
Headline Earnings between 1.75 and 2.25 times. We target an
interim dividend at 40% of the current year interim Adjusted
Headline Earnings.
Any dividends will take into account OML’s underlying local cash
generation, fungibility of earnings, targeted liquidity and solvency
levels, business strategy needs and market conditions at the time.
Dividends will be set using the full flexibility of the range.
OML may, from time to time, distribute additional returns to
shareholders outside of the ordinary dividend cover, where it is
determined that there is excess permanent capital in the business.
Current year trading
The OML Group’s continuing operations have started the year on
a positive note. Results from operations have traded in line with
expectations since the 2017 year end.
Further, the recurring and one-off cost estimates in preparation
for listing remain unchanged from our previous guidance, with
incremental recurring standalone and listing costs reaching their
run-rate by the end of 2018, up to R280 million.
It is anticipated that the next trading update will be for the first quarter
of 2018, which is expected to be published in April 2018.
OMLAC(SA) Insurance Business Solvency
In addition to the OMLAC(SA) SAM solvency ratio, the Group
manages the OMLAC(SA) Insurance Business solvency ratio to a
target range of 180% to 210%. This ratio excludes OMLAC(SA)’s
holding in strategic assets as the Group would not expect to rely on
these to support OMLAC(SA)’s solvency in stress conditions.
Strategic assets include the holding in Nedbank that will be retained
after the anticipated unbundling of Nedbank.
Free surplus generation
Below is a reconciliation of the free surplus generated for OML:
Free surplus generation (Rbn)
OMEM free surplus − restated
Nedbank at 19.9%
OML free surplus generated
2017
6.8
1.2
8.0
2016 % change
36%
−
29%
5.0
1.2
6.2
Nedbank’s contribution to the free surplus generated is based
on the dividends received by the OML Group on its minority
shareholding. Nedbank’s dividends represent approximately 50%
of its Headline Earnings. This also acts to reduce the reported
conversion rate of Adjusted Headline Earnings to free surplus
generation.
Based on the above, the pro-forma OML Group free surplus
generated was R8.0 billion (2016: R6.2 billion). This represents
a conversion rate of 60% of Adjusted Headline Earnings
(2016: 57%).
Debt leverage/gearing
Based on pro-forma 2017 financial statements, the leverage of the
OML Group was 11.5% with interest cover of 29.3 times. These
ratios include only our subordinated debt. The subordinated debt is
expected to qualify, based on draft SAM provision, in contributing
towards the OML Group’s solvency capital and is issued from
OMLAC(SA) at R6.0 billion, with a smaller quantum of R500 million
from Old Mutual Insure.
Senior debt held in our operating entities, debt raised by Nedbank,
and Residual plc debt are not included in the OML Group leverage
metrics.
We expect no more than £402 million of debt to be retained in
Residual plc. Further detail on Old Mutual plc debt is provided in
the Old Mutual plc Group Finance Director’s report.
The OML Group also has a Revolving Credit Facility in place
of R5.25 billion which was undrawn as at 31 December 2017.
Overall, the current level of gearing on the OML balance sheet is
appropriate and we remain within our appetite under stress testing.
Outlook for OML as a standalone business
The International Monetary Fund (IMF) expects global economic
growth to improve to 3.9% in 2018, with emerging markets and
developing economies growing by 4.9%. Sub-Saharan Africa is
expected to accelerate from 2.7% in 2017 to 3.3% in 2018.
In South Africa, economic growth estimates for 2018 have been
revised upwards to 1.4%, by the South African Reserve Bank.
Following the swearing in of Cyril Ramaphosa, the new President
has set out his intentions to restore confidence in the economy,
improving the fiscal situation, addressing corruption and reducing
the size of the cabinet. This was further reinforced by the
messages contained in the recent Budget Speech.
37
19
Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Old Mutual plc
Annual Report and Accounts 2017
Annual Report and Accounts 2017
Nedbank review
Nedbank review
Nedbank review
Mike Brown
Chief Executive, Nedbank
Mike Brown
Mike Brown
Chief Executive, Nedbank
Chief Executive, Nedbank
A solid performance in a volatile
and challenging domestic
A solid performance in a volatile
A solid performance in a volatile
environment.
and challenging domestic
and challenging domestic
environment.
environment.
Mike Brown
Chief Executive, Nedbank
Mike Brown
Mike Brown
Chief Executive, Nedbank
Chief Executive, Nedbank
A solid performance in a volatile and
challenging domestic environment
A solid performance in a volatile and
A solid performance in a volatile and
“Nedbank continued to create value for all our stakeholders in
challenging domestic environment
challenging domestic environment
a challenging political and economic environment. Our headline
“Nedbank continued to create value for all our stakeholders in
earnings of R11.8 billion, up 2.8%, reflect a good performance from
“Nedbank continued to create value for all our stakeholders in
a challenging political and economic environment. Our headline
our managed operations, with headline earnings growth of 7.8%
a challenging political and economic environment. Our headline
earnings of R11.8 billion, up 2.8%, reflect a good performance from
and a ROE (excluding goodwill) of 18.1%. Slower revenue growth
earnings of R11.8 billion, up 2.8%, reflect a good performance from
our managed operations, with headline earnings growth of 7.8%
was offset by reduced impairments and good cost management,
our managed operations, with headline earnings growth of 7.8%
and a ROE (excluding goodwill) of 18.1%. Slower revenue growth
while our share of the loss from our associate ETI following its
and a ROE (excluding goodwill) of 18.1%. Slower revenue growth
was offset by reduced impairments and good cost management,
Q4 2016 results decreased in the second half of the year as the
was offset by reduced impairments and good cost management,
while our share of the loss from our associate ETI following its
ETI business returned to profitability.
while our share of the loss from our associate ETI following its
Q4 2016 results decreased in the second half of the year as the
Q4 2016 results decreased in the second half of the year as the
ETI business returned to profitability.
“The achievements of the last few years have provided us with
ETI business returned to profitability.
a solid base and we continue delivering on our strategies and
“The achievements of the last few years have provided us with
building the capabilities that will enable us to meet the 2020 targets
“The achievements of the last few years have provided us with
a solid base and we continue delivering on our strategies and
we have now set of an ROE (excluding goodwill) of greater than or
a solid base and we continue delivering on our strategies and
building the capabilities that will enable us to meet the 2020 targets
equal to 18% and an efficiency ratio of less than or equal to 53%.
building the capabilities that will enable us to meet the 2020 targets
we have now set of an ROE (excluding goodwill) of greater than or
We released exciting digital innovations such as the new Nedbank
we have now set of an ROE (excluding goodwill) of greater than or
equal to 18% and an efficiency ratio of less than or equal to 53%.
Money app, the Nedbank Private Wealth app and Karri app,
equal to 18% and an efficiency ratio of less than or equal to 53%.
We released exciting digital innovations such as the new Nedbank
chatbots and UNLOCKED.ME (an exclusive e-commerce
We released exciting digital innovations such as the new Nedbank
Money app, the Nedbank Private Wealth app and Karri app,
marketplace for millennials) and continued to gain share of
Money app, the Nedbank Private Wealth app and Karri app,
chatbots and UNLOCKED.ME (an exclusive e-commerce
transactional banking clients in both our retail and wholesale
chatbots and UNLOCKED.ME (an exclusive e-commerce
marketplace for millennials) and continued to gain share of
businesses. We are actively optimising our cost base, as reflected
marketplace for millennials) and continued to gain share of
transactional banking clients in both our retail and wholesale
in cost growth at 5.1%, and maintained a strong balance sheet as
transactional banking clients in both our retail and wholesale
businesses. We are actively optimising our cost base, as reflected
evident in a CET1 ratio of 12.6%, above the top end of our internal
businesses. We are actively optimising our cost base, as reflected
in cost growth at 5.1%, and maintained a strong balance sheet as
target range. Our strategic enablers are making a difference for
in cost growth at 5.1%, and maintained a strong balance sheet as
evident in a CET1 ratio of 12.6%, above the top end of our internal
our operations and for our clients as we create a more agile,
evident in a CET1 ratio of 12.6%, above the top end of our internal
target range. Our strategic enablers are making a difference for
competitive and digital Nedbank.
target range. Our strategic enablers are making a difference for
our operations and for our clients as we create a more agile,
our operations and for our clients as we create a more agile,
competitive and digital Nedbank.
“Looking forward, 2018 started with positive changes to SA’s
competitive and digital Nedbank.
political and socioeconomic landscape and brought renewed
“Looking forward, 2018 started with positive changes to SA’s
prospects for higher levels of inclusive growth. Nedbank is acutely
“Looking forward, 2018 started with positive changes to SA’s
political and socioeconomic landscape and brought renewed
aware of the increased responsibility that we, and indeed all
political and socioeconomic landscape and brought renewed
prospects for higher levels of inclusive growth. Nedbank is acutely
businesses, have to work alongside government, labour and civil
prospects for higher levels of inclusive growth. Nedbank is acutely
aware of the increased responsibility that we, and indeed all
society to play our part in improving the lives of all South Africans.
aware of the increased responsibility that we, and indeed all
businesses, have to work alongside government, labour and civil
businesses, have to work alongside government, labour and civil
society to play our part in improving the lives of all South Africans.
“Reflecting on the impact on the group of the greater levels of
society to play our part in improving the lives of all South Africans.
business and consumer confidence evident in the early part of
“Reflecting on the impact on the group of the greater levels of
2018, an improving economic outlook, ongoing delivery on our
“Reflecting on the impact on the group of the greater levels of
business and consumer confidence evident in the early part of
strategy and ETI’s returning to sustained levels of profitability, our
business and consumer confidence evident in the early part of
2018, an improving economic outlook, ongoing delivery on our
guidance for growth in diluted headline earnings per share for 2018
2018, an improving economic outlook, ongoing delivery on our
strategy and ETI’s returning to sustained levels of profitability, our
is to be in line with our medium-to-long-term target of greater than
strategy and ETI’s returning to sustained levels of profitability, our
guidance for growth in diluted headline earnings per share for 2018
or equal to GDP plus CPI plus 5%.”
guidance for growth in diluted headline earnings per share for 2018
is to be in line with our medium-to-long-term target of greater than
is to be in line with our medium-to-long-term target of greater than
or equal to GDP plus CPI plus 5%.”
or equal to GDP plus CPI plus 5%.”
Old Mutual plc
Annual Report and Accounts 2017
Nedbank highlights on a reported basis1
IFRS profit after tax attributable to equity holders of the parent (Rm)2
Reported AOP (pre-tax, Rm)3
Headline earnings (Rm)
Net interest income (Rm)
Non-interest revenue (Rm)
Net interest margin
Credit loss ratio
Efficiency ratio
Return on equity
Return on equity (excluding goodwill)
Common equity tier 1 ratio
1 As reported by Nedbank
2 IFRS profit after tax attributable to equity holders of Old Mutual plc
3 As reported by Old Mutual Group.
Banking and economic environment
Economic growth in developed markets improved, despite ongoing
geopolitical tensions, supported by accommodative monetary
policies and stronger manufacturing production, and reinforced
by increased global trade. Emerging and developing economies
also improved as a consequence of better-than-expected growth
in China and higher global commodity prices. Emerging-market
equity and bond markets benefited from increased capital inflows
as global investors search for higher yields.
SA’s slow economic recovery continued into the second half of
the year, with 2017 GDP growth estimated at 0.9%, driven mainly
by a recovery in agricultural production following good summer
rainfall and some improvement in mining production in response to
stronger global demand and firmer international commodity prices.
A revival in consumer spending added further momentum in the
second half of 2017 as households benefited from lower inflation
and the marginal reduction in interest rates in July. Despite this
recovery and reflective of weak business and consumer confidence,
business volumes in 2017 were generally lower than in the prior
year, as evident in client loan applications across multiple products
and in slower client trading activity.
The pace of economic activity picked up moderately in sub-
Saharan Africa, with agricultural and mining output recovering on
the upturn in global demand and international commodity prices,
and the prolonged El Niño-induced drought finally broke in many
countries. According to the International Monetary Fund (IMF), sub-
Saharan Africa is expected to record GDP growth of 2.6% in 2017.
Domestic inflation averaged 5.3% in 2017, significantly lower than
the 6.4% recorded in 2016, brought about mainly by sharply lower
food inflation given the strong summer harvest. Relatively moderate
and selective consumer demand coupled with a resilient rand also
helped contain price pressures during the course of the year. After
a year of volatile trade the rand ended 2017 2.5% stronger against
the trade-weighted basket of currencies. The largest gains occurred
near year-end as sentiment surged following the election of Mr Cyril
Ramaphosa as the new leader of the ruling ANC in mid-December
on expectations of a change in the country’s leadership, improved
governance and structural reforms that are likely to support
investment and higher levels of inclusive growth.
2017
6,411
16,522
11,787
27,624
24,063
3.62%
0.49%
58.6%
15.3%
16.4%
12.6%
2016
% change
14%
4%
3%
5%
2%
5,617
15,925
11,465
26,426
23,503
3.41%
0.68%
56.9%
15.3%
16.5%
12.1%
After cutting the repo rate by 25 bps to 6.75% in July, SARB’s
Monetary Policy Committee left interest rates unchanged at both
the September and November 2017 policy meetings. The central
bank’s more cautious approach was driven by concerns over the
upside risk that the rand posed to the inflation outlook at that time.
Fears mounted that SA’s rand-denominated sovereign debt ratings
could be downgraded to sub-investment grade by all three major
rating agencies, given the escalation in political uncertainty and the
sharp deterioration in the country’s fiscal position, as set out in the
Medium Term Budget Policy Statement.
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
In November 2017 Fitch affirmed the country’s BB+ rating with
a stable outlook (one notch below investment grade). Moody’s
placed SA’s Baa3 foreign and local currency ratings on review
for downgrade, with the decision to follow the 2018 National
Budget in February. However, S&P Global downgraded SA’s
local currency rating to BB+ (one notch below investment grade)
and our foreign currency rating to BB (two notches below
investment grade), while changing the rating outlook to stable.
All three rating agencies highlighted similar concerns, including
weaker-than-expected public finances, weak economic growth,
ineffective government spending and policies as well as the
paralysing impact of political infighting and poor governance.
Review of results
Nedbank produced a solid performance in a domestic macro
and political environment that has proved volatile and challenging.
Headline earnings, including losses in associate income from ETI
of R744 million, increased 2.8% to R11,787 million. This translated
into an increase in DHEPS of 2.4% to 2,406 cents and an increase
in HEPS of 2.2% to 2,452 cents. As in prior periods, we highlight
our results both including and excluding ETI (referred to as
managed operations) to provide a better understanding of the
operational performance of the business given the volatility in ETI’s
results in 2016 and 2017. However, we will revert to group-level
reporting in 2019. Our managed operations produced headline
earnings growth of 7.8% to R12,762 million, with slower-than-
expected revenue growth more than offset by reduced impairments
and good cost management.
ROE (excluding goodwill) and ROE remained flat at 16.4%
and 15.3% respectively. ROE (excluding goodwill) in managed
operations also remained stable at 18.1%. ROA decreased
0.01% to 1.22% and, excluding ETI, ROA in managed operations
improved from 1.29% to 1.33%. Return on RWA increased from
2.23% to 2.30%.
CONFIDENTIAL
38
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CONFIDENTIAL
CONFIDENTIAL
16
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CONFIDENTIAL
17
Old Mutual plc Annual Report and Accounts 2017
S
i
t
r
a
t
e
g
c
r
e
p
o
r
t
Old Mutual plc
Annual Report and Accounts 2017
Nedbank highlights on a reported basis1
IFRS profit after tax attributable to equity holders of the parent (Rm)2
Reported AOP (pre-tax, Rm)3
Headline earnings (Rm)
Net interest income (Rm)
Non-interest revenue (Rm)
Net interest margin
Credit loss ratio
Efficiency ratio
Return on equity
Return on equity (excluding goodwill)
Common equity tier 1 ratio
1 As reported by Nedbank
2 IFRS profit after tax attributable to equity holders of Old Mutual plc
3 As reported by Old Mutual Group.
Banking and economic environment
Economic growth in developed markets improved, despite ongoing
geopolitical tensions, supported by accommodative monetary
policies and stronger manufacturing production, and reinforced
by increased global trade. Emerging and developing economies
also improved as a consequence of better-than-expected growth
in China and higher global commodity prices. Emerging-market
equity and bond markets benefited from increased capital inflows
as global investors search for higher yields.
SA’s slow economic recovery continued into the second half of
the year, with 2017 GDP growth estimated at 0.9%, driven mainly
by a recovery in agricultural production following good summer
rainfall and some improvement in mining production in response to
stronger global demand and firmer international commodity prices.
A revival in consumer spending added further momentum in the
second half of 2017 as households benefited from lower inflation
and the marginal reduction in interest rates in July. Despite this
recovery and reflective of weak business and consumer confidence,
business volumes in 2017 were generally lower than in the prior
year, as evident in client loan applications across multiple products
and in slower client trading activity.
The pace of economic activity picked up moderately in sub-
Saharan Africa, with agricultural and mining output recovering on
the upturn in global demand and international commodity prices,
and the prolonged El Niño-induced drought finally broke in many
countries. According to the International Monetary Fund (IMF), sub-
Saharan Africa is expected to record GDP growth of 2.6% in 2017.
Domestic inflation averaged 5.3% in 2017, significantly lower than
the 6.4% recorded in 2016, brought about mainly by sharply lower
food inflation given the strong summer harvest. Relatively moderate
and selective consumer demand coupled with a resilient rand also
helped contain price pressures during the course of the year. After
a year of volatile trade the rand ended 2017 2.5% stronger against
the trade-weighted basket of currencies. The largest gains occurred
near year-end as sentiment surged following the election of Mr Cyril
Ramaphosa as the new leader of the ruling ANC in mid-December
on expectations of a change in the country’s leadership, improved
governance and structural reforms that are likely to support
investment and higher levels of inclusive growth.
% change
14%
4%
3%
5%
2%
2017
6,411
16,522
11,787
27,624
24,063
3.62%
0.49%
58.6%
15.3%
16.4%
12.6%
2016
5,617
15,925
11,465
26,426
23,503
3.41%
0.68%
56.9%
15.3%
16.5%
12.1%
After cutting the repo rate by 25 bps to 6.75% in July, SARB’s
Monetary Policy Committee left interest rates unchanged at both
the September and November 2017 policy meetings. The central
bank’s more cautious approach was driven by concerns over the
upside risk that the rand posed to the inflation outlook at that time.
Fears mounted that SA’s rand-denominated sovereign debt ratings
could be downgraded to sub-investment grade by all three major
rating agencies, given the escalation in political uncertainty and the
sharp deterioration in the country’s fiscal position, as set out in the
Medium Term Budget Policy Statement.
In November 2017 Fitch affirmed the country’s BB+ rating with
a stable outlook (one notch below investment grade). Moody’s
placed SA’s Baa3 foreign and local currency ratings on review
for downgrade, with the decision to follow the 2018 National
Budget in February. However, S&P Global downgraded SA’s
local currency rating to BB+ (one notch below investment grade)
and our foreign currency rating to BB (two notches below
investment grade), while changing the rating outlook to stable.
All three rating agencies highlighted similar concerns, including
weaker-than-expected public finances, weak economic growth,
ineffective government spending and policies as well as the
paralysing impact of political infighting and poor governance.
Review of results
Nedbank produced a solid performance in a domestic macro
and political environment that has proved volatile and challenging.
Headline earnings, including losses in associate income from ETI
of R744 million, increased 2.8% to R11,787 million. This translated
into an increase in DHEPS of 2.4% to 2,406 cents and an increase
in HEPS of 2.2% to 2,452 cents. As in prior periods, we highlight
our results both including and excluding ETI (referred to as
managed operations) to provide a better understanding of the
operational performance of the business given the volatility in ETI’s
results in 2016 and 2017. However, we will revert to group-level
reporting in 2019. Our managed operations produced headline
earnings growth of 7.8% to R12,762 million, with slower-than-
expected revenue growth more than offset by reduced impairments
and good cost management.
ROE (excluding goodwill) and ROE remained flat at 16.4%
and 15.3% respectively. ROE (excluding goodwill) in managed
operations also remained stable at 18.1%. ROA decreased
0.01% to 1.22% and, excluding ETI, ROA in managed operations
improved from 1.29% to 1.33%. Return on RWA increased from
2.23% to 2.30%.
CONFIDENTIAL
39
17
Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Nedbank review
continued
Nedbank review
continued
Our CET1 and tier 1 capital ratios of 12.6% and 13.4% respectively,
average LCR for the fourth quarter of 116.2% and an NSFR
of above 100%, are all Basel III-compliant and are a reflection
Our CET1 and tier 1 capital ratios of 12.6% and 13.4% respectively,
of a strong balance sheet. On the back of solid earnings growth
average LCR for the fourth quarter of 116.2% and an NSFR
in managed operations and a strong capital position, a final
of above 100%, are all Basel III-compliant and are a reflection
dividend of 675 cents was declared, an increase of 7.1%.
of a strong balance sheet. On the back of solid earnings growth
The total dividend per share increased 7.1% to 1,285 cents.
in managed operations and a strong capital position, a final
dividend of 675 cents was declared, an increase of 7.1%.
Cluster financial performance
The total dividend per share increased 7.1% to 1,285 cents.
Nedbank’s managed operations generated headline earnings
growth of 7.8% to R12,762 million and delivered an ROE
Cluster financial performance
(excluding goodwill) of 18.1%. CIB and Wealth were impacted
Nedbank’s managed operations generated headline earnings
the most by the challenging operating environment, RBB made
growth of 7.8% to R12,762 million and delivered an ROE
a strong earnings contribution and RoA subsidiaries delivered
(excluding goodwill) of 18.1%. CIB and Wealth were impacted
an improved performance off a low base.
the most by the challenging operating environment, RBB made
a strong earnings contribution and RoA subsidiaries delivered
CIB maintained an attractive ROE of above 20% and produced
an improved performance off a low base.
solid results, driven by lower credit losses and good expense
management. Revenue lines were affected by slowing economic
CIB maintained an attractive ROE of above 20% and produced
activity as clients postponed projects and borrowed and transacted
solid results, driven by lower credit losses and good expense
less. Early repayments and managed settlements, together with
management. Revenue lines were affected by slowing economic
slower drawdowns resulted in weaker advances growth, although
activity as clients postponed projects and borrowed and transacted
the pipelines remained stable. Credit quality remained strong
less. Early repayments and managed settlements, together with
through proactive risk management as we continued to monitor
slower drawdowns resulted in weaker advances growth, although
stressed sectors of the economy, such as certain areas in retail
the pipelines remained stable. Credit quality remained strong
and certain state-owned enterprises, closely.
through proactive risk management as we continued to monitor
stressed sectors of the economy, such as certain areas in retail
RBB delivered an improved ROE and good headline earnings
and certain state-owned enterprises, closely.
growth, underpinned by solid transactional NIR growth, lower
impairments and expense growth, and achieved PPOP growth of
RBB delivered an improved ROE and good headline earnings
4.0%. NII was underpinned by solid growth in advances and strong
growth, underpinned by solid transactional NIR growth, lower
growth in deposits, offset by a lower NIM due in part to the impact
impairments and expense growth, and achieved PPOP growth of
of prime–JIBAR squeeze. Lower expense growth reflects the initial
4.0%. NII was underpinned by solid growth in advances and strong
impact of optimising processes and operations, including
growth in deposits, offset by a lower NIM due in part to the impact
headcount reductions.
of prime–JIBAR squeeze. Lower expense growth reflects the initial
impact of optimising processes and operations, including
Nedbank Wealth maintained an attractive ROE, although headline
headcount reductions.
earnings were impacted by subdued markets and negative investor
sentiment, further compounded by entropic weather conditions and
Nedbank Wealth maintained an attractive ROE, although headline
the strengthening rand, as well the once-off profit from the sale of
earnings were impacted by subdued markets and negative investor
our Visa share in the 2016 base.
sentiment, further compounded by entropic weather conditions and
the strengthening rand, as well the once-off profit from the sale of
RoA headline earnings were negatively impacted by the fourth-
our Visa share in the 2016 base.
quarter 2016 ETI associate loss accounted for quarterly in arrear.
The loss was reported on in our interim results and was followed
RoA headline earnings were negatively impacted by the fourth-
by subsequent quarterly profits from ETI up to 30 September 2017.
quarter 2016 ETI associate loss accounted for quarterly in arrear.
Our subsidiaries grew headline earnings off a low base, supported
The loss was reported on in our interim results and was followed
by the consolidation of Banco Único (included for three months
by subsequent quarterly profits from ETI up to 30 September 2017.
in 2016), notwithstanding continued investment in infrastructure,
Our subsidiaries grew headline earnings off a low base, supported
systems and skills.
by the consolidation of Banco Único (included for three months
in 2016), notwithstanding continued investment in infrastructure,
systems and skills.
The improvement in the Centre was largely due to the R350 million
release from the central provision, of which R150 million was in the
first half of the year, and fair-value gains on certain hedging portfolios.
The improvement in the Centre was largely due to the R350 million
release from the central provision, of which R150 million was in the
Financial performance
first half of the year, and fair-value gains on certain hedging portfolios.
Net interest income
NII increased 4.5% to R27,624 million, ahead of average interest-
Financial performance
earning banking asset growth of 2.2% (adjusted for the removal
Net interest income
of the liquid-asset portfolio).
NII increased 4.5% to R27,624 million, ahead of average interest-
earning banking asset growth of 2.2% (adjusted for the removal
NIM expansion of 8 bps to 3.62% (2016: 3.54% rebased) was
of the liquid-asset portfolio).
largely driven by an endowment benefit of 5 bps and improved
asset mix changes of 8 bps. Asset pricing pressure, in part due
NIM expansion of 8 bps to 3.62% (2016: 3.54% rebased) was
to the NCA interest rate caps, the narrowing of the prime–JIBAR
largely driven by an endowment benefit of 5 bps and improved
spread and the increased cost associated with enhancing the
asset mix changes of 8 bps. Asset pricing pressure, in part due
funding profile each reduced NIM by 2 bps.
to the NCA interest rate caps, the narrowing of the prime–JIBAR
spread and the increased cost associated with enhancing the
Impairments charge on loans and advances
funding profile each reduced NIM by 2 bps.
Impairments decreased by 27.5% to R3,304 million. The CLR
declined by 0.19% to 0.49%, driven by lower specific impairments
Impairments charge on loans and advances
mostly from resolutions and settlements in CIB. The decrease
Impairments decreased by 27.5% to R3,304 million. The CLR
in impairments reflects the quality of the portfolio across all our
declined by 0.19% to 0.49%, driven by lower specific impairments
businesses and we have specific coverage ratios levels of 36.2%.
mostly from resolutions and settlements in CIB. The decrease
in impairments reflects the quality of the portfolio across all our
Impairments in CIB declined by 82.4% to R193 million, driven by
businesses and we have specific coverage ratios levels of 36.2%.
lower specific impairments relating largely to resolutions of historic
client matters. Impairments are individually determined in CIB
Impairments in CIB declined by 82.4% to R193 million, driven by
and 84% of impairments are concentrated in approximately
lower specific impairments relating largely to resolutions of historic
10 counters. RBB impairments declined by 1.2% to R3.2 billion
client matters. Impairments are individually determined in CIB
as a result of ongoing lower risk origination strategies and an
and 84% of impairments are concentrated in approximately
improvement in collections. The decrease in unsecured lending
10 counters. RBB impairments declined by 1.2% to R3.2 billion
and home loan CLRs reflects the benefits of historic selective
as a result of ongoing lower risk origination strategies and an
origination improving the quality of the book over time and the
improvement in collections. The decrease in unsecured lending
release of additional impairment overlays previously raised for risks
and home loan CLRs reflects the benefits of historic selective
and events that did not materialise. Continued proactive collection
origination improving the quality of the book over time and the
and resolution strategies within CIB and RBB contributed to group
release of additional impairment overlays previously raised for risks
write-offs decreasing 6.0% to R4,675 million and post write-off
and events that did not materialise. Continued proactive collection
recoveries increasing 5.8% to R1,224 million.
and resolution strategies within CIB and RBB contributed to group
write-offs decreasing 6.0% to R4,675 million and post write-off
The group’s central provision decreased to R150 million (from
recoveries increasing 5.8% to R1,224 million.
R500 million at 31 December 2016 and R350 million in June 2017)
as a result of risks that had previously been identified but had not
The group’s central provision decreased to R150 million (from
materialised. The balance is retained for prudency in a volatile
R500 million at 31 December 2016 and R350 million in June 2017)
macroeconomic environment. Excluding the central provision
as a result of risks that had previously been identified but had not
release, the group CLR would have been 0.54%.
materialised. The balance is retained for prudency in a volatile
macroeconomic environment. Excluding the central provision
All business units successfully applied selective origination
release, the group CLR would have been 0.54%.
strategies that enabled an overall de-risking of the advances
portfolio, leading to defaulted advances remaining flat at R19.6
All business units successfully applied selective origination
billion. Lower defaulted advances in CIB resulting from positive
strategies that enabled an overall de-risking of the advances
client resolutions were offset by increased defaulted advances
portfolio, leading to defaulted advances remaining flat at R19.6
in RBB.
billion. Lower defaulted advances in CIB resulting from positive
client resolutions were offset by increased defaulted advances
in RBB.
CONFIDENTIAL
40
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CONFIDENTIAL
18
Old Mutual plc Annual Report and Accounts 2017 Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Nedbank review
continued
Nedbank review
continued
Our CET1 and tier 1 capital ratios of 12.6% and 13.4% respectively,
The improvement in the Centre was largely due to the R350 million
average LCR for the fourth quarter of 116.2% and an NSFR
release from the central provision, of which R150 million was in the
of above 100%, are all Basel III-compliant and are a reflection
Our CET1 and tier 1 capital ratios of 12.6% and 13.4% respectively,
of a strong balance sheet. On the back of solid earnings growth
average LCR for the fourth quarter of 116.2% and an NSFR
in managed operations and a strong capital position, a final
of above 100%, are all Basel III-compliant and are a reflection
dividend of 675 cents was declared, an increase of 7.1%.
of a strong balance sheet. On the back of solid earnings growth
The total dividend per share increased 7.1% to 1,285 cents.
in managed operations and a strong capital position, a final
dividend of 675 cents was declared, an increase of 7.1%.
Cluster financial performance
The total dividend per share increased 7.1% to 1,285 cents.
Nedbank’s managed operations generated headline earnings
growth of 7.8% to R12,762 million and delivered an ROE
Cluster financial performance
(excluding goodwill) of 18.1%. CIB and Wealth were impacted
Nedbank’s managed operations generated headline earnings
the most by the challenging operating environment, RBB made
growth of 7.8% to R12,762 million and delivered an ROE
a strong earnings contribution and RoA subsidiaries delivered
(excluding goodwill) of 18.1%. CIB and Wealth were impacted
an improved performance off a low base.
the most by the challenging operating environment, RBB made
a strong earnings contribution and RoA subsidiaries delivered
CIB maintained an attractive ROE of above 20% and produced
an improved performance off a low base.
solid results, driven by lower credit losses and good expense
management. Revenue lines were affected by slowing economic
CIB maintained an attractive ROE of above 20% and produced
activity as clients postponed projects and borrowed and transacted
solid results, driven by lower credit losses and good expense
less. Early repayments and managed settlements, together with
management. Revenue lines were affected by slowing economic
slower drawdowns resulted in weaker advances growth, although
activity as clients postponed projects and borrowed and transacted
the pipelines remained stable. Credit quality remained strong
less. Early repayments and managed settlements, together with
through proactive risk management as we continued to monitor
slower drawdowns resulted in weaker advances growth, although
stressed sectors of the economy, such as certain areas in retail
the pipelines remained stable. Credit quality remained strong
and certain state-owned enterprises, closely.
through proactive risk management as we continued to monitor
stressed sectors of the economy, such as certain areas in retail
RBB delivered an improved ROE and good headline earnings
and certain state-owned enterprises, closely.
growth, underpinned by solid transactional NIR growth, lower
impairments and expense growth, and achieved PPOP growth of
RBB delivered an improved ROE and good headline earnings
4.0%. NII was underpinned by solid growth in advances and strong
growth, underpinned by solid transactional NIR growth, lower
growth in deposits, offset by a lower NIM due in part to the impact
impairments and expense growth, and achieved PPOP growth of
of prime–JIBAR squeeze. Lower expense growth reflects the initial
4.0%. NII was underpinned by solid growth in advances and strong
impact of optimising processes and operations, including
growth in deposits, offset by a lower NIM due in part to the impact
headcount reductions.
of prime–JIBAR squeeze. Lower expense growth reflects the initial
impact of optimising processes and operations, including
Nedbank Wealth maintained an attractive ROE, although headline
headcount reductions.
earnings were impacted by subdued markets and negative investor
sentiment, further compounded by entropic weather conditions and
Nedbank Wealth maintained an attractive ROE, although headline
the strengthening rand, as well the once-off profit from the sale of
earnings were impacted by subdued markets and negative investor
our Visa share in the 2016 base.
sentiment, further compounded by entropic weather conditions and
the strengthening rand, as well the once-off profit from the sale of
RoA headline earnings were negatively impacted by the fourth-
our Visa share in the 2016 base.
quarter 2016 ETI associate loss accounted for quarterly in arrear.
The loss was reported on in our interim results and was followed
RoA headline earnings were negatively impacted by the fourth-
by subsequent quarterly profits from ETI up to 30 September 2017.
quarter 2016 ETI associate loss accounted for quarterly in arrear.
Our subsidiaries grew headline earnings off a low base, supported
The loss was reported on in our interim results and was followed
by the consolidation of Banco Único (included for three months
by subsequent quarterly profits from ETI up to 30 September 2017.
in 2016), notwithstanding continued investment in infrastructure,
Our subsidiaries grew headline earnings off a low base, supported
systems and skills.
by the consolidation of Banco Único (included for three months
in 2016), notwithstanding continued investment in infrastructure,
systems and skills.
first half of the year, and fair-value gains on certain hedging portfolios.
The improvement in the Centre was largely due to the R350 million
release from the central provision, of which R150 million was in the
Financial performance
first half of the year, and fair-value gains on certain hedging portfolios.
Net interest income
NII increased 4.5% to R27,624 million, ahead of average interest-
Financial performance
earning banking asset growth of 2.2% (adjusted for the removal
Net interest income
of the liquid-asset portfolio).
NII increased 4.5% to R27,624 million, ahead of average interest-
earning banking asset growth of 2.2% (adjusted for the removal
NIM expansion of 8 bps to 3.62% (2016: 3.54% rebased) was
of the liquid-asset portfolio).
largely driven by an endowment benefit of 5 bps and improved
asset mix changes of 8 bps. Asset pricing pressure, in part due
NIM expansion of 8 bps to 3.62% (2016: 3.54% rebased) was
to the NCA interest rate caps, the narrowing of the prime–JIBAR
largely driven by an endowment benefit of 5 bps and improved
spread and the increased cost associated with enhancing the
asset mix changes of 8 bps. Asset pricing pressure, in part due
funding profile each reduced NIM by 2 bps.
to the NCA interest rate caps, the narrowing of the prime–JIBAR
spread and the increased cost associated with enhancing the
Impairments charge on loans and advances
funding profile each reduced NIM by 2 bps.
Impairments decreased by 27.5% to R3,304 million. The CLR
declined by 0.19% to 0.49%, driven by lower specific impairments
Impairments charge on loans and advances
mostly from resolutions and settlements in CIB. The decrease
Impairments decreased by 27.5% to R3,304 million. The CLR
in impairments reflects the quality of the portfolio across all our
declined by 0.19% to 0.49%, driven by lower specific impairments
businesses and we have specific coverage ratios levels of 36.2%.
mostly from resolutions and settlements in CIB. The decrease
in impairments reflects the quality of the portfolio across all our
Impairments in CIB declined by 82.4% to R193 million, driven by
businesses and we have specific coverage ratios levels of 36.2%.
lower specific impairments relating largely to resolutions of historic
client matters. Impairments are individually determined in CIB
Impairments in CIB declined by 82.4% to R193 million, driven by
and 84% of impairments are concentrated in approximately
lower specific impairments relating largely to resolutions of historic
10 counters. RBB impairments declined by 1.2% to R3.2 billion
client matters. Impairments are individually determined in CIB
as a result of ongoing lower risk origination strategies and an
and 84% of impairments are concentrated in approximately
improvement in collections. The decrease in unsecured lending
10 counters. RBB impairments declined by 1.2% to R3.2 billion
and home loan CLRs reflects the benefits of historic selective
as a result of ongoing lower risk origination strategies and an
origination improving the quality of the book over time and the
improvement in collections. The decrease in unsecured lending
release of additional impairment overlays previously raised for risks
and home loan CLRs reflects the benefits of historic selective
and events that did not materialise. Continued proactive collection
origination improving the quality of the book over time and the
and resolution strategies within CIB and RBB contributed to group
release of additional impairment overlays previously raised for risks
write-offs decreasing 6.0% to R4,675 million and post write-off
and events that did not materialise. Continued proactive collection
recoveries increasing 5.8% to R1,224 million.
and resolution strategies within CIB and RBB contributed to group
write-offs decreasing 6.0% to R4,675 million and post write-off
The group’s central provision decreased to R150 million (from
recoveries increasing 5.8% to R1,224 million.
R500 million at 31 December 2016 and R350 million in June 2017)
as a result of risks that had previously been identified but had not
The group’s central provision decreased to R150 million (from
materialised. The balance is retained for prudency in a volatile
R500 million at 31 December 2016 and R350 million in June 2017)
macroeconomic environment. Excluding the central provision
as a result of risks that had previously been identified but had not
release, the group CLR would have been 0.54%.
materialised. The balance is retained for prudency in a volatile
macroeconomic environment. Excluding the central provision
All business units successfully applied selective origination
release, the group CLR would have been 0.54%.
strategies that enabled an overall de-risking of the advances
portfolio, leading to defaulted advances remaining flat at R19.6
All business units successfully applied selective origination
billion. Lower defaulted advances in CIB resulting from positive
strategies that enabled an overall de-risking of the advances
client resolutions were offset by increased defaulted advances
portfolio, leading to defaulted advances remaining flat at R19.6
in RBB.
billion. Lower defaulted advances in CIB resulting from positive
client resolutions were offset by increased defaulted advances
in RBB.
Old Mutual plc
Annual Report and Accounts 2017
The decrease in specific coverage from 37.4% to 36.2% was
primarily due to lower specific coverage in RBB as well as increased
resolutions of various client issues in CIB resulting in lower specific
impairments. The lower coverage reflects increased performing
defaults in RBB and the recovery success in CIB. Nedbank considers
the coverage ratios appropriate given the higher proportion
of wholesale lending, compared with the mix of its peers,
high recovery rates and the collateralised nature of the
commercial-mortgages portfolio, with low loan-to-value ratios.
Portfolio coverage increased marginally from 0.69% to 0.70%,
reflecting the offsetting effects of higher portfolio impairments due
to stronger advances growth in RBB and the reduction of the
central provision and RBB overlays.
Non-interest revenue
NIR growth of 2.4% to R24,063 million reflects the impact of weak
business and consumer confidence levels.
Commission and fee income grew 4.0% to R17,355 million. RBB
reported good transactional NIR growth of 6.0%, notwithstanding
an increasing number of clients who are transacting within fixed-
rate bundles and spending less. CIB experienced lower corporate
activity off a high base the previous year.
Insurance income decreased 9.3% to R1,566 million as a result
of an abnormal number of significant weather-related claims,
lower homeowner’s cover and credit life volumes, and an increase
in lapses.
Trading income increased 3.7% to R3,900 million, given muted
activity levels among wholesale clients, particularly in the second
half of the year, and avoidance of the potential negative impacts
in markets around event risks such as political changes and credit
rating downgrades.
Private-equity income, including positive realisations in the
Commercial Property Finance portfolio, decreased 23.7% to R708
million, given the high base in the comparative period.
Expenses
Expense growth of 5.1% to R29,812 million was below inflation and
in line with the guidance we provided for the full 2017 year (being
growth of mid-single digits), demonstrating disciplined and careful
management of discretionary expenses in an environment of
slower revenue growth. The underlying movements included:
Staff-related costs increasing at a slower rate of 6.5%, following:
an average annual salary increase of 6.5% and a 859
reduction in staff numbers since December 2016; and
a 0.1% decrease in short-term incentives.
Computer-processing costs increasing 3.8% to R4,201 million off
a higher base the previous year.
Fees and insurance costs being 7.8% higher at R3,277 million,
due mostly to additional regulatory-related costs.
The group’s growth in expenses exceeded total revenue growth
(including associate loss) of 2.1% (3.2% in managed operations),
resulting in a negative JAWS ratio of 3.0% and an efficiency ratio
of 58.6%, compared with 56.9% in 2016. Excluding associate
income, our efficiency ratio was 57.8%. Expense growth, excluding
RoA where we continued to invest in distribution, technology and
new-product rollouts, was 4.3%.
Earnings from associates
The loss of R838 million in earnings from associates was attributed
largely to ETI’s loss of R1,203 million in the fourth quarter of 2016
(announced on 18 April 2017), partly offset by the profit of R459
million reported by ETI for the nine months to 30 September 2017,
in line with our policy of accounting for ETI earnings a quarter in
arrear. The total effect of ETI on the group’s headline earnings
was a loss of R975 million, including the R321 million impact
of funding costs.
Accounting for this associate loss, together with Nedbank’s
share of ETI’s other comprehensive income and movements in
Nedbank’s foreign currency translation reserves, resulted in the
carrying value of the group’s strategic investment in ETI declining
from R4.0 billion at 31 December 2016 to R3.3 billion at 31
December 2017. Since the introduction of the new foreign
exchange regime by the Central Bank of Nigeria on 21 April 2017,
confidence has improved and the Nigerian banking index has
increased by 73%. In line with this ETI’s quoted share price – albeit
illiquid – increased by 65% during 2017 which resulted in the
market value of the group’s investment in ETI increasing during
the year to R3.6 billion at 31 December 2017 and R4.1 billion at
28 February 2018. While risks remain, the actions taken to improve
ETI’s financial position and governance, along with an improving
macroeconomic environment, is expected to drive an improved
financial performance from ETI in 2018.
As required by IFRS, the R1 billion impairment provision
recognised at 31 December 2016 was reviewed at 31 December
2017 and it was determined that currently no change to the
provision was required.
A R96 million associate loss was incurred due to operational losses
in an associate, which is the cash-processing supplier to the four
large banks.
Statement of financial position
Capital
The group continued to strengthen its capital position, with our
CET1 ratio of 12.6% now above the top end of our internal target
range of 10.5–12.5%, following organic capital generation through
earnings growth, lower asset growth and some RWA optimisation.
In the current environment of slower advances growth, capital
generation has been stronger following lower credit RWA growth
and continued refinement of Basel models. This was partially offset
by the impact of the rand strengthening at the back end of 2017,
which adversely impacted foreign currency translation reserves
and led to higher credit valuation adjustment RWA. Higher levels
of equity exposure resulted in increased equity RWA. As a result
overall RWA increased 3.7% to R528.2 billion.
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Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Nedbank review
continued
Nedbank review
continued
The group’s tier 1 ratio improved to 13.4% and includes the
issuance of R600 million of new-style additional tier 1 capital
instruments during the year, offsetting the progressive grandfathering
The group’s tier 1 ratio improved to 13.4% and includes the
of old-style perpetual preference shares as we transition towards
issuance of R600 million of new-style additional tier 1 capital
end-state Basel III requirements. The group’s total capital ratio
instruments during the year, offsetting the progressive grandfathering
has improved to 15.5% and includes the issuance of R2.5 billion
of old-style perpetual preference shares as we transition towards
of new-style tier 2 capital instruments during the year, partially
end-state Basel III requirements. The group’s total capital ratio
offsetting the redemption of R3.0 billion in old-style tier 2
has improved to 15.5% and includes the issuance of R2.5 billion
capital instruments.
of new-style tier 2 capital instruments during the year, partially
offsetting the redemption of R3.0 billion in old-style tier 2
Funding and liquidity
capital instruments.
Optimising our funding profile and maintaining a strong liquidity
position remain a priority for the group, especially in the current
Funding and liquidity
environment.
Optimising our funding profile and maintaining a strong liquidity
position remain a priority for the group, especially in the current
The group’s three-month average long-term funding ratio was
environment.
27.0% for the fourth quarter of 2017, supported by growth in
Nedbank Retail Savings Bonds of R5.7 billion to R24.9 billion
The group’s three-month average long-term funding ratio was
and the successful capital market issuances of R3.5 billion senior
27.0% for the fourth quarter of 2017, supported by growth in
unsecured debt, R2.5 billion new-style tier 2 debt and R1.0 billion
Nedbank Retail Savings Bonds of R5.7 billion to R24.9 billion
in securitisation notes.
and the successful capital market issuances of R3.5 billion senior
unsecured debt, R2.5 billion new-style tier 2 debt and R1.0 billion
The group's quarterly average LCR of 116.2% exceeded the
in securitisation notes.
minimum regulatory requirement of 80% in 2017 and 90% effective
from 1 January 2018. The group maintains appropriate operational
The group's quarterly average LCR of 116.2% exceeded the
buffers designed to absorb seasonal and cyclical volatility in
minimum regulatory requirement of 80% in 2017 and 90% effective
the LCR.
from 1 January 2018. The group maintains appropriate operational
buffers designed to absorb seasonal and cyclical volatility in
Further details on the LCR are available in the table section of the
the LCR.
Securities Exchange News Service (SENS) announcement.
Further details on the LCR are available in the table section of the
Nedbank’s portfolio of LCR-compliant HQLA increased by 0.6%
Securities Exchange News Service (SENS) announcement.
to a quarterly average of R138.2 billion. Notwithstanding the low
growth in HQLA, the LCR still increased year-on-year as a result
Nedbank’s portfolio of LCR-compliant HQLA increased by 0.6%
of a decrease in LCR net cash outflows attributable to a positive
to a quarterly average of R138.2 billion. Notwithstanding the low
tilt in our deposit mix towards proportionally more Basel III-friendly
growth in HQLA, the LCR still increased year-on-year as a result
deposits in the form of RBB and Wealth deposits together with
of a decrease in LCR net cash outflows attributable to a positive
market share gains in commercial deposits. The HQLA portfolio,
tilt in our deposit mix towards proportionally more Basel III-friendly
taken together with our portfolio of other sources of quick-liquidity,
deposits in the form of RBB and Wealth deposits together with
resulted in total available sources of quick liquidity of R195.4 billion,
market share gains in commercial deposits. The HQLA portfolio,
representing 19.9% of total assets.
taken together with our portfolio of other sources of quick-liquidity,
resulted in total available sources of quick liquidity of R195.4 billion,
Nedbank has maintained the NSFR at above 100% on a pro forma
representing 19.9% of total assets.
basis and is compliant with the minimum regulatory requirements
that are effective from 1 January 2018.
Nedbank has maintained the NSFR at above 100% on a pro forma
basis and is compliant with the minimum regulatory requirements
that are effective from 1 January 2018.
Loans and advances
Loans and advances increased by 0.5% to R710.3 billion, driven
by solid growth in RBB offset by a decline in term and other loans
Loans and advances
in CIB.
Loans and advances increased by 0.5% to R710.3 billion, driven
by solid growth in RBB offset by a decline in term and other loans
RBB loans and advances grew 5.3% to R305.2 billion, with MFC
in CIB.
(vehicle finance) increasing by 8.6% as new-business volumes
improved despite the contracting vehicle sales market. RBB’s
RBB loans and advances grew 5.3% to R305.2 billion, with MFC
growth was achieved across all asset classes by increasing the
(vehicle finance) increasing by 8.6% as new-business volumes
contribution from lower-risk clients in line with risk appetite and
improved despite the contracting vehicle sales market. RBB’s
prudent origination strategies. We take comfort in the quality and
growth was achieved across all asset classes by increasing the
overall performance of the unsecured-lending portfolio based on
contribution from lower-risk clients in line with risk appetite and
the conservative rules we apply to consolidation, restructuring
prudent origination strategies. We take comfort in the quality and
and term strategies. Home loans grew at below-inflation levels,
overall performance of the unsecured-lending portfolio based on
but market share was maintained.
the conservative rules we apply to consolidation, restructuring
and term strategies. Home loans grew at below-inflation levels,
CIB loans and advances decreased 3.8% to R356.0 billion due to
but market share was maintained.
a combination of unexpected early repayments and managed sell-
downs, which allowed for the diversification of risk. Demand for
CIB loans and advances decreased 3.8% to R356.0 billion due to
new loans was weak as a result of muted client capital expenditure
a combination of unexpected early repayments and managed sell-
in a competitive market in the subdued economic climate.
downs, which allowed for the diversification of risk. Demand for
Commercial-mortgage loans and advances grew by 6.5% to
new loans was weak as a result of muted client capital expenditure
R161.6 billion, maintaining our leading share of the SA market. The
in a competitive market in the subdued economic climate.
portfolio contains good-quality collateralised assets with low LTVs,
Commercial-mortgage loans and advances grew by 6.5% to
underpinned by a large secure asset pool and a strong client base,
R161.6 billion, maintaining our leading share of the SA market. The
and is managed by a highly experienced property finance team.
portfolio contains good-quality collateralised assets with low LTVs,
underpinned by a large secure asset pool and a strong client base,
Deposits
and is managed by a highly experienced property finance team.
Deposits grew 1.3% to R771.6 billion, with total funding-related
liabilities increasing 1.2% to R823.2 billion, while the loan-to-deposit
Deposits
ratio improved to 92.1%.
Deposits grew 1.3% to R771.6 billion, with total funding-related
liabilities increasing 1.2% to R823.2 billion, while the loan-to-deposit
Through the active management of the RBB franchise, deposits
ratio improved to 92.1%.
grew 8.5% to R295.3 billion, resulting in household deposits market
share gains increasing year-on-year to 18.9% from 18.7%,
Through the active management of the RBB franchise, deposits
supported by Nedbank’s strong market share in household current
grew 8.5% to R295.3 billion, resulting in household deposits market
account deposits of 19.1%. Through the growth in current
share gains increasing year-on-year to 18.9% from 18.7%,
accounts, savings and fixed deposits and other structured deposits
supported by Nedbank’s strong market share in household current
Nedbank has successfully reduced the proportion of funding from
account deposits of 19.1%. Through the growth in current
negotiable certificates of deposit as well as more expensive foreign
accounts, savings and fixed deposits and other structured deposits
currency funding used in the general rand funding pool.
Nedbank has successfully reduced the proportion of funding from
negotiable certificates of deposit as well as more expensive foreign
This positive tilt towards more Basel III-friendly deposits achieved
currency funding used in the general rand funding pool.
across RBB, Nedbank Wealth and RoA and through market share
gains in commercial deposits has resulted in lower HQLA and long-
This positive tilt towards more Basel III-friendly deposits achieved
term funding requirements as well as a stronger LCR in terms of
across RBB, Nedbank Wealth and RoA and through market share
ensuring cost-effective regulatory compliance and a strong balance
gains in commercial deposits has resulted in lower HQLA and long-
sheet position.
term funding requirements as well as a stronger LCR in terms of
ensuring cost-effective regulatory compliance and a strong balance
sheet position.
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Old Mutual plc Annual Report and Accounts 2017 Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Nedbank review
continued
Nedbank review
continued
The group’s tier 1 ratio improved to 13.4% and includes the
issuance of R600 million of new-style additional tier 1 capital
instruments during the year, offsetting the progressive grandfathering
The group’s tier 1 ratio improved to 13.4% and includes the
of old-style perpetual preference shares as we transition towards
issuance of R600 million of new-style additional tier 1 capital
end-state Basel III requirements. The group’s total capital ratio
instruments during the year, offsetting the progressive grandfathering
has improved to 15.5% and includes the issuance of R2.5 billion
of old-style perpetual preference shares as we transition towards
of new-style tier 2 capital instruments during the year, partially
end-state Basel III requirements. The group’s total capital ratio
offsetting the redemption of R3.0 billion in old-style tier 2
has improved to 15.5% and includes the issuance of R2.5 billion
capital instruments.
of new-style tier 2 capital instruments during the year, partially
offsetting the redemption of R3.0 billion in old-style tier 2
Funding and liquidity
capital instruments.
Optimising our funding profile and maintaining a strong liquidity
position remain a priority for the group, especially in the current
Funding and liquidity
environment.
Optimising our funding profile and maintaining a strong liquidity
position remain a priority for the group, especially in the current
The group’s three-month average long-term funding ratio was
environment.
27.0% for the fourth quarter of 2017, supported by growth in
Nedbank Retail Savings Bonds of R5.7 billion to R24.9 billion
The group’s three-month average long-term funding ratio was
and the successful capital market issuances of R3.5 billion senior
27.0% for the fourth quarter of 2017, supported by growth in
unsecured debt, R2.5 billion new-style tier 2 debt and R1.0 billion
Nedbank Retail Savings Bonds of R5.7 billion to R24.9 billion
in securitisation notes.
and the successful capital market issuances of R3.5 billion senior
unsecured debt, R2.5 billion new-style tier 2 debt and R1.0 billion
The group's quarterly average LCR of 116.2% exceeded the
in securitisation notes.
minimum regulatory requirement of 80% in 2017 and 90% effective
from 1 January 2018. The group maintains appropriate operational
The group's quarterly average LCR of 116.2% exceeded the
buffers designed to absorb seasonal and cyclical volatility in
minimum regulatory requirement of 80% in 2017 and 90% effective
the LCR.
buffers designed to absorb seasonal and cyclical volatility in
Further details on the LCR are available in the table section of the
Securities Exchange News Service (SENS) announcement.
the LCR.
Further details on the LCR are available in the table section of the
Nedbank’s portfolio of LCR-compliant HQLA increased by 0.6%
Securities Exchange News Service (SENS) announcement.
to a quarterly average of R138.2 billion. Notwithstanding the low
growth in HQLA, the LCR still increased year-on-year as a result
Nedbank’s portfolio of LCR-compliant HQLA increased by 0.6%
of a decrease in LCR net cash outflows attributable to a positive
to a quarterly average of R138.2 billion. Notwithstanding the low
tilt in our deposit mix towards proportionally more Basel III-friendly
growth in HQLA, the LCR still increased year-on-year as a result
deposits in the form of RBB and Wealth deposits together with
of a decrease in LCR net cash outflows attributable to a positive
market share gains in commercial deposits. The HQLA portfolio,
tilt in our deposit mix towards proportionally more Basel III-friendly
taken together with our portfolio of other sources of quick-liquidity,
deposits in the form of RBB and Wealth deposits together with
resulted in total available sources of quick liquidity of R195.4 billion,
market share gains in commercial deposits. The HQLA portfolio,
representing 19.9% of total assets.
taken together with our portfolio of other sources of quick-liquidity,
resulted in total available sources of quick liquidity of R195.4 billion,
Nedbank has maintained the NSFR at above 100% on a pro forma
representing 19.9% of total assets.
basis and is compliant with the minimum regulatory requirements
that are effective from 1 January 2018.
Nedbank has maintained the NSFR at above 100% on a pro forma
basis and is compliant with the minimum regulatory requirements
that are effective from 1 January 2018.
Loans and advances
Loans and advances increased by 0.5% to R710.3 billion, driven
by solid growth in RBB offset by a decline in term and other loans
Loans and advances
in CIB.
in CIB.
Loans and advances increased by 0.5% to R710.3 billion, driven
by solid growth in RBB offset by a decline in term and other loans
RBB loans and advances grew 5.3% to R305.2 billion, with MFC
(vehicle finance) increasing by 8.6% as new-business volumes
improved despite the contracting vehicle sales market. RBB’s
RBB loans and advances grew 5.3% to R305.2 billion, with MFC
growth was achieved across all asset classes by increasing the
(vehicle finance) increasing by 8.6% as new-business volumes
contribution from lower-risk clients in line with risk appetite and
improved despite the contracting vehicle sales market. RBB’s
prudent origination strategies. We take comfort in the quality and
growth was achieved across all asset classes by increasing the
overall performance of the unsecured-lending portfolio based on
contribution from lower-risk clients in line with risk appetite and
the conservative rules we apply to consolidation, restructuring
prudent origination strategies. We take comfort in the quality and
and term strategies. Home loans grew at below-inflation levels,
overall performance of the unsecured-lending portfolio based on
but market share was maintained.
the conservative rules we apply to consolidation, restructuring
and term strategies. Home loans grew at below-inflation levels,
CIB loans and advances decreased 3.8% to R356.0 billion due to
but market share was maintained.
a combination of unexpected early repayments and managed sell-
downs, which allowed for the diversification of risk. Demand for
CIB loans and advances decreased 3.8% to R356.0 billion due to
new loans was weak as a result of muted client capital expenditure
a combination of unexpected early repayments and managed sell-
in a competitive market in the subdued economic climate.
downs, which allowed for the diversification of risk. Demand for
Commercial-mortgage loans and advances grew by 6.5% to
new loans was weak as a result of muted client capital expenditure
R161.6 billion, maintaining our leading share of the SA market. The
in a competitive market in the subdued economic climate.
portfolio contains good-quality collateralised assets with low LTVs,
Commercial-mortgage loans and advances grew by 6.5% to
underpinned by a large secure asset pool and a strong client base,
R161.6 billion, maintaining our leading share of the SA market. The
and is managed by a highly experienced property finance team.
portfolio contains good-quality collateralised assets with low LTVs,
Deposits
and is managed by a highly experienced property finance team.
Deposits grew 1.3% to R771.6 billion, with total funding-related
liabilities increasing 1.2% to R823.2 billion, while the loan-to-deposit
Deposits
ratio improved to 92.1%.
Deposits grew 1.3% to R771.6 billion, with total funding-related
liabilities increasing 1.2% to R823.2 billion, while the loan-to-deposit
Through the active management of the RBB franchise, deposits
ratio improved to 92.1%.
grew 8.5% to R295.3 billion, resulting in household deposits market
share gains increasing year-on-year to 18.9% from 18.7%,
Through the active management of the RBB franchise, deposits
supported by Nedbank’s strong market share in household current
grew 8.5% to R295.3 billion, resulting in household deposits market
account deposits of 19.1%. Through the growth in current
share gains increasing year-on-year to 18.9% from 18.7%,
accounts, savings and fixed deposits and other structured deposits
supported by Nedbank’s strong market share in household current
Nedbank has successfully reduced the proportion of funding from
account deposits of 19.1%. Through the growth in current
negotiable certificates of deposit as well as more expensive foreign
accounts, savings and fixed deposits and other structured deposits
currency funding used in the general rand funding pool.
Nedbank has successfully reduced the proportion of funding from
negotiable certificates of deposit as well as more expensive foreign
This positive tilt towards more Basel III-friendly deposits achieved
currency funding used in the general rand funding pool.
across RBB, Nedbank Wealth and RoA and through market share
gains in commercial deposits has resulted in lower HQLA and long-
This positive tilt towards more Basel III-friendly deposits achieved
term funding requirements as well as a stronger LCR in terms of
across RBB, Nedbank Wealth and RoA and through market share
ensuring cost-effective regulatory compliance and a strong balance
gains in commercial deposits has resulted in lower HQLA and long-
term funding requirements as well as a stronger LCR in terms of
ensuring cost-effective regulatory compliance and a strong balance
sheet position.
sheet position.
from 1 January 2018. The group maintains appropriate operational
underpinned by a large secure asset pool and a strong client base,
Group strategic focus
During 2017 we continued to focus on delivering on our five
strategic focus areas designed to make Nedbank a more agile,
competitive and digital bank, and underpin sustainable earnings
growth and improving returns.
Delivering innovative market-leading client
experiences
We launched various market-leading innovations such as the new
Nedbank Private Wealth mobile app. This was one of the first
products delivered through our Digital Fast Lane capability. It
ranked joint sixth in the global Mobile Apps for Wealth Management
2017 survey and was placed third among 600 apps in the Best
Enterprise Solution category at the MTN Business App of the
Year Awards. The new Nedbank Money app, which makes
banking more convenient for our retail clients, was downloaded
more than 300,000 times since November 2017. We launched
UNLOCKED.ME, an exclusive e-commerce marketplace
for millennials.
Karri, our mobile payment app that enables users to make cash-
free payments for school activities quickly, securely and hassle-
free, has been rolled out to more than 100 schools across the
country. In Nedbank Wealth we piloted geyser telemetry, an
innovative smart home solution that reduces electricity consumption.
As far as our integrated channels are concerned, we have
converted 55% of our outlets to new-image branches to date, and
our investment in distribution channels over the next three years
(until 2020) will result in 73% of our retail clients being exposed
to the new-image branch format and self-service offerings.
The introduction of chatbots and robo-advisors will continue to
enhance client experiences through our contact centre and web-
servicing capabilities. We launched NZone, our digital self-service
branch at the Sandton Gautrain station, as well as Africa’s first
solar-powered branch to enable banking in deep-rural communities.
The foundations put in place through Managed Evolution (our
core systems and technology platform transformation), digital
enhancements and New Ways of Work will lead to ongoing
incremental digital benefits and enhanced client service.
In 2018 Nedbank will bring further exciting digital innovations
to market to enhance client experiences and drive efficiencies.
Some of these include a refreshed internet banking experience in
line with our mobile banking apps, the ability to sell an unsecured
loan bundled with a transactional account, simplified client on-
boarding with convenient, FICA-compliant account opening from
your couch, a new and exciting loyalty and rewards solution, and
further rollout of chatbots, robo-advisors and software robots
(robotic process automation).
Growing our transactional banking franchise
faster than the market
Nedbank’s RBB franchise grew its total client base 1.6% to 7.5
million, with 6.0 million clients having a transactional account and
2.8 million main-banked clients supporting retail transactional NIR
growth of 6.0%. Our main-banked client numbers remained flat
as slower transactional activity caused some of our existing clients
to fall outside our main-banked definition, particularly in the youth
segment, while the middle-market, professional and small business
client segments continued to increase. The newly launched
Consulta survey estimates Nedbank’s share of main-banked clients
at 12.7%, up from the 10.1% recorded through the 2015 AMPS
survey (using a similar methodology) as we aim to reach a share
of more than 15% by 2020. Our integrated model in CIB enabled
deeper client penetration and increased cross-sell, resulting in
26 primary-bank client wins in 2017.
Being operationally excellent in all we do
Cost discipline is an imperative in an environment of slower revenue
growth. We have ongoing initiatives to ensure this, such as having
reduced our core systems from 251 to 129 since inception of the
Managed Evolution programme, with us being well on our way to
reaching a target end state of less than 60 core systems by 2020;
and the reduction of floor space in RBB by more than 30,000 m²
by 2020; of which 24,485 m² has been achieved to date. We
worked with our sister companies in the Old Mutual Group to
deliver synergies of just in excess of R1 billion, R393 million of
which accrued to Nedbank. Good progress was also made with our
target operating model (TOM) initiatives, which aim at generating
R1.0 billion pre-tax benefits for Nedbank by 2019 (and R1.2 billion
by 2020) and are linked to our long-term incentive scheme. Most
cost initiatives have been identified in RBB and we delivered
savings of R621 million in 2017, which includes TOM savings.
During the year we reduced headcount by 859 (mostly through
natural attrition), optimised our staffed points of presence by closing
32 in-retailer and 53 personal-loan outlets (while maintaining our
coverage of the bankable population at 84%). We achieved
efficiencies through the recycling of cash through our increased
footprint of Intelligent Depositor devices. Four client-servicing
functions, previously only accessible through branches, as well
as the new Nedbank Money app were launched during the fourth
quarter of 2017, while another 33 are planned for deployment
across our digital channels by March 2018. We implemented
50 software robots (robotic process automation) to enhance
efficiencies and reduce processing errors in administrative-intense
processes, with more than 200 planned for rollout in 2018.
Managing scarce resources to optimise
economic outcomes
We maintained our focus on growing activities that generate higher
levels of EP, such as growing transactional deposits and increasing
transactional banking revenues, with commission and fees in RBB
up 5.3%, and achieved earnings growth of 6.9% in RBB and 5.0%
in CIB. Our selective origination of personal loans, home loans and
commercial-property finance has proactively limited downside risk
in this challenging operating climate, enabling a CLR of 0.49%,
below the bottom end of our TTC target range. At the same time
our balance sheet metrics remain strong and we continue to deliver
dividend growth above the rate of HEPS growth.
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Old Mutual plc
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Old Mutual plc
Annual Report and Accounts 2017
The decrease in OML’s shareholding in Nedbank Group will be
achieved through the unbundling of Nedbank Group ordinary
shares to OML’s shareholders. This will result in OML, immediately
The decrease in OML’s shareholding in Nedbank Group will be
after the implementation of unbundling, holding a 19.9% strategic
achieved through the unbundling of Nedbank Group ordinary
minority shareholding in Nedbank Group. The unbundling will occur
shares to OML’s shareholders. This will result in OML, immediately
at an appropriate time and in an orderly manner, after the listing
after the implementation of unbundling, holding a 19.9% strategic
of OML and allowing suitable time for the transition of the OML
minority shareholding in Nedbank Group. The unbundling will occur
shareholder register to an investor base with an SA and emerging-
at an appropriate time and in an orderly manner, after the listing
market focus and mandate. After the unbundling, Nedbank Group
of OML and allowing suitable time for the transition of the OML
is likely to see an increase in the number of its shares held by
shareholder register to an investor base with an SA and emerging-
emerging-market-mandated index funds, which will adjust
market focus and mandate. After the unbundling, Nedbank Group
according to the improved free float (from about 45% before
is likely to see an increase in the number of its shares held by
unbundling to about 80% after unbundling) and a normalisation
emerging-market-mandated index funds, which will adjust
of SA institutional shareholding (some of which are currently
according to the improved free float (from about 45% before
underweight on a straight-market-capitalisation basis given some
unbundling to about 80% after unbundling) and a normalisation
Nedbank Group holding through the Old Mutual plc shareholding).
of SA institutional shareholding (some of which are currently
As part of this process Nedbank Group will continue to market itself
underweight on a straight-market-capitalisation basis given some
as an attractive investment for local and international investors.
Nedbank Group holding through the Old Mutual plc shareholding).
As part of this process Nedbank Group will continue to market itself
Nedbank Group will continue business as usual and the managed
as an attractive investment for local and international investors.
separation will have no impact on our strategy, our day-to-day
management or operations, our staff and our clients. Our
Nedbank Group will continue business as usual and the managed
engagements have been at arm’s length and overseen by
separation will have no impact on our strategy, our day-to-day
independent board structures. Old Mutual operates predominantly
management or operations, our staff and our clients. Our
in the investment, savings and insurance industry, which has little
engagements have been at arm’s length and overseen by
overlap with banking, even though we compete in the areas of
independent board structures. Old Mutual operates predominantly
wealth and asset management and personal loans. Our technology
in the investment, savings and insurance industry, which has little
systems, brands and businesses have not been integrated.
overlap with banking, even though we compete in the areas of
wealth and asset management and personal loans. Our technology
As noted before, our collaboration with Old Mutual to unlock
systems, brands and businesses have not been integrated.
synergies by the end of 2017 was successful. Future synergies
will continue to be underpinned by OML’s strategic shareholding
As noted before, our collaboration with Old Mutual to unlock
in Nedbank Group. We are fully committed to working with OML
synergies by the end of 2017 was successful. Future synergies
to deliver ongoing synergistic benefits at arm’s length.
will continue to be underpinned by OML’s strategic shareholding
in Nedbank Group. We are fully committed to working with OML
to deliver ongoing synergistic benefits at arm’s length.
Nedbank review
continued
Nedbank review
continued
Providing our clients with access to the best
financial services network in Africa
In Central and West Africa ETI remains an important strategic
Providing our clients with access to the best
investment for Nedbank, providing our clients with access to
financial services network in Africa
a pan-African transactional banking network across 39 countries
In Central and West Africa ETI remains an important strategic
and Nedbank with access to dealflow in Central and West Africa.
investment for Nedbank, providing our clients with access to
We have made good progress in working with ETI’s board and
a pan-African transactional banking network across 39 countries
other institutional shareholders to strengthen its board and
and Nedbank with access to dealflow in Central and West Africa.
management. We have increased our board representation and
We have made good progress in working with ETI’s board and
our involvement in the group as Brian Kennedy joined Mfundo
other institutional shareholders to strengthen its board and
Nkuhlu on ETI’s board. Mfundo was appointed Chair of the ETI
management. We have increased our board representation and
Risk Committee and Brian was appointed to the Remuneration
our involvement in the group as Brian Kennedy joined Mfundo
and Audit Committees. Risk management practices are being
Nkuhlu on ETI’s board. Mfundo was appointed Chair of the ETI
enhanced and the audit of ETI’s 2017 interim results provides
Risk Committee and Brian was appointed to the Remuneration
comfort that the risk of another fourth-quarter loss as in 2015 and
and Audit Committees. Risk management practices are being
2016 has decreased. We are pleased that ETI reported a profit for
enhanced and the audit of ETI’s 2017 interim results provides
the nine months to 30 September 2017. We remain supportive
comfort that the risk of another fourth-quarter loss as in 2015 and
of ETI’s endeavours to deliver an ROE in excess of its COE over
2016 has decreased. We are pleased that ETI reported a profit for
time. While risk remains, economic conditions in Nigeria and other
the nine months to 30 September 2017. We remain supportive
economies in West Africa are improving and ETI should provide
of ETI’s endeavours to deliver an ROE in excess of its COE over
a strong underpin to Nedbank Group’s earnings growth in 2018.
time. While risk remains, economic conditions in Nigeria and other
economies in West Africa are improving and ETI should provide
In SADC we continue to build scale and optimise costs. Our core
a strong underpin to Nedbank Group’s earnings growth in 2018.
banking system, Flexcube, which was successfully rolled out in
Namibia in 2016, was also implemented in Lesotho, Malawi and
In SADC we continue to build scale and optimise costs. Our core
Swaziland in 2017 and we plan to roll it out in Zimbabwe during
banking system, Flexcube, which was successfully rolled out in
2018. We also launched a number of new digital products and
Namibia in 2016, was also implemented in Lesotho, Malawi and
we continue to grow our distribution footprint. As a result, clients
Swaziland in 2017 and we plan to roll it out in Zimbabwe during
increased 14% and online digital activations were up 22%. The
2018. We also launched a number of new digital products and
acquisition of a majority stake in Banco Único in 2016 continued
we continue to grow our distribution footprint. As a result, clients
to deliver value and positioned Nedbank well to leverage off higher
increased 14% and online digital activations were up 22%. The
levels of economic growth in Mozambique. In 2018 we will rebrand
acquisition of a majority stake in Banco Único in 2016 continued
MBCA in Zimbabwe to Nedbank while completing the last of our
to deliver value and positioned Nedbank well to leverage off higher
core banking system implementations in our subsidiaries.
levels of economic growth in Mozambique. In 2018 we will rebrand
MBCA in Zimbabwe to Nedbank while completing the last of our
Old Mutual plc managed separation
core banking system implementations in our subsidiaries.
On 1 November 2017 Old Mutual plc announced that the
strategic minority shareholding to be retained in Nedbank Group
Old Mutual plc managed separation
by Old Mutual Limited (OML) to underpin the ongoing commercial
On 1 November 2017 Old Mutual plc announced that the
relationship between the companies has been agreed at 19.9%
strategic minority shareholding to be retained in Nedbank Group
of the total Nedbank Group ordinary shares in issue, as held
by Old Mutual Limited (OML) to underpin the ongoing commercial
by shareholder funds. This followed the 11 March 2016
relationship between the companies has been agreed at 19.9%
announcement by Old Mutual plc about the Old Mutual managed
of the total Nedbank Group ordinary shares in issue, as held
separation, and the subsequent communication on 25 May 2017
by shareholder funds. This followed the 11 March 2016
in which Old Mutual plc stated that the new SA holding company,
announcement by Old Mutual plc about the Old Mutual managed
to be named OML, would retain a strategic minority shareholding
separation, and the subsequent communication on 25 May 2017
in Nedbank Group after the implementation of the managed
in which Old Mutual plc stated that the new SA holding company,
separation. The 19.9% shareholding will be held by OML, which
to be named OML, would retain a strategic minority shareholding
will have a primary listing on JSE Limited and a secondary listing
in Nedbank Group after the implementation of the managed
on the London Stock Exchange. OML will be listed at the earliest
separation. The 19.9% shareholding will be held by OML, which
opportunity in 2018, following the publication of Old Mutual plc’s
will have a primary listing on JSE Limited and a secondary listing
2017 full-year results.
on the London Stock Exchange. OML will be listed at the earliest
opportunity in 2018, following the publication of Old Mutual plc’s
2017 full-year results.
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Prospects
Our guidance on financial performance for the full year 2018
is currently as follows:
Average interest-earning banking assets to grow in line with
nominal GDP.
NIM to be slightly above the 2017 level of 3.62%.
CLR to increase into the bottom half of our target range of 60
to 100 bps (under IFRS 9).
NIR to grow above mid-single digits.
Associate income to be positive (ETI associate income reported
quarterly in arrear).
Expenses to increase by mid-single digits.
Given the loss in associate income from ETI in the 2017 base and
continued delivery on the Nedbank strategy, our financial guidance
is for growth in DHEPS for the full 2018 year to be in line with our
medium-to-long-term target of greater than or equal to GDP +
the consumer price index + 5%.
The outlook for our medium-to-long-term targets in 2018 is as
follows, and we have now set ourselves specific 2020 targets of
ROE (excluding goodwill) of greater than or equal to 18% and cost
to income of lower than or equal to 53% as a pathway to ongoing
and sustainable improvements in the key metrics that support
shareholder value creation.
Economic and regulatory outlook
While structural challenges remain, 2018 has started with renewed
optimism that these will be addressed and that improving business
and consumer confidence should lead to a cyclical upturn off
a low base. The SA economy is forecast to grow about 1.6% in
2018 as a resilient world economy and relatively firm international
commodity prices are expected to provide further support to
domestic production and exports. Business and consumer
confidence should also improve from very weak levels in 2017,
boosted by newly elected SA President Ramaphosa’s promises to
restore good governance, take immediate action against corruption
and state capture, and make changes to many cabinet portfolios.
Moderate growth in consumer spending and credit are forecast for
2018, while fixed investment, as well as government consumption
and capital expenditure, is forecast to remain subdued.
The recovery in sub-Saharan Africa is expected to gather pace in
2018, underpinned by the ongoing global commodity price upswing
as well as improved government finances and structural reforms in
some African countries. The International Monetary Fund expects
sub-Saharan Africa to grow faster at 3.4% this year.
Domestic inflation is forecast to recede moderately in the early part
of 2018, before edging higher towards the end of the year, averaging
about 5.1% over the year as a whole. Early in the year a stronger
rand, coupled with easing food and fuel prices, should help contain
inflation off the higher base that prevailed at the start of 2017. The
rand remains the key risk to the inflation outlook. High expectations
of political, policy and fiscal reforms have been built into the rand’s
recent rally. If the new ANC leadership fails to deliver, especially on
the fiscal concerns, SA still runs the risk of being downgraded to
universal sub-investment grade status, which could place the rand
under pressure and alter the inflation outlook for the year. Given
these uncertainties, the anticipated rise in US interest rates, the
gradual tapering of quantitative easing programmes by other major
central banks and the expected upturn in the domestic inflation
cycle towards year-end, the SARB’s Monetary Policy Committee
is forecast to keep interest rates unchanged at current levels
throughout 2018 and into 2019.
Fitch indicated that a failure to implement credible fiscal consolidation
and any further economic deterioration could trigger another rating
downgrade. S&P will act if both the economy and standards of
public governance weaken further, while Moody’s will downgrade
the country if the measures to address the fiscal funding gap lack
credibility or the chosen structural reforms fail to encourage
investment and growth.
Overall economic conditions should improve off a low base and,
despite the many challenges faced by the SA economy, the
SA banking system remains sound, liquid and well capitalised.
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Nedbank review
continued
Nedbank review
continued
Cluster performance
CIB
Cluster performance
RBB
Wealth
CIB
RoA subsidiaries
RBB
Centre
Wealth
Nedbank managed operations
RoA subsidiaries
ETI
Centre
Group
Nedbank managed operations
ETI
Group
Credit loss ratio by cluster (%)
CIB
RBB
Credit loss ratio by cluster (%)
Wealth
CIB
RoA
RBB
Group
Wealth
RoA
Group
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Change
5%
Change
7%
(10%)
5%
90%
7%
79%
(10%)
8%
90%
(> 100%)
79%
3%
8%
(> 100%)
3%
% banking
adv ances
47%
% banking
46%
adv ances
4%
47%
3%
46%
100%
4%
3%
100%
Headline
earnings (Rm)
ROE
(excluding goodwill)
ROE
(excluding goodwill)
2017
Headline
6,315
earnings (Rm)
5,302
2017
1,068
6,315
165
5,302
(88)
1,068
12,762
165
(975)
(88)
11,787
12,762
(975)
11,787
2016
6,014
4,960
2016
1,192
6,014
87
4,960
(414)
1,192
11,839
87
(374)
(414)
11,465
11,839
(374)
11,465
2017
0.06%
1.06%
2017
0.09%
0.06%
1.02%
1.06%
0.49%
0.09%
1.02%
0.49%
2016
0.34%
1.12%
2016
0.08%
0.34%
0.98%
1.12%
0.68%
0.08%
0.98%
0.68%
2016
21.1%
18.9%
2016
35.2%
21.1%
2.1%
18.9%
35.2%
18.0%
2.1%
2017
20.7%
19.1%
2017
27.5%
20.7%
3.3%
19.1%
27.5%
18.1%
3.3%
16.4%
16.4%
18.1%
16.5%
18.0%
16.5%
Through-the-cycle
target ranges
0.15%–0.45%
Through-the-cycle
1.30%–1.80%
target ranges
0.20%–0.40%
0.15%–0.45%
0.65%–1.00%
1.30%–1.80%
0.60%–1.00%
0.20%–0.40%
0.65%–1.00%
0.60%–1.00%
Regulatory
minimum1
7.25%
Regulatory
8.75%
minimum1
10.75%
7.25%
8.75%
10.75%
Basel III (%)
CET1 ratio
Tier 1 ratio
Basel III (%)
Total capital ratio
CET1 ratio
Tier 1 ratio
(Ratios calculated include unappropriated profits.)
Total capital ratio
1 The Basel III regulatory requirements are being phased in between 2013 and 2019, and exclude any idiosyncratic or systemically important bank minimum requirements.
(Ratios calculated include unappropriated profits.)
Internal target range
10.5%–12.5%
> 12.0%
Internal target range
> 14.0%
10.5%–12.5%
> 12.0%
> 14.0%
2017
12.6%
13.4%
2017
15.5%
12.6%
13.4%
15.5%
2016
12.1%
13.0%
2016
15.3%
12.1%
13.0%
15.3%
Nedbank Group LCR
1 The Basel III regulatory requirements are being phased in between 2013 and 2019, and exclude any idiosyncratic or systemically important bank minimum requirements.
HQLA (Rm)
Net cash outflows (Rm)
Nedbank Group LCR
Liquidity coverage ratio (%)2
HQLA (Rm)
Regulatory minimum (%)
Net cash outflows (Rm)
Liquidity coverage ratio (%)2
2 Average for the quarter.
Regulatory minimum (%)
2017
138,180
118,956
2017
116.2%
138,180
80.0%
118,956
116.2%
80.0%
2016
137,350
125,692
2016
109.3%
137,350
70.0%
125,692
109.3%
70.0%
2 Average for the quarter.
Loans and Advances (Rm)
CIB
Banking activities
Loans and Advances (Rm)
Trading activities
CIB
RBB
Banking activities
Wealth
Trading activities
RoA
RBB
Centre3
Wealth
Group
RoA
Centre3
3 Intercompany eliminations.
Group
3 Intercompany eliminations.
Change
(%)
(4%)
Change
(3%)
(%)
(11%)
(4%)
5%
(3%)
3%
(11%)
5%
5%
27%
3%
0%
5%
27%
0%
2017
356,029
324,673
2017
31,356
356,029
305,198
324,673
29,413
31,356
20,541
305,198
(852)
29,413
710,329
20,541
(852)
710,329
2016
370,199
335,113
2016
35,086
370,199
289,882
335,113
28,577
35,086
19,582
289,882
(1,163)
28,577
707,077
19,582
(1,163)
707,077
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2017 performance
ROE (excluding goodwill)
Growth in DHEPS
CLR
NIR-to-expenses ratio
Efficiency ratio (including associate
income)
CET1 capital adequacy ratio (Basel III)
Economic capital
Dividend cover
4 The COE is forecast at 13.2% in 2018.
16.4%
2.4%
0.49%
80.7%
58.6%
12.6%
Full-year 2018 outlook
Improves, but remains
below target
≥ consumer price index + GDP
growth + 5%, supported by ETI
recovery
Increases into the bottom half of
our target range (under IFRS 9)
Improves, but remains below
target
Improves, but remains above
target
Within or above target
Medium-to-long-term target
5% above COE4
(≥ 18% by 2020)
> consumer price index + GDP
growth + 5%
Between 0.6% and 1.0% of average
banking advances
> 85%
50–53% (≤ 53% by 2020)
10.5–12.5%
Internal Capital Adequacy Assessment Process (ICAAP):
A debt rating, including 10% capital buffer
1.91 times
Within target range
1.75–2.25 times
Reconciliation of AOP (pre-tax) to Nedbank's headline earnings
Headline earnings5
Exceptional items
Amortisation of Wealth Joint Ventures
Credit spread (profits) / loss
Non-capital trading items
Tax as reported by Nedbank
Non-controlling interests as reported by Nedbank
Adjusted operating profit per Old Mutual (Rm)
Analysis by cluster
Corporate & Investment Banking
Retail & Business Banking
Wealth
Rest of Africa
Centre
Adjusted operating profit (Rm)
Analysis by line of business
Banking
Asset management
Life & Savings
Property & Casualty
Adjusted operating profit (Rm)
Adjusted operating profit (£m)
5 As reported by Nedbank.
2017
11,787
(73)
86
–
(166)
4,209
679
16,522
7,963
7,330
1,417
(683)
495
16,522
15,361
425
485
251
16,522
2016
11,465
2
74
–
(128)
3,986
526
15,925
7,763
6,903
1,614
(281)
(74)
15,925
14,587
395
567
376
15,925
963
799
Change %
3%
(3,750%)
16%
–
(30%)
6%
29%
4%
3%
6%
(12%)
(143%)
769%
4%
5%
8%
(14%)
(33%)
4%
21%
CONFIDENTIAL
25
47
Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Old Mutual plc
Annual Report and Accounts 2017
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Wealth review
Old Mutual Wealth review
Old Mutual Wealth review
Strong results, good progress and ready to list
Strong results, good progress and ready to list
“I am delighted with our business performance in 2017. The
“I am delighted with our business performance in 2017. The
Strong results, good progress and ready to list
continuation of sustained strong investment performance and
continuation of sustained strong investment performance and
“I am delighted with our business performance in 2017. The
buoyant market conditions is delivering good customer outcomes.
buoyant market conditions is delivering good customer outcomes.
continuation of sustained strong investment performance and
We have attracted very high levels of net flows, and our business
We have attracted very high levels of net flows, and our business
buoyant market conditions is delivering good customer outcomes.
model is proving a huge success in providing what customers
model is proving a huge success in providing what customers
We have attracted very high levels of net flows, and our business
want. I’m particularly pleased that we have been able to maintain
want. I’m particularly pleased that we have been able to maintain
model is proving a huge success in providing what customers
profitability and achieve a 29% operating margin for 2017 for
profitability and achieve a 29% operating margin for 2017 for
want. I’m particularly pleased that we have been able to maintain
the go-forward business, while still investing significantly in the
the go-forward business, while still investing significantly in the
profitability and achieve a 29% operating margin for 2017 for
business. All of this makes me confident of our future prospects
business. All of this makes me confident of our future prospects
the go-forward business, while still investing significantly in the
and growth, with further opportunities to come from the optimisation
and growth, with further opportunities to come from the optimisation
business. All of this makes me confident of our future prospects
initiatives which we intend to pursue post-listing.
initiatives which we intend to pursue post-listing.
and growth, with further opportunities to come from the optimisation
initiatives which we intend to pursue post-listing.
“During the year, we have implemented a number of important
“During the year, we have implemented a number of important
strategic developments towards achieving our goal of becoming the
strategic developments towards achieving our goal of becoming the
“During the year, we have implemented a number of important
UK’s leading wealth manager. We agreed terms for the sale of the
UK’s leading wealth manager. We agreed terms for the sale of the
strategic developments towards achieving our goal of becoming the
Single Strategy business, which simplifies our business and allows
Single Strategy business, which simplifies our business and allows
UK’s leading wealth manager. We agreed terms for the sale of the
us to focus more on our integrated wealth management offering
us to focus more on our integrated wealth management offering
Single Strategy business, which simplifies our business and allows
which is serving customers so well. We have further grown our
which is serving customers so well. We have further grown our
us to focus more on our integrated wealth management offering
distribution capabilities through the acquisition of Caerus. A key
distribution capabilities through the acquisition of Caerus. A key
which is serving customers so well. We have further grown our
project for us, and one which will significantly enhance our offering
project for us, and one which will significantly enhance our offering
distribution capabilities through the acquisition of Caerus. A key
to advisers and their customers, is our UK Platform Transformation
to advisers and their customers, is our UK Platform Transformation
project for us, and one which will significantly enhance our offering
Programme and I am very pleased that this remains on track and
Programme and I am very pleased that this remains on track and
to advisers and their customers, is our UK Platform Transformation
on budget.
on budget.
Programme and I am very pleased that this remains on track and
on budget.
“Following comprehensive product reviews of our legacy business,
“Following comprehensive product reviews of our legacy business,
we are starting voluntary remediation to customers in certain legacy
we are starting voluntary remediation to customers in certain legacy
“Following comprehensive product reviews of our legacy business,
products within the Heritage book. Our core business philosophy
products within the Heritage book. Our core business philosophy
we are starting voluntary remediation to customers in certain legacy
is to do the right thing by our customers, and this product review
is to do the right thing by our customers, and this product review
products within the Heritage book. Our core business philosophy
is part of putting this into action.
is part of putting this into action.
is to do the right thing by our customers, and this product review
is part of putting this into action.
“We have a strong balance sheet, a strong capital and liquidity
“We have a strong balance sheet, a strong capital and liquidity
position and we are financially independent from Old Mutual plc.
position and we are financially independent from Old Mutual plc.
“We have a strong balance sheet, a strong capital and liquidity
We have completed our separation activities and we are ready
We have completed our separation activities and we are ready
position and we are financially independent from Old Mutual plc.
to list as Quilter plc. We expect to publish a Quilter Prospectus
to list as Quilter plc. We expect to publish a Quilter Prospectus
We have completed our separation activities and we are ready
in connection with that listing. This will provide shareholders,
in connection with that listing. This will provide shareholders,
to list as Quilter plc. We expect to publish a Quilter Prospectus
who will become Quilter shareholders at the time separation
who will become Quilter shareholders at the time separation
in connection with that listing. This will provide shareholders,
completes, with a more detailed overview of the Quilter business
completes, with a more detailed overview of the Quilter business
who will become Quilter shareholders at the time separation
and its performance over the last three years. It will also set out
and its performance over the last three years. It will also set out
completes, with a more detailed overview of the Quilter business
what we believe is an attractive investment case for Quilter as
what we believe is an attractive investment case for Quilter as
and its performance over the last three years. It will also set out
a standalone business, and, of course, explain the key risks
a standalone business, and, of course, explain the key risks
what we believe is an attractive investment case for Quilter as
associated with our business. I would urge you to read that
associated with our business. I would urge you to read that
a standalone business, and, of course, explain the key risks
document when it is published.
document when it is published.
associated with our business. I would urge you to read that
document when it is published.
“2017 was a proving year for our business. 2018 will be a defining
“2017 was a proving year for our business. 2018 will be a defining
one and we are excited about the opportunities ahead.”
one and we are excited about the opportunities ahead.”
“2017 was a proving year for our business. 2018 will be a defining
one and we are excited about the opportunities ahead.”
Paul Feeney
Paul Feeney
Paul Feeney
CEO, Old Mutual Wealth
CEO, Old Mutual Wealth
Paul Feeney
CEO, Old Mutual Wealth
CEO, Old Mutual Wealth
During the year, we have
During the year, we have
implemented a number of
implemented a number of
During the year, we have
important strategic developments
important strategic developments
implemented a number of
towards achieving our goal of
towards achieving our goal of
important strategic developments
becoming the UK’s leading
becoming the UK’s leading
towards achieving our goal of
wealth manager.
wealth manager.
becoming the UK’s leading
wealth manager.
Paul Feeney
Paul Feeney
CEO, Old Mutual Wealth
CEO, Old Mutual Wealth
Paul Feeney
CEO, Old Mutual Wealth
48
16
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Old Mutual plc Annual Report and Accounts 2017
Annual Report and Accounts 2017
Old Mutual plc
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Wealth review
Old Mutual Wealth review
Strong results, good progress and ready to list
“I am delighted with our business performance in 2017. The
Strong results, good progress and ready to list
continuation of sustained strong investment performance and
“I am delighted with our business performance in 2017. The
buoyant market conditions is delivering good customer outcomes.
continuation of sustained strong investment performance and
We have attracted very high levels of net flows, and our business
buoyant market conditions is delivering good customer outcomes.
model is proving a huge success in providing what customers
We have attracted very high levels of net flows, and our business
want. I’m particularly pleased that we have been able to maintain
model is proving a huge success in providing what customers
profitability and achieve a 29% operating margin for 2017 for
want. I’m particularly pleased that we have been able to maintain
the go-forward business, while still investing significantly in the
profitability and achieve a 29% operating margin for 2017 for
business. All of this makes me confident of our future prospects
the go-forward business, while still investing significantly in the
and growth, with further opportunities to come from the optimisation
business. All of this makes me confident of our future prospects
initiatives which we intend to pursue post-listing.
and growth, with further opportunities to come from the optimisation
initiatives which we intend to pursue post-listing.
“During the year, we have implemented a number of important
strategic developments towards achieving our goal of becoming the
“During the year, we have implemented a number of important
UK’s leading wealth manager. We agreed terms for the sale of the
strategic developments towards achieving our goal of becoming the
Single Strategy business, which simplifies our business and allows
UK’s leading wealth manager. We agreed terms for the sale of the
us to focus more on our integrated wealth management offering
Single Strategy business, which simplifies our business and allows
which is serving customers so well. We have further grown our
us to focus more on our integrated wealth management offering
distribution capabilities through the acquisition of Caerus. A key
which is serving customers so well. We have further grown our
project for us, and one which will significantly enhance our offering
distribution capabilities through the acquisition of Caerus. A key
to advisers and their customers, is our UK Platform Transformation
project for us, and one which will significantly enhance our offering
Programme and I am very pleased that this remains on track and
to advisers and their customers, is our UK Platform Transformation
on budget.
Programme and I am very pleased that this remains on track and
on budget.
“Following comprehensive product reviews of our legacy business,
we are starting voluntary remediation to customers in certain legacy
“Following comprehensive product reviews of our legacy business,
products within the Heritage book. Our core business philosophy
we are starting voluntary remediation to customers in certain legacy
is to do the right thing by our customers, and this product review
products within the Heritage book. Our core business philosophy
is part of putting this into action.
is to do the right thing by our customers, and this product review
is part of putting this into action.
“We have a strong balance sheet, a strong capital and liquidity
position and we are financially independent from Old Mutual plc.
“We have a strong balance sheet, a strong capital and liquidity
We have completed our separation activities and we are ready
position and we are financially independent from Old Mutual plc.
to list as Quilter plc. We expect to publish a Quilter Prospectus
We have completed our separation activities and we are ready
in connection with that listing. This will provide shareholders,
to list as Quilter plc. We expect to publish a Quilter Prospectus
who will become Quilter shareholders at the time separation
in connection with that listing. This will provide shareholders,
completes, with a more detailed overview of the Quilter business
who will become Quilter shareholders at the time separation
and its performance over the last three years. It will also set out
completes, with a more detailed overview of the Quilter business
what we believe is an attractive investment case for Quilter as
and its performance over the last three years. It will also set out
a standalone business, and, of course, explain the key risks
what we believe is an attractive investment case for Quilter as
associated with our business. I would urge you to read that
a standalone business, and, of course, explain the key risks
document when it is published.
associated with our business. I would urge you to read that
document when it is published.
“2017 was a proving year for our business. 2018 will be a defining
one and we are excited about the opportunities ahead.”
“2017 was a proving year for our business. 2018 will be a defining
one and we are excited about the opportunities ahead.”
Paul Feeney
CEO, Old Mutual Wealth
Paul Feeney
CEO, Old Mutual Wealth
During the year, we have
implemented a number of
During the year, we have
important strategic developments
implemented a number of
towards achieving our goal of
important strategic developments
becoming the UK’s leading
towards achieving our goal of
becoming the UK’s leading
wealth manager.
wealth manager.
Paul Feeney
CEO, Old Mutual Wealth
Paul Feeney
CEO, Old Mutual Wealth
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Wealth highlights on a reported basis
IFRS profit/(loss) after tax attributable to equity holders of the parent (£m)
Reported AOP (pre-tax, £m)1,2
NCCF (£bn)
NCCF, excl. Heritage (£bn)
NCCF/Opening AuMA (excl. Heritage)5
AuMA (£bn)
Pre-tax operating margin3
Revenue margin (bps)4
RoE
2017
99
363
10.9
12.2
12%
138.5
36%
60
19%
2016 % change
40%
110%
114%
12%
(4)
260
5.2
5.7
6%
123.5
32%
64
13%
1 Reported AOP includes Single Strategy of £152m in 2017 (2016: £60m), of which performance fees were £101m (2016: £26m). From 2017, the SA branches are reported within
Old Mutual Emerging Markets and the 2016 profit of the SA branches was £8m
2 In 2016, Head Office costs were allocated to the business. In 2017, these are shown separately and exclude the one-off costs incurred to prepare the business for separation from
Old Mutual plc
3 Includes performance fees, all of which arise in Single Strategy
4 This includes the results of Single Strategy but excludes performance fees
5 NCCF as a % of opening AuMA excludes Italy and SA branches for 2016 and 2017.
For the purposes of this report, references to Old Mutual Wealth refer to the reported results above, which include Single Strategy.
References to Quilter, including those in the table below, refer to the future standalone business, excluding Single Strategy.
Quilter highlights on a standalone basis
Operating profit as a standalone business (pre-tax, £m)1
Normalised operating profit (pre-tax, £m)1
NCCF (£bn)
NCCF, excl. Heritage (£bn)
NCCF/Opening AuMA (excl. Heritage)2
AuMA (£bn)
Pre-tax operating margin
Revenue margin (bps)
Integrated flows (£bn)
2017
209
209
6.3
7.6
9%
114.4
29%
56
4.8
2016 % change
18%
177
−
208
91%
3.3
81%
4.2
6%
98.2
32%
59
1.8
167%
16%
1 A detailed reconciliation of Reported AOP to operating profit as a standalone business to normalised profit can be found within the Performance highlights section
2 NCCF as a % of opening AuMA excludes Italy and SA branches for 2016 and 2017.
2018 will be a defining year
for our business and
we are excited about the
opportunities ahead.
Paul Feeney
CEO, Old Mutual Wealth
Strategy
Our vision is to be the UK’s leading wealth manager. We are a
purpose-built, full service wealth manager delivering good customer
outcomes. We have leading positions in one of the world’s largest
wealth markets, and our multi-channel proposition and investment
performance are driving integrated flows and long term customer
relationships. Together this has delivered attractive top-line growth
and there is the opportunity for improved operating leverage
following our intended listing as Quilter plc.
In 2017, alongside sustained strong investment performance,
we have attracted very high levels of net flows, and our business
model is proving a huge success in providing what customers want.
This has enabled us to maintain our profitability while still investing
in the business ahead of listing, and we achieved a 29% operating
margin for 2017 for the go-forward business. We have further
grown our distribution capabilities through the acquisition of
Caerus, and we remain on track and on budget with our UK
Platform Transformation Programme. We have a strong balance
sheet, strong capital and liquidity positions and we are financially
independent from Old Mutual plc. We have also now completed
our separation activities and we believe that we are ready to list.
16
16
49
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S
i
t
r
a
t
e
g
c
r
e
p
o
r
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Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Wealth review
continued
Old Mutual Wealth review
continued
Business developments
On 2 September 2017, Old Mutual Wealth announced that it would
develop the Multi-Asset and Single Strategy businesses within
Business developments
Old Mutual Global Investors as separate, distinct businesses.
On 2 September 2017, Old Mutual Wealth announced that it would
On 19 December 2017, we announced that we had agreed to sell
develop the Multi-Asset and Single Strategy businesses within
our Single Strategy asset management business (‘Single Strategy’)
Old Mutual Global Investors as separate, distinct businesses.
to the Single Strategy management team and funds managed
On 19 December 2017, we announced that we had agreed to sell
by TA Associates (together ‘the Acquirer’) for an expected total
our Single Strategy asset management business (‘Single Strategy’)
consideration of c.£600 million. This value is subject to a number
to the Single Strategy management team and funds managed
of potential price adjustments depending on the net asset value
by TA Associates (together ‘the Acquirer’) for an expected total
of the business and a number of other factors at the disposal date.
consideration of c.£600 million. This value is subject to a number
Once the transaction completes, economic ownership of Single
of potential price adjustments depending on the net asset value
Strategy will pass to the Acquirer effective from 1 January 2018
of the business and a number of other factors at the disposal date.
with all profits and performance fees generated up until
Once the transaction completes, economic ownership of Single
31 December 2017 for the account of Old Mutual Wealth.
Strategy will pass to the Acquirer effective from 1 January 2018
with all profits and performance fees generated up until
For the purposes of this report, references to Old Mutual Wealth
31 December 2017 for the account of Old Mutual Wealth.
refer to the reported results, which include Single Strategy.
References to Quilter refer to the future standalone business,
For the purposes of this report, references to Old Mutual Wealth
excluding Single Strategy.
refer to the reported results, which include Single Strategy.
References to Quilter refer to the future standalone business,
Completion of the transaction is subject to various regulatory
excluding Single Strategy.
approvals (UK FCA, Hong Kong and Switzerland) and it is
anticipated that completion will take place in the second half of
Completion of the transaction is subject to various regulatory
2018. In addition to regulatory approvals, there are additional
approvals (UK FCA, Hong Kong and Switzerland) and it is
conditions precedent to the completion of the transaction. The
anticipated that completion will take place in the second half of
conditions to completion of the transaction include certain steps
2018. In addition to regulatory approvals, there are additional
to separate the retained Multi-Asset business. These steps include
conditions precedent to the completion of the transaction. The
the reorganisation of the management of certain funds and the
conditions to completion of the transaction include certain steps
transfer of certain assets that form part of the Multi-Asset business
to separate the retained Multi-Asset business. These steps include
into new funds separate from Single Strategy. The completion of
the reorganisation of the management of certain funds and the
these steps depends, in part, upon regulatory approvals and on
transfer of certain assets that form part of the Multi-Asset business
the speed with which certain third party suppliers are able to take
into new funds separate from Single Strategy. The completion of
actions required to establish these funds and implement these
these steps depends, in part, upon regulatory approvals and on
transfers. Upon completion, Transitional Service Agreements
the speed with which certain third party suppliers are able to take
between the Single Strategy and Multi-Asset businesses will be
actions required to establish these funds and implement these
in place. This will allow for the respective provision of services
transfers. Upon completion, Transitional Service Agreements
between the two businesses for a period of up to three years
between the Single Strategy and Multi-Asset businesses will be
on a cost basis.
in place. This will allow for the respective provision of services
between the two businesses for a period of up to three years
As previously announced, on listing, we intend to have two operating
on a cost basis.
segments: Advice and Wealth Management, and Wealth Platforms.
The Advice and Wealth Management segment will include Intrinsic,
As previously announced, on listing, we intend to have two operating
which we intend to rebrand to Quilter Financial Planning; the multi-
segments: Advice and Wealth Management, and Wealth Platforms.
asset solutions business (‘Multi-Asset’), which will become Quilter
The Advice and Wealth Management segment will include Intrinsic,
Investors; and, Quilter Cheviot. The Wealth Platforms segment
which we intend to rebrand to Quilter Financial Planning; the multi-
will include the UK Platform business, which will become Quilter
asset solutions business (‘Multi-Asset’), which will become Quilter
Wealth Solutions; our International business, which will become
Investors; and, Quilter Cheviot. The Wealth Platforms segment
Quilter International; and, our Heritage life assurance business,
will include the UK Platform business, which will become Quilter
which will become Quilter Life Assurance.
Wealth Solutions; our International business, which will become
Quilter International; and, our Heritage life assurance business,
which will become Quilter Life Assurance.
On 9 January 2017, we completed the sale of Old Mutual Wealth
Italy to Phlavia Investimenti. The results for Old Mutual Wealth Italy
have been excluded from the 2017 results.
On 9 January 2017, we completed the sale of Old Mutual Wealth
Italy to Phlavia Investimenti. The results for Old Mutual Wealth Italy
Caerus Capital Group was acquired on 1 June 2017. Throughout
have been excluded from the 2017 results.
2017, we have continued to acquire advice businesses within
Old Mutual Wealth Private Client Advisers, creating ‘hubs’ around
Caerus Capital Group was acquired on 1 June 2017. Throughout
the UK, by careful targeting and acquiring advice businesses that
2017, we have continued to acquire advice businesses within
match our target customer profiles and Quilter Cheviot’s
Old Mutual Wealth Private Client Advisers, creating ‘hubs’ around
geographical footprint, where appropriate.
the UK, by careful targeting and acquiring advice businesses that
match our target customer profiles and Quilter Cheviot’s
On 15 November 2017, we announced that we were closing
geographical footprint, where appropriate.
our Institutional life business within Heritage to new business.
This had AuMA of £4.9 billion at 31 December 2017. It is not
On 15 November 2017, we announced that we were closing
core to our strategy and it is very low margin business.
our Institutional life business within Heritage to new business.
This had AuMA of £4.9 billion at 31 December 2017. It is not
Performance highlights
core to our strategy and it is very low margin business.
Net client cash flow (NCCF)
NCCF performance for Old Mutual Wealth was strong at £10.9
Performance highlights
billion, up 110% on prior year (2016: £5.2 billion) driven by buoyant
Net client cash flow (NCCF)
market conditions and robust investor confidence. This was 12%
NCCF performance for Old Mutual Wealth was strong at £10.9
of opening AuMA, excluding the Heritage assets (which includes
billion, up 110% on prior year (2016: £5.2 billion) driven by buoyant
the Institutional life business), demonstrating very strong growth,
market conditions and robust investor confidence. This was 12%
and well ahead of our annualised target growth of 5% over the
of opening AuMA, excluding the Heritage assets (which includes
medium term.
the Institutional life business), demonstrating very strong growth,
and well ahead of our annualised target growth of 5% over the
Within this, Quilter NCCF was also strong, increasing 91% to
medium term.
£6.3 billion (2016: £3.3 billion). Excluding the Heritage assets,
Quilter NCCF was £7.6 billion and, on this basis, was 9% of
Within this, Quilter NCCF was also strong, increasing 91% to
opening AuMA.
£6.3 billion (2016: £3.3 billion). Excluding the Heritage assets,
Quilter NCCF was £7.6 billion and, on this basis, was 9% of
The Advice and Wealth Management segment contributed total
opening AuMA.
NCCF before intra-group eliminations of £4.4 billion (2016: £1.6
billion). Our Multi-Asset business, which is a core part of our
The Advice and Wealth Management segment contributed total
ongoing proposition and wealth management strategy, received
NCCF before intra-group eliminations of £4.4 billion (2016: £1.6
£3.3 billion (2016: £0.8 billion) of these net flows in 2017 driven
billion). Our Multi-Asset business, which is a core part of our
by robust flows into the Cirilium and WealthSelect fund ranges.
ongoing proposition and wealth management strategy, received
£3.3 billion (2016: £0.8 billion) of these net flows in 2017 driven
NCCF for the Wealth Platforms segment of £4.3 billion was up 95%
by robust flows into the Cirilium and WealthSelect fund ranges.
from 2016 (£2.2 billion). UK Platform net flows were £4.5 billion,
up 61% on 2016 due to strong flows into pension propositions as
NCCF for the Wealth Platforms segment of £4.3 billion was up 95%
customers continue to consolidate existing pensions. As a result,
from 2016 (£2.2 billion). UK Platform net flows were £4.5 billion,
sales into the pension propositions accounted for 61% of total UK
up 61% on 2016 due to strong flows into pension propositions as
Platform sales. Transfers by customers from their defined benefit
customers continue to consolidate existing pensions. As a result,
pensions into defined contribution schemes accounted for gross
sales into the pension propositions accounted for 61% of total UK
sales of £1.8 billion in 2017, representing 20% of gross platform
Platform sales. Transfers by customers from their defined benefit
sales and 6% of total gross sales. Net Heritage outflows were
pensions into defined contribution schemes accounted for gross
primarily due to expected Institutional business outflows. International
sales of £1.8 billion in 2017, representing 20% of gross platform
flows more than doubled to £1.4 billion with strong net flows from
sales and 6% of total gross sales. Net Heritage outflows were
Latin America, the Middle East, UK and Europe. In the International
primarily due to expected Institutional business outflows. International
business, we benefited from certain large single premium inflows
flows more than doubled to £1.4 billion with strong net flows from
which, due to their size, have been made at a discount to our usual
Latin America, the Middle East, UK and Europe. In the International
charging structures.
business, we benefited from certain large single premium inflows
which, due to their size, have been made at a discount to our usual
charging structures.
50
18
18
Old Mutual plc Annual Report and Accounts 2017 Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Wealth review
continued
Old Mutual Wealth review
continued
Business developments
On 2 September 2017, Old Mutual Wealth announced that it would
develop the Multi-Asset and Single Strategy businesses within
Business developments
Old Mutual Global Investors as separate, distinct businesses.
On 2 September 2017, Old Mutual Wealth announced that it would
On 19 December 2017, we announced that we had agreed to sell
develop the Multi-Asset and Single Strategy businesses within
our Single Strategy asset management business (‘Single Strategy’)
Old Mutual Global Investors as separate, distinct businesses.
to the Single Strategy management team and funds managed
On 19 December 2017, we announced that we had agreed to sell
by TA Associates (together ‘the Acquirer’) for an expected total
our Single Strategy asset management business (‘Single Strategy’)
consideration of c.£600 million. This value is subject to a number
to the Single Strategy management team and funds managed
of potential price adjustments depending on the net asset value
by TA Associates (together ‘the Acquirer’) for an expected total
of the business and a number of other factors at the disposal date.
consideration of c.£600 million. This value is subject to a number
Once the transaction completes, economic ownership of Single
of potential price adjustments depending on the net asset value
Strategy will pass to the Acquirer effective from 1 January 2018
of the business and a number of other factors at the disposal date.
with all profits and performance fees generated up until
Once the transaction completes, economic ownership of Single
31 December 2017 for the account of Old Mutual Wealth.
Strategy will pass to the Acquirer effective from 1 January 2018
with all profits and performance fees generated up until
For the purposes of this report, references to Old Mutual Wealth
31 December 2017 for the account of Old Mutual Wealth.
refer to the reported results, which include Single Strategy.
References to Quilter refer to the future standalone business,
For the purposes of this report, references to Old Mutual Wealth
excluding Single Strategy.
refer to the reported results, which include Single Strategy.
References to Quilter refer to the future standalone business,
Completion of the transaction is subject to various regulatory
excluding Single Strategy.
approvals (UK FCA, Hong Kong and Switzerland) and it is
anticipated that completion will take place in the second half of
Completion of the transaction is subject to various regulatory
2018. In addition to regulatory approvals, there are additional
approvals (UK FCA, Hong Kong and Switzerland) and it is
conditions precedent to the completion of the transaction. The
anticipated that completion will take place in the second half of
conditions to completion of the transaction include certain steps
2018. In addition to regulatory approvals, there are additional
to separate the retained Multi-Asset business. These steps include
conditions precedent to the completion of the transaction. The
the reorganisation of the management of certain funds and the
conditions to completion of the transaction include certain steps
transfer of certain assets that form part of the Multi-Asset business
to separate the retained Multi-Asset business. These steps include
into new funds separate from Single Strategy. The completion of
the reorganisation of the management of certain funds and the
these steps depends, in part, upon regulatory approvals and on
transfer of certain assets that form part of the Multi-Asset business
the speed with which certain third party suppliers are able to take
into new funds separate from Single Strategy. The completion of
actions required to establish these funds and implement these
these steps depends, in part, upon regulatory approvals and on
transfers. Upon completion, Transitional Service Agreements
the speed with which certain third party suppliers are able to take
between the Single Strategy and Multi-Asset businesses will be
actions required to establish these funds and implement these
in place. This will allow for the respective provision of services
transfers. Upon completion, Transitional Service Agreements
between the two businesses for a period of up to three years
between the Single Strategy and Multi-Asset businesses will be
on a cost basis.
in place. This will allow for the respective provision of services
between the two businesses for a period of up to three years
As previously announced, on listing, we intend to have two operating
on a cost basis.
segments: Advice and Wealth Management, and Wealth Platforms.
The Advice and Wealth Management segment will include Intrinsic,
As previously announced, on listing, we intend to have two operating
which we intend to rebrand to Quilter Financial Planning; the multi-
segments: Advice and Wealth Management, and Wealth Platforms.
asset solutions business (‘Multi-Asset’), which will become Quilter
The Advice and Wealth Management segment will include Intrinsic,
Investors; and, Quilter Cheviot. The Wealth Platforms segment
which we intend to rebrand to Quilter Financial Planning; the multi-
will include the UK Platform business, which will become Quilter
asset solutions business (‘Multi-Asset’), which will become Quilter
Wealth Solutions; our International business, which will become
Investors; and, Quilter Cheviot. The Wealth Platforms segment
Quilter International; and, our Heritage life assurance business,
will include the UK Platform business, which will become Quilter
which will become Quilter Life Assurance.
Wealth Solutions; our International business, which will become
Quilter International; and, our Heritage life assurance business,
which will become Quilter Life Assurance.
On 9 January 2017, we completed the sale of Old Mutual Wealth
Italy to Phlavia Investimenti. The results for Old Mutual Wealth Italy
have been excluded from the 2017 results.
On 9 January 2017, we completed the sale of Old Mutual Wealth
Italy to Phlavia Investimenti. The results for Old Mutual Wealth Italy
Caerus Capital Group was acquired on 1 June 2017. Throughout
have been excluded from the 2017 results.
2017, we have continued to acquire advice businesses within
Old Mutual Wealth Private Client Advisers, creating ‘hubs’ around
Caerus Capital Group was acquired on 1 June 2017. Throughout
the UK, by careful targeting and acquiring advice businesses that
2017, we have continued to acquire advice businesses within
match our target customer profiles and Quilter Cheviot’s
Old Mutual Wealth Private Client Advisers, creating ‘hubs’ around
geographical footprint, where appropriate.
the UK, by careful targeting and acquiring advice businesses that
match our target customer profiles and Quilter Cheviot’s
On 15 November 2017, we announced that we were closing
geographical footprint, where appropriate.
our Institutional life business within Heritage to new business.
This had AuMA of £4.9 billion at 31 December 2017. It is not
On 15 November 2017, we announced that we were closing
core to our strategy and it is very low margin business.
our Institutional life business within Heritage to new business.
This had AuMA of £4.9 billion at 31 December 2017. It is not
Performance highlights
core to our strategy and it is very low margin business.
Net client cash flow (NCCF)
NCCF performance for Old Mutual Wealth was strong at £10.9
Performance highlights
billion, up 110% on prior year (2016: £5.2 billion) driven by buoyant
Net client cash flow (NCCF)
market conditions and robust investor confidence. This was 12%
NCCF performance for Old Mutual Wealth was strong at £10.9
of opening AuMA, excluding the Heritage assets (which includes
billion, up 110% on prior year (2016: £5.2 billion) driven by buoyant
the Institutional life business), demonstrating very strong growth,
market conditions and robust investor confidence. This was 12%
and well ahead of our annualised target growth of 5% over the
of opening AuMA, excluding the Heritage assets (which includes
medium term.
the Institutional life business), demonstrating very strong growth,
and well ahead of our annualised target growth of 5% over the
Within this, Quilter NCCF was also strong, increasing 91% to
medium term.
£6.3 billion (2016: £3.3 billion). Excluding the Heritage assets,
Quilter NCCF was £7.6 billion and, on this basis, was 9% of
Within this, Quilter NCCF was also strong, increasing 91% to
opening AuMA.
£6.3 billion (2016: £3.3 billion). Excluding the Heritage assets,
Quilter NCCF was £7.6 billion and, on this basis, was 9% of
The Advice and Wealth Management segment contributed total
opening AuMA.
NCCF before intra-group eliminations of £4.4 billion (2016: £1.6
billion). Our Multi-Asset business, which is a core part of our
The Advice and Wealth Management segment contributed total
ongoing proposition and wealth management strategy, received
NCCF before intra-group eliminations of £4.4 billion (2016: £1.6
£3.3 billion (2016: £0.8 billion) of these net flows in 2017 driven
billion). Our Multi-Asset business, which is a core part of our
by robust flows into the Cirilium and WealthSelect fund ranges.
ongoing proposition and wealth management strategy, received
£3.3 billion (2016: £0.8 billion) of these net flows in 2017 driven
NCCF for the Wealth Platforms segment of £4.3 billion was up 95%
by robust flows into the Cirilium and WealthSelect fund ranges.
from 2016 (£2.2 billion). UK Platform net flows were £4.5 billion,
up 61% on 2016 due to strong flows into pension propositions as
NCCF for the Wealth Platforms segment of £4.3 billion was up 95%
customers continue to consolidate existing pensions. As a result,
from 2016 (£2.2 billion). UK Platform net flows were £4.5 billion,
sales into the pension propositions accounted for 61% of total UK
up 61% on 2016 due to strong flows into pension propositions as
Platform sales. Transfers by customers from their defined benefit
customers continue to consolidate existing pensions. As a result,
pensions into defined contribution schemes accounted for gross
sales into the pension propositions accounted for 61% of total UK
sales of £1.8 billion in 2017, representing 20% of gross platform
Platform sales. Transfers by customers from their defined benefit
sales and 6% of total gross sales. Net Heritage outflows were
pensions into defined contribution schemes accounted for gross
primarily due to expected Institutional business outflows. International
sales of £1.8 billion in 2017, representing 20% of gross platform
flows more than doubled to £1.4 billion with strong net flows from
sales and 6% of total gross sales. Net Heritage outflows were
Latin America, the Middle East, UK and Europe. In the International
primarily due to expected Institutional business outflows. International
business, we benefited from certain large single premium inflows
flows more than doubled to £1.4 billion with strong net flows from
which, due to their size, have been made at a discount to our usual
Latin America, the Middle East, UK and Europe. In the International
charging structures.
business, we benefited from certain large single premium inflows
which, due to their size, have been made at a discount to our usual
charging structures.
Old Mutual plc
Annual Report and Accounts 2017
In total, Quilter integrated flows grew 167% from £1.8 billion in 2016
to £4.8 billion in 2017 (£5.2 billion excluding Heritage outflows).
The restricted channel of Intrinsic accounted for £1.2 billion (27%)
of UK Platform net inflows in 2017 (2016: £0.9 billion; 32%) and
£2.5 billion of net flows into OMGI’s Multi-Asset solutions business
in 2017, principally into the Cirilium fund ranges. Integrated net
inflows from Intrinsic into Quilter Cheviot amounted to £0.2 billion,
over half of which was through OMWPCA.
Assets under management/administration
(AuMA)
Old Mutual Wealth AuMA was £138.5 billion, up 20% from the end
of 2016 (31 December 2016: £115.3 billion excluding our divested
Italian business (£6.2 billion) and South African branches (£2.0
billion) which have been transferred to OMEM). Of the 20%
increase in AuMA, 10% (£11.0 billion) is due to positive market
performance, 9% (£10.9 billion) resulted from positive NCCF, and
1% (£1.3 billion) came from the acquisition of Caerus and Attivo.
Quilter AuMA, excluding Single Strategy, was £114.4 billion,
up 16% from £98.2 billion as at 31 December 2016, also driven
by positive market performance and strong NCCF.
IFRS post-tax profit
£m
Adjusted operating profit before tax
Goodwill and intangible charges
Profit on disposals
Short-term fluctuations
in investment return
Managed Separation and
business standalone costs
Platform transformation costs
Voluntary customer remediation
Total adjusting items
Income tax attributable to
policyholder returns
IFRS profit before tax
Tax on adjusted operating profit
Tax on adjusting items
Income tax attributable to
policyholder returns
IFRS profit/(loss) attributable
to equity holders after tax
2017
363
(103)
24
2016
260
(140)
−
(2)
1
(32)
(74)
(69)
(256)
66
173
(44)
36
−
(102)
−
(241)
94
113
(47)
24
(66)
(94)
99
(4)
Old Mutual Wealth‘s IFRS post-tax profit was £99 million for 2017,
compared to a loss of £4 million in 2016. This improvement was
driven by the higher adjusted operating profit, principally resulting
from the exceptional net performance fees in Single Strategy.
Key reconciling items between the IFRS profit and pre-tax
Adjusted Operating Profit (AOP) were UK Platform transformation
costs of £74 million (2016: £102 million), one-off costs in 2017
relating to Managed Separation of £32 million (in 2016, these
one-off costs of £7 million were included within AOP), costs
associated with voluntary customer remediation in certain legacy
products described below, the combined effects of intangibles
amortisation and the impact of acquisition accounting totalling
£103 million (2016: £140 million), and year-on-year movements
in policyholder tax.
On 3 March 2016, the UK Financial Conduct Authority (‘FCA’)
issued a report detailing the findings of its industry-wide thematic
review on the fair treatment of long-standing customers invested in
closed-book products sold by the life insurance sector (TR 16/2)
(‘Thematic Review’). As part of our ongoing work to promote fair
customer outcomes, product reviews consistent with the
recommendations from the FCA’s thematic feedback and the
FCA’s guidance ‘FG16/8 Fair Treatment of long-standing
customers in the life insurance sector’ have been conducted.
Following these reviews, it has been decided to commence
voluntary remediation to customers in certain legacy products
within the Heritage book. As part of this, we have decided to cap
early encashment charges at 5% for pension customers under 55
going forward, to refund all early encashment charges over 5%
on pensions products applied since 1 January 2009 and to refund
certain paid-up charges incurred since 1 January 2009.
A provision of £69 million has been made within our 2017 results
for the aggregate of these remediation costs, and this has been
reported outside of Adjusted Operating Profit, firstly because of the
significant and historical nature of the cost, and secondly, because
it does not reflect the underlying performance of Old Mutual Wealth
during 2017.
Also on 3 March 2016, the FCA announced that it was initiating an
investigation into a number of firms, including Old Mutual Wealth
Life Assurance Limited (OMWLA), a subsidiary of Old Mutual
Wealth reported within Heritage, in relation to potential breaches
of the FCA’s standards relevant to the matters covered by the
Thematic Review. We continue to cooperate and work openly
with the FCA in connection with their investigation following the
Thematic Review. No provision has been made for any potential
fine that may be levied by the FCA.
Adjusted Operating Profit (‘AOP’) –
Reconciliation to result on a standalone basis
AOP (£m)
Reported AOP
Corporate activity1
Reversal of smoothing
shareholder investment returns
Managed Separation and
standalone costs (one-off)
Deduction to exclude Single
Strategy business
Other
Operating profit pre-tax
on a standalone basis
Heritage fee restructure
Other
Normalised operating
profit pre-tax
(on a standalone basis)
2017
363
−
(2)
−
(152)
−
209
−
−
2016 % change
260
40%
(35)
4
7
(60)
1
177
27
4
18%
209
208
1 Corporate activity includes Old Mutual Wealth Italy (sold in January 2017) and South
Africa branches (transferred to Old Mutual Emerging Markets), consistent with the
presentation shown in the Capital Markets Showcase in November 2017.
18
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Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Wealth review
continued
Old Mutual Wealth review
continued
Reported adjusted operating profit
Reported Old Mutual Wealth AOP of £363 million for 2017 was
40% higher than prior year (2016: £260 million), and includes net
Reported adjusted operating profit
performance fees of £101 million in 2017 (2016: £26 million).
Reported Old Mutual Wealth AOP of £363 million for 2017 was
40% higher than prior year (2016: £260 million), and includes net
Pre-tax AOP for the Single Strategy business increased to
performance fees of £101 million in 2017 (2016: £26 million).
£152 million, up 153% from prior year of £60 million, driven by
the unprecedented level of net performance fees of £101 million
Pre-tax AOP for the Single Strategy business increased to
(2016: £26 million), of which £84 million was generated in the six
£152 million, up 153% from prior year of £60 million, driven by
months to December 2017. The net performance fees for 2017
the unprecedented level of net performance fees of £101 million
are substantially ahead of the previous year and are considered
(2016: £26 million), of which £84 million was generated in the six
to be at an unusually high level reflecting exceptional performance
months to December 2017. The net performance fees for 2017
from a narrow range of funds in favourable market conditions.
are substantially ahead of the previous year and are considered
As announced on 19 December 2017, under the terms of the
to be at an unusually high level reflecting exceptional performance
transaction agreement, Old Mutual Wealth will not benefit from
from a narrow range of funds in favourable market conditions.
performance fees which may be earned by Single Strategy in 2018.
As announced on 19 December 2017, under the terms of the
transaction agreement, Old Mutual Wealth will not benefit from
Operating profit pre-tax on a standalone basis
performance fees which may be earned by Single Strategy in 2018.
Operating profit pre-tax on a standalone basis is intended to reflect
the perimeter of the business as it will be after listing, and after the
Operating profit pre-tax on a standalone basis
completion of the sale of Single Strategy, and therefore the results
Operating profit pre-tax on a standalone basis is intended to reflect
of Single Strategy have been removed from both 2017 and 2016.
the perimeter of the business as it will be after listing, and after the
In addition, the results of Old Mutual Wealth Italy and the South
completion of the sale of Single Strategy, and therefore the results
African business have been removed from the comparative period.
of Single Strategy have been removed from both 2017 and 2016.
On this basis, the operating profit pre-tax for 2017 was up 18% to
In addition, the results of Old Mutual Wealth Italy and the South
£209 million (2016: £177 million).
African business have been removed from the comparative period.
On this basis, the operating profit pre-tax for 2017 was up 18% to
£209 million (2016: £177 million).
£m
Advice and Wealth Management
Wealth Platforms
£m
Head Office
Advice and Wealth Management
Operating profit on
Wealth Platforms
a standalone basis
Head Office
Heritage fee restructure
Operating profit on
Other
a standalone basis
Normalised
Heritage fee restructure
operating profit
Other
1 Based on normalisation adjustments being allocated to segments
Normalised
2 As presented at Capital Markets Showcase in November 2017.
2016
restated1
59
2016
166
restated1
(17)
59
166
208
(17)
2017
82
158
2017
(31)
82
158
209
(31)
−
−
209
−
209
−
20162
55
139
20162
(17)
55
139
177
(17)
27
4
177
27
208
4
208
208
209
208
208
operating profit
1 Based on normalisation adjustments being allocated to segments
2 As presented at Capital Markets Showcase in November 2017.
Normalised operating profit
Normalised profit adjusts the comparative period ‘operating profit
on a standalone basis’ to eliminate the impact of the changes to
Normalised operating profit
Heritage fees in 2016, and other normalisation adjustments as
Normalised profit adjusts the comparative period ‘operating profit
presented at the Capital Markets Showcase. No adjustments have
on a standalone basis’ to eliminate the impact of the changes to
been made in 2017. This form of presentation is consistent with
Heritage fees in 2016, and other normalisation adjustments as
the analysis presented during the Company’s Capital Markets
presented at the Capital Markets Showcase. No adjustments have
Showcase held in November 2017.
been made in 2017. This form of presentation is consistent with
the analysis presented during the Company’s Capital Markets
The 2017 normalised operating profit of £209 million compared
Showcase held in November 2017.
to prior year (2016: £208 million) is particularly pleasing given that,
in recent periods, profits have been invested to grow distribution
The 2017 normalised operating profit of £209 million compared
and to prepare the business to operate on a standalone basis.
to prior year (2016: £208 million) is particularly pleasing given that,
The consistent profit pattern is evidence that the business model
in recent periods, profits have been invested to grow distribution
is proven and that the business has reached scale ahead of its
and to prepare the business to operate on a standalone basis.
planned listing.
The consistent profit pattern is evidence that the business model
is proven and that the business has reached scale ahead of its
Pre-tax normalised operating profit for the Advice and Wealth
planned listing.
Management segment increased to £82 million, up 39% from prior
year of £59 million. This was driven by significantly increased
Pre-tax normalised operating profit for the Advice and Wealth
contribution from the Multi-Asset business as a result of increasing
Management segment increased to £82 million, up 39% from prior
revenues, driven by strong flows generated by other business
year of £59 million. This was driven by significantly increased
areas and good investment performance.
contribution from the Multi-Asset business as a result of increasing
revenues, driven by strong flows generated by other business
Pre-tax normalised operating profit for the Wealth Platforms
areas and good investment performance.
segment decreased to £158 million, down 5% from prior year of
£166 million. In 2016, the restated profit of £166 million included
Pre-tax normalised operating profit for the Wealth Platforms
the adjustment to exclude the Heritage fee restructure charge
segment decreased to £158 million, down 5% from prior year of
of £27 million which impacted the segment.
£166 million. In 2016, the restated profit of £166 million included
the adjustment to exclude the Heritage fee restructure charge
Revenue and revenue margin
of £27 million which impacted the segment.
Old Mutual Wealth’s reported revenues increased by 21% to
£1.0 billion due to higher average AuMA, driven by positive
Revenue and revenue margin
market performance, strong NCCF and net performance fees.
Old Mutual Wealth’s reported revenues increased by 21% to
On the same basis, the revenue margin decreased by 4bps during
£1.0 billion due to higher average AuMA, driven by positive
the year from 64bps to 60bps.
market performance, strong NCCF and net performance fees.
On the same basis, the revenue margin decreased by 4bps during
On a standalone basis, Quilter revenues increased by 13% to
the year from 64bps to 60bps.
£728 million comprised of net management fee revenue of
£591 million and other revenues of £137 million.
On a standalone basis, Quilter revenues increased by 13% to
£728 million comprised of net management fee revenue of
£m
£591 million and other revenues of £137 million.
Net management fee
Other revenue
£m
Revenue on a
Net management fee
standalone basis
Other revenue
Revenue on a
The net management fee revenue principally comprises fund-
based revenues including fixed fees. Other revenues include
advice fees generated in Intrinsic and income generated within
The net management fee revenue principally comprises fund-
the protection business in Heritage. The revenue margin for the
based revenues including fixed fees. Other revenues include
standalone Quilter business reduced from 59bps in 2016 to 56bps
advice fees generated in Intrinsic and income generated within
in 2017.
the protection business in Heritage. The revenue margin for the
standalone Quilter business reduced from 59bps in 2016 to 56bps
in 2017.
2017
591
137
2017
591
728
137
2016
524
122
2016
524
646
122
Variance
13%
12%
Variance
13%
13%
12%
standalone basis
13%
728
646
52
20
20
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Reported adjusted operating profit
Normalised operating profit
Reported Old Mutual Wealth AOP of £363 million for 2017 was
Normalised profit adjusts the comparative period ‘operating profit
Old Mutual Wealth review
continued
Old Mutual Wealth review
continued
40% higher than prior year (2016: £260 million), and includes net
Reported adjusted operating profit
performance fees of £101 million in 2017 (2016: £26 million).
Reported Old Mutual Wealth AOP of £363 million for 2017 was
40% higher than prior year (2016: £260 million), and includes net
Pre-tax AOP for the Single Strategy business increased to
performance fees of £101 million in 2017 (2016: £26 million).
£152 million, up 153% from prior year of £60 million, driven by
the unprecedented level of net performance fees of £101 million
Pre-tax AOP for the Single Strategy business increased to
(2016: £26 million), of which £84 million was generated in the six
£152 million, up 153% from prior year of £60 million, driven by
months to December 2017. The net performance fees for 2017
the unprecedented level of net performance fees of £101 million
are substantially ahead of the previous year and are considered
(2016: £26 million), of which £84 million was generated in the six
to be at an unusually high level reflecting exceptional performance
months to December 2017. The net performance fees for 2017
from a narrow range of funds in favourable market conditions.
are substantially ahead of the previous year and are considered
As announced on 19 December 2017, under the terms of the
to be at an unusually high level reflecting exceptional performance
transaction agreement, Old Mutual Wealth will not benefit from
from a narrow range of funds in favourable market conditions.
performance fees which may be earned by Single Strategy in 2018.
As announced on 19 December 2017, under the terms of the
transaction agreement, Old Mutual Wealth will not benefit from
Operating profit pre-tax on a standalone basis
performance fees which may be earned by Single Strategy in 2018.
Operating profit pre-tax on a standalone basis is intended to reflect
the perimeter of the business as it will be after listing, and after the
Operating profit pre-tax on a standalone basis
completion of the sale of Single Strategy, and therefore the results
Operating profit pre-tax on a standalone basis is intended to reflect
of Single Strategy have been removed from both 2017 and 2016.
the perimeter of the business as it will be after listing, and after the
In addition, the results of Old Mutual Wealth Italy and the South
completion of the sale of Single Strategy, and therefore the results
African business have been removed from the comparative period.
of Single Strategy have been removed from both 2017 and 2016.
On this basis, the operating profit pre-tax for 2017 was up 18% to
In addition, the results of Old Mutual Wealth Italy and the South
£209 million (2016: £177 million).
African business have been removed from the comparative period.
On this basis, the operating profit pre-tax for 2017 was up 18% to
£209 million (2016: £177 million).
£m
Advice and Wealth Management
Advice and Wealth Management
Wealth Platforms
£m
Head Office
Operating profit on
Wealth Platforms
a standalone basis
Head Office
Heritage fee restructure
Operating profit on
Other
a standalone basis
Normalised
Heritage fee restructure
operating profit
Other
2016
restated1
59
2016
166
restated1
(17)
59
166
208
(17)
208
208
2017
82
158
2017
(31)
82
158
209
(31)
−
−
209
209
−
−
20162
55
139
20162
(17)
55
139
177
(17)
27
4
177
27
208
4
1 Based on normalisation adjustments being allocated to segments
Normalised
2 As presented at Capital Markets Showcase in November 2017.
operating profit
209
208
208
1 Based on normalisation adjustments being allocated to segments
2 As presented at Capital Markets Showcase in November 2017.
on a standalone basis’ to eliminate the impact of the changes to
Normalised operating profit
Heritage fees in 2016, and other normalisation adjustments as
Normalised profit adjusts the comparative period ‘operating profit
presented at the Capital Markets Showcase. No adjustments have
on a standalone basis’ to eliminate the impact of the changes to
been made in 2017. This form of presentation is consistent with
Heritage fees in 2016, and other normalisation adjustments as
the analysis presented during the Company’s Capital Markets
presented at the Capital Markets Showcase. No adjustments have
Showcase held in November 2017.
been made in 2017. This form of presentation is consistent with
the analysis presented during the Company’s Capital Markets
The 2017 normalised operating profit of £209 million compared
Showcase held in November 2017.
to prior year (2016: £208 million) is particularly pleasing given that,
in recent periods, profits have been invested to grow distribution
The 2017 normalised operating profit of £209 million compared
and to prepare the business to operate on a standalone basis.
to prior year (2016: £208 million) is particularly pleasing given that,
The consistent profit pattern is evidence that the business model
in recent periods, profits have been invested to grow distribution
is proven and that the business has reached scale ahead of its
and to prepare the business to operate on a standalone basis.
planned listing.
The consistent profit pattern is evidence that the business model
is proven and that the business has reached scale ahead of its
Pre-tax normalised operating profit for the Advice and Wealth
planned listing.
Management segment increased to £82 million, up 39% from prior
year of £59 million. This was driven by significantly increased
Pre-tax normalised operating profit for the Advice and Wealth
contribution from the Multi-Asset business as a result of increasing
Management segment increased to £82 million, up 39% from prior
revenues, driven by strong flows generated by other business
year of £59 million. This was driven by significantly increased
areas and good investment performance.
contribution from the Multi-Asset business as a result of increasing
revenues, driven by strong flows generated by other business
Pre-tax normalised operating profit for the Wealth Platforms
areas and good investment performance.
segment decreased to £158 million, down 5% from prior year of
£166 million. In 2016, the restated profit of £166 million included
Pre-tax normalised operating profit for the Wealth Platforms
the adjustment to exclude the Heritage fee restructure charge
segment decreased to £158 million, down 5% from prior year of
of £27 million which impacted the segment.
£166 million. In 2016, the restated profit of £166 million included
the adjustment to exclude the Heritage fee restructure charge
Revenue and revenue margin
of £27 million which impacted the segment.
Old Mutual Wealth’s reported revenues increased by 21% to
£1.0 billion due to higher average AuMA, driven by positive
Revenue and revenue margin
market performance, strong NCCF and net performance fees.
Old Mutual Wealth’s reported revenues increased by 21% to
On the same basis, the revenue margin decreased by 4bps during
£1.0 billion due to higher average AuMA, driven by positive
the year from 64bps to 60bps.
market performance, strong NCCF and net performance fees.
On the same basis, the revenue margin decreased by 4bps during
On a standalone basis, Quilter revenues increased by 13% to
the year from 64bps to 60bps.
£728 million comprised of net management fee revenue of
£591 million and other revenues of £137 million.
On a standalone basis, Quilter revenues increased by 13% to
£728 million comprised of net management fee revenue of
£m
£591 million and other revenues of £137 million.
Net management fee
591
2017
137
2017
591
728
137
2016
524
122
2016
524
646
122
Variance
Variance
13%
12%
13%
13%
12%
Other revenue
£m
Revenue on a
Net management fee
standalone basis
Other revenue
Revenue on a
The net management fee revenue principally comprises fund-
based revenues including fixed fees. Other revenues include
standalone basis
646
728
13%
advice fees generated in Intrinsic and income generated within
The net management fee revenue principally comprises fund-
the protection business in Heritage. The revenue margin for the
based revenues including fixed fees. Other revenues include
standalone Quilter business reduced from 59bps in 2016 to 56bps
advice fees generated in Intrinsic and income generated within
the protection business in Heritage. The revenue margin for the
in 2017.
standalone Quilter business reduced from 59bps in 2016 to 56bps
in 2017.
We currently expect one-off costs in 2018 of c.£36 million in respect
of the completion of the Managed Separation from Old Mutual plc.
These comprise a mixture of standalone, advisor and other
transaction costs, and will be charged outside of operating profit
to reflect their one-off nature. Of these, c.£12 million are expected
to be in respect of the rebrand of the business from Old Mutual
Wealth to Quilter.
Operating margin
The Old Mutual Wealth operating margin was higher than prior year
at 36%, driven by higher net performance fees more than offsetting
the impact of increased expenses. Including Single Strategy, but
excluding net performance fees, the operating margin is
unchanged at 29%.
On a standalone basis, the Quilter operating margin declined to
29% compared to 32% in 2016 principally as a result of the
increase in operational costs and investment in business initiatives
ahead of listing.
The increasing proportion of revenues from advice fees, which are
largely matched by costs of advisers and investment in the advice
model itself, has contributed to the reduction in operating margin.
UK Platform Transformation
The contracts with IFDS related to the UK Platform Transformation
came to an end by mutual agreement effective as of 2 May 2017.
At the same time, we announced that we had contracted with
FNZ to deliver our UK Platform Transformation Programme.
We continue to plan for a soft launch of the enhanced customer
and adviser proposition supplied by FNZ by late 2018 or early
2019 with migration of existing advisers and customers to follow
swiftly thereafter.
Of the estimated UK Platform Transformation Programme costs
of £120-160 million announced in May 2017, £21 million had been
incurred by 31 December 2017. We currently anticipate spend of
c.£75 million in 2018 with the balance arising in 2019. The project
remains on time and within budget and excellent progress has
been made with all key deliverables to date being within our
planned timelines.
Expenses
Old Mutual Wealth’s reported expenses increased by 13% to
£638 million. Single Strategy expenses are £119m in 2017, up
from £95 million in 2016 driven by an increase in variable incentives
in line with performance, increased headcount and regulatory
compliance costs. Old Mutual Wealth Italy and South Africa
branches together accounted for £23 million of costs in 2016
(2017: nil). Consistent with the treatment in prior periods, bonuses
on gross performance fees are deducted from those performance
fees which are reported, on a net basis, within revenue.
Quilter expenses on a standalone basis increased by 18% to
£519 million.
£m
Underlying administration
expenses
Variable incentives
Investment in
business initiatives
Standalone costs (recurring)
Expenses on a
standalone basis
2017
2016
Variance
402
78
23
16
363
64
11
−
519
438
39
14
12
16
81
The main components of the increase in Quilter expenses on
a standalone basis are:
The increase in underlying administration expenses of £39
million reflects a focussed increase in technology spend (£13
million) linked to improving the resiliency of our IT infrastructure;
changes in regulation including compliance with GDPR, MIFID II
requirements and FSCS costs (£10 million); adverse year-on-
year movements in provisions (£6 million); and other organic and
inflationary costs (£10 million).
Variable incentives in 2017 amounted to £78 million, an increase
of £14 million on 2016 in line with performance. This reflects
higher levels of funds under management in the multi-asset
business and Quilter Cheviot and higher senior headcount due to
the strengthening of senior management ahead of listing.
Investment in new business initiatives principally reflects the
costs of expanding Old Mutual Wealth Private Client Advisers
and the inclusion of Caerus Capital Group, the acquisition of
which completed on 1 June 2017.
Managed Separation and standalone costs of £16 million include
£9 million to reflect the strengthening of the business and other
recurring standalone costs. 2017 was a transitional year for the
business, and the incremental recurring costs of £16 million for
2017 do not yet reflect a full-year run-rate of such costs.
Consistent with previous disclosures, separation is estimated to
increase the standalone cost base by £25-30 million per annum
compared to 2016, and therefore additional recurring costs
beyond the £16 million incurred in 2017, are expected to be
incurred in 2018. In line with information provided previously, this
increase excludes the impact of the costs for the proposed new
long-term incentive plan, and future debt financing costs. Details
of future debt financing costs are set out within our cash and
capital disclosures.
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Wealth review
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Old Mutual Wealth review
continued
Delivering good customer outcomes
During 2017, we established a dedicated Retail Customer
Solutions function to focus specifically on those ‘end-to-end’
Delivering good customer outcomes
customers whom we serve through our model of financial advice,
During 2017, we established a dedicated Retail Customer
investment solutions and platform services. The objective of this
Solutions function to focus specifically on those ‘end-to-end’
team is to further improve customer orientation in our proposition.
customers whom we serve through our model of financial advice,
In addition, the team will actively analyse industry trends to enable
investment solutions and platform services. The objective of this
us to create stronger integrated propositions.
team is to further improve customer orientation in our proposition.
In addition, the team will actively analyse industry trends to enable
Regulatory developments
us to create stronger integrated propositions.
There are a number of studies and thematic reviews currently
underway by the UK regulators. These include the FCA’s Asset
Regulatory developments
Management Review, the findings of which were published on
There are a number of studies and thematic reviews currently
28 June 2017, and the Investment Platforms Market Study, the
underway by the UK regulators. These include the FCA’s Asset
terms of reference for which were announced on 17 July 2017 and
Management Review, the findings of which were published on
more recently, in February 2018, the Discussion Paper considering
28 June 2017, and the Investment Platforms Market Study, the
“Effective competition in non-workplace pensions”. The FCA
terms of reference for which were announced on 17 July 2017 and
also published its “Approach to Customers” in November 2017,
more recently, in February 2018, the Discussion Paper considering
informed by the Financial Lives Survey, the results of which were
“Effective competition in non-workplace pensions”. The FCA
published last October. We are very supportive of the FCA’s work
also published its “Approach to Customers” in November 2017,
in these important areas, and believe the outcomes of these will
informed by the Financial Lives Survey, the results of which were
serve to increase the confidence and credibility of the wealth
published last October. We are very supportive of the FCA’s work
management industry in this country, ensuring that it provides fair
in these important areas, and believe the outcomes of these will
outcomes for all customers, whatever stage in life they are at.
serve to increase the confidence and credibility of the wealth
management industry in this country, ensuring that it provides fair
Managing conflicts of interests
outcomes for all customers, whatever stage in life they are at.
We combine our knowledge and capabilities across the businesses
to gain an understanding of our clients and their needs. It is this
Managing conflicts of interests
knowledge that allows us to deliver products and solutions that
We combine our knowledge and capabilities across the businesses
meet those needs. Suitable investment solutions are central to
to gain an understanding of our clients and their needs. It is this
providing good customer outcomes. We aim to blend peer-leading
knowledge that allows us to deliver products and solutions that
capabilities across our business, but the decision about which
meet those needs. Suitable investment solutions are central to
investment solutions are right for each client remains with the
providing good customer outcomes. We aim to blend peer-leading
financial adviser, where client suitability decisions will always
capabilities across our business, but the decision about which
remain sacrosanct.
investment solutions are right for each client remains with the
financial adviser, where client suitability decisions will always
As part of managing potential conflicts of interest, each part of the
remain sacrosanct.
business has strong governance in place, with each business being
a separate regulated entity that seeks to deliver fair outcomes and
As part of managing potential conflicts of interest, each part of the
good value for its customers.
business has strong governance in place, with each business being
a separate regulated entity that seeks to deliver fair outcomes and
good value for its customers.
Return on equity (‘ROE’)
Strong operating performance across our business in 2017 has
increased reported ROE to 19% (31 December 2016: 13%).
Return on equity (‘ROE’)
Excluding Single Strategy, the ROE was 13%.
Strong operating performance across our business in 2017 has
increased reported ROE to 19% (31 December 2016: 13%).
At the time of the acquisition of Quilter Cheviot, it was announced
Excluding Single Strategy, the ROE was 13%.
that the transaction was expected to generate annual synergies of
£15 million by 2017. As at 31 December 2017, the total achieved
At the time of the acquisition of Quilter Cheviot, it was announced
synergies were £14 million. Beyond these synergies, the return on
that the transaction was expected to generate annual synergies of
our investment is reflected in Quilter Cheviot’s contribution to our
£15 million by 2017. As at 31 December 2017, the total achieved
overall wealth management proposition and in the growth of assets
synergies were £14 million. Beyond these synergies, the return on
under management from £17.4 billion at 28 February 2015 to
our investment is reflected in Quilter Cheviot’s contribution to our
£23.6 billion at 31 December 2017. As a result, the overall return
overall wealth management proposition and in the growth of assets
is considered to be in excess of the cost of capital.
under management from £17.4 billion at 28 February 2015 to
£23.6 billion at 31 December 2017. As a result, the overall return
Cash and capital
is considered to be in excess of the cost of capital.
In 2017, Old Mutual Wealth generated free surplus of £293 million
(2016: £179 million), representing a conversion rate of 92% of AOP
Cash and capital
post-tax (2016: 84%). The free surplus generated was used to fund
In 2017, Old Mutual Wealth generated free surplus of £293 million
the Platform Transformation Programme, the costs associated with
(2016: £179 million), representing a conversion rate of 92% of AOP
the Managed Separation, and the investment in new business
post-tax (2016: 84%). The free surplus generated was used to fund
initiatives including the expansion of Old Mutual Wealth Private
the Platform Transformation Programme, the costs associated with
Client Advisers and the acquisition of Caerus Capital Group.
the Managed Separation, and the investment in new business
initiatives including the expansion of Old Mutual Wealth Private
At 31 December 2017, Old Mutual Wealth had an unaudited
Client Advisers and the acquisition of Caerus Capital Group.
155% Solvency II ratio after a 14% adjustment for the impact
of the European Insurance and Occupations Pensions Authority
At 31 December 2017, Old Mutual Wealth had an unaudited
(‘EIOPA’) update described below and adopted with effect
155% Solvency II ratio after a 14% adjustment for the impact
from 31 December 2017. The impact of the EIOPA update
of the European Insurance and Occupations Pensions Authority
is economically neutral and has no impact on the absolute
(‘EIOPA’) update described below and adopted with effect
Solvency II surplus but reduces the Solvency II ratio.
from 31 December 2017. The impact of the EIOPA update
is economically neutral and has no impact on the absolute
The EIOPA has recently published updated guidance regarding
Solvency II surplus but reduces the Solvency II ratio.
the treatment of the Individual Capital Guidance (‘ICG’)
requirements in investment firms subject to the internal capital
The EIOPA has recently published updated guidance regarding
adequacy assessment process (‘ICAAP’) regime. This guidance,
the treatment of the Individual Capital Guidance (‘ICG’)
which is non-mandatory, applies when calculating the Solvency II
requirements in investment firms subject to the internal capital
capital ratio on a consolidated basis for groups comprising both
adequacy assessment process (‘ICAAP’) regime. This guidance,
ICAAP and Solvency II regulated entities. According to the EIOPA
which is non-mandatory, applies when calculating the Solvency II
guidance, the solvency capital requirement (‘SCR’) under Solvency
capital ratio on a consolidated basis for groups comprising both
II for ICAAP regulated entities should include both the capital
ICAAP and Solvency II regulated entities. According to the EIOPA
requirement from the ICAAP and any requirement imposed by the
guidance, the solvency capital requirement (‘SCR’) under Solvency
regulator. The previous methodology used by Old Mutual Wealth
II for ICAAP regulated entities should include both the capital
included the Pillar 1 capital requirement for the ICAAP regulated
requirement from the ICAAP and any requirement imposed by the
entities within the Solvency II capital requirement, with the balance
regulator. The previous methodology used by Old Mutual Wealth
between this and the total capital requirement being excluded from
included the Pillar 1 capital requirement for the ICAAP regulated
both the Solvency II Own Funds and the SCR. On a pro forma
entities within the Solvency II capital requirement, with the balance
basis, the change in treatment would have increased both Own
between this and the total capital requirement being excluded from
Funds and the SCR by £0.2 billion as at 30 June 2017, which
both the Solvency II Own Funds and the SCR. On a pro forma
would have reduced the reported 177% ratio to 163% on a pro
basis, the change in treatment would have increased both Own
forma consolidated basis.
Funds and the SCR by £0.2 billion as at 30 June 2017, which
would have reduced the reported 177% ratio to 163% on a pro
forma consolidated basis.
54
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Old Mutual plc Annual Report and Accounts 2017 Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Wealth review
continued
Old Mutual Wealth review
continued
Delivering good customer outcomes
During 2017, we established a dedicated Retail Customer
Solutions function to focus specifically on those ‘end-to-end’
Delivering good customer outcomes
customers whom we serve through our model of financial advice,
During 2017, we established a dedicated Retail Customer
investment solutions and platform services. The objective of this
Solutions function to focus specifically on those ‘end-to-end’
team is to further improve customer orientation in our proposition.
customers whom we serve through our model of financial advice,
In addition, the team will actively analyse industry trends to enable
investment solutions and platform services. The objective of this
us to create stronger integrated propositions.
team is to further improve customer orientation in our proposition.
In addition, the team will actively analyse industry trends to enable
Regulatory developments
us to create stronger integrated propositions.
There are a number of studies and thematic reviews currently
underway by the UK regulators. These include the FCA’s Asset
Regulatory developments
Management Review, the findings of which were published on
There are a number of studies and thematic reviews currently
28 June 2017, and the Investment Platforms Market Study, the
underway by the UK regulators. These include the FCA’s Asset
terms of reference for which were announced on 17 July 2017 and
Management Review, the findings of which were published on
more recently, in February 2018, the Discussion Paper considering
28 June 2017, and the Investment Platforms Market Study, the
“Effective competition in non-workplace pensions”. The FCA
terms of reference for which were announced on 17 July 2017 and
also published its “Approach to Customers” in November 2017,
more recently, in February 2018, the Discussion Paper considering
informed by the Financial Lives Survey, the results of which were
“Effective competition in non-workplace pensions”. The FCA
published last October. We are very supportive of the FCA’s work
also published its “Approach to Customers” in November 2017,
in these important areas, and believe the outcomes of these will
informed by the Financial Lives Survey, the results of which were
serve to increase the confidence and credibility of the wealth
published last October. We are very supportive of the FCA’s work
management industry in this country, ensuring that it provides fair
in these important areas, and believe the outcomes of these will
outcomes for all customers, whatever stage in life they are at.
serve to increase the confidence and credibility of the wealth
management industry in this country, ensuring that it provides fair
Managing conflicts of interests
outcomes for all customers, whatever stage in life they are at.
We combine our knowledge and capabilities across the businesses
to gain an understanding of our clients and their needs. It is this
Managing conflicts of interests
knowledge that allows us to deliver products and solutions that
We combine our knowledge and capabilities across the businesses
meet those needs. Suitable investment solutions are central to
to gain an understanding of our clients and their needs. It is this
providing good customer outcomes. We aim to blend peer-leading
knowledge that allows us to deliver products and solutions that
capabilities across our business, but the decision about which
meet those needs. Suitable investment solutions are central to
investment solutions are right for each client remains with the
providing good customer outcomes. We aim to blend peer-leading
financial adviser, where client suitability decisions will always
capabilities across our business, but the decision about which
remain sacrosanct.
investment solutions are right for each client remains with the
remain sacrosanct.
financial adviser, where client suitability decisions will always
As part of managing potential conflicts of interest, each part of the
business has strong governance in place, with each business being
a separate regulated entity that seeks to deliver fair outcomes and
As part of managing potential conflicts of interest, each part of the
good value for its customers.
business has strong governance in place, with each business being
a separate regulated entity that seeks to deliver fair outcomes and
good value for its customers.
Return on equity (‘ROE’)
Strong operating performance across our business in 2017 has
increased reported ROE to 19% (31 December 2016: 13%).
Return on equity (‘ROE’)
Excluding Single Strategy, the ROE was 13%.
Strong operating performance across our business in 2017 has
increased reported ROE to 19% (31 December 2016: 13%).
At the time of the acquisition of Quilter Cheviot, it was announced
Excluding Single Strategy, the ROE was 13%.
that the transaction was expected to generate annual synergies of
£15 million by 2017. As at 31 December 2017, the total achieved
At the time of the acquisition of Quilter Cheviot, it was announced
synergies were £14 million. Beyond these synergies, the return on
that the transaction was expected to generate annual synergies of
our investment is reflected in Quilter Cheviot’s contribution to our
£15 million by 2017. As at 31 December 2017, the total achieved
overall wealth management proposition and in the growth of assets
synergies were £14 million. Beyond these synergies, the return on
under management from £17.4 billion at 28 February 2015 to
our investment is reflected in Quilter Cheviot’s contribution to our
£23.6 billion at 31 December 2017. As a result, the overall return
overall wealth management proposition and in the growth of assets
is considered to be in excess of the cost of capital.
under management from £17.4 billion at 28 February 2015 to
£23.6 billion at 31 December 2017. As a result, the overall return
Cash and capital
is considered to be in excess of the cost of capital.
In 2017, Old Mutual Wealth generated free surplus of £293 million
Cash and capital
(2016: £179 million), representing a conversion rate of 92% of AOP
post-tax (2016: 84%). The free surplus generated was used to fund
In 2017, Old Mutual Wealth generated free surplus of £293 million
the Platform Transformation Programme, the costs associated with
(2016: £179 million), representing a conversion rate of 92% of AOP
the Managed Separation, and the investment in new business
post-tax (2016: 84%). The free surplus generated was used to fund
initiatives including the expansion of Old Mutual Wealth Private
the Platform Transformation Programme, the costs associated with
Client Advisers and the acquisition of Caerus Capital Group.
the Managed Separation, and the investment in new business
initiatives including the expansion of Old Mutual Wealth Private
At 31 December 2017, Old Mutual Wealth had an unaudited
Client Advisers and the acquisition of Caerus Capital Group.
155% Solvency II ratio after a 14% adjustment for the impact
of the European Insurance and Occupations Pensions Authority
At 31 December 2017, Old Mutual Wealth had an unaudited
(‘EIOPA’) update described below and adopted with effect
155% Solvency II ratio after a 14% adjustment for the impact
from 31 December 2017. The impact of the EIOPA update
of the European Insurance and Occupations Pensions Authority
is economically neutral and has no impact on the absolute
(‘EIOPA’) update described below and adopted with effect
Solvency II surplus but reduces the Solvency II ratio.
from 31 December 2017. The impact of the EIOPA update
is economically neutral and has no impact on the absolute
The EIOPA has recently published updated guidance regarding
Solvency II surplus but reduces the Solvency II ratio.
the treatment of the Individual Capital Guidance (‘ICG’)
requirements in investment firms subject to the internal capital
The EIOPA has recently published updated guidance regarding
adequacy assessment process (‘ICAAP’) regime. This guidance,
the treatment of the Individual Capital Guidance (‘ICG’)
which is non-mandatory, applies when calculating the Solvency II
requirements in investment firms subject to the internal capital
capital ratio on a consolidated basis for groups comprising both
adequacy assessment process (‘ICAAP’) regime. This guidance,
ICAAP and Solvency II regulated entities. According to the EIOPA
which is non-mandatory, applies when calculating the Solvency II
guidance, the solvency capital requirement (‘SCR’) under Solvency
capital ratio on a consolidated basis for groups comprising both
II for ICAAP regulated entities should include both the capital
ICAAP and Solvency II regulated entities. According to the EIOPA
requirement from the ICAAP and any requirement imposed by the
guidance, the solvency capital requirement (‘SCR’) under Solvency
regulator. The previous methodology used by Old Mutual Wealth
II for ICAAP regulated entities should include both the capital
included the Pillar 1 capital requirement for the ICAAP regulated
requirement from the ICAAP and any requirement imposed by the
entities within the Solvency II capital requirement, with the balance
regulator. The previous methodology used by Old Mutual Wealth
between this and the total capital requirement being excluded from
included the Pillar 1 capital requirement for the ICAAP regulated
both the Solvency II Own Funds and the SCR. On a pro forma
entities within the Solvency II capital requirement, with the balance
basis, the change in treatment would have increased both Own
between this and the total capital requirement being excluded from
Funds and the SCR by £0.2 billion as at 30 June 2017, which
both the Solvency II Own Funds and the SCR. On a pro forma
would have reduced the reported 177% ratio to 163% on a pro
basis, the change in treatment would have increased both Own
forma consolidated basis.
Funds and the SCR by £0.2 billion as at 30 June 2017, which
would have reduced the reported 177% ratio to 163% on a pro
forma consolidated basis.
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual Wealth Management Limited has been given an
issuer’s default rating from Fitch of A-. The financial strength
of Old Mutual Wealth Life Assurance Limited (our Heritage life
assurance business) is rated A by Fitch.
Managed Separation and Board developments
We made good progress with our programme of activity as we
work towards independence as part of the Managed Separation
from Old Mutual plc. By the end of 2017, all functions had materially
delivered all changes necessary to be standalone.
To ensure our organisation is fit for purpose as a listed, standalone
entity, we have continued to reshape and strengthen our executive
management team and our Board. During 2017, Tim Tookey was
appointed as Chief Financial Officer and Mark Satchel assumed
the role of Corporate Finance Director. Paul Hucknall was
appointed as HR Director and joined the executive committee
on 1 January 2018.
Rosie Harris, George Reid and Jon Little joined the Old Mutual
Wealth Board as Independent Non-Executive Directors during
H1 2017. On joining, Rosie was appointed Chair of the Board Risk
Committee. George Reid has been appointed Chair of the Board
Audit Committee, and Moira Kilcoyne, who was appointed to the
Board at the end of 2016, has been appointed Chair of the Board
IT Committee. Old Mutual Wealth intends to comply with the UK
Corporate Governance Code and the arrangements to achieve
compliance are well advanced.
We have also strengthened the boards of our principal regulated
subsidiaries by increasing the level of independence on those
boards, including through additional representation from the
Non-Executive directors on the Old Mutual Wealth Board.
Funding and future capital structure
Quilter plans to maintain a strong solvency and liquidity position
through disciplined management of capital resources and risks.
The backing of a financially strong group is important given the
security and peace of mind that it affords customers and advisers.
Quilter will maintain a disciplined approach to capital, in order
to balance its current and anticipated liquidity, regulatory capital
and investment needs, with a view to returning excess capital to
shareholders as appropriate. As part of its disciplined approach
to capital, the Group has a prudent capital management and
liquidity policy.
On 28 February 2018, we entered into, and fully drew down,
a senior unsecured term loan of £300 million with a number of
relationship banks. This term loan will be repaid in full using
proceeds from the sale of Single Strategy following the completion
of that transaction. In addition, we have entered into a £125 million
revolving credit facility, which is currently undrawn and is expected
to remain undrawn during 2018.
Also on 28 February 2018, we issued a £200 million subordinated
debt security in the form of a 10-year Tier 2 bond with a one-time
issuer call option after five years to J.P. Morgan Securities plc,
paying a semi-annual coupon of 4.478%. Including the impact
of amortisation of bond set-up costs, the issuance of this security
will increase operating expenses in the Corporate Head Office
segment by approximately £11 million on an annual basis. The
debt security is currently undocumented and unlisted and has a
Fitch instrument rating of BBB-. We intend to finalise a prospectus
and obtain a listing for the bond on the regulated market of the
London Stock Exchange, with a view to a potential remarketing
and secondary placement of the security in due course.
The subordinated debt security, the new term loan and the
revolving credit facility have been issued to ensure that Quilter
has sufficient capital and liquidity to maintain strong capital ratios
and free cash balances to withstand severe but plausible stress
scenarios. These include, despite it being considered to be a
remote event, the sale of Single Strategy failing to complete.
Adjusting the 31 December 2017 Solvency II ratio of 155% for the
£200m subordinated debt security and the new term loan would
result in a pro forma Solvency II ratio of 171% at 31 December
2017 (before any impact of the sale of Single Strategy).
Whilst this pro forma ratio does not include the expected Solvency
II benefit arising on completion of the sale of Single Strategy, we
believe it includes sufficient free cash to complete all committed
strategic investments (including the UK Platform Transformation
Programme) and to allow for any further potential costs associated
with the FCA’s Thematic Review, including for any potential fine
which may be levied by the FCA, in respect of which no provision
has yet been made. The impact of this prudent policy is that Quilter
expects to maintain a solvency position in excess of its policy in the
near-term.
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Annual Report and Accounts 2017
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Annual Report and Accounts 2017
Old Mutual Wealth review
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Old Mutual Wealth review
continued
The Solvency II impact of the completion of the sale of Single
Strategy would have increased the pro forma 31 December 2017
solvency ratio by c. 40 percentage points before any potential
The Solvency II impact of the completion of the sale of Single
distribution of surplus proceeds to shareholders.
Strategy would have increased the pro forma 31 December 2017
solvency ratio by c. 40 percentage points before any potential
Subsequent to the year end, and as part of a series of internal
distribution of surplus proceeds to shareholders.
transactions, £566 million of intercompany indebtedness to other
companies within the Old Mutual plc group has been equitised,
Subsequent to the year end, and as part of a series of internal
with the effect of the intercompany indebtedness being cancelled
transactions, £566 million of intercompany indebtedness to other
and replaced with equity in the form of share capital and a merger
companies within the Old Mutual plc group has been equitised,
reserve. The remaining £200 million intercompany indebtedness
with the effect of the intercompany indebtedness being cancelled
was repaid in full from the new facilities referred to above and from
and replaced with equity in the form of share capital and a merger
existing cash resources on 28 February 2018. On the same date,
reserve. The remaining £200 million intercompany indebtedness
the £70 million revolving credit facility with Old Mutual plc
was repaid in full from the new facilities referred to above and from
was cancelled.
existing cash resources on 28 February 2018. On the same date,
the £70 million revolving credit facility with Old Mutual plc
Outlook for the Quilter business
was cancelled.
as a standalone business
Quilter has continued to trade in line with expectations since the
Outlook for the Quilter business
year end. Overall, we continue to remain confident in Quilter’s
as a standalone business
prospects and it is anticipated that the next trading update will be
Quilter has continued to trade in line with expectations since the
for the first quarter of 2018, which is expected to be published in
year end. Overall, we continue to remain confident in Quilter’s
April 2018.
prospects and it is anticipated that the next trading update will be
for the first quarter of 2018, which is expected to be published in
As a key step in the preparation of Quilter to be a separately listed
April 2018.
business, we will be publishing a Prospectus (the “Prospectus”) in
relation to our business. The Prospectus will include more detailed
As a key step in the preparation of Quilter to be a separately listed
information in relation to Quilter’s business, including its strategy
business, we will be publishing a Prospectus (the “Prospectus”) in
and outlook. It will also contain detailed risk factors and other key
relation to our business. The Prospectus will include more detailed
information relevant to our business.
information in relation to Quilter’s business, including its strategy
and outlook. It will also contain detailed risk factors and other key
This section summarises certain information on Quilter’s
information relevant to our business.
business, including certain forward looking information in relation
to operating performance expectations and targets which will be
This section summarises certain information on Quilter’s
set out in detail in the Prospectus, and these statements should
business, including certain forward looking information in relation
be read in conjunction with all the information in the Prospectus
to operating performance expectations and targets which will be
when it is published.
set out in detail in the Prospectus, and these statements should
be read in conjunction with all the information in the Prospectus
NCCF
when it is published.
We believe that the positive structural growth dynamics in the UK
wealth market and our leading market positions and full service,
NCCF
multi-channel model position Quilter for continued success. As a
We believe that the positive structural growth dynamics in the UK
result, we will target NCCF (excluding Heritage) of 5 per cent. of
wealth market and our leading market positions and full service,
opening AuMA per annum over the medium term. Should market
multi-channel model position Quilter for continued success. As a
conditions remain supportive, we expect Quilter to exceed this
result, we will target NCCF (excluding Heritage) of 5 per cent. of
target in 2018.
opening AuMA per annum over the medium term. Should market
conditions remain supportive, we expect Quilter to exceed this
target in 2018.
Revenue margin
Subject to delivering currently expected AuMA volumes and
business mix, we believe Quilter’s overall annual rate of revenue
Revenue margin
margin decline should slow in the near-term, and that the revenue
Subject to delivering currently expected AuMA volumes and
margin should become increasingly stable.
business mix, we believe Quilter’s overall annual rate of revenue
margin decline should slow in the near-term, and that the revenue
Operating margin
margin should become increasingly stable.
In the second half of 2018, management will review the Quilter
standalone cost base and operating model to identify long term
Operating margin
optimisation initiatives to improve overall business efficiency.
In the second half of 2018, management will review the Quilter
However, at this stage, the initiatives, potential efficiency savings
standalone cost base and operating model to identify long term
and restructuring costs to achieve this optimisation have not yet
optimisation initiatives to improve overall business efficiency.
been scoped.
However, at this stage, the initiatives, potential efficiency savings
and restructuring costs to achieve this optimisation have not yet
Our operating model is designed to capture operating leverage
been scoped.
from the growth in assets. We currently intend to continue to invest
in growing our business over the coming years, and in 2018 and
Our operating model is designed to capture operating leverage
2019 we will bear the full impact of a standalone cost base as a
from the growth in assets. We currently intend to continue to invest
listed company. In the near term, this is likely to lead to a small
in growing our business over the coming years, and in 2018 and
decrease in our operating margin, before interest costs, below
2019 we will bear the full impact of a standalone cost base as a
that reported in 2017. We expect the operating leverage benefits
listed company. In the near term, this is likely to lead to a small
will develop thereafter, and we are targeting a Quilter operating
decrease in our operating margin, before interest costs, below
margin, before interest costs, of 30 per cent for the year ending
that reported in 2017. We expect the operating leverage benefits
31 December 2020 before we implement any future optimisation
will develop thereafter, and we are targeting a Quilter operating
initiatives from management’s review.
margin, before interest costs, of 30 per cent for the year ending
31 December 2020 before we implement any future optimisation
Aside from normal operating expense movements as the business
initiatives from management’s review.
grows, this operating margin target incorporates the following
considerations:
Aside from normal operating expense movements as the business
grows, this operating margin target incorporates the following
the operating profit impact of potential selective investments
considerations:
additional staff costs in 2018 and later years arising from long
the operating profit impact of potential selective investments
term incentive plan (“LTIP”) awards under the new Quilter share
in advice distribution;
plans; and
in advice distribution;
additional staff costs in 2018 and later years arising from long
in line with previous statements, Quilter expects up to £30 million
term incentive plan (“LTIP”) awards under the new Quilter share
per annum of additional fixed costs above 2016 operating
plans; and
expense levels as a consequence of the Managed Separation
in line with previous statements, Quilter expects up to £30 million
and its need to operate on a fully standalone basis. Of the
per annum of additional fixed costs above 2016 operating
additional expenses, approximately £16 million on an annual
expense levels as a consequence of the Managed Separation
basis were reflected in 2017 year-end reported results, and
and its need to operate on a fully standalone basis. Of the
therefore up to an incremental approximately £14 million
additional expenses, approximately £16 million on an annual
of annual expenses will be incurred during 2018.
basis were reflected in 2017 year-end reported results, and
therefore up to an incremental approximately £14 million
of annual expenses will be incurred during 2018.
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Solvency II impact of sale of Single Strategy
Following the completion of the sale of the Single Strategy
business, we expect to report that Quilter’s net asset value
will increase by c.£360 million based on current consideration
expectations and before allowing for the costs of disposal.
In addition, we expect to record a restructuring charge of
c.£ 20 million in respect of the establishment of the standalone
multi-asset business.
Dividend policy
Our dividend policy will be to target a dividend pay-out range of
40 to 60 per cent of post-tax operating profit, with the split of interim
and final dividends to be approximately one-third and two-thirds
respectively. Any dividends will take into account Quilter’s
underlying cash generation, cash resources, capital position,
distributable reserves and market conditions at the time.
The first dividend payment which Quilter will make as a separately
listed company is expected to be the final dividend in respect of
the year ending 31 December 2018. Quilter currently expects this
dividend to be determined by a pay-out ratio at the lower end of the
target range and to reflect the expected interim / final dividend split.
Following the completion of the sale of Single Strategy, and outside
the above dividend policy, Quilter will also consider a distribution
from the surplus proceeds to its shareholders. In determining the
size of any potential return, a number of factors will be taken into
account, including: (i) the repayment in full of the senior unsecured
term loan, (ii) the costs associated with the sale of Single Strategy,
and (iii) the costs associated with the establishment of the
standalone Quilter Investors multi-asset business.
Old Mutual Wealth review
continued
Old Mutual Wealth review
continued
The Solvency II impact of the completion of the sale of Single
Strategy would have increased the pro forma 31 December 2017
solvency ratio by c. 40 percentage points before any potential
The Solvency II impact of the completion of the sale of Single
distribution of surplus proceeds to shareholders.
Strategy would have increased the pro forma 31 December 2017
solvency ratio by c. 40 percentage points before any potential
Subsequent to the year end, and as part of a series of internal
distribution of surplus proceeds to shareholders.
transactions, £566 million of intercompany indebtedness to other
companies within the Old Mutual plc group has been equitised,
Subsequent to the year end, and as part of a series of internal
with the effect of the intercompany indebtedness being cancelled
transactions, £566 million of intercompany indebtedness to other
and replaced with equity in the form of share capital and a merger
companies within the Old Mutual plc group has been equitised,
reserve. The remaining £200 million intercompany indebtedness
with the effect of the intercompany indebtedness being cancelled
was repaid in full from the new facilities referred to above and from
and replaced with equity in the form of share capital and a merger
existing cash resources on 28 February 2018. On the same date,
reserve. The remaining £200 million intercompany indebtedness
the £70 million revolving credit facility with Old Mutual plc
was repaid in full from the new facilities referred to above and from
was cancelled.
existing cash resources on 28 February 2018. On the same date,
the £70 million revolving credit facility with Old Mutual plc
Outlook for the Quilter business
was cancelled.
as a standalone business
Quilter has continued to trade in line with expectations since the
Outlook for the Quilter business
year end. Overall, we continue to remain confident in Quilter’s
as a standalone business
prospects and it is anticipated that the next trading update will be
Quilter has continued to trade in line with expectations since the
for the first quarter of 2018, which is expected to be published in
year end. Overall, we continue to remain confident in Quilter’s
prospects and it is anticipated that the next trading update will be
April 2018.
April 2018.
for the first quarter of 2018, which is expected to be published in
As a key step in the preparation of Quilter to be a separately listed
business, we will be publishing a Prospectus (the “Prospectus”) in
relation to our business. The Prospectus will include more detailed
As a key step in the preparation of Quilter to be a separately listed
information in relation to Quilter’s business, including its strategy
business, we will be publishing a Prospectus (the “Prospectus”) in
and outlook. It will also contain detailed risk factors and other key
relation to our business. The Prospectus will include more detailed
information relevant to our business.
information in relation to Quilter’s business, including its strategy
and outlook. It will also contain detailed risk factors and other key
This section summarises certain information on Quilter’s
information relevant to our business.
business, including certain forward looking information in relation
to operating performance expectations and targets which will be
This section summarises certain information on Quilter’s
set out in detail in the Prospectus, and these statements should
business, including certain forward looking information in relation
be read in conjunction with all the information in the Prospectus
to operating performance expectations and targets which will be
when it is published.
set out in detail in the Prospectus, and these statements should
be read in conjunction with all the information in the Prospectus
NCCF
when it is published.
NCCF
We believe that the positive structural growth dynamics in the UK
wealth market and our leading market positions and full service,
multi-channel model position Quilter for continued success. As a
We believe that the positive structural growth dynamics in the UK
result, we will target NCCF (excluding Heritage) of 5 per cent. of
wealth market and our leading market positions and full service,
opening AuMA per annum over the medium term. Should market
multi-channel model position Quilter for continued success. As a
conditions remain supportive, we expect Quilter to exceed this
result, we will target NCCF (excluding Heritage) of 5 per cent. of
opening AuMA per annum over the medium term. Should market
target in 2018.
conditions remain supportive, we expect Quilter to exceed this
target in 2018.
Revenue margin
Subject to delivering currently expected AuMA volumes and
business mix, we believe Quilter’s overall annual rate of revenue
Revenue margin
margin decline should slow in the near-term, and that the revenue
Subject to delivering currently expected AuMA volumes and
margin should become increasingly stable.
business mix, we believe Quilter’s overall annual rate of revenue
margin decline should slow in the near-term, and that the revenue
Operating margin
margin should become increasingly stable.
In the second half of 2018, management will review the Quilter
standalone cost base and operating model to identify long term
Operating margin
optimisation initiatives to improve overall business efficiency.
In the second half of 2018, management will review the Quilter
However, at this stage, the initiatives, potential efficiency savings
standalone cost base and operating model to identify long term
and restructuring costs to achieve this optimisation have not yet
optimisation initiatives to improve overall business efficiency.
However, at this stage, the initiatives, potential efficiency savings
been scoped.
and restructuring costs to achieve this optimisation have not yet
Our operating model is designed to capture operating leverage
been scoped.
from the growth in assets. We currently intend to continue to invest
in growing our business over the coming years, and in 2018 and
Our operating model is designed to capture operating leverage
2019 we will bear the full impact of a standalone cost base as a
from the growth in assets. We currently intend to continue to invest
listed company. In the near term, this is likely to lead to a small
in growing our business over the coming years, and in 2018 and
decrease in our operating margin, before interest costs, below
2019 we will bear the full impact of a standalone cost base as a
that reported in 2017. We expect the operating leverage benefits
listed company. In the near term, this is likely to lead to a small
will develop thereafter, and we are targeting a Quilter operating
decrease in our operating margin, before interest costs, below
margin, before interest costs, of 30 per cent for the year ending
that reported in 2017. We expect the operating leverage benefits
31 December 2020 before we implement any future optimisation
will develop thereafter, and we are targeting a Quilter operating
initiatives from management’s review.
margin, before interest costs, of 30 per cent for the year ending
31 December 2020 before we implement any future optimisation
Aside from normal operating expense movements as the business
initiatives from management’s review.
grows, this operating margin target incorporates the following
considerations:
Aside from normal operating expense movements as the business
grows, this operating margin target incorporates the following
the operating profit impact of potential selective investments
considerations:
in advice distribution;
additional staff costs in 2018 and later years arising from long
the operating profit impact of potential selective investments
term incentive plan (“LTIP”) awards under the new Quilter share
in advice distribution;
plans; and
plans; and
additional staff costs in 2018 and later years arising from long
in line with previous statements, Quilter expects up to £30 million
term incentive plan (“LTIP”) awards under the new Quilter share
per annum of additional fixed costs above 2016 operating
expense levels as a consequence of the Managed Separation
in line with previous statements, Quilter expects up to £30 million
and its need to operate on a fully standalone basis. Of the
per annum of additional fixed costs above 2016 operating
additional expenses, approximately £16 million on an annual
expense levels as a consequence of the Managed Separation
basis were reflected in 2017 year-end reported results, and
and its need to operate on a fully standalone basis. Of the
therefore up to an incremental approximately £14 million
additional expenses, approximately £16 million on an annual
of annual expenses will be incurred during 2018.
basis were reflected in 2017 year-end reported results, and
therefore up to an incremental approximately £14 million
of annual expenses will be incurred during 2018.
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Risks
Sue Kean
Sue Kean
Group Chief Risk Officer
Group Chief Risk Officer
Plc Head Office and the
businesses have made good
progress in planning and
executing key steps in readiness
for the Group’s separation.
Sue Kean
Group Chief Risk Officer
2017 was a critical year for the delivery of the plc strategy.
It marked a transition from planning and preparation to execution
and delivery of the managed separation. Plc Head Office and
the businesses have made good progress in preparing, planning
and executing key steps in readiness for the Group’s separation,
including completion of the sell-down of the OMAM business
and preparing three strong and appropriately capacitated and
capitalised businesses ready to stand alone in 2018. It also
completed a number of important corporate finance transactions,
including the disposal of OMAM and Kotak and further reduction
in plc external debt.
Once executed, managed separation will remove a number of key
risks inherent to the current structure of the Group. These include
currency translation risk, constraints on capital fungibility, and
the 1999 demutualisation agreement under which the current plc
costs and debt interest must be borne by the non-South African
businesses. The risks inherent to the Group structure increased
during 2017, as regulation evolved and the Group structure
became even more South Africa focused. These longer-term
strategic and structural risks are being mitigated to a certain extent
by the managed separation. In turn, separation introduces shorter-
term risks; but while significant, these are largely manageable,
and contingency plans are in place for any unexpected delays.
Under the active portfolio manager model introduced at the start
of the managed separation, the plc evaluates each of the Group’s
businesses as an asset. This model is now fully embedded, with
a significant amount of responsibility for meeting local capital and
liquidity requirements delegated to the respective business Boards.
The OMW and OML Boards and their respective governance
frameworks have been redefined and refreshed to ensure their
fitness to become listed companies.
The managed separation project governance framework has
continuously adapted to meet changing project needs. As might be
expected with a programme of this size, project plans are complex
with many interdependencies, timelines are tight and external
factors such as unexpected political and economic events can
exert additional pressures. Both financial and non-financial risks
to the managed separation are constantly monitored, ensuring
that we remain within the plc financial risk appetite metrics: central
liquidity resources, capital, and earnings volatility. We also continue
to monitor risk culture across the Group.
We review each managed separation activity in terms of balancing
value, cost, time and risk, relative to diverse stakeholder interests.
Extensive stress and scenario testing (including macroeconomic
and political risk) ensures that we have a full understanding of
the possible impacts of variances within the plan and available
management actions, and that the plc can remain within its
financial risk appetite limits.
We continue to focus on managed separation contingency
planning, to ensure that we anticipate and mitigate risks and deploy
appropriate responses in the event of unforeseen external issues
or project management slippage.
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Management of the working
environment and stress-related
risks has been a focus area for us.
We have made good progress in
determining and implementing
appropriate values for each new
standalone business.
We have devoted considerable work to ensuring the orderly wind-
down of the plc and transitioning activities and capabilities to the
businesses. The plc’s contingent liabilities and pre-existing risks
such as the plc employee pension scheme and internal reinsurance
programme are being addressed. To ensure an effective handover
to OML, processes have been decommissioned where possible
and data archived where necessary. The various asset disposals,
currency hedging activities and debt liability management exercises
during 2017 have substantially de-risked the residual plc balance
sheet. To further reduce downside cash flow risks from equity
markets, OM Bermuda updated its hedging strategy at the end
of October.
Within the businesses, the principal risks remain broadly consistent
with those described in the 2015 and 2016 Annual Reports.
However, there is a different emphasis on some risks. Execution
risk relating to the managed separation is elevated at plc Head
Office and the subsidiaries all have significant strategic execution
risks relating to major IT or business change initiatives as well
as the managed separation itself.
Macroeconomic risk in our principal markets continues to be a
focus for the Group, as it is for financial services firms generally.
In OMW the risks to capital are small but the risks to earnings are
very much dependent on market conditions, given OMW’s reliance
on asset-based fees. This contrasts with our African businesses,
particularly in South Africa, where macro conditions create risks
to earnings, liquidity and local capital in the lending, insurance
and asset management operations.
In 2017, South Africa suffered several sovereign downgrades
that increased economic pressures on the country, and there is a
significant risk that the country could be removed from international
government bond indices. Although the ANC leadership change
at the end of 2017 has been positively received by the markets,
political and policy uncertainty will continue in 2018 and potentially
until the April 2019 national elections. We undertake extensive
stress and scenario tests focusing on these economic and political
risks, and business plans have been designed to accommodate
this difficult macroeconomic position.
Finally, given the high level of organisation change, we are mindful
of culture and heightened people risk at plc Head Office and across
the businesses. Management of the working environment and
stress-related risks has been a focus area for us, using specialist
external resources where required. We have made good progress
in developing resource contingency plans at plc Head Office, and
in determining and implementing appropriate values for each new
standalone business.
Sue Kean
Group Chief Risk Officer
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Risks
continued
Risks
continued
Key risks to the managed separation strategy
Old Mutual plc’s key mission is executing the managed separation strategy. When this is complete, the Group will be separated, OMW
will become a separately listed entity and OMEM, Nedbank, OMB and the residual plc will be subsumed into OML, the newly-listed holding
Key risks to the managed separation strategy
company. Given the centrality of managed separation, the risks to its execution are inherently the Group’s top risks, and will remain so
Old Mutual plc’s key mission is executing the managed separation strategy. When this is complete, the Group will be separated, OMW
until managed separation is complete. Although the managed separation is designed to be capable of being executed in adverse market-
will become a separately listed entity and OMEM, Nedbank, OMB and the residual plc will be subsumed into OML, the newly-listed holding
situations, volatile markets combined with the complexities of the process could in extreme situations impact the timetable for and/or the
company. Given the centrality of managed separation, the risks to its execution are inherently the Group’s top risks, and will remain so
value realised from the OMW listing. Therefore the macroeconomic and political risks are included within the key business risk sections
until managed separation is complete. Although the managed separation is designed to be capable of being executed in adverse market-
(pp63-67) rather than below in the risks to execution of managed separation section.
situations, volatile markets combined with the complexities of the process could in extreme situations impact the timetable for and/or the
value realised from the OMW listing. Therefore the macroeconomic and political risks are included within the key business risk sections
The risks are listed in order of descending materiality. All key risks, and their related mitigating actions, are overseen by the plc Board and
(pp63-67) rather than below in the risks to execution of managed separation section.
the plc Board Risk Committee.
Risk mitigation and management actions
The risks are listed in order of descending materiality. All key risks, and their related mitigating actions, are overseen by the plc Board and
Current impact and risk outlook
the plc Board Risk Committee.
OMEM, OMW and Nedbank need to be sufficiently capacitated and capitalised to operate as successful independently listed entities.
Current impact and risk outlook
For the unlisted businesses to be successful standalone
businesses they need to be sufficiently well capacitated and
OMEM, OMW and Nedbank need to be sufficiently capacitated and capitalised to operate as successful independently listed entities.
capitalised. This means strengthening resource in areas where
For the unlisted businesses to be successful standalone
plc provided support (eg treasury, investor relations and finance),
businesses they need to be sufficiently well capacitated and
setting up appropriate Governance arrangements and ensuring
capitalised. This means strengthening resource in areas where
that each business has adequate capital.
plc provided support (eg treasury, investor relations and finance),
setting up appropriate Governance arrangements and ensuring
Perceived weaknesses in any of the businesses’ balance sheets,
that each business has adequate capital.
strategies, operations, governance structures or leadership could
potentially affect the managed separation approvals and the
Perceived weaknesses in any of the businesses’ balance sheets,
ultimate value obtained.
strategies, operations, governance structures or leadership could
potentially affect the managed separation approvals and the
OML estimates that, after its primary listing on the JSE, its effective
ultimate value obtained.
Black Economic Empowerment (BEE) shareholding may be
slightly below the Financial Sector Charter (FSC) target of 25%,
OML estimates that, after its primary listing on the JSE, its effective
but this will only be known once the share register settles. As a
Black Economic Empowerment (BEE) shareholding may be
JSE primarily listed business, OML’s methodology for calculating
slightly below the Financial Sector Charter (FSC) target of 25%,
its BEE ownership percentage will change, in line with the
but this will only be known once the share register settles. As a
provisions of the revised FSC. The BEE shareholding will also be
JSE primarily listed business, OML’s methodology for calculating
impacted by the corporate transactions involved in the managed
its BEE ownership percentage will change, in line with the
separation. OMEM will be using the new scoring methodology
provisions of the revised FSC. The BEE shareholding will also be
for its 2017 scorecard, anticipating the impact of the corporate
impacted by the corporate transactions involved in the managed
restructure, in line with the provisions of the revised Financial
separation. OMEM will be using the new scoring methodology
Services Code that came into effect on 1 December 2017.
for its 2017 scorecard, anticipating the impact of the corporate
restructure, in line with the provisions of the revised Financial
Services Code that came into effect on 1 December 2017.
Risk mitigation and management actions
Good progress has been made in capacitating OML and OMW.
Both businesses have appointed strong and independent new
Boards, enhanced senior management capability and undertaken
Good progress has been made in capacitating OML and OMW.
significant work to review and begin implementing new operating
Both businesses have appointed strong and independent new
models, including enhancing their risk functions. These processes
Boards, enhanced senior management capability and undertaken
have been tracked and monitored by the plc management team.
significant work to review and begin implementing new operating
models, including enhancing their risk functions. These processes
Significant progress has also been made in developing and
have been tracked and monitored by the plc management team.
internally agreeing the approach and structure of their initial balance
sheets to ensure that capital is appropriate for the risks within the
Significant progress has also been made in developing and
businesses even after stress scenarios.
internally agreeing the approach and structure of their initial balance
sheets to ensure that capital is appropriate for the risks within the
OML will consider appropriate transitions, if required, to achieve
businesses even after stress scenarios.
its BEE ownership targets in due course. The OML Board will be
tasked with exploring multiple mechanisms to ensure this goal
OML will consider appropriate transitions, if required, to achieve
is met as agreed.
its BEE ownership targets in due course. The OML Board will be
tasked with exploring multiple mechanisms to ensure this goal
is met as agreed.
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Current impact and risk outlook
Risk mitigation and management actions
The managed separation listings and scheme need to be executed in a manner that balances value, time, cost and risk to ensure the best
outcome for all stakeholders.
Managed separation is an inherently complex project with many
inter-dependencies and will require multiple internal and external
approvals. Project delivery delays or failure to obtain regulatory or
court approvals could potentially impact the separation timelines
and increase costs.
People stretch, both at plc and within the businesses, remains a
key risk to the managed separation execution. The businesses are
implementing managed separation and their own internal change
projects concurrently.
South African political risk could impact or delay the regulatory
approvals required for completion of the managed separation.
Robust project management and governance frameworks have
been implemented, co-ordinated across plc, OML and OMW with
adviser support. The managed separation governance frameworks
have evolved as the project evolves.
The financial and execution risks to managed separation are
regularly reviewed and assessed, with action taken to mitigate
risks balancing time, cost and value.
A number of risks are largely outside Old Mutual’s direct control –
such as obtaining timely regulatory and court approvals. We have
taken action to mitigate these risks as far as possible: for example,
early and proactive engagement on the required regulatory
approvals, implementation of a shareholder engagement strategy,
and the liability debt management exercise.
In 2017, we paid particular attention to people and stretch risk. In plc
we reviewed all resourcing and made contingency plans for delays
to managed separation. The businesses acquired additional
resource or upskilled as required, and each area put in place plans
to address their particular concerns.
While we remain a Group, plc needs to ensure that we meet our fiduciary duties while winding-down the businesses in an orderly manner.
The wind-down of plc needs to be undertaken in a manner that will
still allow plc to fulfil its fiduciary duties. Wherever possible the plc
contingent liabilities and pre-existing plc risks need to be wound
down or addressed to minimise transferring these to either OML
or OMW.
Plc’s fiduciary duties for the remainder of managed separation
have been identified and processes are in place to ensure these
are met.
In 2017 we made significant progress in addressing plc contingent
liabilities and pre-existing risks. Actions included the Kotak sale,
the resolution of the two legacy pension schemes and the
repayment and repurchase of a significant amount of debt.
As a result the plc balance sheet will have a positive net asset
value on transfer to OML.
As part of the wider managed separation process there are robust
plc closure plans in place. Wherever possible, redundant processes
and tasks have already been closed down. This will continue into
2018 to ensure a streamlined plc is handed over to OML.
We have anticipated the risk of not retaining enough plc Head
Office operational capacity and capability to run the residual Group
effectively in the event of a delayed separation. Although not
considered likely, it has been mitigated through contingency planning.
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Risks
continued
Risks
continued
Current impact and risk outlook
Risk mitigation and management actions
Some risks arise from the constraints of the existing Group structure, and will be reduced by managed separation.
Our Group earnings, dividend and surplus capital are reported
Current impact and risk outlook
in sterling but the majority of our earnings and surplus capital
Some risks arise from the constraints of the existing Group structure, and will be reduced by managed separation.
are denominated in South African rand. This creates currency
Our Group earnings, dividend and surplus capital are reported
translation and foreign exchange control risk, and our reported
in sterling but the majority of our earnings and surplus capital
Group earnings are particularly sensitive to rand/GBP exchange
are denominated in South African rand. This creates currency
movements. Managed separation will address this risk, by
translation and foreign exchange control risk, and our reported
removing the current Group structure.
Group earnings are particularly sensitive to rand/GBP exchange
The recent regulatory trend in both the UK and South Africa has
movements. Managed separation will address this risk, by
been to encourage the independence of subsidiary Boards while
removing the current Group structure.
retaining an expectation of Group oversight and control. Managed
The recent regulatory trend in both the UK and South Africa has
separation mitigates the potential risks arising from this
been to encourage the independence of subsidiary Boards while
ambivalence, but any delay could present challenges.
retaining an expectation of Group oversight and control. Managed
separation mitigates the potential risks arising from this
ambivalence, but any delay could present challenges.
Managed separation seeks to allow each business to meet its
Risk mitigation and management actions
capital requirements and debt interest in matched currencies
and cash flows. Each business will have the appropriate capital
Managed separation seeks to allow each business to meet its
to succeed independently and to be more closely aligned to its
capital requirements and debt interest in matched currencies
natural shareholder base.
and cash flows. Each business will have the appropriate capital
Regular stress and scenario testing helps us understand and
to succeed independently and to be more closely aligned to its
monitor the resilience of our capital and liquidity over the managed
natural shareholder base.
separation time horizon. Our modelling shows we are sufficiently
Regular stress and scenario testing helps us understand and
capitalised in line with our philosophy of holding capital where the
monitor the resilience of our capital and liquidity over the managed
risks lie.
separation time horizon. Our modelling shows we are sufficiently
We have implemented dividend hedging on a six-month forward-
capitalised in line with our philosophy of holding capital where the
looking basis, in line with the expected timing for the completion
risks lie.
of managed separation.
We have implemented dividend hedging on a six-month forward-
Risks presented by conflicting regulatory expectations relating to
looking basis, in line with the expected timing for the completion
Group control versus subsidiary independence will ultimately be
of managed separation.
removed as the Group separates. In the meantime, we seek to
Risks presented by conflicting regulatory expectations relating to
address them through open and timely communication with both
Group control versus subsidiary independence will ultimately be
our subsidiaries and the regulators, and through the continued role
removed as the Group separates. In the meantime, we seek to
played by plc executives on the subsidiaries’ Boards.
address them through open and timely communication with both
We have also expanded our documentation of real or perceived
our subsidiaries and the regulators, and through the continued role
conflicts of interest, and this is regularly refreshed in light of real
played by plc executives on the subsidiaries’ Boards.
or perceived case studies.
We have also expanded our documentation of real or perceived
conflicts of interest, and this is regularly refreshed in light of real
or perceived case studies.
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Key risks to OMEM and Nedbank, and OMW
In addition to the risks relating to the execution of the managed separation, OML and OMW are exposed to a number of risks inherent
to the products they offer and the markets that they operate in.
OMEM and Nedbank (ultimately OML)
Current impact and risk outlook
Risk mitigation and management actions
Volatile or difficult macroeconomic conditions, particularly within South Africa, could potentially increase financial pressure on consumers,
impacting OML’s future earnings and credit risk.
In 2017 South Africa’s real GDP growth increased marginally to
0.9%, with the IMF forecasting similar rates of growth in 2018.
There were also several sovereign downgrades which may trigger
South Africa’s subsequent exclusion from the Citi World
Government Bond Index.
The 21 February 2018 Budget introduced a number of tax
increases, which sought to address the rising South African
government’s fiscal deficit. One of these was a 1% increase
to VAT, which together with a continued low growth rate for
the economy could increase financial pressure on consumers.
The result of such pressure could be reduced demand for OML’s
financial products and services, and an increase in lapses and
credit default rates.
Nedbank, and to a lesser but growing extent OMEM, have
significant exposure to credit risk through their banking
businesses. Nedbank has a greater proportion of wholesale
funding than the market norm; and it is exposed to significant
credit risk within the core South African market and in the Rest
of Africa, where there are particular challenges due to low growth.
The economic situation in Zimbabwe remains volatile, with a lack
of liquidity and substantial increases in equity markets, which may
not be sustainable. Local exchange controls may reduce OMEM’s
ability to remit dividends back to South Africa.
OML continuously monitors its financial risk appetite metrics and
builds multiple external economic factors into stress and scenario
testing to understand their possible impact on earnings, liquidity
and capital resilience.
In anticipation of 2017’s sovereign downgrades, we built the
possible impacts into OML’s business plans and downside
projections. Both Nedbank and OMEM are focused on managing
discretionary costs resulting from lower growth and potentially
slowing revenues as consumers come under increasing pressure.
Within OMEM, market and liquidity risks arising from guaranteed
products, and the hedges in place to mitigate them, are actively
overseen by the Balance Sheet Management team.
OMEM’s Credit Loss Ratio remained within limits during 2017,
and work continues to develop an improved credit risk governance
framework. Due to the current macroeconomic environment, lending
is being further restricted to keep OMEM within risk appetite, and
this may impact planned earnings.
Nedbank’s credit losses were better than planned, due mainly to
good risk management and provisioning. Nedbank remains well
positioned to deal with potentially severe stress scenarios.
OMEM continuously reviews developments in Zimbabwe and
undertakes separate stress and scenario testing to understand
exposures and identify possible management actions.
Changing government policies and public sentiment, particularly in South Africa, could adversely influence external perceptions of OML and
impact regulations (including business ownership and fungibility restrictions within Africa).
Global and South African political risk remained elevated
throughout 2017, but has stabilised somewhat following the
February 2018 leadership transition. In H2 2017 media attention
focused on issues relating to corruption and state capture. The
resignation of Jacob Zuma as President and the appointment
of Cyril Ramaphosa as his successor in February 2018 was well
received by markets. Tackling corruption and renewing investor
confidence will be government priorities.
Key risks to OML include the business received from collective
labour organisations and public sector workers, which could
present a risk of mass exits from our products following a change
in sentiment or could be affected by government cutbacks.
South African political risk also creates additional risks in the
macroeconomic environment (see above).
The recent military-backed transfer of power in Zimbabwe raised
concerns around political instability. To date the transition has
been orderly and introduces potential upside political risk,
particularly if the new leadership is able to introduce measures
aimed at supporting economic growth.
OML monitors political developments and their possible impacts
on the business.
Where there are potential systemic risks such as the KPMG
allegations, cross-businesses teams are mobilised to review the
potential impacts of the event, ascertain the actions that can be
taken, and work with external stakeholders.
Nedbank’s CEO began engagement with Cyril Ramaphosa after
his election as ANC leader, emphasising the need for economic
policy certainty. OMEM’s CEO is an active member of Business
Leadership South Africa and the Association for Savings and
Investments South Africa, and attended and sponsored the
JSE South African investment conference in New York in
November 2017.
During 2017, Nedbank enhanced its monitoring and governance
over reputational risk in relation to customers, suppliers and other
stakeholders.
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Risks
continued
Risks
continued
Current impact and risk outlook
Risk mitigation and management actions
All major change programmes are overseen by appropriate
Risk mitigation and management actions
All major change programmes are overseen by appropriate
governance structures and, ultimately, the respective OMEM
and Nedbank Boards.
Delivery of multiple major change programmes increases the risks of non-delivery and people stretch, and could reduce OML’s ability to operate
successfully as a standalone entity.
Current impact and risk outlook
Both OMEM and Nedbank are currently undertaking multiple
Delivery of multiple major change programmes increases the risks of non-delivery and people stretch, and could reduce OML’s ability to operate
change programmes. These include the managed separation
successfully as a standalone entity.
and listing, significant IT transformation, and responding to major
Both OMEM and Nedbank are currently undertaking multiple
regulatory change including the introduction of Twin Peaks
change programmes. These include the managed separation
regulation in South Africa, SAM and Basel III.
and listing, significant IT transformation, and responding to major
The volume of these simultaneous change programmes places
regulatory change including the introduction of Twin Peaks
strain on management and resourcing, and increases delivery risk.
regulation in South Africa, SAM and Basel III.
This applies particularly at OMEM, where the additional demands
The volume of these simultaneous change programmes places
of functioning as an independent organisation and embedding
strain on management and resourcing, and increases delivery risk.
a new management team have put the business under strain.
This applies particularly at OMEM, where the additional demands
We also recognise that OMEM needs to develop and embed
of functioning as an independent organisation and embedding
a new customer-focused and digital culture to support the
a new management team have put the business under strain.
new strategy.
We also recognise that OMEM needs to develop and embed
The continuing Cape Town water crisis presents a significant risk
a new customer-focused and digital culture to support the
of disruption to OMEM’s Cape Town operations.
new strategy.
People risk will remain elevated throughout the managed separation
governance structures and, ultimately, the respective OMEM
and is compounded by the increased need to manage costs due
and Nedbank Boards.
to the depressed South African economic environment.
People risk will remain elevated throughout the managed separation
Where required, interim and contingency resources will be identified
and is compounded by the increased need to manage costs due
and deployed.
to the depressed South African economic environment.
OMEM has a broad range of credible contingency arrangements –
Nedbank has launched its People and Culture 2020 journeys,
including construction of a grey water collection and filtration plant
aimed at increasing efficiency and enhancing execution.
on its Cape Town operations centre, due to come onstream in early
OMEM has a broad range of credible contingency arrangements –
May 2018.
including construction of a grey water collection and filtration plant
on its Cape Town operations centre, due to come onstream in early
May 2018.
Nedbank has launched its People and Culture 2020 journeys,
Where required, interim and contingency resources will be identified
aimed at increasing efficiency and enhancing execution.
and deployed.
The continuing Cape Town water crisis presents a significant risk
Velocity of regulatory change in South Africa and increased risk of regulatory enforcement.
of disruption to OMEM’s Cape Town operations.
In South Africa, the new Twin Peaks supervisory regime and SAM
regulations will be implemented over the next few years. Both will
Velocity of regulatory change in South Africa and increased risk of regulatory enforcement.
drive significant changes for our businesses.
In South Africa, the new Twin Peaks supervisory regime and SAM
Development of the SAM regulations continued through 2017.
regulations will be implemented over the next few years. Both will
Two major issues affecting OMEM and OML are the treatment
drive significant changes for our businesses.
of the Nedbank holding and the agreement of a transitional period
Development of the SAM regulations continued through 2017.
for capital.
Two major issues affecting OMEM and OML are the treatment
Conduct risk remains significant, with an increased focus on the
of the Nedbank holding and the agreement of a transitional period
quality of advice provided with the distribution of our mass market
for capital.
products, presenting a risk of regulatory intervention and redress.
Conduct risk remains significant, with an increased focus on the
Both Nedbank and OMEM will be impacted by the implementation
quality of advice provided with the distribution of our mass market
of IFRS9 and IFRS17, the FICA Amendment Act and Basel III –
products, presenting a risk of regulatory intervention and redress.
which come into effect during 2018 and 2019 – and have
Both Nedbank and OMEM will be impacted by the implementation
programmes underway to ensure compliance.
of IFRS9 and IFRS17, the FICA Amendment Act and Basel III –
which come into effect during 2018 and 2019 – and have
programmes underway to ensure compliance.
Change and readiness programmes are underway to ensure
compliance with the new regulatory framework, although resourcing
within the Risk and Finance functions remains a challenge.
Change and readiness programmes are underway to ensure
Nedbank began with the design and introduction of a conduct risk
compliance with the new regulatory framework, although resourcing
framework in 2016. In 2017 it began a full-scale Market Conduct
within the Risk and Finance functions remains a challenge.
regulatory programme, assisted by EY.
Nedbank began with the design and introduction of a conduct risk
OMEM is developing a new Market Conduct framework which will
framework in 2016. In 2017 it began a full-scale Market Conduct
support enhanced oversight of advice risk.
regulatory programme, assisted by EY.
Both OMEM and Nedbank continue to engage actively with
OMEM is developing a new Market Conduct framework which will
government, regulators and industry forums to positively influence
support enhanced oversight of advice risk.
the evolving public policy landscape.
Both OMEM and Nedbank continue to engage actively with
Nedbank and OMEM continue to embed their Anti Money
government, regulators and industry forums to positively influence
Laundering (AML) frameworks and controls, particularly in their
the evolving public policy landscape.
Rest of Africa subsidiaries.
Nedbank and OMEM continue to embed their Anti Money
Laundering (AML) frameworks and controls, particularly in their
Rest of Africa subsidiaries.
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Current impact and risk outlook
Risk mitigation and management actions
Failure to adequately anticipate or respond to competitive pressures or changing customer expectations, particularly in relation to enhancing the
digital offering.
OMEM faces significant competitive pressures in its core markets
and there is a risk of being left behind in the customer proposition
development race.
OMEM is undertaking several strategic investments to improve
customer processes and experience, respond to new regulatory
requirements, and integrate the UAP business, acquired in 2015,
with investment in sales and service enablement in Africa (starting
in the Faulu and CABS businesses).
Nedbank is currently implementing the digital journey and
managed evolution of its existing IT infrastructure. Its Managed
Evolution systems roll out, now underway, and digital fast lane
strategy are bringing large-scale changes; some increase in
IT disruption and impact to systems availability must therefore
be expected.
OMEM is exposed to risks relating to the stability and maintenance
of its existing IT infrastructure in its Rest of Africa businesses.
Strategic and governance risks in the Rest of Africa subsidiaries.
Nedbank and OMEM’s Rest of Africa businesses have been
subject to strategic and governance risks and in some cases
underperformance. As some of these subsidiaries are separately
listed and not fully owned, there are potential issues relating to
information flows and strategic alignment. In addition, businesses
in some jurisdictions may be subject to government restrictions
on repatriation of profits.
Nedbank’s strategic alliance with ETI was significantly affected
by the fall in oil prices and the downturn in the Nigerian economy,
resulting in losses and lower-than-expected business flows.
However, there have been a number of positive developments
during the year, including Nigeria exiting recession.
OMEM has been working to integrate the UAP business with
a focus on embedding governance and control frameworks.
The CABS business has the risk of volatile results due to the
challenging environment.
De-risking and de-scoping OMEM’s IT transformation programme
has reduced project delivery risk. A robust project governance
framework is in place and progress is monitored by the OMEM
Board IT Committee, which has been augmented with experienced
non-executive directors.
Nedbank has a strong and established IT governance framework
and has enhanced second-line oversight. OMEM is currently
reviewing its entire IT capability framework to ensure that it can
support the future strategy.
The Rest of Africa businesses remain closely monitored and
overseen by the respective Nedbank and OMEM Group functions
and Board committees. Progress has been made in strengthening
and aligning governance and control frameworks and the integration
of Rest of Africa subsidiaries remains a focus area.
Nedbank has identified a need for a centralised and co-ordinated
operating framework to align the subsidiaries with the main
business, increasing monitoring and oversight at the subsidiary
level. This framework is in its early implementation stages.
The outlook for the ETI alliance improved during 2017, as Nigeria’s
exit from recession helped to boost business performance. ETI
governance committees have been strengthened with key
appointments.
A cybersecurity breach may cause business disruption, reputational damage and material adverse effects on the business’
financial condition, operational results and prospects.
Both OMEM and Nedbank are exposed to increasing cyber
security risks, with legacy infrastructure particularly vulnerable.
Cyber attacks could result in operational losses, interruption
of business operations, the loss of critical data and
reputational damage.
Nedbank has an experienced Chief Information Security Officer
and has made significant progress in enhancing cyber-resilience
during 2017. Nedbank continues to invest substantially on
this front.
OMEM has recruited a new Chief Information Security Officer and
strengthening its cybersecurity team. The effectiveness of the
control environment is assessed by regular external assurance.
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continued
Risks
continued
OMW
Current impact and risk outlook
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Risk mitigation and management actions
OMW
Volatile or difficult global macroeconomic conditions could potentially impact OMW’s earnings, particularly asset-based fees.
Global markets maintained historic highs in 2017, with market
Current impact and risk outlook
volatility relatively subdued. However, there is a continuing risk
Volatile or difficult global macroeconomic conditions could potentially impact OMW’s earnings, particularly asset-based fees.
of a rapid correction or return of increased volatility.
Global markets maintained historic highs in 2017, with market
FTSE100 equity levels remained high, with a weaker pound
volatility relatively subdued. However, there is a continuing risk
boosting sterling profitability for many multinational firms in the
of a rapid correction or return of increased volatility.
index. A potential market correction could impact OMW by
FTSE100 equity levels remained high, with a weaker pound
reducing asset-based fees.
boosting sterling profitability for many multinational firms in the
index. A potential market correction could impact OMW by
Changing government policies and public sentiment in our key markets could adversely influence external perceptions of OMW and impact
reducing asset-based fees.
regulatory change.
OMW regularly undertakes stress and scenario testing to understand
During 2017 OMW incorporated the implications of a ‘hard Brexit’
the effect of severe macroeconomic events and their potential
scenario into its stress and scenario testing to understand any
impact on the business.
possible longer-term implications on capital and liquidity.
During 2017 OMW incorporated the implications of a ‘hard Brexit’
scenario into its stress and scenario testing to understand any
possible longer-term implications on capital and liquidity.
the effect of severe macroeconomic events and their potential
impact on the business.
OMW regularly undertakes stress and scenario testing to understand
Risk mitigation and management actions
We continuously monitor political developments and review the
Global political risk remained elevated throughout 2017, with
Changing government policies and public sentiment in our key markets could adversely influence external perceptions of OMW and impact
tensions in the Middle East impacting oil prices, and the ongoing
regulatory change.
stand-off on the Korean peninsula.
Global political risk remained elevated throughout 2017, with
In the UK, concerns remain over the implementation of Brexit
tensions in the Middle East impacting oil prices, and the ongoing
and the impact of the Conservative government losing its
stand-off on the Korean peninsula.
majority in the April 2017 election. This created additional risk
In the UK, concerns remain over the implementation of Brexit
in financial markets.
and the impact of the Conservative government losing its
majority in the April 2017 election. This created additional risk
Delivery of multiple major change programmes increases the risk of non-delivery and people stretch, and could reduce OMW’s ability to operate
in financial markets.
successfully as a standalone entity (including the separation and sale of its single-strategy business, OMGI).
During 2017, OMW undertook scenario testing for possible changes
in government policy.
possible impacts.
During 2017, OMW undertook scenario testing for possible changes
in government policy.
We continuously monitor political developments and review the
possible impacts.
All major change programmes have appropriate and robust
governance structures, and are ultimately overseen by the
strengthened OMW management team and Board.
OMW is currently undertaking multiple change programmes,
Delivery of multiple major change programmes increases the risk of non-delivery and people stretch, and could reduce OMW’s ability to operate
including the managed separation and listing, the sale and
successfully as a standalone entity (including the separation and sale of its single-strategy business, OMGI).
separation of the OMGI single-strategy business, the platform
OMW is currently undertaking multiple change programmes,
transformation programme, and responding to major regulatory
including the managed separation and listing, the sale and
changes such as MiFID II and GDPR.
separation of the OMGI single-strategy business, the platform
This volume of concurrent change inevitably imposes strains on
transformation programme, and responding to major regulatory
management, particularly resource and project management,
changes such as MiFID II and GDPR.
increasing delivery risk. There is an increased risk of human
This volume of concurrent change inevitably imposes strains on
resources process failures regarding employee recruitment,
management, particularly resource and project management,
retention, reward and development.
increasing delivery risk. There is an increased risk of human
resources process failures regarding employee recruitment,
retention, reward and development.
All major change programmes have appropriate and robust
To reduce people risk, OMW is identifying those most at risk,
governance structures, and are ultimately overseen by the
offering coaching, additional resource and wellbeing packages,
strengthened OMW management team and Board.
and providing monthly people reports to management.
To reduce people risk, OMW is identifying those most at risk,
offering coaching, additional resource and wellbeing packages,
and providing monthly people reports to management.
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Current impact and risk outlook
Risk mitigation and management actions
Failure to adequately anticipate or respond to competitive pressures or changing customer expectations, particularly in relation to enhancing
and developing a new platform.
The new platform transformation programme has a robust
governance framework. It is overseen by OMW’s Board IT
Committee, which includes non-executive directors with
transformation project experience. The programme’s well defined
project management framework includes risk identification and
monitoring, with a clearly defined risk appetite framework and
statements. Its progress has remained on-plan from the outset.
Lessons learned from a review of the initial project have been
implemented. Actions included ensuring strong second-line
oversight and the creation of the OMW Board IT Committee.
OMW must continue to anticipate and respond to competitive
pressures and customer expectations relating to product design,
distribution and customer experience. Failure to do so could result
in reduced new business volumes and outflows.
This is particularly relevant to OMW’s IT and systems, where
key IT initiatives may not deliver what is required either on time
or within budget or provide the performance levels required
to support current and future needs.
Failure to devote significant resources to support existing systems
and upgrade legacy systems could impair our ability to gather
information for pricing, underwriting and reserving, and to attract
and retain customers, for whom online functionality is increasingly
important.
The initial platform project experienced significant cost and time
over-runs and was terminated in 2017. It was replaced by a new
platform transformation programme, with FNZ replacing IFDS
as lead external partner. Failure of the new programme could
materially affect OMW’s financial position and client relationships.
Extensive regulatory change in core markets increases the risk of failing to comply with existing and new regulations.
OMW is subject to extensive regulation in the UK and
internationally and thus faces compliance risks, including conduct
risk. The underlying businesses are subject to the risk of adverse
changes in the laws, regulations and regulatory requirements in
the markets in which they operate. It is difficult to accurately predict
the timing, scope or form of future regulatory initiatives, although
it is widely expected that there will continue to be a substantial
amount of regulatory change. Notable developments include
the EU General Data Protection Regulation (GDPR) and UK
Senior Managers and Certification Regime (SMCR) and a high
degree of supervisory oversight of regulated financial services
firms, challenging firms on the extent to which compliance with
requirements and the interests of customers have been achieved.
OMW is currently under investigation over to the treatment
of long-standing customers of closed-book products.
OMW has built a regulatory change framework to allow effective
planning and management across the organisation, and to ensure
prompt identification of regulatory change affecting one or more
OMW businesses.
OMW-level projects are in place for key regulatory changes such
as MiFID II and GDPR to ensure that a consistent approach to both
interpretation and implementation is taken across all businesses,
tracked by the OMW Regulatory Delivery Committee.
A specialist Regulatory Liaison team facilitates effective relations
and communications with OMW’s primary regulators, the FCA and
PRA, ensuring careful tracking and delivery of regulatory requests
and actions. The activities of this team are closely monitored by
executive management and the Board Risk Committee.
OMW is cooperating with the FCA in its investigation, which
is ongoing.
A cybersecurity breach may cause business disruption, reputational damage and material adverse effects on the business’ financial condition,
operational results and prospects.
OMW is increasingly exposed to the risk that third parties or
malicious insiders may attempt to use cybercrime techniques,
including distributed denial of service attacks, to disrupt the
availability, confidentiality and integrity of its IT systems. This could
result in disruption to key operations, make it difficult to recover
critical services, damage assets and compromise data.
OMW have made significant investments across their businesses
to increase system security and resilience, and an Information
Security Improvement Programme is underway. OMW has
appointed a new Chief Information Security Officer and are
strengthening the support team.
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Risks
continued
Risks
continued
Risk appetite
Plc liquidity and regulatory capital have remained our key risk
appetite metrics throughout 2017, supported by earnings volatility
Risk appetite
and risk and control culture. The financial metrics are projected
Plc liquidity and regulatory capital have remained our key risk
over the horizon of managed separation: we evolve and
appetite metrics throughout 2017, supported by earnings volatility
recalibrate them as the managed separation progresses,
and risk and control culture. The financial metrics are projected
by undertaking extensive stress and scenario testing.
over the horizon of managed separation: we evolve and
recalibrate them as the managed separation progresses,
The businesses have developed their own qualitative and
by undertaking extensive stress and scenario testing.
quantitative risk appetite metrics reflecting their own business
models, industries and risk strategies. These are monitored by
The businesses have developed their own qualitative and
the business Boards as well as the plc. At both plc and business
quantitative risk appetite metrics reflecting their own business
levels we use risk appetite limits and early warning thresholds
models, industries and risk strategies. These are monitored by
(EWTs) to define the boundaries of risk taking and manage our
the business Boards as well as the plc. At both plc and business
risk/return profile.
levels we use risk appetite limits and early warning thresholds
(EWTs) to define the boundaries of risk taking and manage our
risk/return profile.
Overview of the Group’s risk
and governance structures
Overview of the Group’s risk
The active portfolio manager governance model, introduced in
2016 after the announcement of the managed separation strategy,
and governance structures
is now fully embedded. Under this model we evaluate each of the
The active portfolio manager governance model, introduced in
Group’s businesses as an asset, with a view to realising maximum
2016 after the announcement of the managed separation strategy,
value through separation.
is now fully embedded. Under this model we evaluate each of the
Group’s businesses as an asset, with a view to realising maximum
The businesses, particularly OMW and OML, have developed their
value through separation.
own governance capabilities – such as appointing independent
chairmen, and defining their own values and culture, risk strategies
The businesses, particularly OMW and OML, have developed their
and appetite frameworks. The plc still oversees these processes
own governance capabilities – such as appointing independent
and will continue to monitor them centrally until separation.
chairmen, and defining their own values and culture, risk strategies
and appetite frameworks. The plc still oversees these processes
Risk strategy
and will continue to monitor them centrally until separation.
Our risk strategy remains unchanged from 2016. We continue
to use the following principles to guide our actions and choices
Risk strategy
throughout the managed separation:
Our risk strategy remains unchanged from 2016. We continue
to use the following principles to guide our actions and choices
All our actions must be directed towards our objective and
throughout the managed separation:
aligned with these measures of success, within the parameters
and risk appetite agreed by the plc Board
All our actions must be directed towards our objective and
We will have to make trade-offs between four principal
aligned with these measures of success, within the parameters
considerations: the value unlocked, the cost involved in
and risk appetite agreed by the plc Board
delivering the strategy, the time it takes to do so, and the risks
We will have to make trade-offs between four principal
incurred or mitigated by our actions
considerations: the value unlocked, the cost involved in
delivering the strategy, the time it takes to do so, and the risks
meaningful action in a reasonable timeframe at valuations that
incurred or mitigated by our actions
are perceived to be, at a minimum, fair
To maintain market confidence we must demonstrate
To maintain market confidence we must demonstrate
We are committed to treating shareholders fairly. We will seek to
meaningful action in a reasonable timeframe at valuations that
communicate our intentions and plans in an open and proactive
are perceived to be, at a minimum, fair
manner, as appropriate in the context of our fiduciary obligations
We are committed to treating shareholders fairly. We will seek to
We are willing to accept short-term price volatility in our stock as
communicate our intentions and plans in an open and proactive
the market digests each action and begins to value each
manner, as appropriate in the context of our fiduciary obligations
business and the plc appropriately
We are willing to accept short-term price volatility in our stock as
We will continue to discharge our fiduciary and regulatory
the market digests each action and begins to value each
responsibilities in an appropriate manner
business and the plc appropriately
We will continue to discharge our fiduciary and regulatory
responsibilities in an appropriate manner
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The plc’s appetite and intentions are set out below, with the metrics used to measure each:
Capital
Earnings
Liquidity
Culture
The Group has no appetite
for regulatory intervention
(whether perceived or real)
during managed separation.
As such, we hold a buffer
above minimum requirements
in order to remain solvent.
During 2017, we continued to set
Solvency II capital risk appetite
at 110% with an EWT at 120%.
This reflects the significant level
of disallowed surplus capital
within South Africa under the
Solvency II calculations. We
indicated at our 2017 Interim
Results that we could accept the
possibility of dipping below our
EWT when considering options
for our capital structure.
Our key principle is that all our
businesses should be well
capitalised as if they were
standalone businesses, and that
the Group position must be
compliant with regulatory
requirements at all times.
There is ongoing monitoring of
our Solvency II position and the
impact of managed separation
activities on this are projected.
We remained above our EWT
throughout 2017. Based on
stress tests, the Board agreed
at the time of the Liability
Management exercise in
November that the Group could
operate below the EWT where
the reasons for it do not reflect
the underlying economic position
of the Group, providing the
Group remained above risk
appetite of 110%.
We accept that as part of our plc
strategy of managed separation,
and as our businesses
consolidate their past expansion,
execution risks and earnings
volatility are likely to increase.
However, we have no appetite
for big surprises, such as
earnings volatility that cannot
be anticipated by the markets
we operate in or significant
operational losses.
The capital management
policy introduced with the
managed separation strategy
allows significant flexibility
in managing liquidity.
We hold a buffer at Group level
to support this, sufficient for a
liquidity survival horizon of at
least 12 months. We also have
a multi-year liquidity view over
the managed separation horizon.
The Group should be able to
meet extreme but plausible
short-term losses.
We measure our risk and
control culture by considering
our governance and tone
from the top, understanding
of risk, attitude to risk,
control functions, quality of
management information,
and remuneration structures.
Qualitative assessment of our
risk and control culture focuses
on the values and behaviours
embedded in the businesses
that shape risk decisions.
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Monitoring and management
At the plc level, we make
The plc liquidity metric is
Each business undertakes
extensive use of multi-year
stress testing to understand
the possible impact of risks
on dividends and earnings.
We also use business-specific
monitoring to identify and
assess risks within individual
businesses.
We monitor earnings volatility by
reviewing year-to-date pre-tax
AOP on a constant currency
basis. In 2017, earnings
remained above this indicator.
continuously monitored and
reported to the plc Board.
The limits and EWT are
calculated dynamically so
are refreshed each month.
In 2017, plc liquidity remained
above both the limits set and
the EWT.
culture monitoring half-yearly
using a 50-question qualitative
assessment.
We set threshold levels for
positive responses, with an
EWT of 70% and a limit of 50%.
At year end 2017 one business
was slightly below EWT but on
an improving trend. Ongoing
actions are being taken to
improve the position.
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Old Mutual plc Annual Report and Accounts 2017Strategic report
Old Mutual plc
Annual Report and Accounts 2017
Board of Directors
Old Mutual plc
Annual Report and Accounts 2017
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Mike Arnold
B.Sc., F.I.A. (70, British)
Independent non-executive director since September 2009. Chairman of the
Board Risk Committee and a member of the Group Audit Committee.
Mike Arnold
Mike Arnold
B.Sc., F.I.A. (70, British)
B.Sc., F.I.A. (70, British)
Mike Arnold was Principal Consulting Actuary and Head of Life practice at
the consulting actuarial firm Milliman from 2002 to 2009. Prior to that, he had
been the senior partner at the practice from 1995. He is a past Member of
Council and Vice Chairman of the Institute of Actuaries, past Chairman of the
Independent non-executive director since September 2009. Chairman of the
International Association of Consulting Actuaries and past member of the
Board Risk Committee and a member of the Group Audit Committee.
Board of Actuarial Standards.
Mike Arnold was Principal Consulting Actuary and Head of Life practice at
Non-executive director of Financial Information Technology Limited.
the consulting actuarial firm Milliman from 2002 to 2009. Prior to that, he had
been the senior partner at the practice from 1995. He is a past Member of
Council and Vice Chairman of the Institute of Actuaries, past Chairman of the
International Association of Consulting Actuaries and past member of the
Board of Actuarial Standards.
Non-executive director of Financial Information Technology Limited.
Zoe Cruz
B.A., M.B.A. (63, US)
Independent non-executive director since January 2014. Also a member
of the Board Risk and Remuneration Committees.
Zoe Cruz
Zoe Cruz
B.A., M.B.A. (63, US)
B.A., M.B.A. (63, US)
Zoe Cruz was Co-President for Institutional Securities and Wealth
Management at Morgan Stanley from 2005 to 2007, where she was
responsible for running major revenue-generating businesses, including
overseeing their securities risk management and information technology.
Independent non-executive director since January 2014. Also a member
From 2009 to 2012, she was involved in founding and running her own
of the Board Risk and Remuneration Committees.
investment management firm, Voras Capital Management. Prior to becoming
Zoe Cruz was Co-President for Institutional Securities and Wealth
Co-President of Morgan Stanley, she had been its Global Head of Fixed
Management at Morgan Stanley from 2005 to 2007, where she was
Income, Commodities and Foreign Exchange from 2001 until 2005. She
responsible for running major revenue-generating businesses, including
joined the company in 1982 and was the third founding member of the
overseeing their securities risk management and information technology.
foreign exchange group.
From 2009 to 2012, she was involved in founding and running her own
Founder and CEO of EOZ Global. Non-executive director of Ripple Labs Inc.
investment management firm, Voras Capital Management. Prior to becoming
Co-President of Morgan Stanley, she had been its Global Head of Fixed
Income, Commodities and Foreign Exchange from 2001 until 2005. She
joined the company in 1982 and was the third founding member of the
foreign exchange group.
Founder and CEO of EOZ Global. Non-executive director of Ripple Labs Inc.
Alan Gillespie
CBE, B.A. Hons, M.A., Ph.D.
(67, British)
Senior Independent Director since May 2011, having joined the Board as
an independent non-executive director in November 2010. Also a member
of the Group Audit, Nomination and Governance, and Remuneration
Committees.
Alan Gillespie
CBE, B.A. Hons, M.A., Ph.D.
Alan Gillespie
(67, British)
CBE, B.A. Hons, M.A., Ph.D. (67, British)
Alan Gillespie was a partner of Goldman Sachs from 1990, with responsibility
for corporate finance and mergers and acquisitions in the UK and Ireland.
Senior Independent Director since May 2011, having joined the Board as
He jointly led the firm’s financial services practice in Europe and in 1996
an independent non-executive director in November 2010. Also a member
established Goldman Sachs’ presence in South Africa. After retiring from
of the Group Audit, Nomination and Governance, and Remuneration
Goldman Sachs in 1999, he became Chief Executive of the Commonwealth
Committees.
Development Corporation in the UK. From 2001 to 2008, he was Chairman
Alan Gillespie was a partner of Goldman Sachs from 1990, with responsibility
of Ulster Bank, a subsidiary of Royal Bank of Scotland plc, and from 2008
for corporate finance and mergers and acquisitions in the UK and Ireland.
to 2017 a non-executive director of UBM plc.
He jointly led the firm’s financial services practice in Europe and in 1996
Alan Gillespie is also a member of the Audit and Risk, Remuneration, and
established Goldman Sachs’ presence in South Africa. After retiring from
Nomination Committees of ContourGlobal plc, Chairman of the Economic
Goldman Sachs in 1999, he became Chief Executive of the Commonwealth
and Social Research Council.
Development Corporation in the UK. From 2001 to 2008, he was Chairman
of Ulster Bank, a subsidiary of Royal Bank of Scotland plc, and from 2008
to 2017 a non-executive director of UBM plc.
Alan Gillespie is also a member of the Audit and Risk, Remuneration, and
Nomination Committees of ContourGlobal plc, Chairman of the Economic
and Social Research Council.
Board of Directors
Patrick O’Sullivan
Patrick O’Sullivan
M.Sc. (Econ), B.B.S., F.C.A. (Ireland)
M.Sc. (Econ), B.B.S., F.C.A. (Ireland)
(68, Irish)
(68, Irish)
Chairman of the Board since January 2010. Also chairs the Nomination and
Governance Committee
Patrick O’Sullivan
M.Sc. (Econ), B.B.S., F.C.A. (Ireland)
(68, Irish)
Patrick O’Sullivan was Vice Chairman of Zurich Financial Services from 2007
to 2009, where he had specific responsibility for its international businesses
including those in South Africa. Prior to that, he had been CFO of the ZFS
Group and CEO of Eagle Star Insurance Company. He held positions
Chairman of the Board since January 2010. Also chairs the Nomination and
at Bank of America, Goldman Sachs, Financial Guaranty Insurance
Governance Committee
Company and Barclays/BZW.
Patrick O’Sullivan was Vice Chairman of Zurich Financial Services from 2007
Patrick O’Sullivan has been appointed Chairman of Saga plc with effect
to 2009, where he had specific responsibility for its international businesses
from 1 May 2018. His previous non-executive roles have included Chairman
including those in South Africa. Prior to that, he had been CFO of the ZFS
of the UK’s Shareholder Executive, Deputy Governor of the Bank of Ireland,
Group and CEO of Eagle Star Insurance Company. He held positions
Senior Independent Director at Man Group plc and Chairman of the Audit
at Bank of America, Goldman Sachs, Financial Guaranty Insurance
Committee at Collins Stewart plc and Cofra Group AG.
Company and Barclays/BZW.
Patrick O’Sullivan has been appointed Chairman of Saga plc with effect
from 1 May 2018. His previous non-executive roles have included Chairman
of the UK’s Shareholder Executive, Deputy Governor of the Bank of Ireland,
Senior Independent Director at Man Group plc and Chairman of the Audit
Committee at Collins Stewart plc and Cofra Group AG.
Bruce Hemphill
Bruce Hemphill
B.A., C.P.E. (54, South African)
B.A., C.P.E. (54, South African)
Group Chief Executive. Also a non-executive director of Nedbank Group
Limited, Nedbank Limited, Old Mutual Group Holdings and Old Mutual Wealth.
Bruce Hemphill
B.A., C.P.E. (54, South African)
Bruce Hemphill has been Group Chief Executive since November 2015.
He was previously Chief Executive of Wealth, Insurance and Non-Bank
Financial Services at Standard Bank Group, the largest African banking
group by assets and earnings. From June 2006 to February 2014, he was
Group Chief Executive. Also a non-executive director of Nedbank Group
Chief Executive of Liberty Group, an African financial services group listed
Limited, Nedbank Limited, Old Mutual Group Holdings and Old Mutual Wealth.
on the JSE. He originally trained as a lawyer in the UK, practising law in
Bruce Hemphill has been Group Chief Executive since November 2015.
both the UK and Hong Kong. After completing a management training
He was previously Chief Executive of Wealth, Insurance and Non-Bank
programme at Anglo American in South Africa, he joined the corporate
Financial Services at Standard Bank Group, the largest African banking
finance team at Standard Merchant Bank, where he eventually headed
group by assets and earnings. From June 2006 to February 2014, he was
up the corporate finance, investment, banking, commercial banking and
Chief Executive of Liberty Group, an African financial services group listed
cash equities businesses.
on the JSE. He originally trained as a lawyer in the UK, practising law in
both the UK and Hong Kong. After completing a management training
programme at Anglo American in South Africa, he joined the corporate
finance team at Standard Merchant Bank, where he eventually headed
up the corporate finance, investment, banking, commercial banking and
cash equities businesses.
Ingrid Johnson
Ingrid Johnson
C.A. (SA), A.M.P. (Harvard)
C.A. (SA), A.M.P. (Harvard)
(51, South African)
(51, South African)
Ingrid Johnson
C.A. (SA), A.M.P. (Harvard)
(51, South African)
Ingrid Johnson has been the Group Finance Director of Old Mutual since
July 2014. She is a non-executive director of Old Mutual Wealth, a director
of Old Mutual Group Holdings, and is currently acting as its interim Chief
Financial Officer, and OML Finance Director-designate until Casper Troskie
is fully transitioned into that role, after which she will resume her non-executive
role on the Board of Old Mutual Group Holdings. She was previously the
Ingrid Johnson has been the Group Finance Director of Old Mutual since
Group Managing Executive: Retail and Business Banking from August 2009
July 2014. She is a non-executive director of Old Mutual Wealth, a director
and a member of the Nedbank Group Executive Committee and a Prescribed
of Old Mutual Group Holdings, and is currently acting as its interim Chief
Officer since 2008. Ingrid was responsible for the turnaround of the Nedbank
Financial Officer, and OML Finance Director-designate until Casper Troskie
Retail Banking cluster, and the integration of Imperial Bank in addition to
is fully transitioned into that role, after which she will resume her non-executive
retaining her role of leading the commercial cluster, Nedbank Business
role on the Board of Old Mutual Group Holdings. She was previously the
Banking, which she had held from 2005. Ingrid has over 20 years’ experience
Group Managing Executive: Retail and Business Banking from August 2009
in financial services. She is a qualified chartered accountant and completed
and a member of the Nedbank Group Executive Committee and a Prescribed
the Advanced Management Programme at Harvard Business School.
Officer since 2008. Ingrid was responsible for the turnaround of the Nedbank
Retail Banking cluster, and the integration of Imperial Bank in addition to
retaining her role of leading the commercial cluster, Nedbank Business
Banking, which she had held from 2005. Ingrid has over 20 years’ experience
in financial services. She is a qualified chartered accountant and completed
the Advanced Management Programme at Harvard Business School.
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Old Mutual plc Annual Report and Accounts 2017
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Annual Report and Accounts 2017
Danuta Gray
Danuta Gray
B.Sc., M.Sc., M.B.A. (59, British)
B.Sc., M.Sc., M.B.A. (59, British)
Trevor Manuel
Trevor Manuel
B.Tech, A.P.M. (62*, South African)
[* as at date of publication]
B.Tech, A.P.M. (62, South African)
Independent non-executive director since March 2013. Also Chairman
of the Remuneration Committee and a member of the Nomination and
Governance Committee
Danuta Gray was Chairman of Telefónica O2 in Ireland until December
2012, having previously been its Chief Executive from 2001 to 2010. Prior to
that, she was a Senior Vice President for BT Europe in Germany, where she
gained experience in sales, marketing, customer service and technology and
in leading and changing large businesses. She previously served for seven
years on the board of Irish Life and Permanent plc and was also a director
of Business in the Community.
Interim Chairman of Aldermore Group plc, non-executive director of Direct
Line Insurance Group plc and a non-executive Defence Board Member and
Chair of the People Committee at the UK Ministry of Defence. She is also
a non-executive director and Chairman of the Remuneration Committee of
PageGroup plc as at the date of this document but will be stepping down
from those roles at that company’s AGM in June 2018.
Non-executive director since January 2016. Also Chairman of Old Mutual
Group Holdings and a member of the Board Risk Committee.
Trevor Manuel was a minister in the South African government for more than
20 years, serving under Presidents Mandela, Mbeki, Motlanthe and Zuma.
He served as Finance Minister from 1996 to 2009. Before his retirement from
public office in 2014, he was Minister in the Presidency responsible for South
Africa’s National Planning Commission. Throughout his career, he assumed
a number of ex officio positions on international bodies, including the United
Nations Commission for Trade and Development (UNCTAD), the World
Bank, the International Monetary Fund, the G20, the African Development
Bank and the Southern African Development Community. He has also
served on a number of voluntary public interest commissions including Africa
Commission, Global Commission on Growth and Development, Global
Ocean Commission, and the New Climate Economy. He holds a National
Diploma in Civil and Structural Engineering from the Peninsula Technikon,
South Africa and completed an Executive Management Programme at
Stanford University, USA.
Member of the International Advisory Board of the Rothschild Group and
Deputy Chairman of Rothschild South Africa, which provides financial
advisory services to Old Mutual. Also a non-executive director of Swiss Re.
Adiba Ighodaro
Adiba Ighodaro
LL.B., B.L., ACCA (54, British)
LL.B., B.L., ACCA (54, British)
Independent non-executive director since January 2014. Also a member of
the Group Audit Committee.
Adiba Ighodaro joined the Commonwealth Development Corporation (CDC)
in 1991, first in London, and later in Lagos, with a remit to establish CDC’s
Nigerian business. In 1995, her focus moved to the Caribbean as a Senior
Investment Executive and Investment Manager, helping to obtain investment
for and dispose of some of CDC’s interests in Africa and the Caribbean.
Later she became CDC’s Country Manager for Nigeria. She also became
Head of West Africa, with responsibility for building the investment business
of CDC/Actis across the region. Actis was spun out of CDC in 2004, following
which she became a founding principal of Actis’ fundraising group. Today, as
a partner of the firm, Adiba both heads fundraising across the Americas and
manages a number of Actis’ global strategic relationships.
Partner at Actis.
Roger Marshall
Roger Marshall
B.Sc. (Econ.), F.C.A. (69, British)
B.Sc. (Econ.), F.C.A. (69, British)
Independent non-executive director of the Company and Chairman of the
Group Audit Committee since August 2010. Also a member of the Board
Risk, and Remuneration Committees
Roger Marshall was formerly an audit partner at PricewaterhouseCoopers,
where he led the audit of a number of major groups, including Zurich
Financial Services and Lloyds TSB.
Director of the Financial Reporting Council, Pension Insurance Corporation
and EFRAG.
Vassi Naidoo
Vassi Naidoo
C.A. (SA) (62, South African/British)
C.A. (SA) (63, South African/British)
Non-executive director of the Company and Chairman of Nedbank Group
Limited since May 2015. Also a director of Old Mutual Group Holdings
and a member of the Group Audit, and Nomination and Governance
Committees.
Vassi Naidoo was Vice Chairman of Deloitte UK from 2009 to 2014. CEO
of Deloitte Southern Africa from 1998 to 2006. Member of the Institute of
Chartered Accountants in England and Wales and honorary life member
of the South African Institute of Chartered Accountants.
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Old Mutual plc Annual Report and Accounts 2017Governance
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Corporate governance
Corporate governance
Board
Nkosana Moyo and Nonkululeko Nyembezi stepped down
from the Board on 29 June and 31 December 2017 respectively.
Board
There were no other changes in the membership of the Board
Nkosana Moyo and Nonkululeko Nyembezi stepped down
during the year. We believe the current Board meets our
from the Board on 29 June and 31 December 2017 respectively.
objective of having the diversity of skills, experience, gender and
There were no other changes in the membership of the Board
geographical experience relevant to the Company’s business
during the year. We believe the current Board meets our
profile, having regard to the managed separation strategy.
objective of having the diversity of skills, experience, gender and
geographical experience relevant to the Company’s business
During 2017, the Board’s focus has been on the successful
profile, having regard to the managed separation strategy.
delivery of the managed separation strategy, while ensuring
that the Company’s ongoing responsibilities and obligations
During 2017, the Board’s focus has been on the successful
as a listed company continue to be well managed.
delivery of the managed separation strategy, while ensuring
that the Company’s ongoing responsibilities and obligations
We will continue to monitor and develop our corporate governance
as a listed company continue to be well managed.
as we adapt to an ever-changing environment, both externally
and internally, bearing in mind the expected life of the Company
We will continue to monitor and develop our corporate governance
in its current form. Moreover, as the managed separation strategy
as we adapt to an ever-changing environment, both externally
has moved into the execution phase, it is crucial that the Board
and internally, bearing in mind the expected life of the Company
ensures its successor businesses are prepared to operate as
in its current form. Moreover, as the managed separation strategy
standalone entities.
has moved into the execution phase, it is crucial that the Board
ensures its successor businesses are prepared to operate as
Given the planned outcome of the managed separation strategy,
standalone entities.
it is more important than ever for the Board to focus on the
underlying businesses themselves and to work more closely
Given the planned outcome of the managed separation strategy,
with their boards, as they prepare for life as standalone entities.
it is more important than ever for the Board to focus on the
At a Board meeting in Johannesburg in June the Board held
underlying businesses themselves and to work more closely
joint sessions with the boards of each of Old Mutual Emerging
with their boards, as they prepare for life as standalone entities.
Markets (OMEM) and Nedbank Group Limited. Similarly, the
At a Board meeting in Johannesburg in June the Board held
Board held joint sessions with the board of Old Mutual Wealth
joint sessions with the boards of each of Old Mutual Emerging
(OMW) in London in May and October. These meetings were
Markets (OMEM) and Nedbank Group Limited. Similarly, the
focused on the managed separation, in particular on those
Board held joint sessions with the board of Old Mutual Wealth
businesses’ strategies and readiness to be separated from the
(OMW) in London in May and October. These meetings were
Group. The second meeting with the OMW board focused on
focused on the managed separation, in particular on those
the OMW showcase, where the business presented itself to
businesses’ strategies and readiness to be separated from the
potential investors for the first time as a standalone proposition.
Group. The second meeting with the OMW board focused on
the OMW showcase, where the business presented itself to
Annual General Meeting (AGM)
potential investors for the first time as a standalone proposition.
Our AGM will be held in London on 30 April 2018. As usual,
the AGM will be webcast via our website and there will be an
Annual General Meeting (AGM)
opportunity for shareholders to submit questions beforehand
Our AGM will be held in London on 30 April 2018. As usual,
to be dealt with at the meeting. Our shareholder circular relating
the AGM will be webcast via our website and there will be an
to the AGM gives further details.
opportunity for shareholders to submit questions beforehand
to be dealt with at the meeting. Our shareholder circular relating
Patrick O’Sullivan
to the AGM gives further details.
Chairman
Patrick O’Sullivan
Chairman
Patrick O’Sullivan
Chairman
Patrick O’Sullivan
Patrick O’Sullivan
Chairman
Chairman
Board focus during 2017
Execution of the managed separation strategy
Supporting the subsidiary boards as each
Board focus during 2017
business prepares for managed separation
Execution of the managed separation strategy
Enhancing business performance.
Supporting the subsidiary boards as each
business prepares for managed separation
Enhancing business performance.
It is more important than ever
for the Board to focus on the
underlying businesses and work
It is more important than ever
more closely with their boards,
for the Board to focus on the
as they prepare for life as
underlying businesses and work
standalone entities.
more closely with their boards,
as they prepare for life as
standalone entities.
Patrick O’Sullivan
Chairman
Patrick O’Sullivan
Chairman
I am pleased to introduce this Corporate Governance report
which, amongst other things, explains how the Board and its main
standing committees have operated during the past year, and
I am pleased to introduce this Corporate Governance report
describes how effective stewardship is exercised over the Group’s
which, amongst other things, explains how the Board and its main
activities in the interests of shareholders and other stakeholders.
standing committees have operated during the past year, and
We also describe the Company’s compliance with the UK
describes how effective stewardship is exercised over the Group’s
Corporate Governance Code 2016.
activities in the interests of shareholders and other stakeholders.
We also describe the Company’s compliance with the UK
Corporate Governance Code 2016.
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Old Mutual plc Annual Report and Accounts 2017
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Annual Report and Accounts 2017
What is the Company’s
approach to governance?
As the Company’s primary listing (known in the UK as a premium
listing) is on the London Stock Exchange, this report mainly
addresses the matters covered by the UK Corporate Governance
Code 2016, but the Company also has appropriate regard to
governance expectations in other countries where its shares
are listed.
Has the Company complied with the
UK Corporate Governance Code?
Throughout the year ended 31 December 2017 and in the
preparation of this Annual Report and Accounts, the Company
has complied with the main and supporting principles and
provisions set out in the UK Corporate Governance Code 2016
applicable to that period, as described in more detail in the
following sections of this report.
Each year the Old Mutual plc Nomination and Governance
Committee conducts a review of the membership of the Board
and its committees. The Committee also considers committee
composition at the time of every Board appointment and
resignation. Following the resignation from the Board of
Dr Nkosana Moyo on 29 June 2017, Alan Gillespie joined the
Group Audit Committee (GAC) with effect from 1 August 2017.
In view of the expected timetable for managed separation and
the range of skills and experience remaining on the committees
following Nonkululeko Nyembezi’s departure from the Board, the
Nomination and Governance Committee decided not to replace
her roles on the Board Risk Committee and the Nomination and
Governance Committee; however, the situation will be kept under
review in the event of any material delays to the completion of
managed separation.
Vassi Naidoo is not classified as independent due to his position
as Chairman of Nedbank Group Limited. In respect of Vassi’s
membership of the GAC, the Nomination and Governance
Committee considers that his skills and experience, particularly
regarding accounting and auditing matters, augment the
composition of the GAC, and his membership is in the Company’s
best interests. The GAC is chaired by an independent non-
executive director, Roger Marshall, and the three other members
are independent non-executive directors. The Committee as
a whole, has competence relevant to the sectors in which the
Group operates.
The Company’s compliance with the provisions of the
UK Corporate Governance Code 2016, and the statement relating
to the going concern basis adopted in preparing the financial
statements set out towards the end of this section of this report,
have been reviewed by the Company’s auditor, KPMG LLP,
in accordance with guidance published by the UK Auditing
Practices Board.
The text of the UK Corporate Governance Code 2016 is available
on the Financial Reporting Council’s website at: www.frc.org.uk.
Approach to governance
The Group’s governance framework, the Decision-Making
Framework (DMF), sets out how the Company discharges its
responsibilities as a shareholder of the Group’s businesses.
The DMF was adopted to support the managed separation
strategy. Its objectives are:
To establish clear principles of delegation and escalation
designed to provide appropriate levels of assurance about
the control environment, while retaining flexibility for our
businesses to operate efficiently
To set out a clear and comprehensive governance framework –
with appropriate procedures, systems and controls – facilitating
the satisfactory discharge of the duties and obligations of
regulated firms, directors and employees within the Group’s
businesses
To articulate clearly what Old Mutual plc (as shareholder)
expects from the boards of the businesses when exercising
their powers as set out in their respective constitutions
To take due account of the regulatory requirement that boards
of regulated entities maintain proper controls over the affairs
of their respective businesses
To protect the interests of our various stakeholders, including
shareholders, creditors, policyholders and customers, in all of
the countries in which we operate
How the DMF operates
Under the DMF (and the related arrangements with our majority-
owned subsidiaries Nedbank and, while it was under the Group’s
ownership, OMAM), the Company appoints up to three members
of its senior executive management as non-executive directors
on the boards of its major subsidiaries to ensure transparent
communication of information in both directions. The boards of
OMW, Old Mutual Group Holdings (OMGH), Nedbank Group
Limited and OMEM are independently regulated and have a
majority of independent directors (although for part of the year this
was not the case for OMW while membership of its board was
being refreshed). The Group’s major subsidiaries also have their
own Audit, Risk and Remuneration Committees. OMGH, OMEM,
Nedbank and OMW have independent chairmen.
The major businesses hold regular review meetings with the
Company’s Executive Committee (plc Exco) to monitor their
business performance and managed separation preparations.
These arrangements sit alongside the submission of monthly
financial information.
The DMF incorporates the ‘three lines of defence’ principles,
assigning roles and responsibilities under three categories:
acceptors of risk, overseers of the risks being taken, and
independent reviewers and reporters of risk.
The governance relationship with Nedbank recognises the latter’s
own governance framework as a separately-listed entity on the JSE
Limited and that it has minority shareholders. The Company has a
relationship agreement with Nedbank that sets out the Company’s
requirements and expectations as its majority shareholder and
which is available on the Company’s website.
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Old Mutual plc Annual Report and Accounts 2017Governance
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Corporate governance
continued
Corporate governance
continued
The Group contains two ‘domestic systemically important
financial institutions’ in South Africa: OMEM and Nedbank.
OMGH operates as a holding company for these two businesses,
The Group contains two ‘domestic systemically important
and was constituted in its current form in response to the expected
financial institutions’ in South Africa: OMEM and Nedbank.
requirements of South Africa’s Solvency Assessment and
OMGH operates as a holding company for these two businesses,
Management (SAM) regime. These businesses are also subject
and was constituted in its current form in response to the expected
to applicable local governance expectations, including those
requirements of South Africa’s Solvency Assessment and
contained in King III (and King IV, when it comes into effect) and,
Management (SAM) regime. These businesses are also subject
for Nedbank, the JSE’s Listings Requirements.
to applicable local governance expectations, including those
contained in King III (and King IV, when it comes into effect) and,
During the Group’s period of ownership, OMAM was also listed on
for Nedbank, the JSE’s Listings Requirements.
the New York Stock Exchange (NYSE) and therefore also subject
to the rules of the US Securities and Exchange Commission,
During the Group’s period of ownership, OMAM was also listed on
the NYSE listing rules and other requirements applicable to
the New York Stock Exchange (NYSE) and therefore also subject
US publicly-listed entities, including those of the Sarbanes-Oxley
to the rules of the US Securities and Exchange Commission,
Act of 2002. As part of the arrangements leading up to its IPO in
the NYSE listing rules and other requirements applicable to
2014, OMAM entered into a shareholders’ agreement giving the
US publicly-listed entities, including those of the Sarbanes-Oxley
Company various rights with respect to the management and
Act of 2002. As part of the arrangements leading up to its IPO in
conduct of OMAM’s affairs. Certain provisions of this agreement
2014, OMAM entered into a shareholders’ agreement giving the
were assigned to HNA Capital following completion of the sale
Company various rights with respect to the management and
of the second tranche of the Group’s shares in OMAM to HNA
conduct of OMAM’s affairs. Certain provisions of this agreement
Capital on 10 November 2017.
were assigned to HNA Capital following completion of the sale
of the second tranche of the Group’s shares in OMAM to HNA
The table below sets out the Board’s continuing membership in more detail and in order of original appointment.
Capital on 10 November 2017.
Under the Group’s governance model, a significant amount of
responsibility for meeting local capital and liquidity requirements
has been delegated to the subsidiary boards. However, the Board
Under the Group’s governance model, a significant amount of
retains overall responsibility as well as specific responsibility for
responsibility for meeting local capital and liquidity requirements
Group-level risks and for debt.
has been delegated to the subsidiary boards. However, the Board
retains overall responsibility as well as specific responsibility for
How big is the Board and how is it structured?
Group-level risks and for debt.
Old Mutual’s Board currently has 11 members: two of whom are
executive and nine (including the Chairman) are non-executive.
How big is the Board and how is it structured?
Old Mutual’s Board currently has 11 members: two of whom are
Tenure of non-executive directors
executive and nine (including the Chairman) are non-executive.
Other than in exceptional circumstances, non-executive directors
(including the Chairman) serve a maximum of nine years in office.
Tenure of non-executive directors
This maximum period consists of two three-year terms, followed
Other than in exceptional circumstances, non-executive directors
by up to three further one-year terms. Renewal of non-executive
(including the Chairman) serve a maximum of nine years in office.
directors’ engagements for successive terms is not automatic and
This maximum period consists of two three-year terms, followed
the continued suitability of each non-executive director is assessed
by up to three further one-year terms. Renewal of non-executive
by the Nomination and Governance Committee before their
directors’ engagements for successive terms is not automatic and
appointment is renewed.
the continued suitability of each non-executive director is assessed
by the Nomination and Governance Committee before their
appointment is renewed.
The Board’s current membership
The table below sets out the Board’s continuing membership in more detail and in order of original appointment.
Role
Name and nationality
The Board’s current membership
Non-executive director
Mike Arnold (British)
Chairman
Role
Patrick O’Sullivan (Irish)
Name and nationality
Date of original
appointment to the Board
Date current term ends,
where applicable
Current term as director,
where applicable
September 2009
Date of original
January 2010
appointment to the Board
September 2018
Date current term ends,
January 2019
where applicable
3rd (third period)
Current term as director,
3rd (third period)
where applicable
Roger Marshall (British)
Mike Arnold (British)
Patrick O’Sullivan (Irish)
Danuta Gray (British)
Roger Marshall (British)
Zoe Cruz (US)
Non-executive director
Non-executive director
Senior Independent Director Alan Gillespie (British)
Chairman
Non-executive director
Non-executive director
Non-executive director
Senior Independent Director Alan Gillespie (British)
Non-executive director
Non-executive director
Group Finance Director
Non-executive director
Non-executive director
Non-executive director
Group Chief Executive
Group Finance Director
Non-executive director
Non-executive director
Adiba Ighodaro (British)
Danuta Gray (British)
Ingrid Johnson (SA)
Zoe Cruz (US)
Vassi Naidoo (SA/British) May 2015
Adiba Ighodaro (British)
Bruce Hemphill (SA)
Ingrid Johnson (SA)
Trevor Manuel (SA)
Vassi Naidoo (SA/British) May 2015
August 2010
September 2009
November 2010
January 2010
March 2013
August 2010
January 2014
November 2010
January 2014
March 2013
July 2014
January 2014
January 2014
November 2015
July 2014
January 2016
Group Chief Executive
Bruce Hemphill (SA)
November 2015
August 2018
September 2018
November 2018
January 2019
March 2019
August 2018
January 2020
November 2018
January 2020
March 2019
January 2020
May 2018
January 2020
January 2019
May 2018
3rd (second period)
3rd (third period)
3rd (second period)
3rd (third period)
2nd
3rd (second period)
2nd
3rd (second period)
2nd
2nd
2nd
1st
2nd
1st
1st
January 2016
Trevor Manuel (SA)
Non-executive director
What is the Board’s role
and how does it operate?
The Board’s role is to exercise stewardship of the Company within
What is the Board’s role
a framework of prudent and effective controls that enables risk to be
and how does it operate?
assessed and managed. The Board sets the Company’s strategic
The Board’s role is to exercise stewardship of the Company within
aims, based on recommendations made by the Group Chief Executive,
a framework of prudent and effective controls that enables risk to be
reviews whether the necessary financial and human resources are
assessed and managed. The Board sets the Company’s strategic
in place for it to meet its objectives, and monitors management
aims, based on recommendations made by the Group Chief Executive,
performance and performance reporting. It is kept informed about
reviews whether the necessary financial and human resources are
major developments affecting the Group through the Group Chief
in place for it to meet its objectives, and monitors management
Executive’s and Group Finance Director’s regular reports and also
performance and performance reporting. It is kept informed about
through reports from the Director of Managed Separation and the
major developments affecting the Group through the Group Chief
Group Chief Risk Officer. The DMF identifies the matters that are
Executive’s and Group Finance Director’s regular reports and also
through reports from the Director of Managed Separation and the
Group Chief Risk Officer. The DMF identifies the matters that are
1st
January 2019
specifically reserved for Board decision and protocols governing
escalation of issues to it and delegation of powers from it, to ensure
clear allocation of responsibility for decision-making.
specifically reserved for Board decision and protocols governing
escalation of issues to it and delegation of powers from it, to ensure
In accordance with the DMF, the Board has delegated its executive
clear allocation of responsibility for decision-making.
powers to the Group Chief Executive, with power to sub-delegate.
The Group Chief Executive is supported by the Company’s Executive
In accordance with the DMF, the Board has delegated its executive
Committee. The plc Exco supports the Group Chief Executive in
powers to the Group Chief Executive, with power to sub-delegate.
exercising the powers delegated to him by the Board. During the year,
The Group Chief Executive is supported by the Company’s Executive
the former Managed Separation Strategy Committee, which was
Committee. The plc Exco supports the Group Chief Executive in
established in 2016 as the strategic decision-making forum for
exercising the powers delegated to him by the Board. During the year,
implementation of the managed separation programme, was merged
the former Managed Separation Strategy Committee, which was
with the plc Exco, in view of the centrality of the managed separation
established in 2016 as the strategic decision-making forum for
to the Group’s strategy and operations.
implementation of the managed separation programme, was merged
with the plc Exco, in view of the centrality of the managed separation
to the Group’s strategy and operations.
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Old Mutual plc
Annual Report and Accounts 2017
Are the non-executive directors independent?
Of the eight current non-executive directors (excluding the
Chairman), the Board considers six to be independent within
the criteria set out in the UK Corporate Governance Code 2016;
that is, they are independent in character and judgement and
have no relationships or circumstances which are likely to affect
their judgement, or could appear to affect it. These six are: Mike
Arnold, Zoe Cruz, Alan Gillespie, Danuta Gray, Adiba Ighodaro
and Roger Marshall.
As previously noted, Vassi Naidoo is not considered independent
because he is chairman of Nedbank Group Limited, and
circumstances may arise where he has to balance the fiduciary
duties owed to both parent and subsidiary having regard to minority
interests in the latter.
Trevor Manuel is the Chairman of OMGH, the holding company
of both OMEM and Nedbank Group Limited, and will become the
Chairman of Old Mutual Limited (OML) on its listing. In light of the
enhanced role that OMGH is expected to play as the South African
Twin Peaks regulation comes into effect, Trevor Manuel was not
categorised as an independent non-executive director at plc level
when he was appointed in 2016.
What was the directors’ attendance
record during 2017?
The table below sets out the number of meetings held and
individual directors’ attendance at meetings of the Board and its
principal committees (based on membership of those committees,
rather than attendance as an invitee) during 2017.
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In addition to its interaction with the two executive directors, the
Board interacts with senior executive management (including senior
executives of the Group’s main businesses) through their regular
participation in Board meetings and other briefing sessions.
Separately from the formal Board meeting schedule, the Chairman
meets with the non-executive directors, with no executives present,
to provide a forum where any issues can be raised. He also conducts
an annual one-to-one performance evaluation of each of the non-
executive directors, and any resulting action points are reported to the
Nomination and Governance Committee. The Company also facilitates
informal meetings among the non-executive directors, without the
Chairman or any executive present. These meetings include the
annual review of the Chairman’s own performance – led by the Senior
Independent Director, who also obtains whatever input he considers
appropriate from the executive directors.
The assignment of responsibilities between Chairman, Patrick
O’Sullivan, and Group Chief Executive, Bruce Hemphill, ensures
a clear division between running the Board and executive responsibility
for running the Company’s business, as set out below:
Key roles and responsibilities
Chairman
Leading the Board
Ensuring the Board’s effectiveness and setting its agenda
Ensuring that the directors receive accurate, timely and clear
information, and adequate time is available for discussion
of all agenda items
Ensuring effective communication with shareholders
Promoting a culture of openness and debate
Ensuring constructive relationships between the executive
and non
executive directors
‑
Group Chief Executive
Defining, creating and implementing strategy and objectives
Developing manageable goals and priorities
Leading and motivating the management teams
Developing proposals to present to the Board on all areas
reserved for its judgement
Developing policies for approval by the Board and ensuring
their implementation
Attendance record
Mike Arnold
Zoe Cruz
Alan Gillespie
Danuta Gray
Bruce Hemphill
Adiba Ighodaro
Ingrid Johnson
Trevor Manuel
Roger Marshall
Vassi Naidoo
Patrick O’Sullivan
Former directors
Nkosana Moyo
Nonkululeko Nyembezi
Board
(scheduled
only)
Board
(scheduled and
ad hoc)
Group Audit
Committee
Board Risk
Committee
Remuneration
Committee
Nomination and
Governance
Committee
Number of meetings attended/number of meetings eligible to attend
8/8
7/8
7/8
8/8
8/8
7/8
8/8
8/8
8/8
8/8
8/8
5/5
8/8
11/11
9/11
10/11
10/11
11/11
8/11
11/11
10/11
11/11
11/11
11/11
6/7
11/11
7/7
–
4/4
–
–
6/7
–
–
7/7
7/7
–
3/3
–
6/6
5/6
–
–
–
–
–
6/6
6/6
–
–
–
6/6
–
7/9
7/9
9/9
–
–
–
–
9/9
–
–
4/5
–
–
–
6/7
7/7
–
–
–
–
–
7/7
7/7
–
4/41
1 Due to the matters under discussion, Nonkululeko Nyembezi agreed in advance with the Committee Chairman that she would not attend three Nomination and Governance
Committee meetings held during the year.
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Old Mutual plc
Annual Report and Accounts 2017
Corporate governance
continued
Old Mutual plc
Annual Report and Accounts 2017
The Group contains two ‘domestic systemically important
financial institutions’ in South Africa: OMEM and Nedbank.
OMGH operates as a holding company for these two businesses,
Nationality of Board members (as at 31 December 2017)
and was constituted in its current form in response to the expected
requirements of South Africa’s Solvency Assessment and
Management (SAM) regime. These businesses are also subject
UK and Europe 50%
to applicable local governance expectations, including those
contained in King III (and King IV, when it comes into effect) and,
for Nedbank, the JSE’s Listings Requirements.
African 42%
US 8%
1
5
During the Group’s period of ownership, OMAM was also listed on
the New York Stock Exchange (NYSE) and therefore also subject
to the rules of the US Securities and Exchange Commission,
the NYSE listing rules and other requirements applicable to
US publicly-listed entities, including those of the Sarbanes-Oxley
Act of 2002. As part of the arrangements leading up to its IPO in
2014, OMAM entered into a shareholders’ agreement giving the
Company various rights with respect to the management and
Note: For the purposes of this table, Vassi Naidoo is treated as South African.
conduct of OMAM’s affairs. Certain provisions of this agreement
Allocation of Board time during 2017
were assigned to HNA Capital following completion of the sale
of the second tranche of the Group’s shares in OMAM to HNA
Capital on 10 November 2017.
1. Capital, business
performance and
6
1
5
4
The Board’s current membership
finance 34%
2. Strategy 34%
3. Risk and regulatory
matters 13%
4. Culture, responsible
business and
stakeholder matters 5%
5. Other 14%
Role
3
Non-executive director
Chairman
Name and nationality
Mike Arnold (British)
2
Patrick O’Sullivan (Irish)
September 2009
January 2010
Non-executive director
Roger Marshall (British)
August 2010
Senior Independent Director Alan Gillespie (British)
November 2010
March 2013
Zoe Cruz (US)
Danuta Gray (British)
Non-executive director
Who is the Senior Independent Director?
Non-executive director
Alan Gillespie has been the Senior Independent Director since May
Non-executive director
2011. The Senior Independent Director is available to shareholders
if they have concerns that are unresolved after contact through the
July 2014
Group Finance Director
normal channels of the Chairman, Group Chief Executive or Group
Vassi Naidoo (SA/British) May 2015
Non-executive director
Finance Director, or where such contact would not be appropriate.
Group Chief Executive
The Senior Independent Director’s contact details can be obtained
from the Group Company Secretary.
Non-executive director
Adiba Ighodaro (British)
Bruce Hemphill (SA)
Ingrid Johnson (SA)
Trevor Manuel (SA)
January 2014
January 2014
January 2016
November 2015
Under the Group’s governance model, a significant amount of
responsibility for meeting local capital and liquidity requirements
has been delegated to the subsidiary boards. However, the Board
Non-executive directors’ fees
retains overall responsibility as well as specific responsibility for
As outlined in the 2016 Annual Report and Accounts, non-
Group-level risks and for debt.
executive directors’ fees were increased with effect from
1 January 2017. No increase is proposed for the year ending
How big is the Board and how is it structured?
31 December 2018, nor is any review of fees anticipated until
Old Mutual’s Board currently has 11 members: two of whom are
the conclusion of managed separation.
executive and nine (including the Chairman) are non-executive.
What did the Board do during 2017?
Tenure of non-executive directors
The implementation and execution of managed separation has
Other than in exceptional circumstances, non-executive directors
been the Board’s main focus throughout the year, from the sale
(including the Chairman) serve a maximum of nine years in office.
of OMAM in the first half to the capital markets days for OMW and
This maximum period consists of two three-year terms, followed
OMEM in the second half. The Board is committed to delivering the
by up to three further one-year terms. Renewal of non-executive
annualised cost savings and unlocking the conglomerate discount
directors’ engagements for successive terms is not automatic and
while preparing the constituent businesses for independence by
the continued suitability of each non-executive director is assessed
enhancing business performance with appropriate standalone
by the Nomination and Governance Committee before their
balance sheets.
appointment is renewed.
In parallel, ‘business as usual’ activities included reviewing
performance against the 2017 to 2019 business plan, approval
of the second interim dividend for 2016 and the contents of the
2016 Annual Report and Accounts and preliminary results
announcement.
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Date of original
appointment to the Board
Finally, mindful of the Company’s continuing responsibilities as
Current term as director,
a listed company, the Board ensured that the following matters
where applicable
continued to be well managed:
September 2018
Date current term ends,
where applicable
3rd (third period)
January 2019
Governance of the managed separation process, including
internal management, decision-making and use of advisers,
3rd (second period)
and management of its risks, following recommendations from
the Board Risk Committee
3rd (second period)
3rd (third period)
November 2018
August 2018
The sale of OMAM, the single-strategy business in OMW and
March 2019
2nd
of our stake in our joint venture in India
January 2020
2nd
Strategy and developments in OMW, including its platform
transformation programme
January 2020
2nd
The size and composition of the balance sheets of the entities
to be listed as a result of the managed separation
May 2018
1st
The process for preparing the listing documents to be issued
in connection with the managed separation
Performance of the Group’s businesses, as well as the 2018 to
January 2019
1st
The table below sets out the Board’s continuing membership in more detail and in order of original appointment.
How many times did the Board meet
What is the Board’s role
during 2017, and where did it meet?
and how does it operate?
The Board met 11 times during 2017, of which eight meetings
were scheduled and three were additional meetings. Two Board
The Board’s role is to exercise stewardship of the Company within
meetings (in June and December) were held in South Africa.
a framework of prudent and effective controls that enables risk to be
The majority of the rest of the meetings were held at the
assessed and managed. The Board sets the Company’s strategic
Company’s Head Office in London, with ad hoc meetings being
aims, based on recommendations made by the Group Chief Executive,
held by telephone. In addition, Board members participated in
reviews whether the necessary financial and human resources are
regular, informal update calls to keep them informed of progress
in place for it to meet its objectives, and monitors management
on the managed separation.
performance and performance reporting. It is kept informed about
major developments affecting the Group through the Group Chief
Executive’s and Group Finance Director’s regular reports and also
through reports from the Director of Managed Separation and the
Group Chief Risk Officer. The DMF identifies the matters that are
2020 business plan and consideration of the first interim dividend
for 2017
specifically reserved for Board decision and protocols governing
Advancing arrangements for the wind-down of the Company’s
escalation of issues to it and delegation of powers from it, to ensure
Head Office, including the continued management of risks and
clear allocation of responsibility for decision-making.
processes for which the Head Office has been responsible
Management of the Company’s external debt, including the
In accordance with the DMF, the Board has delegated its executive
tender offers for the repayment and redemption of the
powers to the Group Chief Executive, with power to sub-delegate.
Company’s Tier 1 and partial redemption of the Tier 2 debt
The Group Chief Executive is supported by the Company’s Executive
securities
Committee. The plc Exco supports the Group Chief Executive in
Briefings on economic, political and regulatory developments
exercising the powers delegated to him by the Board. During the year,
in South Africa and some of the Group’s other major markets
the former Managed Separation Strategy Committee, which was
established in 2016 as the strategic decision-making forum for
The Board continues to focus on the performance of the
implementation of the managed separation programme, was merged
businesses, in particular highlighting the effects of volatile markets
with the plc Exco, in view of the centrality of the managed separation
on the Company and its businesses in the regular reports it
to the Group’s strategy and operations.
receives from the Group Finance Director.
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Are directors required to hold shares in the
Company and what are their current interests?
Under the Directors’ Remuneration Policy, the Group Chief
Executive is required to build a holding of shares in the Company
equal in value to at least 200% of his annual base salary within five
years of appointment. For other executive directors the requirement
is 150% of annual base salary within five years of appointment.
The Board encourages, but does not require, non-executive
directors to build holdings equal to 50% of their annual base fees
within 12 months after appointment and to increase this over time
to 100% of their annual base fees. The target for the Chairman was
set at 50% of his annual base fee, to be achieved over time.
Details of directors’ interests (including interests of their connected
persons) in the share capital of the Company and its quoted
subsidiary, Nedbank Group Limited, at the beginning and end
of 2017 are set out in the table below. No director held shares
in OMAM while it was under the Company’s control.
The interests of the executive directors in share options and
forfeitable shares awards are described in the section of the
Directors’ Remuneration Report entitled ‘Directors’ shareholdings
and share interests’. There were no changes to any of the
Directors’ shareholdings and share interests between
31 December 2017 and 14 March 2018.
Directors’ interests
Mike Arnold
Zoe Cruz
Alan Gillespie
Danuta Gray
Bruce Hemphill
Adiba Ighodaro
Ingrid Johnson
Trevor Manuel
Roger Marshall
Vassi Naidoo
Patrick O’Sullivan
Former directors
Nkosana Moyo (resigned 29 June 2017)
Nonkululeko Nyembezi (resigned 31 December 2017)
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(or date of resignation, if earlier)
At 31 December 2016
Old Mutual plc
ordinary shares
Nedbank Group
Limited shares
Old Mutual plc
ordinary shares
Nedbank Group
Limited shares
26,475
34,500
13,000
14,175
96,6001
–
5251
–
45,000
5,000
100,000
10,000
28,667
–
–
–
–
–
–
142
–
–
26,475
34,500
13,000
14,175
48,3001
–
5251
–
45,000
–
–
–
–
–
–
10,0882
–
–
47,135
–
45,785
–
–
–
100,000
10,000
28,667
–
–
–
1 These figures do not include rights to forfeitable shares that have not yet vested, which are described in the Directors’ Remuneration Report
2 These shares were held under the terms of the Nedbank Compulsory Bonus Share Scheme and the Nedbank Voluntary Bonus Share Scheme.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Corporate governance
continued
Corporate governance
continued
How are directors’ conflicts
of interest managed?
Processes are in place for any potential conflicts of interest
How are directors’ conflicts
to be disclosed and for directors to avoid participation in any
of interest managed?
decisions where they may have any such conflict or potential
Processes are in place for any potential conflicts of interest
conflict. The Nomination and Governance Committee considers
to be disclosed and for directors to avoid participation in any
other significant commitments or external interests of potential
decisions where they may have any such conflict or potential
appointees as part of the selection process and discloses them
conflict. The Nomination and Governance Committee considers
to the Board when recommending an appointment. Non-executive
other significant commitments or external interests of potential
directors are required to inform the Board of any subsequent
appointees as part of the selection process and discloses them
changes to such commitments, which must be pre-cleared with
to the Board when recommending an appointment. Non-executive
the Chairman, if material.
directors are required to inform the Board of any subsequent
changes to such commitments, which must be pre-cleared with
The presence of our directors and senior management on the
the Chairman, if material.
boards of our subsidiaries creates a risk that their duties to the
company of which they are a director, and to the Company as
The presence of our directors and senior management on the
shareholder, may conflict. The managed separation has created
boards of our subsidiaries creates a risk that their duties to the
an increased risk of these conflicts of interests as the strategy
company of which they are a director, and to the Company as
for these businesses develops and is implemented.
shareholder, may conflict. The managed separation has created
an increased risk of these conflicts of interests as the strategy
In addition to its existing processes, and the duties of those
for these businesses develops and is implemented.
directors under applicable company law, the Company has
established additional procedures for disclosing and managing
In addition to its existing processes, and the duties of those
those conflicts of interests and those situations which, although
directors under applicable company law, the Company has
not strictly giving rise to a conflict of interest, might reflect
established additional procedures for disclosing and managing
differences of interests which need to be carefully managed.
those conflicts of interests and those situations which, although
not strictly giving rise to a conflict of interest, might reflect
The Company’s procedures for dealing with directors’ conflicts of
differences of interests which need to be carefully managed.
interest continued to operate effectively during 2017 and no director
had a material interest in any significant contract with the Company
The Company’s procedures for dealing with directors’ conflicts of
or any of its subsidiaries during the year. Additional details of
interest continued to operate effectively during 2017 and no director
various non-material transactions between the directors and the
had a material interest in any significant contract with the Company
Group are reported on an aggregated basis, along with other
or any of its subsidiaries during the year. Additional details of
transactions by senior managers of the Group, in Note J3 to
various non-material transactions between the directors and the
the financial statements.
Group are reported on an aggregated basis, along with other
transactions by senior managers of the Group, in Note J3 to
The executive directors are permitted to hold and retain, for their
the financial statements.
own benefit, fees from one external (non-Group) non-executive
directorship of another listed company (but not a chairmanship),
The executive directors are permitted to hold and retain, for their
subject to prior clearance by the Board and provided the
own benefit, fees from one external (non-Group) non-executive
directorship concerned is not in conflict or potential conflict with
directorship of another listed company (but not a chairmanship),
any of the Group’s businesses. None of the executive directors
subject to prior clearance by the Board and provided the
currently holds any external non-executive directorships of other
directorship concerned is not in conflict or potential conflict with
publicly-quoted companies.
any of the Group’s businesses. None of the executive directors
currently holds any external non-executive directorships of other
Has the Company granted
publicly-quoted companies.
indemnities to its directors?
In accordance with the Company’s Articles of Association, each
Has the Company granted
director is granted an indemnity by the Company in respect of
indemnities to its directors?
liabilities incurred as a result of their office, to the extent permitted
In accordance with the Company’s Articles of Association, each
by UK law. The Company has entered into formal deeds of
director is granted an indemnity by the Company in respect of
indemnity in favour of each of the directors. The indemnities
liabilities incurred as a result of their office, to the extent permitted
described above were in force throughout 2017 and have remained
by UK law. The Company has entered into formal deeds of
so up to the date of this report. The Company also maintains
indemnity in favour of each of the directors. The indemnities
directors’ and officers’ liability insurance.
described above were in force throughout 2017 and have remained
so up to the date of this report. The Company also maintains
directors’ and officers’ liability insurance.
plc Board gender split (as at 31 December 2017)
Female 42%
Male 58%
2018 target = >30%
F
M
plc Exco gender split (as at 31 December 2017)
F
Female 33%
Male 67%
2018 target = >30%
Key roles1 gender split
F
M
M
Female 22%
Male 78%
2018 target = >30%
1. Membership of the
Executive Committees
of the Company and the
three businesses as at
31 December 2017
(49 positions in total)
Gender split of permanent employees
F
Female 58% – 35,666
Male 42% – 25,593
M
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Leadership and effectiveness
Our business relies on the commitment, talent and diversity
of our employees. In order to understand and meet the needs
of customers better, we strive to have an employee population
that is representative of the markets we serve. To attract and
retain appropriately skilled employees, managers and executives,
we maintain effective HR practices.
The Company has a comprehensive induction programme
for new non-executive directors. This enables them to familiarise
themselves with the Group’s operations, financial affairs and
strategic position so that they can make an effective contribution as
soon as possible after they have joined the Board. This programme
includes sessions with each of the constituent businesses and the
Company’s auditors and external legal advisers.
How is the performance of the
Board and its committees reviewed?
Performance reviews of the Board and its standing committees are
conducted annually and, under normal circumstances, are carried
out by an external expert at least once every three years. Under its
current Chairman, the Board has invested a significant amount of
effort in understanding its effectiveness through both internally and
externally facilitated reviews using a range of approaches.
The feedback from the 2016 review resulted in a number of actions
being taken during 2017. In particular, these included further
increasing the interaction and collaboration between the Board
and the subsidiary boards. A need was also identified for deeper
understanding of the business capability, capacity and culture
required to successfully execute managed separation. This led
to the adoption of a set of plc Head Office values, re-establishing
the standards which the constituent businesses were seeking
to adhere to. These values were recognised to be of particular
importance during the managed separation.
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The Board effectiveness review for 2017 was conducted internally
using an online questionnaire supplemented by one-to-one
interviews with each Board member. The questionnaire
sought feedback on various aspects of the Board and its
committees, including:
Board governance
Managed separation
Decision-making
A separate questionnaire was issued to gather feedback on
the Chairman.
The feedback was collated and reported back to the Board.
The review concluded that:
The Chairman, the Board and its committees had operated
effectively during 2017, with clarity of purpose and
appropriate consideration given to stakeholder expectations.
In the final period leading up to managed separation, the Board
should work closely with the subsidiary boards whilst retaining its
focus on the Company’s ongoing obligations as a listed company
In normal circumstances, under the UK Corporate Governance
Code 2016, an externally-facilitated Board effectiveness evaluation
would have been undertaken during the year, being the third
anniversary of the previous external evaluation. In light of the
managed separation, and the limited scope for making changes
during the Company’s remaining lifespan as a listed entity, it was
agreed that an internally-managed effectiveness evaluation be
performed instead.
What is the Company’s approach
to ensuring diversity?
Each business is required to develop an environment that
promotes the benefits of equal opportunities and diversity.
Recruitment, promotion, selection for training and other aspects
of employee management are free from discrimination – including
on grounds of gender, race, disability, age, marital status, sexual
orientation and religious belief. For our businesses in South Africa,
these imperatives have to be balanced against their Broad-Based
Black Economic Empowerment (B-BBEE) requirements.
We recognise that difference in its broadest sense is critical to
our success and, while focus varies by country, increasing gender
diversity is a priority for all of our businesses. Despite a reduction
in the size of the Board during the year, we continued to exceed
our diversity target of at least three female members of the Board,
with female membership ranging from 38% (five out of 13) at the
start of the year to 42% (five out of 12) during the year, falling back
to 36% (four out of 11) following the resignation of Nonkululeko
Nyembezi at the year-end. Two of our six-member plc Exco are
women. The Company continues to meet the recommendations
of the Parker Review’s report into the ethnic diversity of UK boards.
Notwithstanding the sale of OMAM, the gender split of key roles
within the Group improved slightly during 2017 on account of
senior female appointments in OMEM.
We remain committed to improving our diversity. We continue
to strive towards the 2018 targets that we set in 2013, as shown
in the diagrams on the preceding page, and continue to invest
significantly in our women’s networks and mentoring initiatives.
While the Old Mutual plc Board has not formally adopted its own
diversity policy, it remains committed to its earlier targets and
commitments, notwithstanding the managed separation strategy.
Furthermore, in respect of its UK successor business, Quilter plc,
we are pleased that the Board has set a target of 33%, which
is in line with the Hampton Alexander Review recommendations
and is also considering how it can further improve its broader
Board diversity.
How do we ensure that Board members have
the right knowledge to discharge their duties?
The Board’s composition and succession plans are formally
considered at least annually. We have developed a skills and
industry experience matrix to help the Board assess the composition
profiles of the Board and major subsidiary boards. The Nomination
and Governance Committee regularly discusses talent and
succession plans for the businesses’ Executive Committees.
Training and induction of
non-executive directors
Training for Board members in 2017 covered topics such
as Solvency II, UK remuneration trends, and briefings on the
process for the listing of OMW and OML – delivered by external
speakers from the Group’s auditors and other professional
advisers. In addition, internal briefings were provided on
political and economic developments in the various territories
in which the Group operates, responsible business updates
and B-BBEE programmes.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Corporate governance
continued
Corporate governance
continued
What are the Board’s standing committees
and what did they do during the year?
The Board has a number of standing committees to which
What are the Board’s standing committees
various matters are delegated in line with their terms of reference.
and what did they do during the year?
The Board has a number of standing committees to which
The main change to the committees during 2017 was that
various matters are delegated in line with their terms of reference.
Alan Gillespie replaced Nkosana Moyo as a member of the
Group Audit Committee with effect from 1 August 2017, after
The main change to the committees during 2017 was that
the latter stepped down from the Board on 29 June 2017.
Alan Gillespie replaced Nkosana Moyo as a member of the
Group Audit Committee with effect from 1 August 2017, after
The current membership of the Board’s main standing
the latter stepped down from the Board on 29 June 2017.
committees is:
The current membership of the Board’s main standing
Group Audit Committee
committees is:
Roger Marshall (Chairman) (since 2010)
Mike Arnold (since 2009)
Group Audit Committee
Alan Gillespie (since August 2017)
Roger Marshall (Chairman) (since 2010)
Adiba Ighodaro (since 2014)
Mike Arnold (since 2009)
Vassi Naidoo (since 2016).
Alan Gillespie (since August 2017)
Adiba Ighodaro (since 2014)
Other member of the committee during part of the year:
Vassi Naidoo (since 2016).
Nkosana Moyo (to June 2017)
Other member of the committee during part of the year:
Secretary to the committee:
Nkosana Moyo (to June 2017)
Colin Campbell (since 2016)
Secretary to the committee:
Board Risk Committee
Colin Campbell (since 2016)
Mike Arnold (Chairman) (since 2010)
Zoe Cruz (since 2014)
Board Risk Committee
Trevor Manuel (since 2016)
Mike Arnold (Chairman) (since 2010)
Roger Marshall (since 2010)
Zoe Cruz (since 2014)
Trevor Manuel (since 2016)
Other member of the committee during the year:
Roger Marshall (since 2010)
Nonkululeko Nyembezi (to December 2017).
Other member of the committee during the year:
Secretary to the committee:
Nonkululeko Nyembezi (to December 2017).
Colin Campbell (since 2012).
Secretary to the committee:
Nomination and Governance Committee
Colin Campbell (since 2012).
Patrick O’Sullivan (Chairman) (since 2010)
Alan Gillespie (since 2010)
Nomination and Governance Committee
Danuta Gray (since 2013)
Patrick O’Sullivan (Chairman) (since 2010)
Vassi Naidoo (since 2015)
Alan Gillespie (since 2010)
Danuta Gray (since 2013)
Other member of the committee during the year:
Vassi Naidoo (since 2015)
Nonkululeko Nyembezi (to December 2017).
Other member of the committee during the year:
Secretary to the committee:
Nonkululeko Nyembezi (to December 2017).
Colin Campbell (since 2016)
Secretary to the committee:
Colin Campbell (since 2016)
Remuneration Committee
For details of the Remuneration Committee, see the Directors’
Remuneration Report.
Remuneration Committee
For details of the Remuneration Committee, see the Directors’
Other committees
Remuneration Report.
The Board establishes special-purpose committees as required, to
deal with particular strategic projects or other matters. In connection
Other committees
with the managed separation, in 2016 the Board established a
The Board establishes special-purpose committees as required, to
Managed Separation Urgent Issues Committee, consisting of the
deal with particular strategic projects or other matters. In connection
Chairman, the Senior Independent Director, the Chairmen of the
with the managed separation, in 2016 the Board established a
Board’s standing committees and the Chairman of OMGH, to take
Managed Separation Urgent Issues Committee, consisting of the
time-critical decisions in relation to managed separation on the
Chairman, the Senior Independent Director, the Chairmen of the
Board’s behalf. All members of the Board are, however, entitled to
Board’s standing committees and the Chairman of OMGH, to take
attend and participate in this committee’s meetings. The Managed
time-critical decisions in relation to managed separation on the
Separation Urgent Issues Committee met twice during 2017.
Board’s behalf. All members of the Board are, however, entitled to
attend and participate in this committee’s meetings. The Managed
Reports from the Board’s standing committees
Separation Urgent Issues Committee met twice during 2017.
The following reports on the activities of the Group Audit, Board
Risk and Nomination and Governance Committees during 2017
Reports from the Board’s standing committees
have been submitted by their respective Chairmen. The activities
The following reports on the activities of the Group Audit, Board
of the Remuneration Committee are described in the Directors’
Risk and Nomination and Governance Committees during 2017
Remuneration Report later in this document.
have been submitted by their respective Chairmen. The activities
of the Remuneration Committee are described in the Directors’
Report from the Group Audit Committee
Remuneration Report later in this document.
Report from the Group Audit Committee
Roger Marshall
Chairman of the Group Audit Committee
Roger Marshall
Roger Marshall
Chairman of the Group Audit Committee
Chairman of the Group Audit Committee
The Group Audit Committee (the committee) met seven times
during 2017. Four of the meetings were held partly as a joint
session with members of the Board Risk Committee to discuss
The Group Audit Committee (the committee) met seven times
matters of joint interest including Solvency II reporting, cyber-
during 2017. Four of the meetings were held partly as a joint
security, major IT projects across the Group, the internal control
session with members of the Board Risk Committee to discuss
framework and matters affecting the Group’s auditors, KPMG, in
matters of joint interest including Solvency II reporting, cyber-
South Africa. In addition, as part of the preparations for managed
security, major IT projects across the Group, the internal control
separation, I held regular meetings with the chairmen of the audit
framework and matters affecting the Group’s auditors, KPMG, in
committees of the three businesses.
South Africa. In addition, as part of the preparations for managed
separation, I held regular meetings with the chairmen of the audit
committees of the three businesses.
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Old Mutual plc Annual Report and Accounts 2017
Group Audit
Committee focus area
Disclosure of businesses held for sale and
for distribution
The presentation of the 2017 Group financial
statements is complicated by managed
separation. At 31 December 2017 both
Old Mutual Wealth and Nedbank have been
classified in the financial statements as held
for distribution to shareholders. This reflects
the Board’s assessment that distribution is
considered to be highly probable within the
following 12 months. As a result net income,
assets and liabilities are shown as one-line
entries in the income statement and statement
of financial position rather than fully consolidated.
Assumptions related to policyholder liabilities
recognised by the Group’s insurance
businesses
The Group recognised insurance policyholder
liabilities of £10,145 million at 31 December 2017
(2016: £9,982 million). Estimation of these
routinely involves assessment of risk exposures,
expense allocations and business persistency.
Loan loss provisions
Loan loss provisioning requires the assessment
of recoverable amounts, which requires
judgement in the estimation of future payments.
At 31 December 2017, the Group’s total
advances were £44,740 million, with related
provisions of (£891 million) (2016:
£44,237 million and (£1,129 million)). Loans
outstanding are principally from Nedbank.
Implementation of new accounting standards
IFRS 9 and IFRS 15
The Committee also considered the proposed
disclosure of the transitional impact of the new
accounting standard, IFRS 9 ‘Financial
Instruments’ and 15 ‘Revenue from contracts
with customers’, which will be implemented
in 2018.
Goodwill valuations and impairments
Goodwill and intangible assets amounted
to £2,460 million at 31 December 2017
(2016: £2,471 million).
Old Mutual plc
Annual Report and Accounts 2017
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How the matter was reviewed
Observations of the Committee
We considered the correct accounting with
management and KPMG. We considered the
remaining risks of managed separation, taking
into account the detailed review carried out
by the Risk Committee, and concurred with
management’s view that there was a high
probability of distribution occurring in 2018
and that the businesses are available for
immediate distribution.
We note that accounting standards require all
of the group’s existing interest in Nedbank be
shown as held for distribution at 31 December
2017, despite the intention that OML will retain
a 19.9% interest.
As Nedbank and Old Mutual Wealth are
classified as held for distribution, the assets
and liabilities are reflected as single line entries
on the balance sheet.
In order to facilitate the users in understanding
year on year comparability, balances contained
in this report include balances attributable to
Nedbank and Old Mutual Wealth. As such,
amounts stated will not agree directly with the
Statement of Financial Position.
We reviewed reports from the Group Chief
Actuary and the external auditors. We also
reviewed the conclusions of the subsidiary
Audit Committees.
Items in particular focus were the bases of
cost allocations in OMLACSA which were
incorporated into the principles used for
insurance product expense assumption setting
at 31 December 2017.
The committee considered this area in detail,
particularly in light of the increased stresses
affecting credit conditions in South Africa. Local
governance structures provide assurance on
the adequacy of loan loss provisioning and key
matters arising were routinely highlighted in
reports from the subsidiary audit committees. The
committee reviewed detailed information related
to specific credit exposures where appropriate.
A particular focus was the Group’s exposure
to Steinhoff and to state-owned enterprises in
South Africa.
The committee was satisfied that adequate
provisions were carried at 31 December 2017
under current accounting standards.
The committee reviewed analysis of the expected
impact of each standard, and the valuation and
disclosure proposals. The Committee also
received analysis in support of the robustness of
management’s estimate of the IFRS 9 and 15
transitional impacts at 1 January 2018.
Although IFRS 15 is not anticipated to have
a significant impact for the Group, IFRS 9
is particularly relevant to the Group’s lending
businesses.
Disclosure of the estimated transitional impact
of IFRS 9 and 15 is provided in note A7 to the
financial statements.
During the year the OMEM business has revised
the Cash Generating Units (CGUs) applied in
the goodwill valuation models so that these align
with the revised operating model of the business.
During February 2018 the committee reviewed
further impairment calculations in respect of
OMEM based on the latest business planning
inputs. The committee also considered the
sensitivity of the outcomes to declining growth
rates and increasing discount rates.
In view of the Held for Distribution accounting
treatment the valuation reviews of OM Wealth
and Nedbank have compared the consolidated
NAV with the fair value of these businesses, less
costs to distribute. A similar specific assessment
was required in respect of the Old Mutual Wealth
single strategy business classified as Held for
Sale at 31 December 2017.
The revised CGUs applied by OMEM during
2017 were the principal cause of a further
impairment of R1.2bn that was recorded in
relation to the OMEM East Africa businesses
at 30 June 2017.
Furthermore, as a result of the February 2018
review a further impairment of R0.3bn was
recorded in relation to the group’s operations
in Latin America at 31 December 2017.
Other than these items the analysis supported
the committee in concluding that goodwill
and intangible assets of OMEM are
appropriately valued.
No impairments have been required in relation to
the Old Mutual Wealth or Nedbank businesses.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Corporate governance
continued
Corporate governance
continued
Group Audit
Committee focus area
Valuation of investments and securities
Group Audit
Total investments and securities were
Committee focus area
£116,290 million at 31 December 2017
(2016: £100,388 million)
Valuation of investments and securities
Total investments and securities were
Investments in associated undertakings and
£116,290 million at 31 December 2017
joint ventures were £511 million at 31 December
(2016: £100,388 million)
2017 (2016: £542 million). Of this balance,
£198 million (2016: £235 million) relates
Investments in associated undertakings and
to Nedbank’s investment in Ecobank
joint ventures were £511 million at 31 December
Transnational Incorporated (ETI).
2017 (2016: £542 million). Of this balance,
£198 million (2016: £235 million) relates
Regulatory provisions in Old Mutual Wealth
to Nedbank’s investment in Ecobank
During Q4 2017, Old Mutual Wealth recognised
Transnational Incorporated (ETI).
provisions of £69 million in relation to customer
remediation costs in connection with the FCA
Regulatory provisions in Old Mutual Wealth
enforcement action following its thematic review.
During Q4 2017, Old Mutual Wealth recognised
This action began in 2016 and is still ongoing.
provisions of £69 million in relation to customer
remediation costs in connection with the FCA
enforcement action following its thematic review.
This action began in 2016 and is still ongoing.
The committee considered the valuation
How the matter was reviewed
of investments and received reports from
management and the external auditors.
The vast majority of investments can be valued
The committee considered the valuation
using current market practices. However, for
of investments and received reports from
certain private equity investments and others
management and the external auditors.
where there have not been recent market
The vast majority of investments can be valued
transactions, more judgement is required.
using current market practices. However, for
certain private equity investments and others
where there have not been recent market
transactions, more judgement is required.
The committee received and considered reports
from the Old Mutual Wealth Audit Committee
and KPMG, and also considered the treatment
of similar matters by peers.
The committee received and considered reports
from the Old Mutual Wealth Audit Committee
and KPMG, and also considered the treatment
of similar matters by peers.
How the matter was reviewed
Observations of the Committee
The committee was satisfied with the valuation
Observations of the Committee
processes. The committee in particular was
satisfied that no additional provision was required
against ETI.
The committee was satisfied with the valuation
processes. The committee in particular was
satisfied that no additional provision was required
against ETI.
The committee is satisfied that it is appropriate
to record this provision on the basis of the
information available, which indicates that the
business is committed to meeting these costs.
The committee is satisfied that it is appropriate
No provision has been made for any potential
to record this provision on the basis of the
fine that may be levied by the FCA.
information available, which indicates that the
business is committed to meeting these costs.
The committee notes that the FCA action is
No provision has been made for any potential
ongoing and that additional provisions may be
fine that may be levied by the FCA.
required for remediation and/or penalties when
the outcome is known.
The committee notes that the FCA action is
ongoing and that additional provisions may be
required for remediation and/or penalties when
the outcome is known.
Membership of the committee
Alan Gillespie replaced Nkosana Moyo on the committee during
the year. A majority of the committee’s members have competence
Membership of the committee
in accounting and auditing, and the committee as a whole has
Alan Gillespie replaced Nkosana Moyo on the committee during
experience of insurance, banking and investment.
the year. A majority of the committee’s members have competence
in accounting and auditing, and the committee as a whole has
Going concern and viability statement
experience of insurance, banking and investment.
We reviewed the materials submitted to the Board in support of
the going concern statement and longer-term viability statement,
Going concern and viability statement
and discussed the appropriate duration of and wording for this for
We reviewed the materials submitted to the Board in support of
the Board to approve. The viability statement has been heavily
the going concern statement and longer-term viability statement,
modified to reflect the managed separation timetable.
and discussed the appropriate duration of and wording for this for
the Board to approve. The viability statement has been heavily
Set out in the table above is a summary of areas of focus
modified to reflect the managed separation timetable.
during the year, in addition to the committee’s usual oversight
responsibilities, which are described in the table on page 84.
Set out in the table above is a summary of areas of focus
during the year, in addition to the committee’s usual oversight
Financial Reporting Council
responsibilities, which are described in the table on page 84.
During September 2017, the Financial Reporting Council (FRC)
requested information in relation to the calculation and presentation
Financial Reporting Council
of OMAM, Old Mutual Wealth and OMEM investment performance
During September 2017, the Financial Reporting Council (FRC)
metrics, included in the Group’s annual report for the year ended
requested information in relation to the calculation and presentation
31 December 2016. We understand that this request was part of an
of OMAM, Old Mutual Wealth and OMEM investment performance
industry wide assessment, not specific to Old Mutual. Prior to the
metrics, included in the Group’s annual report for the year ended
Group responding to the FRC, the Group Audit Committee
31 December 2016. We understand that this request was part of an
considered the matter at the meeting in October 2017. The Group
industry wide assessment, not specific to Old Mutual. Prior to the
Finance Director responded to the FRC request on 11 October
Group responding to the FRC, the Group Audit Committee
2017 and subsequently received a response from the FRC on
considered the matter at the meeting in October 2017. The Group
24 October 2017 to the effect that the FRC felt that this was
Finance Director responded to the FRC request on 11 October
satisfactory and the FRC considered this matter closed.
2017 and subsequently received a response from the FRC on
24 October 2017 to the effect that the FRC felt that this was
satisfactory and the FRC considered this matter closed.
This response highlighted the Group’s approach to these
disclosures, in particular the allocation of costs in calculating
investment returns.
This response highlighted the Group’s approach to these
disclosures, in particular the allocation of costs in calculating
The FRC’s review only covered the specific disclosures and
investment returns.
provides no assurance that the report and accounts are correct in
all material respects; the FRC did not seek to verify the information
The FRC’s review only covered the specific disclosures and
provided but considered compliance with reporting requirements
provides no assurance that the report and accounts are correct in
consistent with their mandate.
all material respects; the FRC did not seek to verify the information
provided but considered compliance with reporting requirements
Solvency II
consistent with their mandate.
The committee has received regular reports during the year on the
Group’s Solvency II reporting to the PRA and has received reports
Solvency II
from the Group Chief Actuary and the external auditors concerning
The committee has received regular reports during the year on the
the Solvency II information as at 31 December 2017 contained
Group’s Solvency II reporting to the PRA and has received reports
in this Annual Report.
from the Group Chief Actuary and the external auditors concerning
the Solvency II information as at 31 December 2017 contained
Consistent with PRA requirements, the final 2017 Solvency II
in this Annual Report.
annual submission will not be submitted until June 2018. The
committee will review these reports, in support of the Board
Consistent with PRA requirements, the final 2017 Solvency II
approval process, in due course.
annual submission will not be submitted until June 2018. The
committee will review these reports, in support of the Board
Alternative profit measure
approval process, in due course.
The Group makes a number of adjustments to IFRS profit to derive
an Adjusted Operating Profit (AOP) measure. This is common
Alternative profit measure
practice among peers. Some of these adjustments eliminate
The Group makes a number of adjustments to IFRS profit to derive
required IFRS accounting treatments that can distort results,
an Adjusted Operating Profit (AOP) measure. This is common
such as recognising gains or losses on own debt instruments or
practice among peers. Some of these adjustments eliminate
recognising certain costs of financing in equity. Other adjustments
required IFRS accounting treatments that can distort results,
seek to adjust the IFRS result in order to arrive at an outcome
such as recognising gains or losses on own debt instruments or
that the Board feels is more reflective of underlying profit by,
recognising certain costs of financing in equity. Other adjustments
seek to adjust the IFRS result in order to arrive at an outcome
that the Board feels is more reflective of underlying profit by,
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Old Mutual plc
Annual Report and Accounts 2017
for example, substituting a Long-Term Investment Return for the
actual investment returns for the year. The committee reviews
the appropriateness of the AOP measure on an ongoing basis.
It also reviews the Long-Term Investment Return rate annually.
The committee seeks to validate that the adjustments made in
determining AOP are appropriate to the objective of presenting
a measure of the long-term profitability of the business to users
of the financial statements and is mindful of the FRC’s expectations
in this area.
As noted in my 2016 report, additional adjustments have had to
be made this year to adjust for certain one-off costs of achieving
managed separation, and also to exclude the costs of remediating
historic issues in Old Mutual Wealth. The committee has
individually reviewed each of the AOP adjustments and also the
overall effect of the adjustments on the reported AOP results.
External Auditors
As a result of emerging EU guidance in relation to audit tender
requirements, during 2014, a competitive tender for the Group’s
external audit was last carried out. Following this tender the
decision was made to reappoint KPMG.
During 2017, in line with Group policy, the committee has reviewed
KPMG LLP’s effectiveness as our auditor. This review confirmed
satisfaction with the quality of the audit. The review analysed
critical competencies expected of our external auditor and
included feedback from key finance personnel from Group and
subsidiary entities and audit committee members at subsidiaries
and Group level.
The criticisms of KPMG South Africa’s work do not extend beyond
South Africa and we consider that KPMG’s audit team in the UK
has performed good quality audits of the Group. We therefore
recommend that Old Mutual plc reappoint KPMG LLP in relation
to the audit for the year ending 31 December 2018 at this year’s
AGM. Following the completion of managed separation we expect
that the Audit Committees of the South African businesses will
continue to review KPMG’s ongoing engagement in light of the
findings of the regulatory investigations, but also in the context of
the new Mandatory Audit Firm Rotation rules that were introduced
in South Africa in June 2017 to be effective from 1 April 2023.
As part of assessing the impact of these rules, the South African
businesses will need to consider the transitional requirements
in relation to auditor independence.
Non-audit services
The Group operates within a clearly defined policy on the nature
and amount of non-audit services that can be provided by its
external auditor (see ‘Audit arrangements’ later in this Annual
Report). The policy itself is formally reviewed annually. Under the
revised policy adopted during the year, total fees for non-audit
services are limited to a maximum of 25% of the total fees for
external audit services unless I, as Chairman of the committee,
specifically approve any fees in excess of this amount. The actual
non-audit fee ratio for 2017 was 16%.
As Chairman of the committee, I am notified of expenditure on non-
audit services monthly and for certain services I will be consulted
for pre-approval. The committee reviews compliance with the non-
audit services policy each quarter.
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The committee spent significant time discussing the implications
of significant and widespread concerns over certain work carried
out by KPMG in South Africa relating to audits of Gupta-related
entities and an investigation on behalf of the South African
Revenue Service. At the current time a regulatory investigation
(initiated by IRBA) and an independent enquiry (initiated by the
South African Institute of Chartered Accountants) are ongoing.
These reviews are scrutinising KPMG’s South Africa conduct,
and KPMG South Africa has already taken action to address
a number of concerns.
In light of this situation, we have held discussions with KPMG
senior management at global, UK and South African level. These
discussions confirmed the contingency plans available in the event
that KPMG South Africa became unable to carry out its work on the
Group’s South African operations in the short or medium term, or
if it was concluded that it was inappropriate for them to continue
in this role. This was particularly important given the reporting
accountant work required for the public documents to be issued
in connection with managed separation. The audit committees
of the South African businesses held similar discussions.
Despite our concerns about the ethical issues involved, we have
determined it would have been impractical to change external
auditors in 2017 – not least because of inflexible independence
rules in both the EU and South Africa.
The committee sought commitment from KPMG globally and in the
UK that they would support their South African firm to ensure the
2017 audit and reporting accountant work could be concluded.
Furthermore, in order to ensure that the 2017 audit was delivered
to the quality we expect of our external auditors, the committee
requested that a senior UK KPMG partner review the quality of
the 2017 audits of the South African businesses. In line with this
request KPMG UK has completed engagement quality review
procedures in respect of the OMEM and Nedbank audits and
reported that the results of these reviews were satisfactory.
The committee is satisfied that KPMG LLP has been engaged
by the Group in accordance with the requirements of this policy
during 2017.
Internal Audit
The committee pays close attention to Internal Audit reports and
to the progress of management actions to address weaknesses
identified. As managed separation proceeded during 2017,
Internal Audit implemented a more agile approach to provide
coverage of managed separation planning, execution and
reporting activities. In addition to the Internal Audit plans covering
the core business areas, the committee approved a specific
Managed Separation Internal Audit plan. During the year Internal
Audit also separated and strengthened its business unit audit
teams to ensure they are ready to operate on a standalone basis
following managed separation.
Internal Audit has embedded recommendations of the Financial
Services Internal Audit Code and in particular is encouraged to
carry out work in advance of developments or in parallel with them,
rather than intervening after the event. Internal Audit’s overall
conclusion for 2017 was that it had not observed any unmitigated
material issues that would indicate that the overall control
environment in the Group was unsatisfactory.
We operate a quality assurance process for Internal Audit using
an external professional services firm to perform an independent
external quality assurance review as mandated by the International
Standards for the Professional Practice of Internal Auditing (the
Standards) and reporting directly to the committee. This concluded
that Internal Audit is of a high quality and generally complies with
the Standards.
The Group’s Internal Audit Charter was reviewed and updated
in February 2017 and is available on the Company’s website.
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Old Mutual plc
Annual Report and Accounts 2017
Corporate governance
continued
Old Mutual plc
Annual Report and Accounts 2017
How the matter was reviewed
Group Audit
Committee focus area
Primary responsibilities of the Group Audit Committee
Valuation of investments and securities
Total investments and securities were
Financial and capital reporting
£116,290 million at 31 December 2017
(2016: £100,388 million)
Monitor the integrity of the Group’s financial statements and
Investments in associated undertakings and
review the critical accounting policies
joint ventures were £511 million at 31 December
Review and challenge, where necessary, management’s critical
2017 (2016: £542 million). Of this balance,
accounting estimates and judgements in relation to the interim
£198 million (2016: £235 million) relates
and annual financial statements
to Nedbank’s investment in Ecobank
Review the content of the Annual Report and Accounts and
Transnational Incorporated (ETI).
interim results and advise the Board on whether, taken as a
whole, the Annual Report is fair, balanced and understandable
Regulatory provisions in Old Mutual Wealth
Review the going concern and viability statements so as to be
During Q4 2017, Old Mutual Wealth recognised
provisions of £69 million in relation to customer
able to report the committee’s views on these to the Board
remediation costs in connection with the FCA
Consider the Group’s Solvency II capital calculations and
enforcement action following its thematic review.
This action began in 2016 and is still ongoing.
methodologies, with input from the Group Chief Actuary and the
external auditor
The committee considered the valuation
Internal Audit
of investments and received reports from
management and the external auditors.
The vast majority of investments can be valued
using current market practices. However, for
certain private equity investments and others
where there have not been recent market
transactions, more judgement is required.
The committee received and considered reports
from the Old Mutual Wealth Audit Committee
and KPMG, and also considered the treatment
of similar matters by peers.
Preparation for the implementation of SAM and the Twin Peaks
regulatory model in South Africa
Determine whether any training or education sessions are
required by the committee on specific issues
Monitor and review the costs of the managed separation.
Observations of the Committee
The committee was satisfied with the valuation
processes. The committee in particular was
satisfied that no additional provision was required
against ETI.
Approve the appointment of the Group Internal Audit Director
Approve the annual Group Internal Audit plan
Review results of Internal Audit work and management plans
to address issues raised
Review Internal Audit’s annual assessment of controls
Monitor external effectiveness reviews of Internal Audit.
The committee is satisfied that it is appropriate
to record this provision on the basis of the
information available, which indicates that the
business is committed to meeting these costs.
No provision has been made for any potential
fine that may be levied by the FCA.
The committee notes that the FCA action is
ongoing and that additional provisions may be
required for remediation and/or penalties when
the outcome is known.
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External audit
Membership of the committee
Make recommendations concerning the appointment,
Alan Gillespie replaced Nkosana Moyo on the committee during
reappointment and removal of the external auditor
the year. A majority of the committee’s members have competence
Be responsible for the Group’s audit tender process
in accounting and auditing, and the committee as a whole has
Oversee the relationship with the external auditor, including the
experience of insurance, banking and investment.
terms of engagement (including remuneration) and their
effectiveness, independence and objectivity
external auditor
Going concern and viability statement
Agree the policy for and provision of non-audit services
Agree the policy on the employment of former employees of the
We reviewed the materials submitted to the Board in support of
the going concern statement and longer-term viability statement,
Review the qualifications, expertise and resources of the external
and discussed the appropriate duration of and wording for this for
the Board to approve. The viability statement has been heavily
auditor and the effectiveness of the audit process
Approve the annual audit plan, to ensure that it is consistent with
modified to reflect the managed separation timetable.
the scope of the audit engagement and co-ordinated with the
activities of the Group’s Internal Audit function
Set out in the table above is a summary of areas of focus
Review the findings of audits with the external auditor and
during the year, in addition to the committee’s usual oversight
responsibilities, which are described in the table on page 84.
consider management’s responsiveness to audit findings and
recommendations
Monitor the effectiveness of the external audit by a formal annual
Financial Reporting Council
assessment and also the results of any reviews published by the
During September 2017, the Financial Reporting Council (FRC)
Financial Reporting Council’s Audit Quality Review.
requested information in relation to the calculation and presentation
of OMAM, Old Mutual Wealth and OMEM investment performance
metrics, included in the Group’s annual report for the year ended
31 December 2016. We understand that this request was part of an
industry wide assessment, not specific to Old Mutual. Prior to the
Group responding to the FRC, the Group Audit Committee
considered the matter at the meeting in October 2017. The Group
Finance Director responded to the FRC request on 11 October
2017 and subsequently received a response from the FRC on
24 October 2017 to the effect that the FRC felt that this was
satisfactory and the FRC considered this matter closed.
Internal control and risk management
Review the effectiveness of systems for internal control, financial
This response highlighted the Group’s approach to these
disclosures, in particular the allocation of costs in calculating
investment returns.
Liaise with subsidiary audit committees and ensure all relevant
reporting and risk management
issues are communicated to the committee
The FRC’s review only covered the specific disclosures and
Consider the major findings of any internal investigations into
provides no assurance that the report and accounts are correct in
control weaknesses, fraud or misconduct and management’s
all material respects; the FRC did not seek to verify the information
response.
provided but considered compliance with reporting requirements
consistent with their mandate.
Whistleblowing
Solvency II
The committee has received regular reports during the year on the
Group’s Solvency II reporting to the PRA and has received reports
from the Group Chief Actuary and the external auditors concerning
Review arrangements by which employees may confidentially
the Solvency II information as at 31 December 2017 contained
in this Annual Report.
raise concerns about possible improprieties in financial reporting
or other matters.
Consistent with PRA requirements, the final 2017 Solvency II
annual submission will not be submitted until June 2018. The
committee will review these reports, in support of the Board
approval process, in due course.
Alternative profit measure
The Group makes a number of adjustments to IFRS profit to derive
an Adjusted Operating Profit (AOP) measure. This is common
practice among peers. Some of these adjustments eliminate
required IFRS accounting treatments that can distort results,
such as recognising gains or losses on own debt instruments or
recognising certain costs of financing in equity. Other adjustments
seek to adjust the IFRS result in order to arrive at an outcome
that the Board feels is more reflective of underlying profit by,
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Report from the Board Risk Committee
Areas of focus
During our meetings and workshops in 2017, we focused on:
Mike Arnold
Mike Arnold
Chairman of the Board Risk Committee
Chairman of the Board Risk Committee
The Board is responsible for maintaining sound risk management
and internal control systems. In order to meet that objective, it has
mandated the Board Risk Committee (the committee) to reinforce
a strong risk culture by ensuring that the Group fulfils its strategic
objectives within the stated risk framework, that poor practice in risk
management is challenged, and that sustained improvements in
risk management are made. During 2017, the committee continued
to meet that objective by overseeing, reviewing and monitoring
the management of risk during the managed separation process,
in addition to the ongoing oversight of risk management and
governance processes within the Group’s constituent businesses.
The committee met formally six times during the year. Parts of four
of the scheduled meetings were held jointly with the Group Audit
Committee. The Chief Risk Officer, Group Chief Actuary and Group
Internal Audit Director attended all the meetings. The external
auditor was invited to attend all the meetings. As well as these six
meetings, the committee held a workshop session to look more
deeply at the risks of the managed separation, in particular the non-
financial execution risks.
The committee received a report from the Group Chief Risk Officer
on risk and regulatory matters at each of its scheduled meetings
during 2017, in which changes to the Group’s risk profile were
identified and discussed.
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The risks of all aspects of the managed separation, including:
the risks of the strategy itself and the risks to executing it
the effective governance and management of the Company’s
risks and regulatory responsibilities as the Company’s Head
Office winds down its activities
risk appetite and liquidity impacts, both in general and at
different points during execution of the managed separation
The size and composition of the balance sheets of the entities
to be listed as a result of the managed separation
The Group’s Own Risk and Solvency Assessment (ORSA),
under which the Group identifies and assesses its risks and
determines the resources necessary to ensure that its solvency
needs are met and are sufficient to achieve its business strategy
Assessments of the Group’s capital and solvency position,
including the impact of the external macroeconomic environment
and of market volatility
Strategic projects proposed by the Group, including significant
IT projects and the tender offers for the Company’s Tier 1 and
Tier 2 bonds
I received updates between the scheduled meetings through my
regular meetings with the Group Chief Risk Officer and Group
Chief Actuary. The committee also held a private meeting with
the Group Chief Risk Officer.
In connection with the finalisation of the Group’s annual results, the
committee reviewed and approved the Chief Risk Officer’s report
for the Remuneration Committee in order to assist that committee
in its deliberations.
The committee also undertook a review of its performance against
its terms of reference. It complied with the vast majority of these,
and put plans in place to ensure that the remaining items could
be addressed.
During 2017 either Roger Marshall or I personally attended
meetings of the Risk and Audit Committees of the major
subsidiaries of the Group. We have ongoing dialogue with the
independent non-executive directors of those subsidiaries who
chair their committees.
Plans for 2018
In 2018, the committee will be closely involved in overseeing the
execution of the final stages of the Company’s managed separation
strategy, as well as maintaining continued oversight over the key
risks of the Group’s businesses. The committee will be placing
increased reliance on the risk and assurance work undertaken
by the businesses themselves as they prepare to be standalone
businesses and will be reviewing the concentration risk between
OML and OMW.
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Old Mutual plc Annual Report and Accounts 2017Governance
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Old Mutual plc
Annual Report and Accounts 2017
Annual Report and Accounts 2017
Corporate governance
continued
Corporate governance
Corporate governance
continued
continued
Report from the Nomination
and Governance Committee
Report from the Nomination
Report from the Nomination
and Governance Committee
and Governance Committee
Patrick O’Sullivan
Chairman of the Nomination and
Patrick O’Sullivan
Patrick O’Sullivan
Patrick O’Sullivan
Governance Committee
Chairman of the Nomination and
Chairman of the Nomination and
Chairman of the Nomination and
Governance Committee
Governance Committee
Governance Committee
Our role as the Nomination and Governance Committee is
to review and make recommendations to the Board on the
appointment of directors, the structure of the Board and the
Our role as the Nomination and Governance Committee is
Our role as the Nomination and Governance Committee is
appropriate governance arrangements between Old Mutual plc
to review and make recommendations to the Board on the
to review and make recommendations to the Board on the
as the parent company and its underlying major businesses.
appointment of directors, the structure of the Board and the
appointment of directors, the structure of the Board and the
We also review development and succession plans for senior
appropriate governance arrangements between Old Mutual plc
appropriate governance arrangements between Old Mutual plc
executive management and certain appointments to the boards
as the parent company and its underlying major businesses.
as the parent company and its underlying major businesses.
and standing committees of principal subsidiaries in line with the
We also review development and succession plans for senior
We also review development and succession plans for senior
Decision-Making Framework. We receive regular updates on the
executive management and certain appointments to the boards
executive management and certain appointments to the boards
composition of principal subsidiary boards, which include details of
and standing committees of principal subsidiaries in line with the
and standing committees of principal subsidiaries in line with the
the skills represented on them and the subsidiary companies’ own
Decision-Making Framework. We receive regular updates on the
Decision-Making Framework. We receive regular updates on the
succession plans. This has enabled us to ensure that these bodies
composition of principal subsidiary boards, which include details of
composition of principal subsidiary boards, which include details of
are equipped to deliver the Group’s managed separation strategy.
the skills represented on them and the subsidiary companies’ own
the skills represented on them and the subsidiary companies’ own
succession plans. This has enabled us to ensure that these bodies
succession plans. This has enabled us to ensure that these bodies
In planning for refreshing and renewing the Board’s composition,
are equipped to deliver the Group’s managed separation strategy.
are equipped to deliver the Group’s managed separation strategy.
we aim to ensure that changes take place without undue disruption,
that there is an appropriate balance of experience and length of
In planning for refreshing and renewing the Board’s composition,
In planning for refreshing and renewing the Board’s composition,
service, and that our process for identifying and recommending
we aim to ensure that changes take place without undue disruption,
we aim to ensure that changes take place without undue disruption,
candidates as Board directors is formal, rigorous and transparent.
that there is an appropriate balance of experience and length of
that there is an appropriate balance of experience and length of
In identifying candidates and making recommendations, we pay
service, and that our process for identifying and recommending
service, and that our process for identifying and recommending
appropriate regard to the independence of candidates, their ability
candidates as Board directors is formal, rigorous and transparent.
candidates as Board directors is formal, rigorous and transparent.
to meet the expected time commitment involved, and their
In identifying candidates and making recommendations, we pay
In identifying candidates and making recommendations, we pay
suitability and willingness to serve on Board committees.
appropriate regard to the independence of candidates, their ability
appropriate regard to the independence of candidates, their ability
to meet the expected time commitment involved, and their
to meet the expected time commitment involved, and their
During 2017, the committee recommended that Alan Gillespie join
suitability and willingness to serve on Board committees.
suitability and willingness to serve on Board committees.
the Group Audit Committee (GAC) as a replacement for Nkosana
Moyo, who stepped down from the Board. As a former partner of
During 2017, the committee recommended that Alan Gillespie join
During 2017, the committee recommended that Alan Gillespie join
Goldman Sachs in New York from 1990 and a former Chairman
the Group Audit Committee (GAC) as a replacement for Nkosana
the Group Audit Committee (GAC) as a replacement for Nkosana
of Ulster Bank, a subsidiary of Royal Bank of Scotland, from 2001-
Moyo, who stepped down from the Board. As a former partner of
Moyo, who stepped down from the Board. As a former partner of
2008 – as well as previously being a member of the GAC from
Goldman Sachs in New York from 1990 and a former Chairman
Goldman Sachs in New York from 1990 and a former Chairman
2010 to 2013 – Alan brings skills and experience that complement
of Ulster Bank, a subsidiary of Royal Bank of Scotland, from 2001-
of Ulster Bank, a subsidiary of Royal Bank of Scotland, from 2001-
those of the existing committee members. Following Nonkululeko
2008 – as well as previously being a member of the GAC from
2008 – as well as previously being a member of the GAC from
Nyembezi’s resignation, the committee decided not to replace her
2010 to 2013 – Alan brings skills and experience that complement
2010 to 2013 – Alan brings skills and experience that complement
on the Board Risk Committee or on the committee itself, although
those of the existing committee members. Following Nonkululeko
those of the existing committee members. Following Nonkululeko
the situation will be kept under review in the event of any material
Nyembezi’s resignation, the committee decided not to replace her
Nyembezi’s resignation, the committee decided not to replace her
delays to the completion of managed separation.
on the Board Risk Committee or on the committee itself, although
on the Board Risk Committee or on the committee itself, although
the situation will be kept under review in the event of any material
the situation will be kept under review in the event of any material
delays to the completion of managed separation.
delays to the completion of managed separation.
As managed separation continues, the committee has further
intensified its focus on the composition of the boards and senior
executive management of the Group’s constituent businesses,
As managed separation continues, the committee has further
As managed separation continues, the committee has further
including their development and succession plans. In particular,
intensified its focus on the composition of the boards and senior
intensified its focus on the composition of the boards and senior
the committee oversaw the appointment of the CEO, CFO and new
executive management of the Group’s constituent businesses,
executive management of the Group’s constituent businesses,
non-executive directors of Old Mutual Group Holdings (OMGH),
including their development and succession plans. In particular,
including their development and succession plans. In particular,
the South African holding company of OMEM and Nedbank, as
the committee oversaw the appointment of the CEO, CFO and new
the committee oversaw the appointment of the CEO, CFO and new
well as the appointment of a new CFO and Audit Committee
non-executive directors of Old Mutual Group Holdings (OMGH),
non-executive directors of Old Mutual Group Holdings (OMGH),
Chairman at OMW.
the South African holding company of OMEM and Nedbank, as
the South African holding company of OMEM and Nedbank, as
well as the appointment of a new CFO and Audit Committee
well as the appointment of a new CFO and Audit Committee
In addition to changes mandated by managed separation, the
Chairman at OMW.
Chairman at OMW.
committee has been mindful of the requirements of the Twin
Peaks regulation in South Africa to ensure the relevant boards
In addition to changes mandated by managed separation, the
In addition to changes mandated by managed separation, the
have the necessary facilities and governance arrangements to
committee has been mindful of the requirements of the Twin
committee has been mindful of the requirements of the Twin
meet regulatory expectations. We have also considered the timing
Peaks regulation in South Africa to ensure the relevant boards
Peaks regulation in South Africa to ensure the relevant boards
and process for the winding-down of the Company’s Head Office in
have the necessary facilities and governance arrangements to
have the necessary facilities and governance arrangements to
London, including the expected times of departure from the Group
meet regulatory expectations. We have also considered the timing
meet regulatory expectations. We have also considered the timing
of the members of the plc Exco.
and process for the winding-down of the Company’s Head Office in
and process for the winding-down of the Company’s Head Office in
London, including the expected times of departure from the Group
London, including the expected times of departure from the Group
In addition to our work described above, we continued during
of the members of the plc Exco.
of the members of the plc Exco.
the year to monitor talent management and diversity initiatives,
progress against action items identified by the previous year’s
In addition to our work described above, we continued during
In addition to our work described above, we continued during
externally-facilitated Board effectiveness review, and the process
the year to monitor talent management and diversity initiatives,
the year to monitor talent management and diversity initiatives,
for conducting the 2017 review.
progress against action items identified by the previous year’s
progress against action items identified by the previous year’s
externally-facilitated Board effectiveness review, and the process
externally-facilitated Board effectiveness review, and the process
The committee considers the current Old Mutual plc Board
for conducting the 2017 review.
for conducting the 2017 review.
composition to be suitable for the Group’s business requirements,
especially within the context of managed separation and
The committee considers the current Old Mutual plc Board
The committee considers the current Old Mutual plc Board
a company in the process of winding-down its operations.
composition to be suitable for the Group’s business requirements,
composition to be suitable for the Group’s business requirements,
The existing Board will stay in place until the managed separation
especially within the context of managed separation and
especially within the context of managed separation and
process is materially complete, with planned retirements and the
a company in the process of winding-down its operations.
a company in the process of winding-down its operations.
filling of casual vacancies suspended. However, the position remains
The existing Board will stay in place until the managed separation
The existing Board will stay in place until the managed separation
under active review, for example in the event of any unexpected
process is materially complete, with planned retirements and the
process is materially complete, with planned retirements and the
material delay to managed separation or regulatory change.
filling of casual vacancies suspended. However, the position remains
filling of casual vacancies suspended. However, the position remains
under active review, for example in the event of any unexpected
under active review, for example in the event of any unexpected
Following the expected de-listing of the Company’s shares as part
material delay to managed separation or regulatory change.
material delay to managed separation or regulatory change.
of the managed separation, the Board will be rationalised to suit its
status as a subsidiary company with listed debt securities.
Following the expected de-listing of the Company’s shares as part
Following the expected de-listing of the Company’s shares as part
of the managed separation, the Board will be rationalised to suit its
of the managed separation, the Board will be rationalised to suit its
How did we engage with our shareholders
status as a subsidiary company with listed debt securities.
status as a subsidiary company with listed debt securities.
and how did it change from previous years?
Following the launch of the managed separation in 2016, we
How did we engage with our shareholders
How did we engage with our shareholders
adapted our investor relations (IR) programme to support the
and how did it change from previous years?
and how did it change from previous years?
change in plc strategy. We significantly accentuated the
Following the launch of the managed separation in 2016, we
Following the launch of the managed separation in 2016, we
underlying operations of the four businesses, their performance
adapted our investor relations (IR) programme to support the
adapted our investor relations (IR) programme to support the
and their management teams. We also increased the disclosure
change in plc strategy. We significantly accentuated the
change in plc strategy. We significantly accentuated the
around the cost reduction process and the path to closure of the
underlying operations of the four businesses, their performance
underlying operations of the four businesses, their performance
Head Office activity. Accordingly, we de-emphasised the marketing
and their management teams. We also increased the disclosure
and their management teams. We also increased the disclosure
of the equity and debt investment case of Old Mutual plc as a
around the cost reduction process and the path to closure of the
around the cost reduction process and the path to closure of the
single group entity.
Head Office activity. Accordingly, we de-emphasised the marketing
Head Office activity. Accordingly, we de-emphasised the marketing
of the equity and debt investment case of Old Mutual plc as a
of the equity and debt investment case of Old Mutual plc as a
During 2017 we continued to make significant efforts to educate the
single group entity.
single group entity.
public markets and to communicate openly with our shareholders,
institutional debt and equity investors and sell-side analysts
During 2017 we continued to make significant efforts to educate the
During 2017 we continued to make significant efforts to educate the
globally. Old Mutual’s investor base is very diverse in both investor
public markets and to communicate openly with our shareholders,
public markets and to communicate openly with our shareholders,
style and geographic location and the Group has approximately
institutional debt and equity investors and sell-side analysts
institutional debt and equity investors and sell-side analysts
478,000 retail shareholders.
globally. Old Mutual’s investor base is very diverse in both investor
globally. Old Mutual’s investor base is very diverse in both investor
style and geographic location and the Group has approximately
style and geographic location and the Group has approximately
478,000 retail shareholders.
478,000 retail shareholders.
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
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We maintained an active dialogue with shareholders through our
planned IR activities and also through responding to their queries.
In addition, in 2017 we considered the IR needs of the separating
businesses. We began targeting specific institutional shareholders
relevant to each business and monitored the businesses’ progress
in engaging with their future investor bases. As existing listed
entities, OMAM and Nedbank already had their own IR teams in
place; during 2017 the Finance Directors of OMEM and OMW
established IR teams supported by the plc IR team to develop
and run their own IR within the centrally coordinated programme.
Where did we meet with investors
and research analysts in 2017
and how will this change in 2018?
During 2017, we conducted investor meetings in the UK,
South Africa and North America, involving the executives
and/or senior management from the plc, OMEM, Nedbank,
OMAM and OMW teams. All four businesses continued to build
their own relationships with shareholders, potential investors and
sell-side analysts.
The most significant outputs of this co-ordinated activity were two
capital markets events in November 2017: in Johannesburg for our
South African-managed businesses, OMEM and Nedbank, and in
London for UK-based OMW. These were attended in person by
some 70 and 85 market participants respectively, with many more
watching the webcast. Both events provided a strategic overview of
the businesses, financial highlights and detailed expositions of the
underlying operating divisions. There were extensive opportunities
for attendees to interact with the management teams.
The events received positive feedback and are summarised below:
OMEM and Nedbank Showcase 1 November 2017
Welcome and introduction – Bruce Hemphill,
Group Chief Executive, Old Mutual plc
Update on managed separation – Rob Leith,
Director of Managed Separation, Old Mutual plc
CEO overview and introduction to the business reviews –
Peter Moyo, CEO Designate OML
Nedbank overview – Mike Brown & Raisibe Morathi,
Chief Executive & CFO Nedbank
Presentation by each of the OMEM business units CEOs
Financial highlights – Iain Williamson, COO OMEM
Risk and capital – Richard Treagus, CRO OMEM
OMW Showcase 15 November 2017
Welcome and introduction – Bruce Hemphill,
Group Chief Executive, Old Mutual plc
Strategic Overview – Paul Feeney, CEO OMW
Advice – Andy Thompson, CEO Advice
OMW Investors – Paul Simpson, CEO OMW Investors
Quilter Cheviot – Martin Baines, CEO Quilter Cheviot
UK Platform & Heritage – Steven Levin, CEO UK
Platform & Heritage
International – Peter Kenny, MD International
Financials – Tim Tookey, CFO OMW
Extensive and tailored international roadshows took place after
these events. Centralised feedback was then considered as part
of the ongoing strategic planning for the managed separation.
Copies of all materials are available on the Group’s website.
We anticipate similar capital
markets events during 2018 as part
of the wider investor marketing of
the managed separation process.
The Group Finance Director continued one-to-one meetings with
sell-side analysts in the UK and South Africa. Currently 12 sell-side
analysts actively publish research on the Company. We encourage
sell-side analysts to cover the Company, giving investors their
opinions on the Group’s valuation, performance and the business
environment in which it operates, and also to make meaningful
comparisons with our peers.
MiFID II came into force from January 2018 and we expect this to
further increase direct engagement with the investor bases that
we already have. It is widely expected that the number of covering
sell-side analysts will decrease in the future. However, given the
managed separation, we expect the standalone businesses to
develop different and, in aggregate, larger sell-side research
coverage over time. The IR teams will take increasing responsibility
for the management of research relationships and interactions with
our shareholders as well as the management of the prospective
new shareholder bases.
Copies of all investor presentations and, where appropriate,
transcripts are posted on the Company’s website so that they are
accessible to shareholders.
We anticipate similar capital markets events during 2018 as part of
the wider investor marketing of the managed separation process.
Number of investor events during 2017
(excluding sell-side and governance meetings)
244 events in total
214 with management (30 IR only)
188 institutions
How did we manage corporate governance
relationships with investors in 2017
and how will this change in 2018?
The Chairman makes contact with our major shareholders and
meets them as required. The Senior Independent Director is also
available to shareholders.
During 2017, we maintained extensive governance dialogue with
investors and their advisers as part of the execution of managed
separation. Matters raised in these governance-focused meetings
during 2017 and early 2018 included the Company’s strategy,
regulatory developments, remuneration, succession planning,
diversity and transformation. The IR team updates the Board on
issues arising from communication with the investment community.
In 2018, we expect the Chairmen and non-executives of individual
businesses to participate in governance meetings as part of their
own preparation processes for managed separation.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Corporate governance
continued
Corporate governance
continued
What are the arrangements for
Annual General Meetings (AGMs)?
The Board uses the AGM, held at the Company’s Head Office in
What are the arrangements for
London each year, to comment on the Group’s results for the
Annual General Meetings (AGMs)?
previous year and developments during the current year to date.
The Board uses the AGM, held at the Company’s Head Office in
Shareholders also have the opportunity to ask the Board questions.
London each year, to comment on the Group’s results for the
The AGM is webcast and a record of the proceedings is also made
previous year and developments during the current year to date.
available on the Company’s website shortly after the end of the
Shareholders also have the opportunity to ask the Board questions.
meeting. All formal business items at the AGM are conducted
The AGM is webcast and a record of the proceedings is also made
on a poll, rather than by a show of hands. The Company’s share
available on the Company’s website shortly after the end of the
registrars ensure that all properly submitted proxy votes are
meeting. All formal business items at the AGM are conducted
counted, and a senior member of the UK registrar’s staff acts
on a poll, rather than by a show of hands. The Company’s share
as scrutineer to ensure that votes cast are correctly received
registrars ensure that all properly submitted proxy votes are
and recorded.
counted, and a senior member of the UK registrar’s staff acts
as scrutineer to ensure that votes cast are correctly received
Each substantially separate issue at the AGM is dealt with by
and recorded.
a separate resolution and the business of the meeting always
includes a resolution on the receipt and adoption of the Report
Each substantially separate issue at the AGM is dealt with by
and Accounts.
a separate resolution and the business of the meeting always
includes a resolution on the receipt and adoption of the Report
The notice of AGM is sent out to shareholders who have elected
and Accounts.
or are entitled to receive physical documents in time to arrive in
the ordinary course of the post at least 20 working days before the
The notice of AGM is sent out to shareholders who have elected
date of the meeting.
or are entitled to receive physical documents in time to arrive in
the ordinary course of the post at least 20 working days before the
Who will be standing for election
date of the meeting.
or re-election at this year’s AGM?
All the current directors will stand for re-election at this year’s AGM
Who will be standing for election
and the Board will recommend that every director who is standing
or re-election at this year’s AGM?
should be re-elected. Brief biographical details of all the directors
All the current directors will stand for re-election at this year’s AGM
are contained in the Board of Directors section earlier in this
and the Board will recommend that every director who is standing
Annual Report. Additional information about them, and further
should be re-elected. Brief biographical details of all the directors
details of the basis on which the Board has assessed each
are contained in the Board of Directors section earlier in this
director’s performance and recommends their re-election,
Annual Report. Additional information about them, and further
are set out in the shareholder circular relating to the AGM.
details of the basis on which the Board has assessed each
director’s performance and recommends their re-election,
What is the Company’s issued share capital and
are set out in the shareholder circular relating to the AGM.
who are the Company’s largest shareholders?
The Company’s issued share capital at 31 December 2017
What is the Company’s issued share capital and
was £563,738,888 divided into 4,932,715,269 ordinary shares
who are the Company’s largest shareholders?
of 113⁄7p each (2016: £563,421,277 divided into 4,929,936,178
The Company’s issued share capital at 31 December 2017
ordinary shares of 113⁄7p each). The total number of voting rights
was £563,738,888 divided into 4,932,715,269 ordinary shares
in the Company’s issued ordinary share capital at 31 December
of 113⁄7p each (2016: £563,421,277 divided into 4,929,936,178
2017 was also 4,932,715,269.
ordinary shares of 113⁄7p each). The total number of voting rights
in the Company’s issued ordinary share capital at 31 December
During 2017, the Company issued 2,779,091 ordinary shares of
2017 was also 4,932,715,269.
113⁄7p each under employee share schemes at an average price
of £1.5984 per share.
During 2017, the Company issued 2,779,091 ordinary shares of
113⁄7p each under employee share schemes at an average price
of £1.5984 per share.
At 31 December 2017, shareholder authorities were in force
enabling the Company to make market purchases of, and/or
to purchase pursuant to contingent purchase contracts relating
At 31 December 2017, shareholder authorities were in force
to each of the overseas exchanges on which its shares are
enabling the Company to make market purchases of, and/or
listed, its own shares up to an aggregate of 492,992,500 shares.
to purchase pursuant to contingent purchase contracts relating
It bought back no shares during 2017 or during the period up to
to each of the overseas exchanges on which its shares are
14 March 2018.
listed, its own shares up to an aggregate of 492,992,500 shares.
It bought back no shares during 2017 or during the period up to
In the period 1 January to 14 March 2018, the Company issued
14 March 2018.
a further 64,308 shares under its employee share schemes at an
average price of £1.5907 each. As a result, the Company’s issued
In the period 1 January to 14 March 2018, the Company issued
share capital at 14 March 2018 was £563,746,237.37 divided into
a further 64,308 shares under its employee share schemes at an
4,932,779,577 ordinary shares of 113⁄7p each. The total number of
average price of £1.5907 each. As a result, the Company’s issued
voting rights at that date was also 4,932,779,577.
share capital at 14 March 2018 was £563,746,237.37 divided into
4,932,779,577 ordinary shares of 113⁄7p each. The total number of
There have been no other notifications of changes to the interests
voting rights at that date was also 4,932,779,577.
set out in the table of substantial interests in the Company’s shares
(below) between 31 December 2017 and 14 March 2018, save that
There have been no other notifications of changes to the interests
on 6 February 2018, Coronation Asset Management (Pty) Limited
set out in the table of substantial interests in the Company’s shares
increased its interests in voting rights in relation to the Company’s
(below) between 31 December 2017 and 14 March 2018, save that
shares to 198,488,578 or 4.02%.
on 6 February 2018, Coronation Asset Management (Pty) Limited
increased its interests in voting rights in relation to the Company’s
How can I find out about the rights and
shares to 198,488,578 or 4.02%.
obligations attaching to the Company’s shares?
The rights and obligations attaching to the Company’s ordinary
How can I find out about the rights and
shares are those conventional for a publicly-listed UK company.
obligations attaching to the Company’s shares?
The Governance section of the Company’s website provides a
The rights and obligations attaching to the Company’s ordinary
summary of these (along with certain other information relating to
shares are those conventional for a publicly-listed UK company.
dividends, directors and amendments to the Company’s articles
The Governance section of the Company’s website provides a
of association) and the Company’s current articles of association.
summary of these (along with certain other information relating to
dividends, directors and amendments to the Company’s articles
What is the Company’s dividend policy
of association) and the Company’s current articles of association.
and what dividend will be paid for 2017?
In March 2016 we announced a new capital management policy
What is the Company’s dividend policy
for the period of the managed separation, targeting a dividend
and what dividend will be paid for 2017?
cover equivalent to 2.5 to 3.5 times Group AOP earnings for
In March 2016 we announced a new capital management policy
each annual reporting period, with the first interim dividend cover
for the period of the managed separation, targeting a dividend
equivalent to three times Group AOP earnings for the first interim
cover equivalent to 2.5 to 3.5 times Group AOP earnings for
period. The revised policy has provided the flexibility to balance
each annual reporting period, with the first interim dividend cover
the requirements of our multiple stakeholders and our businesses
equivalent to three times Group AOP earnings for the first interim
as they prepare for managed separation by enabling them to
period. The revised policy has provided the flexibility to balance
both continue to invest in order to drive enhanced performance
the requirements of our multiple stakeholders and our businesses
and strengthen their balance sheets in preparation for being
as they prepare for managed separation by enabling them to
standalone businesses.
both continue to invest in order to drive enhanced performance
and strengthen their balance sheets in preparation for being
Consistent with this policy, the Board has declared a second
standalone businesses.
interim dividend for 2017 of 3.57p per share (or its equivalent in
other applicable currencies). This, together with the first interim
Consistent with this policy, the Board has declared a second
dividend of 3.53p per share paid in October 2017, equates to
interim dividend for 2017 of 3.57p per share (or its equivalent in
3.42 times AOP earnings cover for the full year.
other applicable currencies). This, together with the first interim
dividend of 3.53p per share paid in October 2017, equates to
3.42 times AOP earnings cover for the full year.
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Old Mutual plc Annual Report and Accounts 2017 Old Mutual plc
Annual Report and Accounts 2017
Dividends in currencies other than sterling will be paid in local
currency on the basis of the average effective exchange rate after
taking into account hedging activities and timing of remittances for
the relevant period. Accordingly, shareholders in South Africa and
Namibia will receive the full-year effective hedge rate achieved
by the Company on rand forward sales undertaken in respect of
rand flows supporting the 2017 interim dividends. Dividends to
shareholders in Zimbabwe, Malawi and Sweden will be converted
into local currency at the daily weighted average exchange rate
for the six-month period from 1 July to 31 December 2017.
Further information on the second interim dividend for 2017
(including the currency equivalents) is given in the Shareholder
Information section at the back of this Annual Report.
The capital management policy is intended to remain in place until
the shares of Old Mutual plc are de-listed. The proposed future
Capital Management Policy of the independent Old Mutual Limited
and Quilter businesses are presented in their respective Business
Review sections on pages 36 and 57.
Substantial interests in the Company’s shares
At 31 December 2017, the following substantial interests in voting rights in relation to the Company’s shares had been declared to the
Company in accordance with the Disclosure Guidance and Transparency Rules:
Public Investment Corporation of the Republic of South Africa
BlackRock Inc.
Coronation Asset Management (Pty) Limited
Norges Bank
Shareholder analysis (as at 31 December 2017)
1
9
8
6 7
5
4
3
2
1. South African
institutional 44.8%
2. UK institutional 13.8%
3. USA institutional 12.0%
4. Rest of Europe
institutional 4.7%
5. Rest of the world
institutional 4.3%
6. South African retail 4.7%
7. BEE 1.6%
8. Policyholders 1.3%
9. Miscellaneous 12.8%
Source: Nasdaq
Why is the Company paying a second interim
dividend instead of a final dividend?
As with 2016, the final dividend for 2017 has been declared as
a second interim dividend, which does not require shareholder
approval at the AGM. Consequently, the second interim dividend
is revocable by the Board until paid. This means that the Company
is able to pay the dividend at the end of April. This also means that,
under Solvency II rules, the Company’s ordinary shares continue
to qualify as eligible regulatory capital.
Number of
voting rights
% of
voting rights
535,592,482
10.86%
261,673,856
151,352,245
147,952,754
5.3%
3.07%
2.99%
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What other factors are relevant in
determining dividend payments?
In addition to giving specific consideration to the Company’s
dividend policy, all dividend declarations are assessed by the
Board in the context of their impact on the viability of the Company,
as described elsewhere in this report.
Dividend declarations must also take account of the distributable
reserves of the holding company, Old Mutual plc, which were
£2,966 million at 31 December 2017.
The Group capital management policy also takes account of
provisions in the OMLAC(SA) demutualisation agreement which
restrict the application of South African dividend remittances to
the payment of Company dividends.
What dividends were waived during 2017?
During 2017, trustees of the Company’s, Quilter Cheviot’s and
the Company’s South African subsidiary’s employee benefit trusts
waived dividends on certain shares in the Company held by them
relating to awards where the scheme participants were not entitled
to receive dividends pending vesting. The total number of shares
concerned was 32,015,773 for the second interim dividend for 2016
and 30,260,023 for the first interim dividend for 2017.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Corporate governance
continued
Corporate governance
continued
Audit arrangements
Who is the Company’s external auditor
Audit arrangements
and how much is it paid?
KPMG LLP (or, before 2014, its related associated entity KPMG
Who is the Company’s external auditor
Audit Plc) has been the Company’s external auditor since 1999.
and how much is it paid?
We have made arrangements with KPMG LLP for appropriate audit
KPMG LLP (or, before 2014, its related associated entity KPMG
partner rotation in line with the requirements of the UK Auditing
Audit Plc) has been the Company’s external auditor since 1999.
Practices Board. The current audit engagement partner in the UK,
We have made arrangements with KPMG LLP for appropriate audit
Jonathan Holt, assumed this role in June 2016.
partner rotation in line with the requirements of the UK Auditing
Practices Board. The current audit engagement partner in the UK,
The Group Audit Committee report above describes how that
Jonathan Holt, assumed this role in June 2016.
committee satisfies itself about the external auditor’s performance
and its recommendation to reappoint KPMG LLP (which has
The Group Audit Committee report above describes how that
expressed its willingness to continue in office) as auditor for
committee satisfies itself about the external auditor’s performance
2018 at this year’s AGM. The Company has not entered into
and its recommendation to reappoint KPMG LLP (which has
any contractual restriction preventing it from considering a
expressed its willingness to continue in office) as auditor for
change of auditor.
2018 at this year’s AGM. The Company has not entered into
any contractual restriction preventing it from considering a
During the year ended 31 December 2017, fees paid by the Group
change of auditor.
to KPMG LLP and its associates totalled £18.1 million for audit
services (2016: £15.1 million) and £1.8 million for tax compliance,
During the year ended 31 December 2017, fees paid by the Group
audit-related assurance, corporate finance transactions and other
to KPMG LLP and its associates totalled £18.1 million for audit
non-audit services (2016: £3.7 million). In addition to the above,
services (2016: £15.1 million) and £1.8 million for tax compliance,
Nedbank paid a further £4.3 million (2016: £3.3 million) to Deloitte
audit-related assurance, corporate finance transactions and other
in respect of joint audit arrangements.
non-audit services (2016: £3.7 million). In addition to the above,
Nedbank paid a further £4.3 million (2016: £3.3 million) to Deloitte
The Group Audit Committee has approved detailed guidelines
in respect of joint audit arrangements.
as part of the Group’s policy on non-audit services, which are
summarised in the Corporate Governance section of our website.
The Group Audit Committee has approved detailed guidelines
as part of the Group’s policy on non-audit services, which are
summarised in the Corporate Governance section of our website.
The Board has overall
responsibility for the Group’s
The Board has overall
system of internal control and
responsibility for the Group’s
for reviewing its effectiveness,
system of internal control and
while the implementation of
for reviewing its effectiveness,
internal control systems is the
while the implementation of
responsibility of management.
internal control systems is the
responsibility of management.
Risk assessment and financial
control environment
Risk assessment and financial
What is the Company’s internal control
control environment
environment and how is it monitored?
The Group’s Finance function actively monitors the quality of the
What is the Company’s internal control
Group’s financial reporting controls, by seeking positive affirmation
environment and how is it monitored?
from its principal subsidiary businesses twice-yearly that key
The Group’s Finance function actively monitors the quality of the
controls safeguarding reliable, accurate and timely Group external
Group’s financial reporting controls, by seeking positive affirmation
IFRS reporting are in place and operating effectively.
from its principal subsidiary businesses twice-yearly that key
controls safeguarding reliable, accurate and timely Group external
Management assessed the effectiveness of this framework at
IFRS reporting are in place and operating effectively.
31 December 2017, based on the criteria described in ‘Internal
Control – Integrated Framework’ issued by the Committee of
Management assessed the effectiveness of this framework at
Sponsoring Organizations of the Treadway Commission, and
31 December 2017, based on the criteria described in ‘Internal
concluded that it was effective. Management reports on the status
Control – Integrated Framework’ issued by the Committee of
of these controls to the Group Audit Committee, and this has
Sponsoring Organizations of the Treadway Commission, and
enabled the committee to support the Board in concluding that
concluded that it was effective. Management reports on the status
it can rely on the operation of these controls as part of its review
of these controls to the Group Audit Committee, and this has
of internal control effectiveness referred to above.
enabled the committee to support the Board in concluding that
it can rely on the operation of these controls as part of its review
An ongoing process for identifying, evaluating and managing the
of internal control effectiveness referred to above.
significant risks faced by the Group and its businesses has been in
place for the year ended 31 December 2017 and up to this report’s
An ongoing process for identifying, evaluating and managing the
date of approval, as described in more detail below. Further details
significant risks faced by the Group and its businesses has been in
of the Group’s risk and capital management disciplines are
place for the year ended 31 December 2017 and up to this report’s
described earlier in this Annual Report.
date of approval, as described in more detail below. Further details
of the Group’s risk and capital management disciplines are
The Board has overall responsibility for the Group’s system of
described earlier in this Annual Report.
internal control and for reviewing its effectiveness, while the
implementation of internal control systems is the responsibility
The Board has overall responsibility for the Group’s system of
of management. Executive management has implemented an
internal control and for reviewing its effectiveness, while the
internal control system designed to help ensure:
implementation of internal control systems is the responsibility
of management. Executive management has implemented an
The effective and efficient operation of the Group’s businesses
internal control system designed to help ensure:
by enabling management to respond appropriately to significant
risks to achieving the Group’s business objectives
The effective and efficient operation of the Group’s businesses
The safeguarding of assets from inappropriate use or from loss
by enabling management to respond appropriately to significant
and fraud and ensuring that liabilities are identified and managed
risks to achieving the Group’s business objectives
The quality of internal and external reporting
The safeguarding of assets from inappropriate use or from loss
Compliance with applicable laws and regulations, and with
internal policies on the conduct of business.
and fraud and ensuring that liabilities are identified and managed
internal policies on the conduct of business.
The quality of internal and external reporting
Compliance with applicable laws and regulations, and with
The system of internal control is designed to manage, rather
than eliminate, the risk of failure to achieve the Group’s business
objectives. It can only provide reasonable, and not absolute,
The system of internal control is designed to manage, rather
assurance against material misstatement or loss.
than eliminate, the risk of failure to achieve the Group’s business
objectives. It can only provide reasonable, and not absolute,
assurance against material misstatement or loss.
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
The Group’s actions to review the effectiveness of the system
of internal control include:
An annual review of the risk assessment procedures,
control environment considerations, information and
communication and monitoring procedures at Group level and
within each business. This review covers all material controls
including financial, operational and compliance controls and
risk management systems
A certification process, under which all businesses are required
to confirm that they have undertaken risk management in
accordance with the Group risk framework, that they have
reviewed the effectiveness of the system of internal controls, that
internal policies have been complied with, and that no significant
risks or issues are known which have not been reported in
accordance with policy
Regular reviews of the effectiveness of the system of internal
control by the Group Audit Committee, which receives reports
from the Group Internal Audit function. The committee also
receives reports from the external auditor, which include details
of significant internal control matters that have been identified
during the course of its work.
These activities supplement the regular risk management activities
which are performed on an ongoing basis.
The certification process described above does not apply to some
joint ventures where the Group does not exercise full management
control. In these cases, the Company monitors the internal control
environment and the potential impact on the Group through
representation on the board of the entity concerned.
The Board reviewed the effectiveness of the system of internal
control during and at the end of the year. Our annual internal
control assessment has not highlighted any material failings.
We remain committed to having a robust internal control
environment across the Group.
The Board confirms that, in accordance with the processes
described above and in the Risks section of this Annual Report,
it has, in conjunction with the Board Risk Committee, carried out
a robust assessment of the principal risks facing the Company,
including those that would threaten its business model, future
performance, solvency or liquidity. The relevant risks and the
manner in which they are being managed or mitigated are
explained in more detail in the Risks section of this Annual Report.
What is the role of Group Internal Audit?
The purpose of Group Internal Audit (GIA) is to help the Board
and executive management to protect the assets, reputation
and sustainability of the Group. GIA does this by assessing
whether all significant risks are identified and appropriately
reported by management and the Risk function to the Board
and executive management; assessing whether they are
adequately controlled; and challenging executive management
to improve the effectiveness of governance, risk management
and internal controls.
GIA’s work is focused on the areas of greatest risk to the Group,
both current and emerging, as determined by a comprehensive
risk-based planning process. The Group Audit Committee
approves the annual Internal Audit plan and any subsequent
material amendments to it and also satisfies itself that GIA has
adequate resources to discharge its function. The Board is able
to confirm that this was the case for 2017.
There are Internal Audit teams in each of our major businesses.
The heads of Internal Audit in the Group’s wholly-owned
subsidiaries report directly to the Group Internal Audit Director
(GIAD). Heads of audit in majority-owned subsidiaries have a dual
reporting line to the GIAD.
During 2017, the GIAD reported functionally to the Chairman of the
Group Audit Committee and administratively to the Group Chief
Executive. The GIAD attends all meetings of the Group Audit
Committee, and has unrestricted access to the Group Chief
Executive and the Chairman of the Board, as well as open
invitations to attend any meetings of the subsidiary audit
committees, the Board Risk Committee and the plc Exco.
Internal Audit teams across the Group’s businesses use a single
audit methodology which meets the international standards set by
the Institute of Internal Auditors. Issues raised by Internal Audit in
the course of its work are discussed with management, who are
responsible for implementing agreed actions to address them
within an appropriate and agreed timeframe.
The GIAD submits formal reports to each meeting of the Group
Audit Committee, summarising the results of Internal Audit
activity, management’s progress in addressing issues and
other significant matters.
As reported last year, an external quality assurance process is
now in place for internal audit.
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We remain committed to having
a robust internal control
environment across the Group.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Corporate governance
continued
Corporate governance
continued
Can you confirm that the Company
is a going concern?
The Group’s financial position, its cash flows, liquidity position and
Can you confirm that the Company
borrowing facilities are described in the Financial Review and Risks
is a going concern?
sections of this Annual Report. In addition, Notes F1 to F5 to the
The Group’s financial position, its cash flows, liquidity position and
financial statements include the Group’s objectives, policies and
borrowing facilities are described in the Financial Review and Risks
processes for managing its capital (solvency risk) and liquidity
sections of this Annual Report. In addition, Notes F1 to F5 to the
risks, and sets out details of the principal risks related to financial
financial statements include the Group’s objectives, policies and
instrument market risk, credit risk and insurance risk as well as
processes for managing its capital (solvency risk) and liquidity
their sensitivities.
risks, and sets out details of the principal risks related to financial
instrument market risk, credit risk and insurance risk as well as
The preceding sections of the Annual Report referred to above also
their sensitivities.
explain the basis on which the Group generates and preserves
value over the longer term and the strategy for delivering its
The preceding sections of the Annual Report referred to above also
objectives. The Group’s capital and cash flow under the Solvency II
explain the basis on which the Group generates and preserves
Directive are stress tested and are within the limits described in the
value over the longer term and the strategy for delivering its
Risks section in order to identify those risks that would threaten the
objectives. The Group’s capital and cash flow under the Solvency II
Group’s solvency and liquidity. As a consequence, the directors
Directive are stress tested and are within the limits described in the
believe that the Group is in a strong financial position and is well
Risks section in order to identify those risks that would threaten the
placed to manage its business risks successfully.
Group’s solvency and liquidity. As a consequence, the directors
believe that the Group is in a strong financial position and is well
Notwithstanding the Group’s declared strategy of managed
placed to manage its business risks successfully.
separation, the Board has a reasonable expectation, based on
its enquiries, that the Company and Group in their present form
Notwithstanding the Group’s declared strategy of managed
have adequate resources to continue in operational existence for
separation, the Board has a reasonable expectation, based on
the next 12 months. Accordingly, it continues to adopt the going
its enquiries, that the Company and Group in their present form
concern basis in preparing the financial statements.
have adequate resources to continue in operational existence for
the next 12 months. Accordingly, it continues to adopt the going
The Board’s assessment of going concern is underpinned by
concern basis in preparing the financial statements.
the enquiries and assessments it has made in the course of its
assessment of the Group’s viability, which is set out in further
The Board’s assessment of going concern is underpinned by
detail below.
the enquiries and assessments it has made in the course of its
assessment of the Group’s viability, which is set out in further
Is the Board satisfied that the Group’s
detail below.
businesses are viable in the longer term?
The Board routinely assesses the reasonableness of the
Is the Board satisfied that the Group’s
expectation that the Company and Group will have adequate
businesses are viable in the longer term?
resources to continue in operational existence for the foreseeable
The Board routinely assesses the reasonableness of the
future. In view of the Company’s strategy to divide the Group into
expectation that the Company and Group will have adequate
its constituent businesses, the Board has had to make an
resources to continue in operational existence for the foreseeable
assessment that both the Company itself and each of the Group’s
future. In view of the Company’s strategy to divide the Group into
current businesses will be able to continue in operational existence
its constituent businesses, the Board has had to make an
on that basis.
assessment that both the Company itself and each of the Group’s
current businesses will be able to continue in operational existence
In addition to enabling the Board to conclude that the Company is a
on that basis.
going concern, this assessment has enabled the Board to confirm
that the Company and wider Group will remain viable, such that
In addition to enabling the Board to conclude that the Company is a
they are able to settle their liabilities as they fall due in the longer
going concern, this assessment has enabled the Board to confirm
term – meaning for this purpose the period up to the end of 2020.
that the Company and wider Group will remain viable, such that
Although, as a result of the managed separation, it is expected that
they are able to settle their liabilities as they fall due in the longer
the Group will cease to exist in its current form during 2018 and will
term – meaning for this purpose the period up to the end of 2020.
certainly not exist by 2020, an analysis of the companies which
Although, as a result of the managed separation, it is expected that
comprise each of the current Group’s three businesses indicates
the Group will cease to exist in its current form during 2018 and will
that each business will be viable on a standalone basis. In addition,
certainly not exist by 2020, an analysis of the companies which
although it is expected that the Company will cease to be the listed
comprise each of the current Group’s three businesses indicates
parent company of the Group in 2018, the Company itself will retain
that each business will be viable on a standalone basis. In addition,
sufficient resources to meet its obligations in its reduced state and
although it is expected that the Company will cease to be the listed
parent company of the Group in 2018, the Company itself will retain
sufficient resources to meet its obligations in its reduced state and
will continue to exist in the new structure. In reaching this
conclusion, the Board has assessed projections covering the
period from 2018 to 2020, as set out in the Group’s rolling three-
will continue to exist in the new structure. In reaching this
year business plan, which was formally approved by the Board.
conclusion, the Board has assessed projections covering the
period from 2018 to 2020, as set out in the Group’s rolling three-
These projections include analysis of the Group’s and businesses’
year business plan, which was formally approved by the Board.
current and prospective financial performance and cash flows on
which forecasts of its regulatory capital, liquidity and financial
These projections include analysis of the Group’s and businesses’
positions have been based.
current and prospective financial performance and cash flows on
which forecasts of its regulatory capital, liquidity and financial
The Board considers a three-year outlook when considering the
positions have been based.
longer-term viability of the businesses of the Group. This is the
period for which the Group prepares its detailed business plan
The Board considers a three-year outlook when considering the
which sets out the businesses’ prospective operating performance
longer-term viability of the businesses of the Group. This is the
and financial position, including its capital position.
period for which the Group prepares its detailed business plan
which sets out the businesses’ prospective operating performance
Some Group businesses write business that is very long-term in
and financial position, including its capital position.
nature, especially in the areas of life assurance and pensions. This
is accounted for appropriately, applying well-established actuarial
Some Group businesses write business that is very long-term in
principles. In adopting a three-year time horizon for this viability
nature, especially in the areas of life assurance and pensions. This
statement, no inference should be drawn about a lack of viability of
is accounted for appropriately, applying well-established actuarial
the Group in relation to such longer-term commitments.
principles. In adopting a three-year time horizon for this viability
statement, no inference should be drawn about a lack of viability of
In assessing the viability of the Group and the businesses,
the Group in relation to such longer-term commitments.
consideration has been given to the applicable regulatory capital
requirements. This has included an assessment of the Company’s
In assessing the viability of the Group and the businesses,
Solvency II position over the period of the managed separation.
consideration has been given to the applicable regulatory capital
This has been addressed by overlaying the financial impacts of a
requirements. This has included an assessment of the Company’s
number of managed separation scenarios on to the ‘base case’
Solvency II position over the period of the managed separation.
business plan. In considering the possible steps required to
This has been addressed by overlaying the financial impacts of a
undertake the process of managed separation, the Board has
number of managed separation scenarios on to the ‘base case’
routinely taken into consideration the adequacy of the Group’s
business plan. In considering the possible steps required to
capital and resources in the relevant geographies and in light of the
undertake the process of managed separation, the Board has
appropriate local regulatory obligations to enable it to achieve the
routinely taken into consideration the adequacy of the Group’s
desired strategic outcome.
capital and resources in the relevant geographies and in light of the
appropriate local regulatory obligations to enable it to achieve the
In addition, as part of the preparations for the listing of OMW and
desired strategic outcome.
OML, reports are being produced to support the working capital
statements which are required by local listing requirements in order
In addition, as part of the preparations for the listing of OMW and
to provide confidence to investors and other stakeholders that the
OML, reports are being produced to support the working capital
relevant businesses have sufficient working capital for their present
statements which are required by local listing requirements in order
requirements. Drafts of these reports were considered by the Board
to provide confidence to investors and other stakeholders that the
in assessing the viability of the Group and its businesses.
relevant businesses have sufficient working capital for their present
requirements. Drafts of these reports were considered by the Board
in assessing the viability of the Group and its businesses.
Although it is intended that the
Group will cease to exist in its
Although it is intended that the
current form during 2018, analysis
Group will cease to exist in its
of the companies comprising each
current form during 2018, analysis
of the current Group’s three
of the companies comprising each
businesses indicates that each
of the current Group’s three
business will be viable on a
businesses indicates that each
standalone basis.
business will be viable on a
standalone basis.
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Old Mutual plc
Annual Report and Accounts 2017
As the ongoing viability of the Group and its constituent businesses
is additionally subject to certain factors beyond the control of its
directors and the directors of the future parent companies of those
businesses – such as future macro-environmental conditions and
the political situation of the countries in which it operates. Further
analysis has therefore been performed to ensure that, barring
unforeseen circumstances, these do not pose a material threat to
the viability of the Group or its businesses. As a consequence, the
base case business plan and related managed separation
scenarios have been subject to stress testing and risk assessment.
The principal risks considered in these scenarios are consistent
with those set out elsewhere in this Annual Report. In addition to
the more severe stress tests and scenarios, management and the
Board also consider milder downside sensitivities as part of routine
Board reports. The Group and Company also maintain contingency
plans and resources to deal with potential adverse developments,
which have been reviewed by the Board, and equivalent plans and
resources have been reviewed by the boards of the future parent
companies of those businesses.
We remain focused on our purpose
to help our customers thrive by
enabling them to achieve their
lifetime financial goals.
Has all relevant information been
disclosed to the auditor?
The directors who held office at the date of approval of this Annual
Report confirm that, so far as they are each aware, there is no
relevant audit information of which the Company’s auditor is
unaware, and each director has taken all the steps that he or she
ought to have taken as a director to make himself or herself aware
of any relevant audit information and to establish that the
Company’s auditor was aware of that information.
Other Directors’ Report matters
As an international business active in many countries, the Group
operates through subsidiaries, branches, joint ventures and
associated companies established in, and subject to the laws
and regulations of, many different jurisdictions.
Does the Company have any significant
agreements involving change of control?
The following significant agreement to which the Company is a
party contains provisions entitling counterparties to exercise
termination or other rights in the event of a change of control of
the Company:
£800 million Revolving Credit Facility dated 22 August 2014,
as amended, between the Company, various syndicate banks
(the Banks) and Bank of America Merrill Lynch International
Limited as agent (the Agent). If a person or group of persons
acting in concert gains control of the Company, the Company
must notify the Agent. The Agent and the Company will negotiate
with a view to agreeing terms and conditions acceptable to the
Company and all of the Banks for continuing the facility. If such
negotiations fail within 30 days of the original notification to the
Agent by the Company, the Banks become entitled to declare
any outstanding indebtedness repayable by giving notice to the
Agent within 15 days of the 30-day period mentioned above.
On receiving notice for payment from the Agent, the Company
shall pay the outstanding sums within three business days to the
relevant Bank(s).
What is our approach to being
a responsible business?
In 2015 we set out our commitment to being a responsible
business through our Positive Futures Plan. As we look towards
our managed separation we remain focused on our purpose of
helping our customers thrive by enabling them to achieve their
lifetime financial goals, while investing their funds in ways which
create a positive future for them, their families, their communities
and the world at large.
Responsible business practices remain core components of
how we operate as a business and of the Company’s risk
management strategy. We maintain a network of people who
manage and monitor our responsible business approach.
Each business has named a senior executive with overall
responsibility for these issues.
After our adoption of the managed separation strategy, the role
played by the Company in developing the responsible business
vision was transferred to the businesses. Each of them is
developing its own approach, guided by our Positive Futures
Plan. The Company’s Head of Responsible Business uses the
Communications, Brand and Stakeholder Forum to ensure that
we meet our commitment to remaining a responsible business
throughout the managed separation and to support the businesses
in developing their responsible business practices as they prepare
to stand alone as independent businesses.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Corporate governance
continued
Corporate governance
continued
What is the Company’s approach
to non-financial reporting?
As part of managed separation (see business model on page 3),
What is the Company’s approach
the Company is transitioning the management of non-financial
to non-financial reporting?
matters to our businesses. Accordingly, discussion of the impact of
As part of managed separation (see business model on page 3),
material non-financial matters on the businesses of Quilter plc and
the Company is transitioning the management of non-financial
Old Mutual Limited will be discussed in greater detail in the listing
matters to our businesses. Accordingly, discussion of the impact of
documents of those companies, with further information being
material non-financial matters on the businesses of Quilter plc and
made available on their respective websites and in other
Old Mutual Limited will be discussed in greater detail in the listing
standalone reports going forward.
documents of those companies, with further information being
made available on their respective websites and in other
In respect of elements which continue to impact the Group as a
standalone reports going forward.
whole, or where group-wide policies and procedures continue to
apply until the completion of managed separation, we have
In respect of elements which continue to impact the Group as a
consolidated and will report at a group-wide level. Accordingly,
whole, or where group-wide policies and procedures continue to
Old Mutual plc will produce a final Carbon Disclosure Project (CDP)
apply until the completion of managed separation, we have
report, Principles for Responsible Investment (PRI) report and
consolidated and will report at a group-wide level. Accordingly,
our United Nations Global Compact (UNGC) Communication on
Old Mutual plc will produce a final Carbon Disclosure Project (CDP)
Progress Report, all of which will be published on the Old Mutual
report, Principles for Responsible Investment (PRI) report and
plc website. The Group’s Modern Slavery Act statement will be
our United Nations Global Compact (UNGC) Communication on
produced by Old Mutual plc and focuses primarily on the UK
Progress Report, all of which will be published on the Old Mutual
business, Old Mutual Wealth, which will become Quilter plc.
plc website. The Group’s Modern Slavery Act statement will be
In respect of gender pay gap reporting, Old Mutual plc and the
produced by Old Mutual plc and focuses primarily on the UK
subsidiary legal entities which comprise the Head Office companies
business, Old Mutual Wealth, which will become Quilter plc.
fall below the minimum employee threshold for reporting on the
In respect of gender pay gap reporting, Old Mutual plc and the
gender pay gap; however, other subsidiaries (primarily within
subsidiary legal entities which comprise the Head Office companies
Old Mutual Wealth) are covered by the legislation and will provide
fall below the minimum employee threshold for reporting on the
reports, for example by the publication of the relevant disclosure
gender pay gap; however, other subsidiaries (primarily within
on the Quilter plc website.
Old Mutual Wealth) are covered by the legislation and will provide
reports, for example by the publication of the relevant disclosure
Our approach to managing the environment
on the Quilter plc website.
Across our businesses, we have a responsibility to ensure we
are as environmentally efficient as possible. This extends to our
Our approach to managing the environment
property portfolio as well as our employee-occupied properties.
Across our businesses, we have a responsibility to ensure we
Through our large presence in South Africa, with its ongoing
are as environmentally efficient as possible. This extends to our
resource supply constraints, we continue to look for innovative
property portfolio as well as our employee-occupied properties.
ways of contributing positively to the environment and ensuring
Through our large presence in South Africa, with its ongoing
our business approach reflects best environmental practices.
resource supply constraints, we continue to look for innovative
ways of contributing positively to the environment and ensuring
We offer investment and savings products, insurance and banking
our business approach reflects best environmental practices.
services. As a result we are able to invest in sustainable
technologies and to offer and promote products that allow our
We offer investment and savings products, insurance and banking
customers to manage and minimise their own environmental
services. As a result we are able to invest in sustainable
impacts. Within our own footprint, our approach to responsible
technologies and to offer and promote products that allow our
environmental management focuses on efficient facilities and
customers to manage and minimise their own environmental
property management. We also use employee communication
impacts. Within our own footprint, our approach to responsible
and engagement programmes to ensure that our employees
environmental management focuses on efficient facilities and
understand how they can minimise the environmental impacts
property management. We also use employee communication
of the decisions they make at work. Our main environmental
and engagement programmes to ensure that our employees
impacts come from our energy and water consumption and waste
understand how they can minimise the environmental impacts
management. We aim to reduce these in a range of ways, from
of the decisions they make at work. Our main environmental
investing in energy efficient lighting to promoting recycling across
impacts come from our energy and water consumption and waste
our sites. We encourage employee suggestions and feedback to
management. We aim to reduce these in a range of ways, from
help us reduce our reliance on scarce resources.
investing in energy efficient lighting to promoting recycling across
our sites. We encourage employee suggestions and feedback to
help us reduce our reliance on scarce resources.
Our Responsible Business Policy includes details of how we
manage our environmental responsibilities effectively. In 2010
we set a target to reduce our direct carbon emissions by 20%
Our Responsible Business Policy includes details of how we
by 2020 (from a 2010 baseline) in our property portfolio and
manage our environmental responsibilities effectively. In 2010
employee-occupied properties. As we undertake managed
we set a target to reduce our direct carbon emissions by 20%
separation we are working with the businesses to identify targets
by 2020 (from a 2010 baseline) in our property portfolio and
that support their move to independence and the long-term
employee-occupied properties. As we undertake managed
approach they will take. The environment task forces in the
separation we are working with the businesses to identify targets
businesses will continue to work on implementing our strategy and
that support their move to independence and the long-term
meeting our targets. Our carbon emissions (using Defra & IEA
approach they will take. The environment task forces in the
stipulated country-specific emission factors for Scope 1 and 2)
businesses will continue to work on implementing our strategy and
cover our Scope 1 and 2 emissions in our employee-occupied
meeting our targets. Our carbon emissions (using Defra & IEA
locations and investment property portfolio. Our total carbon
stipulated country-specific emission factors for Scope 1 and 2)
footprint (Scope 1 and 2 emissions) was 491,278 tonnes CO2e
cover our Scope 1 and 2 emissions in our employee-occupied
(2016: 489,949 tonnes). Our carbon intensity for 2017 was
locations and investment property portfolio. Our total carbon
2.2 tonnes CO2e/£m FUM (2016: 1.2 tonnes).
footprint (Scope 1 and 2 emissions) was 491,278 tonnes CO2e
(2016: 489,949 tonnes). Our carbon intensity for 2017 was
Our greatest environmental impact comes indirectly from the
2.2 tonnes CO2e/£m FUM (2016: 1.2 tonnes).
investments we hold and the policies we underwrite throughout our
businesses. We are working to understand the carbon emissions
Our greatest environmental impact comes indirectly from the
of our investments, and to apply our Responsible Investment
investments we hold and the policies we underwrite throughout our
Standard to our investment capabilities. The businesses offer
businesses. We are working to understand the carbon emissions
customers various socially responsible investment and ethical
of our investments, and to apply our Responsible Investment
funds which allow them to invest in specific environmental projects;
Standard to our investment capabilities. The businesses offer
however, our aim remains to embed environmental, social and
customers various socially responsible investment and ethical
governance criteria in all our investment decisions and not just
funds which allow them to invest in specific environmental projects;
those confined to specialised funds.
however, our aim remains to embed environmental, social and
governance criteria in all our investment decisions and not just
We support the recommendations from the Taskforce on Climate-
those confined to specialised funds.
related Financial Disclosures and are working with the Group’s
businesses to ensure they embed these recommendations as
We support the recommendations from the Taskforce on Climate-
they prepare for listing and operation as standalone entities going
related Financial Disclosures and are working with the Group’s
forward. To read more about the Group’s approach to managing
businesses to ensure they embed these recommendations as
environmental risks in the previous year, please see our CDP,
they prepare for listing and operation as standalone entities going
UNGC and PRI reports.
forward. To read more about the Group’s approach to managing
environmental risks in the previous year, please see our CDP,
UNGC and PRI reports.
We remain committed to
increasing diversity throughout
We remain committed to
our businesses and have set
increasing diversity throughout
targets to promote this.
our businesses and have set
targets to promote this.
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Old Mutual plc
Annual Report and Accounts 2017
How do we manage social
and employee matters?
All our businesses uphold the principle of freedom of association,
and recognise the right to collective bargaining where permitted by
local law. Old Mutual does not, under any circumstances, tolerate
forced labour or child labour and we work with our supply chain and
investment teams to uphold this position. We remain committed to
increasing diversity throughout our businesses and have set targets
to promote this. With over 65,000 employees, we see the different
backgrounds, perspectives and experiences of our employees as
one of our greatest assets. Our people policies at both plc and
business level ensure that no employee receives less favourable
treatment based on any factor unrelated to the requirements of
their position. In South Africa we further address our commitment
to employment equality through our approach to Broad-Based
Black Economic Empowerment. To find out more please see the
Nedbank and OMEM business reviews on pages 38 to 47 and
26 to 37 respectively, and their separate websites.
We have a Human Resource Risk Management Policy governing
labour standards for all employees in the plc and all our
businesses. This covers a range of areas including employee
relations and employment, diversity, recruitment, remuneration,
performance management and employee welfare. Twice a year,
the CEOs of all our businesses are required to sign a Letter of
Representation to confirm that both they and their employees have
complied with the policy over the previous year and give details if
any compliance issues have arisen. Regular internal audit checks
covering this and other Group policies support this process.
To ensure our suppliers reflect the values we see as important
in relation to labour standards, we have strengthened our
Responsible Business Policy to include a section on responsible
procurement. As part of managed separation we are working with
the businesses to ensure they are embedding the aims of the
policy and contacting key suppliers regularly. In the UK we provide
ongoing employee training to ensure that everyone responsible
for procurement understands the relevant requirements and our
expectations – our focus for 2017 was the UK Modern Slavery
Act 2015 (MSA).
As an active and committed member of the communities in which
we operate, we invested £20 million in local projects in 2017 (2016:
£15 million). £9.8 million was invested in education initiatives in
2017 (2016: £7.4 million). Recognising our role as part of a healthy
society, our responsible business policy requires our businesses to
be active in their local areas, supporting matters that have a
material impact on their business and the communities around
them.
What is our commitment to human rights?
Our commitment to respect human rights and comply with the
Universal Declaration of Human Rights is embedded in our Code
of Conduct and employment practices. This commitment has not
changed as a result of managed separation and we are working
to transfer to the businesses our understanding of the risks and
responsibilities relating to human rights. As part of the transition,
we are building local-level engagement and collaboration with a
range of stakeholders, including those in our supply and investment
chains, to support the process.
Each business embeds its response to our Positive Futures Plan
into its business strategy, and responsible investment remains a
priority for all of them. We continue to build on our understanding
and approach to identifying and managing the human rights risks
associated with our investments. We also assess new investments
for their impact on respecting and protecting human rights and for
potential human rights abuses.
Each business continues to identify areas where it can mitigate
risk and take steps to ensure it does not cause or contribute to any
negative human rights impacts. This work will continue during the
managed separation and forms part of our responsible business
transition plans. In particular, each business takes account of
human rights risks as it puts in place appropriate risk management
and responsible business governance structures at local level.
In addition to our ongoing global approach we are also required to
comply with country-specific legislation, such as MSA legislation
which sets out measures on how modern slavery and human
trafficking is dealt with in the UK. In light of managed separation,
this work has focused on Old Mutual Wealth; our MSA statement
is available to download from the Company’s website.
Our Code of Conduct emphasises the Group’s human rights stance
and is supported by our Human Rights statement. Twice a year,
CEOs from all our businesses are required to sign a Letter of
Representation to confirm that both they and their employees have
complied with the Code over the previous year and give details if
any compliance issues have arisen. Regular internal audit checks
covering this and other Group policies support this process.
How do we manage anti-corruption
and anti-bribery?
Old Mutual’s Anti-Bribery and Corruption Policy and its Code of
Conduct strongly emphasise zero tolerance for bribery and corrupt
business practices. We are fully committed to ethical and compliant
business conduct across all the countries in which we operate.
Our policy requires that each business demonstrates:
A strong ethical tone from top management
A thorough bribery risk assessment as the basis for
risk-focused controls
Due diligence on third parties corresponding with the risk posed
by the third party or the nature of the business relationship
Employee training and counterparty awareness
Ongoing compliance monitoring
Anti-bribery and corruption compliance is overseen by a
suitably experienced expert in each of our businesses. Issues
are reported to the plc Exco and Board Risk and Group Audit
Committees. The Board Risk Committee also receives an annual
compliance assessment as part of the group-wide Financial Crime
Prevention Report.
Each business has established anonymous whistleblowing
arrangements facilitating the reporting of suspicions of corrupt
behaviour supported by strong investigative capability and rigorous
disciplinary processes/sanctions. No significant issues were
reported through these arrangements during 2017.
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Old Mutual plc Annual Report and Accounts 2017Governance
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Corporate governance
continued
Corporate governance
continued
Did the Group make any political donations
during 2017?
The Group made no EU or other political donations during the year.
Did the Group make any political donations
during 2017?
How did the Board approve this Annual Report?
The Group made no EU or other political donations during the year.
The Board approved this Annual Report at its meeting on
14 March 2018. It confirmed that it considered the Annual
How did the Board approve this Annual Report?
Report and Accounts, taken as a whole, to be fair, balanced
The Board approved this Annual Report at its meeting on
and understandable and to provide the information necessary for
14 March 2018. It confirmed that it considered the Annual
shareholders to assess the Company’s position and performance,
Report and Accounts, taken as a whole, to be fair, balanced
business model and strategy. In reaching this conclusion, it took
and understandable and to provide the information necessary for
into account input from the Group Audit, Remuneration and Board
shareholders to assess the Company’s position and performance,
Risk Committees, which had previously had the opportunity to
business model and strategy. In reaching this conclusion, it took
review and comment on drafts of the sections falling within their
into account input from the Group Audit, Remuneration and Board
respective remits.
Risk Committees, which had previously had the opportunity to
review and comment on drafts of the sections falling within their
Governing law
respective remits.
The Strategic Report, Financial Review and Risks section and this
Corporate Governance report collectively comprise the directors’
Governing law
report for the purposes of section 463(1)(a) of the Companies Act
The Strategic Report, Financial Review and Risks section and this
2006. The Directors’ Remuneration Report contained in this Annual
Corporate Governance report collectively comprise the directors’
Report is the directors’ remuneration report for the purposes of
report for the purposes of section 463(1)(a) of the Companies Act
section 463(1)(b) of that Act. English law governs the disclosures
2006. The Directors’ Remuneration Report contained in this Annual
contained in and liability for the Directors’ Report and the Directors’
Report is the directors’ remuneration report for the purposes of
Remuneration Report.
section 463(1)(b) of that Act. English law governs the disclosures
contained in and liability for the Directors’ Report and the Directors’
Colin Campbell
Remuneration Report.
Group Company Secretary
14 March 2018
Colin Campbell
Group Company Secretary
14 March 2018
Old Mutual is not aware of any bribery or corruption regulatory or
law enforcement investigations in relation to its activities nor of any
issues arising in its businesses during the year that might require
Old Mutual is not aware of any bribery or corruption regulatory or
self-reporting to the authorities under either the UK Bribery Act or
law enforcement investigations in relation to its activities nor of any
the US Foreign Corrupt Practices Act.
issues arising in its businesses during the year that might require
self-reporting to the authorities under either the UK Bribery Act or
All employees across the Group are required to confirm annually
the US Foreign Corrupt Practices Act.
that they have read their local business’ anti-bribery policy,
understand it and will comply with it. CEOs of our businesses are
All employees across the Group are required to confirm annually
required to confirm their compliance with the Anti-Bribery and
that they have read their local business’ anti-bribery policy,
Corruption Policy twice a year.
understand it and will comply with it. CEOs of our businesses are
required to confirm their compliance with the Anti-Bribery and
Our Code of Conduct emphasises the Group’s anti-bribery stance
Corruption Policy twice a year.
and our position on employee conflicts of interest. The Code
supplements our policies in this area and aims to ensure the
Our Code of Conduct emphasises the Group’s anti-bribery stance
overarching message is fully understood and embedded, in line
and our position on employee conflicts of interest. The Code
with our values. We have robust controls to tackle corruption in all
supplements our policies in this area and aims to ensure the
its forms. Our working culture and active employee engagement
overarching message is fully understood and embedded, in line
on this topic help us create positive, proactive networks to work
with our values. We have robust controls to tackle corruption in all
against corruption.
its forms. Our working culture and active employee engagement
on this topic help us create positive, proactive networks to work
Where can I find the other matters required
against corruption.
to be included in the Directors’ Report?
The Company has taken advantage of paragraph 1A of Schedule 7
Where can I find the other matters required
to The Large and Medium-sized Companies and Groups (Accounts
to be included in the Directors’ Report?
and Reports) Regulations 2008 to disclose certain information that
The Company has taken advantage of paragraph 1A of Schedule 7
must be disclosed as part of its Directors’ Report either elsewhere
to The Large and Medium-sized Companies and Groups (Accounts
in this document or on our website as set out below:
and Reports) Regulations 2008 to disclose certain information that
must be disclosed as part of its Directors’ Report either elsewhere
Important events relating to the Group since the end of the
in this document or on our website as set out below:
financial year are included in the Strategic Report as well as
in Note J8 to the financial statements
Important events relating to the Group since the end of the
A description of likely future developments of the business
financial year are included in the Strategic Report as well as
of the Company and its subsidiaries is contained in the
in Note J8 to the financial statements
Strategic Report and the Financial Review and Risks section
A description of likely future developments of the business
The Group’s involvement in research and development, insofar
of the Company and its subsidiaries is contained in the
as relevant to its operations, is given in the Strategic Report and
Strategic Report and the Financial Review and Risks section
the Financial Review and Risks section
The Group’s involvement in research and development, insofar
Our financial risk management objectives and policies are
as relevant to its operations, is given in the Strategic Report and
described in the Risks section of this Annual Report. Along with
the Financial Review and Risks section
Notes F1 to F5 to the financial statements, this also addresses
the Group’s exposure to price risk, credit risk, liquidity risk and
described in the Risks section of this Annual Report. Along with
cash flow risk.
Notes F1 to F5 to the financial statements, this also addresses
the Group’s exposure to price risk, credit risk, liquidity risk and
cash flow risk.
Our financial risk management objectives and policies are
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Old Mutual plc Annual Report and Accounts 2017 Old Mutual plc
Annual Report and Accounts 2017
Directors’ Remuneration Report
In this section, we describe the
Directors’ Remuneration Policy
and how our directors were paid
during 2017.
Annual Report on Remuneration
112 Market benchmarks
112 Single total figures of remuneration for
executive directors (audited)
113 Additional requirements in respect of the
single total figure table for executive directors
119 Single total figures of remuneration for
non-executive directors (audited)
119 Scheme interests awarded during 2017 (audited)
120 Directors’ shareholdings and share interests (audited)
121 Shares in trust and shareholder dilution
122 Payments to past directors (audited)
122 Payments for loss of office (audited)
123 Performance graphs
123 Group Chief Executive’s remuneration over the
last eight years
124 Percentage change in the remuneration of the
Group Chief Executive
124 Relative importance of spend on pay
125 Implementation of policy in 2018
126 Solvency II
127 Consideration by the directors of matters relating
to directors’ remuneration
127 Advisers to the committee
128 Voting at General Meetings
128 Consideration of shareholder views
Danuta Gray
Chairman of the Remuneration
Danuta Gray
Committee
Chairman of the Remuneration Committee
Contents
98−128
Annual Statement
98 Annual Statement from the Chairman of the
Remuneration Committee
Our remuneration at a glance
101 Performance against targets in 2017
101 Single total figures of remuneration for 2017 (audited)
102 Implementation of policy in 2018 − Summary
Directors’ Remuneration Policy
103 Introduction
103 Directors’ Remuneration Policy table (executive directors)
Notes to the Directors’ Remuneration Policy table
(executive directors)
107 Performance measures and targets
107 External directorships
107 Consideration of employment conditions elsewhere
in the Group
107 Approach to remuneration in connection with recruitment
108 Service agreements and payments for loss of office
109 Treatment of incentive awards on termination, change
of control or other corporate events
111 How shareholder views are reflected in the policy
111 Dates of directors’ service contracts and letters of appointment
111 Directors’ Remuneration Policy table (non-executive directors)
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Old Mutual plc Annual Report and Accounts 2017Governance
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Directors’ Remuneration Report
continued
A new holding company, Old Mutual Limited (OML) has been created in South Africa, which will be the listed entity with the operating
company, Old Mutual Emerging Markets (OMEM), and Old Mutual plc within its structure. For the purpose of this report, we refer to
OMEM for items linked to business performance, but also refer to OML in respect of the strategic execution. Old Mutual Wealth (OMW)
is rebranding to Quilter plc. For simplicity of reporting, we will only refer to OMW in this report.
Three-year perspective 2015 to 2017
The Group delivered returns for shareholders of 19.2% on the
LSE and 21.3% on the JSE ALSI over the past three years (using
a three-month average at the beginning and end of the period).
Although this return was behind the indices over the period,
performance since the beginning of 2018 has closed the gap.
EPS grew at a double-digit compound rate over three years on
a sterling basis, while RoE was above target over the period.
These performance indicators are the principal financial measures
that the committee considers in the incentive plans for executives,
and the results are reflected in the incentive outcomes measured
against performance periods ending 31 December 2017. The
committee was mindful of shareholder feedback and the voting
result for the 2016 Directors’ Remuneration Report in considering
the performance delivered and corresponding outcome of the plans
at the end of 2017. The committee assessed performance relative
to targets and to key macro-economic factors and was satisfied
that the outcomes were appropriate for the performance delivered.
This is consistent with our commitment to align executive
remuneration to company performance and shareholder interests.
Short-Term Incentive – outcome
In 2017, the Short-Term Incentive (STI) had two components –
a financial component and a personal performance component.
The committee has approved an outcome of 100% for both
the financial component of the STI, reflecting the very strong
performance delivered in 2017 in respect of AOP EPS and
RoE, and the personal element, based on an assessment of
the performance of each director against a personal scorecard.
A summary of key achievements for each of the executive
directors in 2017 is given later in this report.
Annual Statement
On behalf of the Remuneration Committee, I am pleased to
present our Directors’ Remuneration Report for 2017.
During 2017, the Group met a number of significant objectives
that were required to enable it to materially complete managed
separation by the end of 2018. These included:
Completion of the sale of OM Asset Management in November
2017, realising good value for its holding
A significant reduction in holding company debt by a further
£821 million
The strengthening of the boards and management teams, and
the formulation of competitive strategies and strong balance
sheets for OML and OMW, in preparation for them becoming
successful standalone businesses
Approval from the Competition Tribunal in South Africa for
OML to acquire Old Mutual plc (received in January 2018)
The agreed sale of the OMW UK Single Strategy Asset
Management business, for an estimated consideration
of c.£600 million
There is no doubt that we are at a pivotal point in our strategy,
with the listing of OML and the demerger and listing of OMW the
critical steps toward the completion of managed separation.
Review of performance in 2017
The Group’s operating performance was ahead of expectations,
with a very strong H2, achieving pre-tax adjusted operating profit
(AOP) of £2.0 billion in 2017, up 22% on 2016 on a reported basis
and 7% on a constant currency basis. AOP EPS of 24.3p was up
25% on a reported basis and 10% on a constant currency basis,
well ahead of nominal GDP over the period in our major markets.
This is a key macro-economic indicator when considering the
effectiveness of the performance delivered. Adjusted RoE of 14.6%
was up 130 basis points on 2016. Our strong businesses delivered
resilient operational performance alongside significant progress
towards managed separation, all in the context of challenging
macro-economic conditions continuing in South Africa through
2017. Although markets were strong in the UK, weak currency,
uncertainty around Brexit, and regulatory developments in financial
services continued to have an impact.
Long-Term Incentive – outcome
Awards under the legacy Long-Term Incentive (LTI) plan, originally
granted in 2015 (inclusive of the recruitment award granted to
Bruce Hemphill), will vest at 66.92% of maximum, reflecting
achievement against a scorecard of financial and strategic metrics
and a TSR adjustor, all measured up to 31 December 2017. Strong
financial outcomes and strategic delivery was offset to some extent
by a negative TSR adjustor on the plan outcome. As noted earlier
in this statement, the Company’s share price and TSR has
improved considerably during the first quarter of 2018, and the TSR
adjustment would have been positive if measured at the date of
finalisation of this report. However, as this occurred after the end of
the performance period it was not reflected in the outcome of the
plan. A full assessment of achievement against these metrics is
given later in this report.
Managed separation and the application of the
Directors’ Remuneration Policy in 2018
The policy approved by shareholders on 28 June 2016 aligned
the interests of key executives with the execution of the managed
separation, and the value it will bring to shareholders. The
Managed Separation Incentive Plan (MSIP) has played a key role
in ensuring that the executive directors and wider management
team execute the strategy while unlocking shareholder value.
The outcome of the MSIP will be determined through a balanced
assessment of performance across three criteria:
Successful execution of the managed separation strategy
balancing time, cost, risk, and value
Continued strong performance of the constituent businesses
during the period to separation
Unlocking long-term shareholder value through simplification
and disaggregation of the Group
These criteria form the three measurement categories of the MSIP:
(i) Execution of the managed separation (40%)
(ii) Performance of the underlying businesses (25%)
(iii) Relative total shareholder return (TSR) (35%).
When the Company announced the managed separation strategy,
the nature, sequencing, and timing of the steps involved were not
precisely defined. The policy and rules of the MSIP were therefore
designed to give the committee a reasonable degree of flexibility to
implement both in an appropriate manner to reflect the completion
of the strategy. During 2017, the committee undertook an extensive
review to determine when and how to assess the three
measurement categories to reflect accurately the original intent of
the MSIP. The committee took external legal advice to ensure that
any approaches considered were consistent with the policy and
rules of the MSIP, as approved by the Company’s shareholders.
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The committee has concluded that the listing of OML and the
demerger and listing of OMW will constitute the material completion
of managed separation (material completion being the point at
which the committee stated it would determine performance
outcomes and vest the MSIP awards). This is because it
represents the critical point at which the strategy will be materially
complete, and oversight from plc executives over the constituent
businesses will effectively end. As a result, the committee intends
to assess the execution of the managed separation (40% of the
award) shortly before the listing of OML and the demerger and
listing of OMW (this being contingent on the necessary approvals
subsequently being received with a legal obligation on OML to
proceed with the unbundling of Nedbank), and will assess the
performance of the underlying businesses (25% of the award)
shortly after the listing of OML and the demerger and listing
of OMW.
The intention is for both of those elements of the MSIP to vest
following the listing of OML and the demerger and listing of OMW,
with a one-year holding period applied to 50% of the net value of
the award that vests. In respect of the measurement category
relating to TSR (the remaining 35% of the award), the committee
is mindful that the way the execution of managed separation has
evolved means that the constituent businesses will be listed. The
committee has determined that the TSR from the independently-
listed businesses should therefore continue to be measured until
the end of the holding period applicable to the elements of the
MSIP that will vest following the listing of OML and the demerger
and listing of OMW. This is consistent with the commitment to
maintain shareholder alignment for a period beyond completion
and ensure the outcome reflects the shareholder value created
through separating the constituent businesses, which will take time.
2018 Short-Term Incentive awards
As managed separation is expected to be materially completed in
2018, the committee has concluded that an alternative structure
for the STI scorecard to that used in previous years is appropriate.
In 2017, the scorecard was weighted 75% financial measures and
25% non-financial measures. In 2018, the committee has
determined that the scorecard up to the listing of OML and the
demerger and listing of OMW will be weighted 50% financial
measures and 50% non-financial measures. The financial
measures will be a combination of cost management of the plc
Head Office in London, and the performance of the businesses.
Non-financial measures will focus on the executives’ continued
oversight of the businesses in the management of risk and
execution of the strategies.
After the listing of OML and the demerger and listing of OMW, the
committee believes performance relative to non-financial measures
only is appropriate, as Old Mutual plc executive oversight of the
businesses will effectively end. The non-financial measures will
focus on the principal remaining steps for managed separation,
including the complete wind-down plan for the plc Head Office
in London, the management of Company debt, and the
anticipated unbundling of Nedbank. Further detail is given in
the ‘Implementation of policy in 2018’ section of this report.
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Long-Term Incentive – outcome
Awards under the legacy Long-Term Incentive (LTI) plan, originally
granted in 2015 (inclusive of the recruitment award granted to
Bruce Hemphill), will vest at 66.92% of maximum, reflecting
achievement against a scorecard of financial and strategic metrics
and a TSR adjustor, all measured up to 31 December 2017. Strong
financial outcomes and strategic delivery was offset to some extent
by a negative TSR adjustor on the plan outcome. As noted earlier
in this statement, the Company’s share price and TSR has
improved considerably during the first quarter of 2018, and the TSR
adjustment would have been positive if measured at the date of
finalisation of this report. However, as this occurred after the end of
the performance period it was not reflected in the outcome of the
plan. A full assessment of achievement against these metrics is
given later in this report.
Managed separation and the application of the
Directors’ Remuneration Policy in 2018
The policy approved by shareholders on 28 June 2016 aligned
the interests of key executives with the execution of the managed
separation, and the value it will bring to shareholders. The
Managed Separation Incentive Plan (MSIP) has played a key role
in ensuring that the executive directors and wider management
team execute the strategy while unlocking shareholder value.
The outcome of the MSIP will be determined through a balanced
assessment of performance across three criteria:
Successful execution of the managed separation strategy
balancing time, cost, risk, and value
Continued strong performance of the constituent businesses
during the period to separation
Unlocking long-term shareholder value through simplification
and disaggregation of the Group
These criteria form the three measurement categories of the MSIP:
(i) Execution of the managed separation (40%)
(ii) Performance of the underlying businesses (25%)
(iii) Relative total shareholder return (TSR) (35%).
When the Company announced the managed separation strategy,
the nature, sequencing, and timing of the steps involved were not
precisely defined. The policy and rules of the MSIP were therefore
designed to give the committee a reasonable degree of flexibility to
implement both in an appropriate manner to reflect the completion
of the strategy. During 2017, the committee undertook an extensive
review to determine when and how to assess the three
measurement categories to reflect accurately the original intent of
the MSIP. The committee took external legal advice to ensure that
any approaches considered were consistent with the policy and
rules of the MSIP, as approved by the Company’s shareholders.
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The committee has concluded that the listing of OML and the
demerger and listing of OMW will constitute the material completion
of managed separation (material completion being the point at
which the committee stated it would determine performance
outcomes and vest the MSIP awards). This is because it
represents the critical point at which the strategy will be materially
complete, and oversight from plc executives over the constituent
businesses will effectively end. As a result, the committee intends
to assess the execution of the managed separation (40% of the
award) shortly before the listing of OML and the demerger and
listing of OMW (this being contingent on the necessary approvals
subsequently being received with a legal obligation on OML to
proceed with the unbundling of Nedbank), and will assess the
performance of the underlying businesses (25% of the award)
shortly after the listing of OML and the demerger and listing
of OMW.
The intention is for both of those elements of the MSIP to vest
following the listing of OML and the demerger and listing of OMW,
with a one-year holding period applied to 50% of the net value of
the award that vests. In respect of the measurement category
relating to TSR (the remaining 35% of the award), the committee
is mindful that the way the execution of managed separation has
evolved means that the constituent businesses will be listed. The
committee has determined that the TSR from the independently-
listed businesses should therefore continue to be measured until
the end of the holding period applicable to the elements of the
MSIP that will vest following the listing of OML and the demerger
and listing of OMW. This is consistent with the commitment to
maintain shareholder alignment for a period beyond completion
and ensure the outcome reflects the shareholder value created
through separating the constituent businesses, which will take time.
2018 Short-Term Incentive awards
As managed separation is expected to be materially completed in
2018, the committee has concluded that an alternative structure
for the STI scorecard to that used in previous years is appropriate.
In 2017, the scorecard was weighted 75% financial measures and
25% non-financial measures. In 2018, the committee has
determined that the scorecard up to the listing of OML and the
demerger and listing of OMW will be weighted 50% financial
measures and 50% non-financial measures. The financial
measures will be a combination of cost management of the plc
Head Office in London, and the performance of the businesses.
Non-financial measures will focus on the executives’ continued
oversight of the businesses in the management of risk and
execution of the strategies.
After the listing of OML and the demerger and listing of OMW, the
committee believes performance relative to non-financial measures
only is appropriate, as Old Mutual plc executive oversight of the
businesses will effectively end. The non-financial measures will
focus on the principal remaining steps for managed separation,
including the complete wind-down plan for the plc Head Office
in London, the management of Company debt, and the
anticipated unbundling of Nedbank. Further detail is given in
the ‘Implementation of policy in 2018’ section of this report.
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Old Mutual plc Annual Report and Accounts 2017Governance
Old Mutual plc
Annual Report and Accounts 2017
Directors’ Remuneration Report
continued
Remuneration governance after listing
Shortly after the listing of OML, the committee in its current form
will cease to exist. In order to ensure appropriate oversight of the
continued delivery of the MSIP and other elements of remuneration,
a new Committee of the Board will be established, made up of
myself, Roger Marshall and Mike Arnold, from the current Old
Mutual plc board, along with other nominations from the OML
board. This committee will be responsible for ensuring that the
delivery of the MSIP and other remuneration-related matters
continue to be appropriately aligned to the achievement of the
executives at the plc Head Office in London.
Summary
Once again, I would like to thank shareholders for their continued
support during a time that has presented both the Group and the
committee with unique challenges. The committee will continue to
assess the Group’s performance and progress towards managed
separation, aligning executives to the key financial and strategic
deliverables and shareholder experience, as well as ensuring that
it exercises the discretion afforded to it in the policy and the rules
of the plans in a responsible and transparent manner.
Danuta Gray
Chairman of the
Remuneration Committee
Other incentive awards
As the committee has concluded that managed separation will be
deemed to be materially complete at the listing of OML and the
demerger and listing of OMW (this being contingent on the
necessary approvals subsequently being received with a legal
obligation on OML to proceed with the unbundling of Nedbank), all
unvested deferred STI and LTI awards will vest on or shortly after
the listing of OML, in accordance with the rules of the plans and
the policy. Executives will continue to have significant alignment
to shareholders, business performance, and risk management
events. This is achieved through the continued vesting and holding
period of a substantial proportion of the MSIP awards and the
Company’s ability to apply claw back to vested awards in the event
of a significant risk issue.
Continued focus on executive pay
Although the Group’s focus on managed separation and the
resulting limited tenure of the executives means that it is difficult
to react to any of the major changes in opinion with respect to the
structure of executive pay, the committee has continued to monitor
shareholder concerns and the wider governance and regulatory
landscape. In particular, the committee has spent a substantial
amount of time in 2017 ensuring that the MSIP reflects
shareholders’ views, and continues to drive alignment between
shareholders and executives.
In reaching the decisions set out above, the committee has
carefully considered the remuneration requirements of Solvency II,
including the requirement to defer a material proportion of variable
pay over three years, and to ensure that executives are aligned to
the risks inherent in executing the strategy throughout the period
over which managed separation is expected to be completed, and
for a suitable period of time beyond. The committee is satisfied that
the executives will be appropriately aligned through the continued
vesting and holding period applicable to the MSIP and the claw
back provisions that apply to all incentive plans.
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Our remuneration at a glance
Our approach to remuneration is designed to align our executives to the delivery of our strategy and long-term shareholder value creation.
In respect of incentive targets shown in this report, EPS and RoE are calculated on a post-tax AOP basis.
Performance against targets in 2017
2017 STI awards (audited)
Executive director
Bruce Hemphill
Ingrid Johnson
RoE
Metric
weight
37.5%
37.5%
% of metric
achieved
100
100
EPS in constant currency
% of metric
achieved
100
100
Metric
weight
37.5%
37.5%
Personal objectives
% of metric
Metric
achieved
weight
100
25%
100
25%
Weighted outcomes
% of
maximum
100
100
% of
base pay
150
150
£000
1,384
969
LTI awards granted in 2015
Financial metrics
Strategic objectives
Total weighted outcome
Total weighted outcome (as a percentage of maximum) (A)
TSR multiplier – % achieved (B)
Achievement – % of maximum award (A x B)
Weighting
70%
30%
% of maximum
achieved
81.67
100.00
87.17
75.80
88.28
66.92
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2015 LTI awards over Old Mutual plc shares due to vest to the executive directors (audited)
Executive director
Bruce Hemphill
Ingrid Johnson
Old Mutual
shares under
option at grant
1,509,686
639,824
Achievement of
performance
targets
66.92%
66.92%
Old Mutual
shares under
option to vest
in 2018
505,141
214,085
Old Mutual
shares under
option to vest
in 2019
505,141
214,085
Average
Old Mutual plc
share price
over
Q4 2017
198.38p
198.38p
Value of
share options
to vest in 2018
£000
1,002
425
Value of
share options
to vest in 2019
£000
1,002
425
Total value of
LTI as shown
in the single
figure table
£000
2,004
850
Single total figures of remuneration for 2017 (audited)
Executive director
Bruce Hemphill
Ingrid Johnson
Base pay
£000
923
646
Taxable
benefits
£000
104
98
STI
£000
1,384
969
LTI
£000
2,004
850
Pension-
related
benefits
£000
321
226
Items in the
nature of
remuneration
£000
3
5
Total
£000
4,739
2,794
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Old Mutual plc Annual Report and Accounts 2017Governance
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Directors’ Remuneration Report
continued
Implementation of policy in 2018 − Summary
The committee has concluded that the listing of OML and the demerger and listing of OMW constitute the material completion of managed
separation. In this context, we set out below a summary of how we will implement each policy element in 2018. Further detail can be found
in the ‘Implementation of policy in 2018’ section of this report.
Element
Base pay
Benefits including
pension-related benefits
STI
Application in 2018
2.5% increase
No change in application.
Up to listing:
50% based on financial measures
50% based on non-financial measures
Subject to claw back
After listing:
Non-financial measures only
Subject to claw back
MSIP
Unvested DSTI and
Legacy LTI awards
Shareholding requirements
2017 application (provided as a reference)
75% Group financial targets: 50% RoE and 50% EPS (constant currency)
25% personal scorecard metrics
Subject to malus and claw back
The metrics relating to the Execution of the managed separation (40% of the award) will be assessed shortly before
the listing of OML and the demerger and listing of OMW. The metrics relating to Performance of the underlying
businesses (25% of the award) will be assessed shortly after the listing of OML and the demerger and listing of OMW.
50% of the net value of the vested award will be subject to a one-year post-vesting holding period. Claw back applies
during this period to the full value of vested shares
TSR will be measured until the end of the holding period applicable to the elements of the MSIP that will vest following
the listing of OML and the demerger and listing of OMW. There will therefore be no post-vesting holding period
applied to this part of the MSIP award
As the Old Mutual plc shares will not be tradeable after the listing of OML, the nil cost share options will be rolled-over
into OML and OMW shares in the same proportions as will be received by shareholders
Malus will apply during the TSR measurement period and claw back will apply for 12 months thereafter.
Unvested deferred STI and LTI awards will vest on or shortly after the listing of OML, in accordance with the rules
of the plans. As the performance period will be complete, there will be no time-based pro-rating applied. As the
Old Mutual plc shares will not be tradeable after the listing of OML, the nil cost share options will be exercisable
over OML and OMW shares in the same proportions as will be received by shareholders
All LTI awards have completed any relevant performance period and therefore no early testing of performance
conditions is required
LTI awards will remain subject to claw back.
No change in application
Bruce Hemphill: 200% of base pay
Ingrid Johnson: 150% of base pay
There is no requirement for the executive directors to hold Company shares post-employment.
Directors’ Remuneration Policy
Introduction
The policy was subject to a binding shareholder vote at a General Meeting held on 28 June 2016. It was approved with 81.71% of votes
cast being in favour of its adoption and took effect for a period of up to three years from the date of shareholder approval. The policy is
displayed on the Investor Relations section of the Company’s website.
Directors’ Remuneration Policy table (executive directors)
How the element
supports our
strategic objectives
Base pay
Recognises the role
and the responsibility
for delivery of strategy
and results.
Operation
of the element
Maximum potential payout
and payment at threshold
Performance measures used,
weighting and time period applicable
Paid in 12 monthly instalments
Reviewed annually with any changes
becoming effective from 1 January.
Base pay is set in the range of peer
None.
benchmark groups. The maximum is
the top of the range of large insurers
Maximum annual increases will not
normally exceed the average
increase for the home country
workforce. Larger increases may be
awarded in certain circumstances,
such as an increase in scope
or responsibility of the role, or
salary progression for a newly
appointed director.
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Benefits allowance for retirement provision and other elective benefits
The Company provides a benefit
A fixed allowance of 35% of
None.
Designed to provide
appropriate, market-
aligned benefits
allowance to fund contributions to
base pay.
retirement funding arrangements and
consistent with the role.
other elective benefits
Otherwise paid monthly in cash.
Other benefits
Benefits common to employees of the
The cost of core insured benefits
None.
home employer, health assessments
is determined by the insurance
and the opportunity to participate in
provider based on experience
Sharesave
Travel from home to work, and travel
factors in the pool of employees
covered and so may vary from
for partners to certain Board meetings
year to year
or corporate events of the Company
and its major subsidiaries (including
the tax for which settled on the
individual’s behalf)
For overseas appointments, flexibility
The Company offers the opportunity
to participate in an HMRC-approved
Sharesave scheme
All other benefits are direct costs
borne by the Company based on
to provide benefits in line with those
policy agreed by the Remuneration
of the executive’s home country
and relocation costs for internal
or external appointments of
executive directors.
committee (the committee)
A summary of key items normally
paid for on relocation is set out
under ‘Approach to remuneration in
connection with recruitment’ below.
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Directors’ Remuneration Policy
Introduction
The policy was subject to a binding shareholder vote at a General Meeting held on 28 June 2016. It was approved with 81.71% of votes
cast being in favour of its adoption and took effect for a period of up to three years from the date of shareholder approval. The policy is
displayed on the Investor Relations section of the Company’s website.
Performance measures used,
weighting and time period applicable
None.
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None.
None.
Directors’ Remuneration Policy table (executive directors)
How the element
supports our
strategic objectives
Base pay
Recognises the role
and the responsibility
for delivery of strategy
and results.
Paid in 12 monthly instalments
Reviewed annually with any changes
becoming effective from 1 January.
Operation
of the element
Maximum potential payout
and payment at threshold
Base pay is set in the range of peer
benchmark groups. The maximum is
the top of the range of large insurers
Maximum annual increases will not
normally exceed the average
increase for the home country
workforce. Larger increases may be
awarded in certain circumstances,
such as an increase in scope
or responsibility of the role, or
salary progression for a newly
appointed director.
Benefits allowance for retirement provision and other elective benefits
Designed to provide
appropriate, market-
aligned benefits
consistent with the role.
The Company provides a benefit
allowance to fund contributions to
retirement funding arrangements and
other elective benefits
A fixed allowance of 35% of
base pay.
Otherwise paid monthly in cash.
Other benefits
Benefits common to employees of the
home employer, health assessments
and the opportunity to participate in
Sharesave
Travel from home to work, and travel
for partners to certain Board meetings
or corporate events of the Company
and its major subsidiaries (including
the tax for which settled on the
individual’s behalf)
For overseas appointments, flexibility
to provide benefits in line with those
of the executive’s home country
and relocation costs for internal
or external appointments of
executive directors.
The cost of core insured benefits
is determined by the insurance
provider based on experience
factors in the pool of employees
covered and so may vary from
year to year
The Company offers the opportunity
to participate in an HMRC-approved
Sharesave scheme
All other benefits are direct costs
borne by the Company based on
policy agreed by the Remuneration
committee (the committee)
A summary of key items normally
paid for on relocation is set out
under ‘Approach to remuneration in
connection with recruitment’ below.
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continued
Operation
of the element
How the element
supports our
strategic objectives
Short-term incentive (STI)
Incentivises achievement
of annually agreed
business objectives and
strategic priorities.
Determined annually following the
finalisation of annual results
50% of the award vests immediately
50% is deferred for a period of three
years into a share award, conditional on
continued employment. Dividends are
paid during the restricted period
The committee has the discretion to
amend deferred STI awards under the
rules of the plan, to adjust deferred STI
awards in the event of any variation of
the share capital of the Company, and
to adjust or vest deferred STI awards on
a demerger, special dividend or other
similar event which affects the market
price of the shares to a material extent.
Maximum potential payout
and payment at threshold
Performance measures used,
weighting and time period applicable
The maximum opportunity is 150%
Annual measures include:
Financial (minimum 50%);
Operational;
Strategic;
Measures of individual
performance (set out in the
director’s personal scorecard); and
Risk management (up to 5%
formulaic downward adjustment)
The committee has discretion to
reduce STI outcomes to nil if
required, via a risk management
assessment based on a report of
risk exposures or to reflect
financial underperformance not
adequately reflected in the
financial measures
The committee has discretion to
vary the weighting of the
performance measures over the
life of the Directors’ Remuneration
Policy.
of base pay
Vesting against targets is 0% at
threshold performance and 100%
for meeting stretching targets, with
interpolation between these points
The committee has discretion:
To amend, and/or set different
performance measures for
material changes (such as a
change in strategy, acquisition,
demerger or market conditions),
if it considers such amendments
necessary to achieve the original
purpose and any new measures
are not materially less difficult
to satisfy
To adjust the outcome, if it
is not aligned to the overall
performance of the Company
Any exercise of discretion would,
where relevant, be explained in
the Annual Report on
Remuneration and may, as
appropriate, be the subject of
consultation with the Company’s
major shareholders.
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Old Mutual plc
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Mutual plc shares
Operation
of the element
Grant of nil cost share options over Old
How the element
supports our
strategic objectives
Managed Separation Incentive Plan (MSIP)
Incentivises executive
directors to:
(i) execute the managed
separation
(ii) deliver performance in
the underlying Group
businesses
(iii) unlock and create long-
term shareholder value
(iv) operate within a robust
risk framework.
Vesting depends on the achievement of
performance targets measured at the
earlier of the completion of the managed
separation or a four-year period ending
on 11 March 2020
successor) will make a judgement on
the completion of the managed
separation based on the strategic
objectives announced on 11 March
2016
The Board of Old Mutual plc (or its
The committee (or its successor) will
determine when it is appropriate for
vesting to occur upon completion of the
managed separation
Participants are entitled to receive
dividend equivalents representing the
dividends or any other distributions they
would have received if they had been
owners of their vested shares between
the date of grant (or 14 March 2016 in
the case of the initial awards) and the
earliest possible exercise date of their
awards
A post-vesting holding period of one
year will be applied to 50% of the vested
award (on a net of tax basis if
applicable), in a form that will track the
shareholder experience as closely as
possible, which might include a
restriction on the ability of the executive
to exercise 50% of the option during that
one-year period
The committee (or its successor) has
discretion:
To amend awards under the rules of
the plan
To adjust awards in the event of any
variation of the share capital of the
Company
To split awards into separate
awards, or adjust or vest awards on
a demerger
To adjust or vest awards on a
special dividend or other similar
event which affects the market price
of the shares to a material extent.
Over the course of the managed
separation period, the form of the award
will track the shareholder experience as
closely as possible
Awards may in certain situations be
automatically surrendered and replaced
by awards in a new/acquiring/demerged
company.
Maximum potential payout
and payment at threshold
Performance measures used,
weighting and time period applicable
The maximum grant will not
Performance conditions include:
Strategic (40%)
Financial (25%)
TSR relative to a bespoke
composite peer group
benchmark TSR (35%)
Risk management (up to 5%
formulaic downward
adjustment).
The committee has discretion to
reduce MSIP outcomes to nil if
required, via a risk management
assessment based on a report of
risk exposures or to reflect
financial underperformance not
adequately reflected in the
financial measures
Performance is measured over the
period up to vesting
Divestment of a business may
trigger testing of the financial
performance criteria for that
business and/or re-weighting of
the businesses and TSR indices.
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exceed a face value of 1,000% of
2016 base pay (equal to
5,122,367 shares) for the current
Group Chief Executive and 750%
of 2016 base pay (2,689,243
shares) for the current Group
Finance Director. The maximum
awards are based on the average
Old Mutual plc share price over a
30-day period up to and including
the date on which the Company
announced the managed
separation of the Group
(£1.757 per share)
The maximum grant is inclusive of
the nil cost share options granted
under the Old Mutual plc
Performance Share Plan –
Restricted Shares on 14 March
2016, which were exchanged for
nil cost share options under the
Old Mutual plc Managed
Separation Incentive Plan
Upon recruitment, the committee
may grant awards with a face
value of up to 750% of base pay in
the year of award. This is in
addition to the buying out of
unvested awards from a previous
employer
Vesting at threshold is 8.75% of
the award and 100% vests only for
meeting stretching targets, with
interpolation between these points
The committee has discretion to:
Amend, and/or set different
performance measures for
material changes (such as an
acquisition, demerger or
market conditions), if it
considers such amendments
necessary to achieve the
original purpose and any new
measures are not
materially less difficult to satisfy
Adjust the outcome if it is not
aligned to the overall
performance of the Company
Any exercise of discretion would
be explained in the Annual Report
on Remuneration and may, as
appropriate, be the subject of
consultation with the Company’s
major shareholders.
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Directors’ Remuneration Report
continued
Operation
of the element
Maximum potential payout
and payment at threshold
How the element
Performance measures used,
supports our
strategic objectives
weighting and time period applicable
Legacy long-term incentives (LTI) – no further awards will be granted to executive directors under
this plan
Incentivised attainment of
long-term objectives and
strengthened the
alignment of interests
between executive
directors and
shareholders.
Financial (70%)
Strategic (30%)
TSR multiplier against the FTSE
100 index (50%) and the JSE
ALSI (50%).
Vesting is 0% at threshold and
100% for achieving stretching
targets, with interpolation between
the points
Vesting is subject to the achievement of
performance targets measured after a
three-year period
Awards granted in 2013 and 2014:
Awards granted in 2015:
Vesting normally occurs 50% after three
years and 50% after four years and in
no circumstances before three years
The committee has discretion to amend
awards under the rules of the plan, to
adjust awards in the event of any
variation of the share capital of the
Company, and to adjust or vest awards
on a demerger, special dividend or other
similar event which affects the market
price of the shares to a material extent.
The committee has discretion to:
Amend, and/or set different
performance measures for
material changes (such as a
change in strategy, acquisition,
demerger or market
conditions), if it considers such
amendments necessary to
achieve the original purpose
and any new measures are not
materially less difficult to satisfy
Financial (60%)
Strategic (40%)
TSR multiplier against the FTSE
100 Index (50%) and the JSE
ALSI (50%).
Adjust the outcome if it is not
aligned to the overall
performance of the Company
Any exercise of discretion would
be explained in the Annual Report
on Remuneration and may, as
appropriate, be the subject of
consultation with the Company's
major shareholders.
None.
None.
Shareholding requirements
To strengthen alignment of
interests between
executive directors and
shareholders.
The minimum shareholding requirement
as a percentage of base pay is to be
achieved within five years of
appointment to the role as follows:
Group Chief Executive – 200%
Other executive directors –150%
Unvested and vested but unexercised
share awards or options are not taken
into account in the calculation.
Provisions of previous policy that will continue to apply
Any commitment made before the individual became an executive director of the Company and any vesting of outstanding share incentive awards will be
honoured, even where it is not consistent with the policy prevailing at the time such commitment is fulfilled or such vesting occurs.
Malus and claw back provisions
Malus
Criteria
Misleading or misstated financial results
Loss due to failure to observe risk
management policies
Gross misconduct
Actions leading to reputational damage.
Claw back
Misleading or misstated financial results
Loss due to failure to observe risk
Applicable to:
Cash STI − during the period between the end of the performance period
and the payment date
Unvested deferred STI awards – during the three-year performance period
Unvested legacy LTI awards – three or four years matching the vesting
period
Unvested MSIP awards – up to the date of vesting of the award.
Cash STI – for a three-year period following the payment date
Vested legacy LTI awards – for two years if three-year vesting and for one
management policies
Gross misconduct.
year if four-year vesting
Vested MSIP awards – for one year from vesting.
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Annual Report and Accounts 2017
Notes to the Directors’ Remuneration Policy table (executive directors)
Performance measures and targets
The committee selects performance measures that are central to the Company’s overall strategy and are used by the executive directors
and Board in overseeing the operation of the business. The performance targets for the STI are determined annually by the committee.
External directorships
Executive directors are, subject to prior clearance by the Board, permitted to hold one external non-executive directorship of a listed
company and are entitled to retain the fees payable to them for doing so.
Consideration of employment conditions elsewhere in the Group
The Company’s approach to executive director and wider employee remuneration is based on a common set of remuneration principles
and a governance structure which have been implemented across all major subsidiaries. This includes subsidiary remuneration
committees with agreed terms of reference, who have oversight over local matters and ensure that the remuneration principles and
policies are implemented consistently.
Although the committee does not consult directly with employees on the executive director remuneration policy, it reviews proposals in the
context of a detailed understanding of remuneration for the broader employee population. The structure of total remuneration packages for
executive directors, and for the broader employee population is similar, with the exception of MSIP and LTI awards, which comprises base
pay, pension and benefits and eligibility for a discretionary STI based on performance in the financial year. The level of STI and the portion
deferred are determined by role and responsibility.
Executive directors and selected senior executives participate in the MSIP. As with the MSIP, the legacy LTI plan applied to executive
directors and senior executives based at the plc in London. Other LTI plans are in place for senior executives in subsidiary companies.
Annual base pay increases for the executive directors are normally limited to the average base pay increase for employees in their home
country, unless there has been a change in role or salary progression for a newly appointed director.
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Approach to remuneration in connection with recruitment
The committee’s approach to remuneration in connection with recruitment is to pay no more than is necessary to attract appropriate
candidates to the role. It should be noted that the Company operates in a specialised sector, is undergoing an extraordinary period of
transition under the managed separation strategy, and many of its competitors for talent are from outside the UK. Remuneration terms
for any new executive directors will be based on the approved remuneration policy and would include the same elements, and be subject
to constraints at or below those of the existing executive directors, as shown below:
Element of remuneration
Base pay
Benefit allowance (for retirement, elective benefits or in cash)
Other benefits
STI
MSIP
Maximum percentage of base pay
N/A
35%
Dependent on circumstances and location
150%
Up to 750%
In determining the MSIP award opportunity to be offered to new executive directors on recruitment, consideration will be given to progress
achieved in executing the managed separation strategy and the time elapsed. These considerations will likely lead to a reduction of the
level of award opportunity over time as the managed separation progresses.
When it is necessary to ‘buy out’ an individual’s unvested awards from a previous employer, the committee will seek to match the
expected value of the awards by granting awards that vest over a timeframe similar to those given up, with a commensurate reduction
in quantum where the new awards will be subject to performance conditions that are not as stretching as those applicable to the awards
given up. Existing annual incentive given up may be bought out on an expected value basis or incorporated in an appropriate way into the
executive’s bonus for the first performance year only.
Where appropriate, the committee will agree reasonable costs of relocation in line with the Group’s mobility policy which, based on
individual circumstances, provides for a settling-in allowance and costs incurred such as travel, shipping, immigration and tax advice,
temporary housing, transaction costs on home sale/purchase, home/school search and school fees and, if in relation to a temporary
assignment, tax equalisation and a housing allowance. All of these costs will be covered gross of tax incurred by the executive, where
applicable.
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Directors’ Remuneration Report
continued
Service agreements and payments for loss of office
Executive directors’ service agreements are designed to provide an appropriate level of protection for the executive and the Company by:
(i) setting out individual entitlements to elements of remuneration consistent with policy; (ii) summarising notice periods and compensation
on termination of employment by the Company; and (iii) describing the obligations in relation to confidentiality, data protection, intellectual
property and restraint on certain activities. In the event that the employment of an executive director is terminated, any compensation
payable will be determined in accordance with the terms of the service agreement between the Company and the executive director,
as well as the rules of any incentive plans.
The Company’s policy is to make payments in accordance with pre-established contractual arrangements, but with consideration of
individual circumstances. These circumstances may include the reason for termination and, for deferred STI, MSIP and legacy LTI share
incentive awards, some discretion in the determination of Good Leaver status for vesting of such awards.
The policy in this respect is set out in the following table:
Standard provision
Notice
Policy
Policy is to provide a maximum of 12 months' notice.
Details
In certain cases, executive directors will not be
required to work their notice period and,
depending on the circumstances, may be put on
'garden leave' or granted pay in lieu of all or part
of their notice period (PILON). PILON, including
base pay, benefits and pension-related benefits,
would normally be paid monthly and be subject
to mitigation when alternative employment is
secured but may also be paid as a lump sum
Executive directors are generally subject to
annual re-election at the Company's Annual
General Meeting.
Treatment of STI awards
STI awards will be made to Good Leavers based on an
Paid in cash.
Treatment of MSIP awards
All awards lapse except for Good Leavers.
overall assessment of corporate and personal
performance and pro-rated for the period worked in the
performance year of termination.
Treatment of unvested legacy LTI
and deferred STI share incentive
awards
All awards lapse except for Good Leavers.
MSIP vesting for Good Leavers1 is based on the
achievement of performance conditions. The
number of shares to vest would be calculated on
a pro-rata basis, based on the period of time
after the date of grant (or 14 March 2016 in the
case of the initial awards) and ending on the date
of termination relative to the restricted period up
to the vesting date. The committee retains the
discretion not to apply time-based pro-rating
where appropriate.
Legacy LTI vesting for Good Leavers1 is based
on the achievement of performance conditions.
The number of shares to vest would be
calculated on a pro-rata basis, based on the
period of time after the date of grant and ending
on the date of termination relative to the
restricted period
Deferred STI awards for Good Leavers1 vest fully
on termination, subject to the committee's
discretion to lapse part or all of the award.
1 Subject to further adjustments which may be applied to discretionary Good Leavers as set out in the ‘Treatment of incentive awards on termination, change of control or other
corporate events’ section of this policy.
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Standard provision
Compensation for loss of office
Policy
Settlement agreements with executive directors may
Details
Terms are subject to the signing of a settlement
provide for, as appropriate:
Incidental costs related to the termination, such as
legal fees for advice on the settlement agreement
Provision of outplacement services
Payment in lieu of accrued, but untaken, holiday
entitlements
Exit payments in relation to any legal obligation or
damages arising from such obligation
Settlement of any claim arising from the termination
Continuation or payment in lieu of other incidental
benefits
In the case of redundancy, two weeks' base pay per
year of service.
One month's notice (12 months for the Chairman)
Appointed for an initial three-year term
Normally expected to serve two three-year terms,
subject to annual re-election at the Company's Annual
General Meeting
A third term (of up to three years, or longer in
exceptional circumstances) may be offered on a year-
by-year basis after completion of the first two terms.
agreement.
Non-executive directors are subject to annual
re-election at the Company’s Annual General
Meeting.
Non-executive directors
Treatment of incentive awards on termination, change of control or other corporate events
For all deferred short-term incentives, legacy long-term incentives, and MSIP awards, the share incentive plan rules provide for automatic
‘Good Leaver’ status on termination of employment in the event of: (i) death; (ii) injury or disability; (iii) redundancy; (iv) the employing
company or business ceasing to be a subsidiary or business of Old Mutual plc; and (v) certain takeovers and other corporate events.
In addition, the committee has discretion to award Good Leaver status for any other reason (discretionary Good Leavers). In these
circumstances, the committee has discretion to apply less generous terms than would apply under the automatic Good Leaver reasons.
The committee’s determination will take into account the particular circumstances of the executive director’s departure and the recent
performance of the Company. Following the execution of the managed separation, it is not expected that the executive directors will have
roles in the resulting independent entities. This is addressed in the table below:
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Component
STI
Deferred STI
Automatic Good Leaver
Pro-rata payment for the period
worked in the performance year,
based on agreed performance
criteria
Paid in cash.
The committee has discretion to
vest all awards on termination.
1 Anyone who is not a Good Leaver or a discretionary Good Leaver.
Other leaver1
No award will be
made.
Change of control
At the discretion of
the committee.
Other corporate events
No impact, but
performance targets may
need to be reviewed.
Outstanding awards
Vest automatically except in the
are forfeit.
case of internal
re-organisations or mergers (as
defined in the rules), where there
may be an automatic surrender
and replacement of awards in
the new/acquiring company.
The committee has the
discretion to amend
deferred STI awards
under the rules of the
plan, to adjust deferred
STI awards in the event
of any variation of the
share capital of the
Company, and to adjust
or vest deferred STI
awards on a demerger,
special dividend or other
similar event, which
affects the market price
of the shares to a
material extent.
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Directors’ Remuneration Report
continued
Component
MSIP
Automatic Good Leaver
Vest on the normal vesting date
Other leaver1
Outstanding awards
Change of control
Awards may be Exchanged or
are forfeit.
(except where exceptional
reasons apply, when vesting may
be immediate), subject to
achievement of performance
targets, calculated on a pro-rata
basis, based on the period of time
after the date of grant (or 14 March
2016 in the case of the initial
awards) and ending on the date of
termination relative to the
restricted period
The committee has discretion to
disapply automatic time-based
pro-rating of awards for Good
Leavers before the date at which
the managed separation is
complete
Options will be granted on the
basis that there will be no time-
based pro-rating of awards where
the managed separation is
completed before the end of the
four-year long-stop period and the
director remains in employment at
that time, but the committee
retains discretion to apply time-
based pro-rating if appropriate.
Vest on the normal vesting date
(except in the event of death or
where other exceptional
compassionate reasons apply,
when vesting may be immediate),
subject to achievement of
performance targets, calculated on
a pro-rata basis, based on the
period of time after the date
of grant and ending on the date of
termination relative to the
restricted period
The committee has discretion to
disapply time-based pro-rating of
awards when appropriate.
In line with HMRC rules and the
rules of Sharesave.
Legacy LTI
Sharesave
may vest subject to the
achievement of performance
measures and pro-rated to
reflect the reduced period of time
between the date of grant
(or 14 March 2016 in the case of
the initial awards) and vesting
(rounded up to the next whole
year). The committee may
disapply pro-rating if it considers
it appropriate to do so.
Other corporate events
Demerger: awards may
be split into separate
awards, Exchanged for
new awards over the
demerged company,
adjusted or vested at the
committee’s discretion
Other corporate events:
the committee has the
discretion to amend
MSIP awards under the
rules of the plan, to adjust
MSIP awards in the event
of any variation of the
share capital of the
Company, and to adjust
or vest MSIP awards on
a special dividend or
other similar event, which
affects the market price
of the shares to a
material extent.
Outstanding awards
are forfeit.
Vest subject to the achievement
of performance measures and
pro-rated from grant date to the
anniversary of grant date
following change of control. In
the case of internal re-
organisations or mergers (as
defined in the rules), there may
be an automatic surrender and
replacement of awards in the
new/acquiring company. The
committee may disapply pro-
rating if it considers it appropriate
to do so.
The committee has the
discretion to amend LTI
awards under the rules
of the plan, to adjust LTI
awards in the event of
any variation of the share
capital of the Company,
and to adjust or vest LTI
awards on a demerger,
special dividend or other
similar event, which
affects the market price
of the shares to a
material extent.
In line with HMRC
rules and the rules
of Sharesave.
In line with HMRC rules and the
rules of Sharesave.
The committee does not
have the discretion under
the rules of the plan to
adjust the number of
shares under option.
1 Anyone who is not a Good Leaver or a discretionary Good Leaver.
The committee retains the discretion to make reasonable and proportionate changes to the policy if the committee considers this
appropriate in order to respond to changing legal or regulatory requirements or guidelines (including but not limited to any PRA guidance
relating to Solvency II). This includes the ability to make administrative changes to benefit the operation of the policy and/or to implement
such changes ahead of any formal effective date, ensuring timely compliance. Where proposed changes are considered by the committee
to be material, the Company will consult its major shareholders. Any changes would be formally incorporated into the policy when it is next
put to shareholders for approval.
The committee retains the discretion, acting in accordance with the applicable share plan rules, to adjust the delivery of awards at the
completion of the managed separation, reflecting the circumstances of the corporate events.
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How shareholder views are reflected in the policy
The change in strategy prompted the committee to review and propose revised incentive plans, resulting in consultation with shareholders.
We discussed the design features of the draft MSIP with our largest shareholders and also shared a substantial amount of information
about the proposed design with major shareholder representative bodies in the UK such as ISS and the Investment Association.
The feedback received during this period was reflected in the policy.
Dates of directors’ service contracts and letters of appointment
Executive director
Bruce Hemphill
Ingrid Johnson
Non-executive director
Patrick O’Sullivan
Mike Arnold
Zoe Cruz
Alan Gillespie
Danuta Gray
Adiba Ighodaro
Trevor Manuel
Roger Marshall
Vassi Naidoo
Commencement
date in current role
1 November 2015
1 July 2014
Continuous
service date
1 November 2015
1 September 1993
Notice period
12 months
12 months
Date of original
appointment
1 January 2010
1 September 2009
6 January 2014
3 November 2010
1 March 2013
6 January 2014
1 January 2016
5 August 2010
1 May 2015
Date of current
appointment
1 January 2018
1 September 2017
6 January 2017
3 November 2017
1 March 2016
6 January 2017
1 January 2016
5 August 2017
1 May 2015
Current term
as director
3rd (third period)
3rd (third period)
2nd
3rd (second period)
2nd
2nd
1st
3rd (second period)
1st
Date current
appointment terminates
1 January 2019
1 September 2018
6 January 2020
3 November 2018
1 March 2019
6 January 2020
1 January 2019
5 August 2018
1 May 2018
Directors’ service contracts and letters of engagement for the non-executive directors are available on the Company’s website
at www.oldmutualplc.com.
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Operation of the elements
(fees and benefits)
Fees for non-executive directors (other
Directors’ Remuneration Policy table (non-executive directors)
How the element
supports our
strategic objectives
To attract non-executive
directors who have the
broad range of experience
and skills required to
oversee the
implementation of the
strategy.
than the Chairman) are set by the Board
and paid in 12 monthly instalments
The Chairman's fees are set by the
committee and paid in 12 monthly
instalments
Maximum potential
pay-out
Fees are set within the range of
comparative board and committee
fees, benchmarked against an
appropriate group of FTSE 100
companies. Average increases will
not normally exceed the average
increase for the UK workforce,
except where:
Committee roles or responsibilities
Performance measures used,
weighting and time period applicable
Non-executive directors are
not eligible to participate
in performance-related
incentive plans.
Reimbursement and settlement by the
Company of travel expenses to Board
meetings or corporate events of the
Company (including the tax for which
settled on the individual's behalf)
Travel for partners to a limited number
of Board meetings or corporate events
of the Company and its major
subsidiaries (including the tax for which
settled on the individual's behalf).
change significantly
Market fees in relation to certain
roles change significantly
Non-executive directors may
hold positions on the boards of
subsidiary companies and are
entitled to retain the fees payable
to them for doing so.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Directors’ Remuneration Report
continued
Additional requirements in respect of the single total figure table for executive directors
2017 STI outcomes (audited)
of achievement against those targets:
The following charts illustrate the outcome for each element of the 2017 STI performance targets, followed by the underlying detail
Annual Report on Remuneration
The Annual Report on Remuneration sets out the payments made, and awards granted to the directors in 2017, and how the Company
intends to implement the policy in 2018. This, along with the Chairman’s Annual Statement, is subject to an advisory shareholder vote
at the 2018 AGM.
Market benchmarks
In accordance with the policy, benchmarking is only undertaken in relation to the base pay of the executive directors. The primary peer
group for benchmarking executive remuneration comprises large insurers and, for 2017 and 2018, included Prudential plc, Aviva plc,
RSA Insurance Group plc, Legal & General Group plc, Standard Life Aberdeen plc, Allianz Group and Axa Group. For non-executive
directors, benchmarking is performed against non-executive directors’ remuneration in FTSE100 companies using the whole of the
FTSE100 population as well as an extract of companies by market capitalisation.
Single total figures of remuneration for executive directors (audited)
Executive director
Bruce Hemphill
Ingrid Johnson
Base pay
2017
£000
923
646
2016
£000
900
630
Taxable
benefits
STI
LTI
2017
£000
104
98
2016
£000
2016
£000
2017
£000
2017
£000
92 1,384 1,173 2,004
92
850
818
969
Pension-
related benefits
2016
2017
£000
£000
313
321
220
226
2016
£000
–
849
Items in the
nature of
remuneration
2017
£000
3
5
2016
£000
Total
2017
£000
2016
£000
2 4,739 2,480
5 2,794 2,614
Group financial performance achievement (audited)
Performance measure
RoE
EPS in constant currency
Weighted outcome
Threshold
11.4%
18.8
Target1
12.8%
20.9
Maximum
14.0%
23.0
Actual
14.6%
24.3
1 The committee approved an adjustment to the targets to take consideration of the completion dates of the sales of OM Asset Management and Kotak from the Group.
The Group operated within the expected risk framework and policies during 2017.
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% of
maximum
achieved
100%
100%
100%
Element
Taxable benefits
Description
These amounts represent the gross value of benefits paid for by the Company that are chargeable to UK income tax.
STI
LTI
They cover such items as tax advice and use of a car and driver
The increase in taxable benefits relates to the payment of tax advice following Bruce Hemphill's transfer to the UK in
2015. Advice in relation to 2015 and 2016 was charged to the Company during 2017, meaning that there was no
comparable cost in 2016.
STI awarded in relation to performance in the year, including 50% deferred for three years in the form of a share
award. Vesting of the share award is not subject to the achievement of performance targets but requires the director to
remain in office during the vesting period. It is intended that the share award will vest on or shortly after the listing of
OML
Malus applies to the shares held under award prior to vesting and claw back applies to the cash element.
The 2017 LTI value has been calculated using the average Old Mutual plc share price over the final quarter of 2017
(198.38p). Malus and claw back apply to the shares held under option. Bruce Hemphill did not have an LTI vest in
2016, so no amount appears in respect of this element in his 2016 remuneration
In respect of Ingrid Johnson, the 2016 LTI value has been restated to show the actual market value of the Nedbank
awards that vested or were matched (namely R250.93 per share) converted to sterling using the exchange rate on the
date of vesting (R16.81 to £1). 50% of the LTI award over Old Mutual plc shares (granted in August 2014) vested in
August 2017 and the value of that part of the award has been restated to reflect the Old Mutual plc share price on the
date of vesting (206.4p). The unvested nil cost share option (equal to 50% of the award) has not been revalued. Ingrid
Johnson has not exercised her vested nil cost share option.
Pension-related benefits
This represents the benefit allowance of 35% of base pay less any amounts sacrificed for the purchase of other
benefits. The Company allocated £10,000 (£27,750 in 2016) of Bruce Hemphill’s benefit allowance to the Old Mutual
Group Personal Pension Plan, and the corresponding amount for Ingrid Johnson was £10,000 (£19,031 in 2016).
Items in the nature of remuneration This includes non-taxable benefits not considered significant in value.
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Old Mutual plc Annual Report and Accounts 2017
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100%
100%
100%
Old Mutual plc
Annual Report and Accounts 2017
Additional requirements in respect of the single total figure table for executive directors
2017 STI outcomes (audited)
The following charts illustrate the outcome for each element of the 2017 STI performance targets, followed by the underlying detail
of achievement against those targets:
Bruce Hemphill
Actual
% of maximum opportunity
Ingrid Johnson
Actual
% of maximum opportunity
RoE
EPS in constant currency
Personal scorecard objectives
37.50%
37.50%
37.50%
37.50%
37.50%
37.50%
37.50%
37.50%
25.00%
25.00%
25.00%
25.00%
£1,383,750
£1,383,750
£969,000
£969,000
Group financial performance achievement (audited)
Performance measure
RoE
EPS in constant currency
Weighted outcome
Threshold
11.4%
18.8
Target1
12.8%
20.9
Maximum
14.0%
23.0
Actual
14.6%
24.3
1 The committee approved an adjustment to the targets to take consideration of the completion dates of the sales of OM Asset Management and Kotak from the Group.
The Group operated within the expected risk framework and policies during 2017.
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Old Mutual plc Annual Report and Accounts 2017Governance
Old Mutual plc
Annual Report and Accounts 2017
Directors’ Remuneration Report
continued
Additional requirements in respect of the single total figure table for executive directors (continued)
Personal performance achievement
The tables below summarise achievement against the personal objectives of the executive directors in 2017. The committee considered
achievement against these objectives in the round. In recognition of the achievement of these objectives whilst exceeding the Group’s
financial performance targets and the exceptional leadership demonstrated by the executive directors, the committee determined that it
was appropriate to award maximum outcomes on the personal element.
Bruce Hemphill
Leadership
Weight
30%
Managed
separation
40%
Objectives
Work closely with key stakeholders to ensure
understanding of all the stages of managed
separation and continued support for it
Ensure that all regulatory obligations continue to
be fulfilled within the agreed organisational risk
appetite
Serve as an example of the organisation’s values
as a collaborative leader of the executive team.
Deliver central operational cost savings and a
plan for achieving a ‘clean’ Old Mutual plc
balance sheet
Capacitate OMEM and OMW senior
management teams and boards appropriately
for a listed entity. Begin new operating model
implementation
Ensure the majority of the Group’s stake in OM
Asset Management is sold at an acceptable
price, trading-off cost, time and risk
considerations.
Supporting
business
delivery
30%
Work with each business’ leadership team to
refine the respective strategy to ensure that it can
offer an attractive case to the market and deliver
business performance improvements
Ensure appropriate business plans are in place
for 2018 to 2020, designed to deliver appropriate
value uplift for shareholders
Support the subsidiary chief executives in driving
cultures that embed values appropriate for high-
performing organisations.
Performance
Very positive investor and analyst feedback from the OML and OMW
capital market showcase events in respect of the equity story and
investment cases presented
Regulators have indicated their continued support for the managed
separation and the organisation operated within risk appetite
limits/satisfied all regulatory obligations during the year
Demonstrated a strong leadership style, which provides clear direction,
draws on the strengths of the management teams, and fosters
collaboration across the Group
Strong leadership and relationship management to support creation of
and working with newly formed boards and teams in OMEM and OMW.
plc Head Office in London operational costs, which totalled £123 million
before recharges in 2015, have reduced to £68 million in 2017. We are
on track to achieve the stated operational cost savings of c.£95 million
per annum by the end of 2018
Holding company debt reduced by a further £821 million. Significant
legacy liabilities, such as the transfer of the legacy pension schemes,
the captive insurer, and several warranties and certain indemnities
emanating from historic M&A transactions, have been resolved in line
with management’s original cost estimates
Appointment of a new CEO in OMEM, and support for the strengthening
of the management team and implementation of a new operating model
Support for the CEO and the new Board in OMW in preparing the
business for managed separation in a year in which they continued
momentum with very strong performance
The Group sold its stake in OM Asset Management through a series
of transactions at an attractive net realised average price
Transactions generating very positive outcomes for shareholders were
in place for the sale of Kotak and the agreed sale of the OMW Single
Strategy Asset Management business in which the Group Chief
Executive played an active role.
Strong and effective engagement with subsidiary management teams to
define their future strategies. Key strategy reviews were completed with
OMEM and OMW enabling them to put forward a compelling vision and
investment case at the capital market showcase events
All businesses performing well in the context of a volatile business
environment (political and economic uncertainty in South Africa,
uncertainty around Brexit in the UK, political volatility in the US) with
confirmed business plans and identification of critical initiatives over the
2018 to 2020 timeframe, which are expected to generate meaningful
value for shareholders
The Group Chief Executive engaged effectively with the subsidiary chief
executives throughout the year to determine the necessary culture
required in each business and worked with them and their respective
boards to define and implement changes that will embed these values
in each organisation
As well as a focus on managed separation and all of the activities
associated with it, the Group Chief Executive continued to work
alongside the businesses to drive performance. Despite uncertainty
in South Africa, the South African businesses delivered resilient
performance. OMW delivered strong performance in the UK
alongside the successful process to sell its Single Strategy Asset
Management business.
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Old Mutual plc
Annual Report and Accounts 2017
Additional requirements in respect of the single total figure table for executive directors (continued)
Ingrid Johnson
Leadership
Weight
30%
Managed
separation
40%
Objectives
Work closely with key stakeholders to ensure
understanding of all the stages of managed
separation and continued support for it
Ensure that all regulatory obligations continue to
be fulfilled within the agreed organisational risk
appetite
Serve as an example of the organisation’s values
as a collaborative leader of the executive team.
Deliver central operational cost savings and
a plan for achieving a ‘clean’ Old Mutual plc
balance sheet
Build strategic balance sheet management
capabilities, evaluating financial implications to
support managed separation decision making
and delivery of objectives
Performance
Very positive investor and analyst feedback from the OML and OMW
capital market showcase events in respect of the equity story and
investment cases presented
Regulators have indicated their continued support for the managed
separation and the organisation operated within risk appetite
limits/satisfied all regulatory obligations during the year
Collaborative leadership demonstrating strong inclusive values and high
standards of delivery. Effectively built stakeholder relationships at Board,
peer and team levels and took on an additional direct role to support
OMEM in H2 2017.
plc Head Office in London operational costs, which totalled £123 million
before recharges in 2015, have reduced to £68 million in 2017. We are
on track to achieve the stated operational cost savings of c.£95 million
per annum by the end of 2018
Effective liability management strategy in place, broadening the range
of strategic options
Significant de-risking of the Company’s balance sheet to facilitate
Ensure effective messaging to shareholders,
managed separation execution
bondholders and other stakeholders regarding
the Company’s performance and managed
separation implementation.
30%
Supporting
business
delivery
Operate an appropriate capital management
policy for the management of cash, debt and
capital within liquidity and solvency risk appetite
limits
Reposition functional processes to align with
managed separation and oversee production and
integrity of all financial information and reporting
Actively participate in board and committee roles
and stakeholder engagements.
Holding company debt reduced by a further £821 million. Significant
legacy liabilities, such as the transfer of the legacy pension schemes,
the captive insurer, and several warranties and certain indemnities
emanating from historic M&A transactions, have been resolved in line
with management’s original cost estimates
External communication process well executed, with analyst
commentary indicating that investors understood the progress and
demands of managed separation.
Ensured that the Group operated within liquidity and solvency risk
appetite through 2017
Effectively oversaw the Finance function to ensure the appropriate
resources, expertise and processes were in place to fulfil information
and reporting requirements and support managed separation execution
Continued representation on the OMW Board and stepped in to provide
interim CFO support to OMEM during H2 2017, in addition to continuing
in the plc executive role
Frequent and active engagement with shareholders, regulators and
other third-party stakeholders to facilitate managed separation.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Directors’ Remuneration Report
continued
Additional requirements in respect of the single total figure table for executive directors (continued)
Outcomes for LTI awards over Old Mutual plc shares granted in 2015
(for the performance period 2015 to 2017)
Bruce Hemphill received a grant of nil cost share options in November 2015 when he joined the Company, which are due to vest 50% on
15 November 2018 and 50% on 15 November 2019. Ingrid Johnson received a grant of nil cost share options in April 2015, which are due
to vest 50% on 17 April 2018 and 50% on 17 April 2019. The first vesting of the nil cost share options granted in 2015 to Paul Hanratty, a
former executive director, is due to occur on 17 April 2018, with the remainder due to vest on 17 April 2019.
As the nil cost share options granted in 2015 had not vested at the date of this report, the average share price for the final quarter of 2017
(198.38p) has been used to determine the value for the purposes of the single total figure. The underlying detail of achievement against
objectives is set out below:
Executive director
Financial metrics
Execution of the managed separation
Total weighted outcome
Total weighted outcome (as a percentage of maximum) (A)
TSR multiplier – % achieved (B)
Achievement – % of maximum award (A x B)
Financial metrics (70%)
Weighting
70%
30%
EPS (p) (IFRS AOP-based CAGR2) post-tax
EPS (c) (IFRS AOP-based CAGR2) post-tax
RoE (IFRS-AOP based averaged over three years)
Threshold1
5.0%
5.0%
12.0%
Target
7.5%
7.5%
13.5%
Maximum
10.0%
10.0%
15.0%
1 Vesting − 0% at threshold with straight-line interpolation between threshold and maximum.
2 Compound annual growth rate over the three-year performance period.
% of maximum
achieved
81.67
100.00
87.17
75.80
88.28
66.92
Actual
15.2%
13.6%
13.9%
% of maximum
achieved
100.00
100.00
63.34
81.67
Execution of the managed separation (30%)
The strategic element of the 2015 LTI performance condition was directly aligned with the execution of the managed separation strategy
(as approved by shareholders at the General Meeting held on 28 June 2016). An assessment of progress made towards the separation
of the Group into four standalone businesses, including the elimination of central costs, has been made in the judgement of the committee
at 31 December 2017. The structural steps required to effect the managed separation were fully defined, with detailed project and
resource plans in place through to the completion of the managed separation transactions. The separation is on track as originally
envisaged from a structural perspective.
In particular:
The separation of OM Asset Management has been completed
The wind-down of Old Mutual Bermuda has been planned in detail and its portfolio has been substantially hedged
The demerger and listing of OMW remains on-track, and the sale of its Single Strategy Asset Management business has allowed
shareholders to capture the value in this business, which was no longer considered core to the strategy
The listing of OML, in which Old Mutual plc will become a subsidiary of the newly established OML (which will be primary-listed on the
JSE Limited) is on-track, with in principle regulatory approval received in early 2018
Preparations for OMW and OML to be capable of operating independently are well advanced and have been delivered within the
planned timelines.
Additional requirements in respect of the single total figure table for executive directors (continued)
The outcome of the Execution of the managed separation performance condition has been measured against the following key criteria:
Objectives
Performance
Appropriate capitalisation of
The strategy for each business has been reviewed and sharpened, and the equity stories for the two unlisted businesses
the businesses
have been re-articulated, with positive investor feedback at the capital market showcase events in November 2017
In-principle agreement on the structure of the Day 1 balance sheets of the businesses has been reached, subject to
final regulatory approval. The businesses will be capitalised appropriately on Day 1, meeting both regulatory and local
The boards and management teams of the two unlisted businesses have been restructured to address gaps in
skills and experience and ensure that each business will be managed rigorously with strong oversight by suitably
market expectations
experienced boards.
Time
Quality of execution
(reflecting the balance of
time, cost, risk and value)
The management team is on track to deliver managed separation in line with the timelines communicated to the market
The separation of OM Asset Management was completed as fast as was deemed appropriate given the market
environment, buyer interest, and the complexities of executing a sales transaction in this industry
Company debt has been reduced substantially as fast as was possible given the requirement to maintain prudent liquidity
The implementation of managed separation to the end of 2017 has been completed within the cost figures previously
Significant legacy liabilities, such as the transfer of the legacy pension schemes, the captive insurer, and several warranties
and certain indemnities emanating from historic M&A transactions, have been resolved in line with management’s original
levels throughout the separation process.
Cost
communicated to the market
cost estimates.
Value
The projected value realisation for shareholders over time, which is based on an internal sum-of-the-parts-valuation
based on the valuation of publicly traded peers, continues to track in line with the original projections
The agreed sale of the OMW Single Strategy Asset Management business in the UK was concluded for an estimated
consideration of c.£600 million
The actual valuation gains realised by shareholders can only be determined after the demerger and listing of OMW
and the anticipated unbundling of Nedbank. The gains cannot be fully assessed until sometime after these events,
given the need for the share registers to settle and for analysts and investors to develop a closer understanding of the
Management has realised more value than initially projected from the sale of the OM Asset Management stake and
concluded the series of market placements at sequentially decreasing cost points as market appetite and liquidity
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hitherto unlisted businesses
improved after each transaction.
Risk
risk appetite
The operational risks in each business were managed appropriately and they operated within qualitative and quantitative
The market and execution risks inherent in the sale to HNA Capital US and the market sell-down of the OM Asset
Management stake, realising a price ahead of the average price during the period, were managed appropriately
Similarly, market and timing risk of Company debt repurchases was managed within the constraints of the Group’s
risk appetite in terms of operational and execution risks, and with respect to solvency and liquidity
People risks have been addressed proactively and the execution of managed separation has been de-risked in this
Execution risks in relation to the listing of OML and the demerger and listing of OMW have been mitigated to the
regard to the extent possible
extent possible
Regulatory risk has been managed at Group level and in each of the businesses with proactive engagement by the
respective management teams and/or Group resources
All relevant regulators have been engaged and relevant applications for the remaining separation transactions have
been filed or are on track to be filed within the requisite timelines.
TSR multiplier
A TSR multiplier was used to adjust the outcome of the LTI scorecard in the tables above. TSR was averaged at the start (Q4 2014) and
end (Q4 2017) of the three-year performance period.
Weighting
50%
50%
4% or more
below index1
Equal to
index1
4% or more
above index1
85%
100%
115%
Outcome
-3.16%
-3.09%
Multiplier
88.16%
88.41%
Weighted
outcome
44.08%
44.20%
88.28%
Annualised relative TSR growth (£)
Annualised relative TSR growth (R)
Weighted total
1 Straight-line interpolation between the points.
Risk adjuster
The committee received input from the Group’s Chief Risk Officer, endorsed by the Board Risk Committee, which confirmed that the
Group had achieved its objectives within the risk policies and risk appetite limits established for the period, and as a result, no downward
risk adjustment was recommended. The Committee applied discretion to make a downward adjustment to the outcome of both the LTIs
that vested at the end of 2015 and 2016 to take consideration of the time and cost overruns of the OMW IT outsourcing project. It was not
considered appropriate to make any further adjustments to the 2015 LTI.
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Old Mutual plc
Annual Report and Accounts 2017
Additional requirements in respect of the single total figure table for executive directors (continued)
The outcome of the Execution of the managed separation performance condition has been measured against the following key criteria:
Objectives
Appropriate capitalisation of
the businesses
Performance
The strategy for each business has been reviewed and sharpened, and the equity stories for the two unlisted businesses
have been re-articulated, with positive investor feedback at the capital market showcase events in November 2017
In-principle agreement on the structure of the Day 1 balance sheets of the businesses has been reached, subject to
final regulatory approval. The businesses will be capitalised appropriately on Day 1, meeting both regulatory and local
market expectations
The boards and management teams of the two unlisted businesses have been restructured to address gaps in
skills and experience and ensure that each business will be managed rigorously with strong oversight by suitably
experienced boards.
Quality of execution
(reflecting the balance of
time, cost, risk and value)
Time
The management team is on track to deliver managed separation in line with the timelines communicated to the market
The separation of OM Asset Management was completed as fast as was deemed appropriate given the market
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environment, buyer interest, and the complexities of executing a sales transaction in this industry
Company debt has been reduced substantially as fast as was possible given the requirement to maintain prudent liquidity
levels throughout the separation process.
Cost
The implementation of managed separation to the end of 2017 has been completed within the cost figures previously
communicated to the market
Significant legacy liabilities, such as the transfer of the legacy pension schemes, the captive insurer, and several warranties
and certain indemnities emanating from historic M&A transactions, have been resolved in line with management’s original
cost estimates.
Value
The projected value realisation for shareholders over time, which is based on an internal sum-of-the-parts-valuation
based on the valuation of publicly traded peers, continues to track in line with the original projections
The agreed sale of the OMW Single Strategy Asset Management business in the UK was concluded for an estimated
consideration of c.£600 million
The actual valuation gains realised by shareholders can only be determined after the demerger and listing of OMW
and the anticipated unbundling of Nedbank. The gains cannot be fully assessed until sometime after these events,
given the need for the share registers to settle and for analysts and investors to develop a closer understanding of the
hitherto unlisted businesses
Management has realised more value than initially projected from the sale of the OM Asset Management stake and
concluded the series of market placements at sequentially decreasing cost points as market appetite and liquidity
improved after each transaction.
Risk
The operational risks in each business were managed appropriately and they operated within qualitative and quantitative
risk appetite
The market and execution risks inherent in the sale to HNA Capital US and the market sell-down of the OM Asset
Management stake, realising a price ahead of the average price during the period, were managed appropriately
Similarly, market and timing risk of Company debt repurchases was managed within the constraints of the Group’s
risk appetite in terms of operational and execution risks, and with respect to solvency and liquidity
People risks have been addressed proactively and the execution of managed separation has been de-risked in this
regard to the extent possible
Execution risks in relation to the listing of OML and the demerger and listing of OMW have been mitigated to the
extent possible
Regulatory risk has been managed at Group level and in each of the businesses with proactive engagement by the
respective management teams and/or Group resources
All relevant regulators have been engaged and relevant applications for the remaining separation transactions have
been filed or are on track to be filed within the requisite timelines.
TSR multiplier
A TSR multiplier was used to adjust the outcome of the LTI scorecard in the tables above. TSR was averaged at the start (Q4 2014) and
end (Q4 2017) of the three-year performance period.
Annualised relative TSR growth (£)
Annualised relative TSR growth (R)
Weighted total
1 Straight-line interpolation between the points.
Weighting
50%
50%
4% or more
below index1
Equal to
index1
4% or more
above index1
85%
100%
115%
Outcome
-3.16%
-3.09%
Multiplier
88.16%
88.41%
Weighted
outcome
44.08%
44.20%
88.28%
Risk adjuster
The committee received input from the Group’s Chief Risk Officer, endorsed by the Board Risk Committee, which confirmed that the
Group had achieved its objectives within the risk policies and risk appetite limits established for the period, and as a result, no downward
risk adjustment was recommended. The Committee applied discretion to make a downward adjustment to the outcome of both the LTIs
that vested at the end of 2015 and 2016 to take consideration of the time and cost overruns of the OMW IT outsourcing project. It was not
considered appropriate to make any further adjustments to the 2015 LTI.
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Old Mutual plc
Annual Report and Accounts 2017
Directors’ Remuneration Report
continued
Additional requirements in respect of the single total figure table for executive directors (continued)
2015 LTI awards over Old Mutual plc shares due to vest to the executive directors (audited)
Old Mutual
shares under
option at grant
1,509,686
639,824
Achievement of
performance
targets
66.92%
66.92%
Old Mutual
shares under
option to vest
in 2018
505,141
214,085
Old Mutual
shares under
option to vest
in 2019
505,141
214,085
Average
Old Mutual plc
share price
over
Q4 2017
198.38p
198.38p
Value of
share options
to vest in 2018
£000
1,002
425
Value of
share options
to vest in 2019
£000
1,002
425
Total value of
LTI as shown
in the single
figure table
£000
2,004
850
Executive director
Bruce Hemphill
Ingrid Johnson
MSIP performance update
The MSIP comprises objectives and targets in three categories (highlighted in bold below):
Objectives
Execution of
the managed
separation (40%)
This performance condition is directly aligned with the execution of the managed separation strategy. It is assigned the
highest weighting at 40% because it is the core of the strategy. It consists of the managed separation of the Group into
four standalone businesses through a series of transactions. The assessment of performance against this condition will
be made in the judgement of the committee against the key criteria set by the Board, namely: (i) material completion of
the business separation, (ii) appropriate capitalisation of the businesses, and (iii) quality of transaction execution
An update in relation to the progress toward managed separation is given under the ‘Outcomes for LTI awards over Old Mutual plc shares granted in
2015’ section above.
Performance of
the underlying
businesses (25%)
Our strong businesses delivered resilient operational performance alongside significant progress towards managed separation, all in the context of
This performance condition is directly aligned with the strategic objective to deliver competitive financial performance in
each of the businesses while they are part of the Group, in order to maximise the value creation opportunity on separation
challenging macro-economic conditions continuing in South Africa through 2017. Although markets were strong in the UK, weak currency, uncertainty
around Brexit, and regulatory developments in financial services continued to have an impact
The financial targets in the MSIP are based on a three-year timeframe. The actual performance of each business will be crystallised as it separates from
the Group1
In accordance with the terms of the MSIP, the committee determined the outcome of the financial performance of OM Asset Management at the point
of separation from the Group at the end of 2017. OM Asset Management achieved 14.3% growth over the period, resulting in a maximum outcome.
This outcome represents 1.7% of the total MSIP award.
1 If the committee considers it necessary to review the financial targets under the discretion afforded in the policy for reasons linked to the macro-economic environment, the
phasing of three-year growth plans relative to the timeframe taken to complete the separation of a business, or the reallocation of the Group’s assets, it will do so with
transparency and in a way that ensures the targets are as relevant and stretching as originally intended.
Alignment with
shareholder
value (35%)
In accordance with the principles approved in 2016, the weighting of the peer groups is reviewed each time a transaction is completed. Accordingly, in
This performance condition is directly aligned with the strategic objective to unlock and create significant long-term value
for shareholders through managed separation and will be measured through relative total shareholder return (TSR)
November 2017, the weightings were reviewed to reflect the completion of the sale of OM Asset Management. The new weightings that apply from that
date are: OMEM 46.4% (43.9%); Nedbank 21.4% (20.3%); OMW 32.2% (30.5%); and OM Asset Management 0% (5.3%)
TSR is monitored throughout the period, with the committee receiving regular updates. TSR will be measured until the end of the holding period applicable
to the elements of the MSIP that will vest following the listing of OML and the demerger and listing of OMW. This is consistent with the commitment to
maintain shareholder alignment for a period beyond completion and ensure the outcome reflects the shareholder value created through separating the
constituent businesses, which will take time.
Risk management A quantitative downward adjustment of up to 5% and qualitative assessment of risk management over the entire period
with an uncapped discretionary downward adjustment
In 2016 and 2017, the Company exceeded its liquidity and solvency ratio targets, meaning that no quantitative downward adjustment would apply for the
period 2016 to 2017 (see 2017 STI outcome for details of the 2017 risk performance). The committee receives annual risk reports from the Group’s
Chief Risk Officer, endorsed by the Board Risk Committee, to ensure it has a full understanding of risk events and management’s performance as
managed separation progresses. While some risk adjustment was applied to the outcome of incentives at the end of 2016, these were in relation to
legacy issues pre-dating the managed separation strategy, so no events have transpired to date that the committee considers should result in a
downward-adjustment to the MSIP at completion. The committee will continue to monitor risk management closely.
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Old Mutual plc
Annual Report and Accounts 2017
Single total figures of remuneration for non-executive directors (audited)
Non-executive directors do not participate in any of the Company’s incentive arrangements, nor do they receive any benefits, other than
those described in footnote 1 to the table below. This table shows the single total figures for both 2016 and 2017 for the Chairman and the
other non-executive directors:
Non-executive director
Patrick O’Sullivan
Mike Arnold2
Zoe Cruz
Alan Gillespie
Danuta Gray3
Adiba Ighodaro4
Trevor Manuel5
Roger Marshall6
Vassi Naidoo7
Former non-executive director
Nkosana Moyo
Nonkululeko Nyembezi8
Fees
2016
£000
380
101
80
95
98
70
161
122
322
80
77
2017
£000
400
126
96
116
120
81
420
157
413
48
104
Taxable benefits1
2017
£000
16
–
–
–
–
–
–
–
–
2016
£000
17
–
–
–
–
–
–
–
–
–
–
–
–
Total
2016
£000
397
101
80
95
98
70
161
122
322
80
77
2017
£000
416
126
96
116
120
81
420
157
413
48
104
1 Neither the Chairman nor any of the other non-executive directors received any pension-related benefits, short-term or long-term incentives or any other items in the nature of
remuneration in 2016 or 2017. The amounts included in the taxable benefits columns relate to the provision of travel to and from the Company’s office in London.
2 Includes fees of £5,250 in relation to attendance at Old Mutual Wealth Management Limited Risk Committee meetings (£1,481 in 2016).
3 Includes fees of £5,250 in relation to attendance at Old Mutual Wealth Management Limited Remuneration Committee meetings (£1,481 in 2016).
4 Fees payable to Adiba Ighodaro were paid to Actis LLP rather than to her personally.
5 Includes fees of £338,846 in respect of Old Mutual Group Holdings (SA) (Pty) Limited and Old Mutual Emerging Markets Limited (£91,434 in 2016).
6 Includes fees of £21,250 in respect of Old Mutual Wealth Management Limited. Roger Marshall joined the Board of Old Mutual Wealth Management Limited on 10 November 2016
and resigned on 31 March 2017 (£11,987 in 2016).
7 Includes fees of £323,252 in respect of Nedbank Group Limited and Old Mutual Group Holdings (SA) (Pty) Limited (£244,600 in 2016).
8 Includes fees of £14,777 in respect of Old Mutual Group Holdings (SA) (Pty) Limited.
Scheme interests awarded during 2017 (audited)
The following table shows share incentive awards granted to the executive directors during 2017. The number of shares awarded was
calculated using the middle market quotation of Old Mutual plc shares on the business day preceding the date of grant.
Date of grant
Bruce Hemphill
29 Mar 2017
Ingrid Johnson
29 Mar 2017
Award type
Forfeitable
shares award
Forfeitable
shares award
Basis of
award
Old Mutual
shares held
under award
Share price at
date of grant
Face value
at date of
grant
£000
% receivable
if minimum
performance is
achieved
The end of the
period over which the
performance targets
have to be fulfilled
Vesting date
DSTI
268,824
218.2p
587
100% 29 Mar 2020
DSTI
187,354
218.2p
409
100% 29 Mar 2020
N/A
N/A
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Old Mutual plc Annual Report and Accounts 2017Governance
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Directors’ Remuneration Report
continued
Directors’ shareholdings and share interests (audited)
Share awards and options outstanding at 1 January 2017 and 31 December 2017
Bruce Hemphill
Performance
targets
to be met
Market
value per
share at
grant (p)
Grant
date
Number of
shares
under
award or
option at
1 Jan 17
No
No
05 Nov 15
213.50 182,263
05 Nov 15
213.50 182,263
Award type
Forfeitable
shares –
Buy-out
Nil cost
share options
– Buy-out
Yes
Yes
No
No
Yes
Forfeitable
shares –
DSTI
Nil cost
share options
– MSIP
05 Nov 15
213.50 754,843
05 Nov 15
213.50 754,843
14 Mar 16
182.00
260,990
29 Mar 17
218.20
–
268,824
11 Jul 16
175.70 1,978,020
Yes
11 Jul 16
175.70 3,144,347
Exercised
or released
182,2632
–
–
–
–
–
–
–
Number of
shares
under
award or
option at
31 Dec 17
Date
from which
exercisable
or releasable
–
Expiry
date1
182,263 05 Nov 18 05 Nov 18
754,843 05 Nov 18 04 Nov 25
754,843 05 Nov 19 04 Nov 25
260,990 14 Mar 19 14 Mar 19
268,824 29 Mar 20 29 Mar 20
Lapsed
–
–
–
–
–
–
– 1,978,020 Completion
of managed
separation
– 3,144,347 Completion
of managed
separation
10 Jul 26
10 Jul 26
Granted
–
–
–
–
–
–
–
Total
7,257,569
268,824
182,263
– 7,344,130
1 The expiry date is determined by the rules of the plans under which the awards and options were granted.
2 In respect of the forfeitable shares that vested during 2017, the value of Old Mutual plc shares on the date of vesting was 192.9p per share.
Ingrid Johnson
Directors’ shareholdings and share interests (audited) continued
Within a period of five years of appointment to the role, the Group Chief Executive is required to build-up a holding of shares in the
Company equal in value to 200% of base pay; the equivalent figure for other executive directors is 150% of base pay.
Unvested share awards or share options and vested but unexercised share options are excluded for the purposes of the calculations.
There is no requirement for executive directors to hold shares or share interests in the Company once they have ceased employment
with the Group. Bruce Hemphill’s and Ingrid Johnson’s interests in Old Mutual plc shares at 31 December 2017 are set out below.
Shares have been valued for these purposes using the Old Mutual plc share price on 29 December 2017, which was 231.7p per share.
There have been no changes to the current directors’ personal shareholdings or share interests between 31 December 2017 and 15
March 2018 other than in relation to the outcome of the 2015 LTI targets set out earlier in this report.
Date
Share
Number of
shares owned
Forfeitable
shares
Nil cost share
Nil cost share
Sharesave
ownership
ownership
Number of
outright
Share
Vested but
awards
options
options
share options
requirement
requirement
shares
(including by
ownership
unexercised
not subject to
not subject to
subject to
not subject to
to be met
(% of base
required
connected
requirement
nil cost
performance
performance
performance
performance
Executive director
by
pay)
to be held
Bruce Hemphill 1 Nov 20
Ingrid Johnson
1 Jul 19
200% 796,288
150% 418,213
persons)
96,600
525
met
share options
No
No
–
192,419
targets
712,077
528,977
targets
targets
targets
6,632,053
–
192,419 3,329,067
16,068
There are no share ownership requirements for the non-executive directors. Shares owned by the Chairman and the other non-executive
directors holding office at 31 December 2017 (including holdings by connected persons) are shown below (holdings at date of resignation
are shown for Nkosana Moyo):
Old Mutual plc shares held at 31 December 2017
Non-executive director
Patrick O’Sullivan
Mike Arnold
Zoe Cruz
Alan Gillespie
Danuta Gray
Adiba Ighodaro
Trevor Manuel
Roger Marshall
Vassi Naidoo
Former non-executive director
Nkosana Moyo (resigned 29 June 2017)
Nonkululeko Nyembezi (resigned 31 December 2017)
31 December 2017 and 15 March 2018.
Shares in trust and shareholder dilution
There have been no changes to the interests in shares owned by the Chairman and the current non-executive directors between
At 31 December 2017, there were 109,161,165 shares held in employee share ownership trusts (ESOTs) for the purposes of collaterising
some of the obligations under the Group’s employee share incentive schemes. The usual strategy is to ensure that, with the exception of
Black Economic Empowerment-related ESOTs, at least sufficient shares are held to satisfy restricted share/forfeitable shares awards. In
calculating dilution limits, any awards that are satisfied by transfer of pre-existing issued shares (such as shares acquired by market
purchase through ESOTs) and any shares comprised in any share option or share award that has lapsed or has been cash-settled are
disregarded. At 31 December 2017, the Company had 4.58% of share capital available under the 5%-in-10-years limit applicable to
discretionary share incentive schemes and 8.66% of share capital available under the 10%-in-10-years limit applicable to all share
incentive schemes. The Company has complied with these limits at all times.
C
o
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p
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a
t
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g
o
v
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a
n
c
e
100,000
26,475
34,500
13,000
14,175
–
–
45,000
5,000
10,000
28,667
Performance
targets
to be met
Market
value per
share at
grant (p)
Grant
date
Number of
shares
under
award or
option at
1 Jan 17
Granted
Exercised
or released
Lapsed
Number of
shares
under
award or
option at
31 Dec 17
Date
from which
exercisable
or releasable
Expiry
date1
Award type
Forfeitable
shares –
DSTI
Nil cost
share
options –
LTI
Nil cost share
options –
MSIP
No
No
No
Tested
Tested
Yes
Yes
Yes
17 Apr 15
240.30 126,204
14 Mar 16
182.00
215,419
–
–
29 Mar 17
218.20
–
187,354
08 Aug 14
190.60
393,494
08 Aug 14
190.60
393,495
17 Apr 15
240.30 319,912
17 Apr 15
240.30 319,912
11 Jul 16
175.70 1,384,614
Yes
11 Jul 16
175.70 1,304,629
Sharesave2 No
05 May 15
186.70
16,068
–
–
–
–
–
–
–
126,204 17 Apr 18
17 Apr 18
215,419 14 Mar 19 14 Mar 19
187,354 29 Mar 20 29 Mar 20
201,075
192,419 08 Aug 17 07 Aug 24
– 201,076
192,419 08 Aug 18 07 Aug 24
–
–
–
–
–
–
319,912 17 Apr 18
16 Apr 25
319,912 17 Apr 19
16 Apr 25
– 1,384,614 Completion
of managed
separation
– 1,304,629 Completion
of managed
separation
10 Jul 26
10 Jul 26
–
–
16,068 01 Jun 20 30 Nov 20
–
–
–
–
–
–
–
Total
4,473,747
187,354
– 402,151 4,258,950
1 The expiry date is determined by the rules of the plans under which the awards and options were granted.
2 The market value per share at grant represents the exercise price of the option granted under the Old Mutual plc 2008 Sharesave Plan, which was set at a 20% discount to the
average Old Mutual plc share price over a three-day period immediately preceding the date of invitation.
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Old Mutual plc Annual Report and Accounts 2017
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Old Mutual plc
Annual Report and Accounts 2017
Directors’ shareholdings and share interests (audited) continued
Within a period of five years of appointment to the role, the Group Chief Executive is required to build-up a holding of shares in the
Company equal in value to 200% of base pay; the equivalent figure for other executive directors is 150% of base pay.
Unvested share awards or share options and vested but unexercised share options are excluded for the purposes of the calculations.
There is no requirement for executive directors to hold shares or share interests in the Company once they have ceased employment
with the Group. Bruce Hemphill’s and Ingrid Johnson’s interests in Old Mutual plc shares at 31 December 2017 are set out below.
Shares have been valued for these purposes using the Old Mutual plc share price on 29 December 2017, which was 231.7p per share.
There have been no changes to the current directors’ personal shareholdings or share interests between 31 December 2017 and 15
March 2018 other than in relation to the outcome of the 2015 LTI targets set out earlier in this report.
Date
ownership
requirement
to be met
Executive director
by
Bruce Hemphill 1 Nov 20
1 Jul 19
Ingrid Johnson
Share
ownership
requirement
(% of base
pay)
Number of
shares
required
to be held
200% 796,288
150% 418,213
Number of
shares owned
outright
(including by
connected
persons)
96,600
525
Share
ownership
requirement
met
No
No
Vested but
unexercised
nil cost
share options
–
192,419
Forfeitable
shares
awards
not subject to
performance
targets
712,077
528,977
Nil cost share
options
not subject to
performance
targets
Nil cost share
options
subject to
performance
targets
6,632,053
192,419 3,329,067
Sharesave
share options
not subject to
performance
targets
–
16,068
There are no share ownership requirements for the non-executive directors. Shares owned by the Chairman and the other non-executive
directors holding office at 31 December 2017 (including holdings by connected persons) are shown below (holdings at date of resignation
are shown for Nkosana Moyo):
Non-executive director
Patrick O’Sullivan
Mike Arnold
Zoe Cruz
Alan Gillespie
Danuta Gray
Adiba Ighodaro
Trevor Manuel
Roger Marshall
Vassi Naidoo
Former non-executive director
Nkosana Moyo (resigned 29 June 2017)
Nonkululeko Nyembezi (resigned 31 December 2017)
Old Mutual plc shares held at 31 December 2017
100,000
26,475
34,500
13,000
14,175
–
–
45,000
5,000
10,000
28,667
There have been no changes to the interests in shares owned by the Chairman and the current non-executive directors between
31 December 2017 and 15 March 2018.
Shares in trust and shareholder dilution
At 31 December 2017, there were 109,161,165 shares held in employee share ownership trusts (ESOTs) for the purposes of collaterising
some of the obligations under the Group’s employee share incentive schemes. The usual strategy is to ensure that, with the exception of
Black Economic Empowerment-related ESOTs, at least sufficient shares are held to satisfy restricted share/forfeitable shares awards. In
calculating dilution limits, any awards that are satisfied by transfer of pre-existing issued shares (such as shares acquired by market
purchase through ESOTs) and any shares comprised in any share option or share award that has lapsed or has been cash-settled are
disregarded. At 31 December 2017, the Company had 4.58% of share capital available under the 5%-in-10-years limit applicable to
discretionary share incentive schemes and 8.66% of share capital available under the 10%-in-10-years limit applicable to all share
incentive schemes. The Company has complied with these limits at all times.
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Old Mutual plc Annual Report and Accounts 2017Governance
Old Mutual plc
Annual Report and Accounts 2017
Directors’ Remuneration Report
continued
Payments to past directors (audited)
Julian Roberts
LTI awards granted to Julian Roberts, the former Group Chief Executive, vested during 2017 as set out below:
Date of grant
8 Apr 13
8 Apr 14
Shares under
option at grant
569,059
561,451
Shares forfeited
in respect of
performance targets
and time-based
pro-rating
355,002
376,831
Shares vested
in 2017
214,057
184,620
Share price on
date of vesting
189.7p
189.7p
Julian Roberts
Paul Hanratty
LTI awards granted to Paul Hanratty, the former Group Chief Operating Officer, vested during 2017 as set out below:
Date of grant
8 Apr 13
8 Apr 14
8 Aug 14
Shares under
option at grant
282,922
278,875
57,844
Shares forfeited
in respect of
performance targets
and time-based
pro-rating
158,069
168,137
38,023
Shares vested
in 2017
124,853
110,738
19,821
Share price on
date of vesting
189.7p
189.7p
206.4p
Paul Hanratty
Value of
share options
vested in 2017
£000
406
350
Value of
share options
vested in 2017
£000
237
210
41
Payments for loss of office (audited)
There were no payments for loss of office paid to any of the executive directors of the Company in 2017.
122
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Performance graphs
The charts below show the Company’s eight-year annual TSR performance against the FTSE 100 Index and JSE ALSI. These indices
were selected because: (i) the Company is part of those indices; and (ii) due to the international structure and diversity of the Group’s
businesses, the two broad market indices shown are the only relevant market comparators available.
The charts show the value of TSR (assuming dividends reinvested) at each year end from 31 December 2009 to 31 December 2017 on
£100/R100 invested in Old Mutual plc shares compared with the TSR (calculated on the same basis) on £100/R100 invested in the FTSE
100 Index and the JSE ALSI at the same dates.
Old Mutual versus
FTSE 100
Old Mutual (LSE)
FTSE 100
Old Mutual versus
JSE ALSI
Old Mutual (JSE)
JSE ALSI
700%
650%
600%
550%
500%
450%
400%
350%
300%
250%
200%
150%
100%
0%
31 Dec 08
31 Dec 09
31 Dec 10
31 Dec 11
31 Dec 12
31 Dec 13
31 Dec 14
31 Dec 15
31 Dec 16
31 Dec 17
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o
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700%
650%
600%
550%
500%
450%
400%
350%
300%
250%
200%
150%
100%
Source: Datastream
0%
31 Dec 08
31 Dec 09
31 Dec 10
31 Dec 11
31 Dec 12
31 Dec 13
31 Dec 14
31 Dec 15
31 Dec 16
31 Dec 17
Single figure
Group Chief Executive’s remuneration over the last eight years
2012
£000
7,881
–
88%
–
80%
–
Julian Roberts
Bruce Hemphill
Julian Roberts
Bruce Hemphill
Julian Roberts
Bruce Hemphill
STI payout against
maximum opportunity
LTI vesting against
maximum opportunity
2011
£000
8,521
–
92%
–
100%
–
2009
£000
2,163
–
77%
–
0%
–
2010
£000
2,447
–
98%
–
0%
–
2013
£000
4,817
–
85%
–
84%
–
2014
£000
4,444
–
79%
–
69%
–
2015
£000
2,270
4,811
86.3%
–
71.5%
–
2016
£000
–
2,480
–
2017
£000
–
4,739
–
86.9% 100.0%
48.9%
–
–
66.9%
123
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Old Mutual plc Annual Report and Accounts 2017Governance
Old Mutual plc
Annual Report and Accounts 2017
Directors’ Remuneration Report
continued
Percentage change in the remuneration of the Group Chief Executive
The table below shows the percentage change in the remuneration of the Group Chief Executive (from 2016 to 2017) compared to that for
UK-based employees of the plc Head Office in London. The committee has selected employees in the plc Head Office in London, as the
Group Chief Executive is employed in that office and managed separation has made comparison to other businesses less relevant.
Element
Base pay
Taxable benefits1
STI
Group
Chief Executive
% change
2.5
13
18
Average UK-based
employee
% change
3.1
14.3
22.8
1 The increase in taxable benefits for the Group Chief Executive relates to the payment of tax advice following his transfer to the UK in 2015. Advice in relation to 2015 and 2016 was
charged to the Company during 2017, meaning that there was no comparator for 2016. For other employees the increase is partly attributable to 2017 being the first full calendar year
that the lower annual pension cap applied.
Relative importance of spend on pay
The table below illustrates the Group’s spend on pay compared with distributions to shareholders:
Dividends paid to ordinary equity holders
Dividends paid to Nedbank non-controlling interests
Dividends paid to OMAM non-controlling interests
Remuneration paid to all Group employees
2017
£m
330
166
4
2,244
2016
£m
426
132
10
1,782
Year-on-year change
£m
(96)
34
(6)
462
%
(22.5)
26
(60)
26
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Implementation of policy in 2018
The committee intends to apply the policy in the following manner for 2018:
Base pay
The table below shows the changes to base pay for 2018, which were equal to the average increase of 2.5% received by other employees
in the plc Head Office in London.
Executive director
Bruce Hemphill
Ingrid Johnson
2018
£
945,565
662,150
2017
£
922,500
646,000
% increase
2.5
2.5
STI
In 2017, the STI scorecard was weighted 75% financial measures and 25% non-financial measures. In 2018, the committee has
determined that the STI scorecard up to the point of listing of OML and the demerger and listing of OMW will be weighted 50% financial
measures and 50% non-financial measures. The financial measures will be a combination of cost management of the plc Head Office
in London, and the performance of the businesses. Non-financial measures will focus on the executives’ continued oversight of the
businesses in the management of risk and execution of the strategies. After listing of OML and the demerger and listing of OMW, the
committee believes performance relative to non-financial measures only is appropriate, as plc executive oversight of the businesses will
effectively end. The non-financial measures will focus on the principal remaining steps for managed separation, including the wind-down
plan for the plc Head Office in London, the management of Company debt, and the anticipated unbundling of Nedbank. In relation to
the pre-listing metrics only, a potential downward adjustment of up to 5% will apply based on the outcome of two risk-based metrics.
Achievement of the target (or better) will result in no adjustment to the outcome; achievement at or below the threshold will result in a 5%
downward adjustment to the outcome, with straight-line interpolation between threshold and target. There will also be a qualitative risk
assessment undertaken by the Group’s Chief Risk Officer and endorsed by the Board Risk Committee in relation to the pre-listing metrics
only, which will cover management of risk in relation to risk management policy and risk appetite limits, audit/governance reports and
regulatory breaches.
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The maximum award will remain 150% of base pay and the objectives for the executive directors will be as follows:
Period
Qualitative component
(assessed at listing)
Performance objectives
Personal objectives linked to the continued oversight of the businesses
in the management of risk and execution of the strategies
Quantitative
component
After listing
plc Head Office in London - cost management
OML – Adjusted Headline Earnings
Nedbank – Headline Earnings
OMW – IFRS Profit (excluding amortisation of intangibles and policyholder tax)
plc Head Office in London - cost management
Personal objectives linked to:
Delivery of the wind-down plan for the plc Head Office in London
Supporting the OML management team, including:
Management of remaining Company debt
Preparation for and management of the anticipated Nedbank unbundling
1 The actual category weighting will be determined by the committee on the listing of OML and the demerger and listing of OMW.
LTI
There will be no long-term incentive awards granted by the Company in 2018.
Category
weight1
Sub-
component
weight
Minimum
of 70%
50%
27.5%
7.5%
7.5%
7.5%
Maximum
of 30%
N/A
Legacy deferred STI and LTI awards
The committee has concluded that when managed separation is determined to be materially complete at the time of listing of OML and the
demerger and listing of OMW (this being contingent on the necessary approvals subsequently being received with a legal obligation on
OML to proceed with the unbundling of Nedbank), all unvested deferred STI and LTI awards will vest on or shortly after the listing of OML,
in accordance with the rules of the plans and the terms of the policy. As the performance period will be complete, there will be no time-
based pro-rating applied. Executives will continue to have significant alignment to shareholders, business performance, and risk
management events through the continued vesting and holding period of a substantial proportion of the MSIP awards, and the Company’s
ability to apply claw back to vested awards in the event of a significant risk issue. As the Old Mutual plc shares will not be tradeable after
the listing of OML, the nil cost share options will be exercisable over OML and OMW shares in the same proportions as will be received
by shareholders.
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Old Mutual plc
Annual Report and Accounts 2017
Directors’ Remuneration Report
continued
The Managed Separation Incentive Plan
The intention is for the elements of the MSIP relating to the Execution of the managed separation (40% of the award), and Performance of
the underlying businesses (25% of the award), to vest following the listing of OML and the demerger and listing of OMW, with a one-year
holding period applied to 50% of the net value of the vested award. In respect of the measurement category relating to TSR (the remaining
35% of the award), the committee is mindful that the way the execution of managed separation has evolved means that the constituent
businesses will be listed. The committee has determined that the TSR from the independently-listed businesses should therefore continue
to be measured until the end of the holding period applicable to the elements of the MSIP that will vest following the listing of OML and the
demerger and listing of OMW. This is consistent with the commitment to maintain shareholder alignment for a period beyond completion
and ensure the outcome reflects the shareholder value created through separating the constituent businesses, which will take time. As the
Old Mutual plc shares will not be tradeable after the listing of OML, the nil cost share options will be rolled-over into OML and OMW shares
in the same proportions as will be received by shareholders.
The combined application of malus, cross-malus (enabling the committee to apply malus to an unvested award in respect of a risk event
that applies to an award that has already vested) and claw back ensures that the committee has appropriate mechanisms to apply
reductions to awards up to 12 months following the final vesting date if a significant risk event occurs.
Post-employment holding periods
The committee has chosen not to require executive directors to hold shares for a period after vesting or exercise, or after leaving the
Group. The holding period will apply to 50% of the net value of the vested MSIP award (other than in relation to the TSR metric).
Non-executive directors’ fees
The annual fees payable to the Chairman and to the other non-executive directors in 2017 and 2018, are set out below, by role. There has
been no increase to the fees payable to the Chairman and the other non-executive directors in 2018.
Role
Chairman
Senior Independent Director
Board fee
Chairman of the Board Risk Committee
Member of the Board Risk Committee
Chairman of the Group Audit Committee
Member of the Group Audit Committee
Member of the Nomination and Governance Committee
Chairman of the Remuneration Committee
Member of the Remuneration Committee
2018
£
400,000
20,000
66,000
40,000
15,000
40,000
15,000
8,500
40,000
15,000
2017
£
400,000
20,000
66,000
40,000
15,000
40,000
15,000
8,500
40,000
15,000
Solvency II
From 1 January 2016, certain parts of the Group were required to comply with the remuneration requirements of Solvency II. The parts
of the Group specifically impacted are Old Mutual plc, OMW and OMEM. The committee, along with the Company’s Management
Remuneration Committee, oversees compliance of all relevant businesses in the Group with the Solvency II remuneration requirements.
In reaching the decisions relating to existing share awards as a result of the managed separation, the committee carefully considered
the remuneration requirements of Solvency II, including the requirement to defer a material proportion of variable pay over three years,
and to ensure that executives are aligned to the risks inherent in executing the strategy throughout the period over which managed
separation is expected to be completed, and for a suitable period of time beyond. The committee is satisfied that the executives will be
appropriately aligned through the continued vesting and holding period applicable to the MSIP and the claw back provisions that apply
to all incentive plans.
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Old Mutual plc
Annual Report and Accounts 2017
Consideration by the directors of matters relating to directors’ remuneration
Committee meetings and members
The following, all of whom are or were at the relevant time independent non-executive directors of the Company, served as members
of the committee during the year:
Non-executive director Position
Danuta Gray
Zoe Cruz
Alan Gillespie
Roger Marshall
Nkosana Moyo
Chairman
Member
Member
Member
Member
Period on the committee
March 2013 to date (Chairman since May 2014)
January 2014 to date
November 2010 to date (Chairman from May 2013 to May 2014)
May 2013 to date
January 2014 to June 2017
1 The meetings that Zoe Cruz, Alan Gillespie and Nkosana Moyo did not attend were ad-hoc meetings. They attended all scheduled meetings in 2017.
Meetings
Attended1
9/9
7/9
7/9
9/9
4/5
The committee Chairman has access to and regular contact with the Group Human Resources Department independently of the
executive directors. During 2017, the committee met nine times. The Board accepted the recommendations made by the committee
during the year without amendment. Paul Forsythe, Deputy Group Company Secretary, acted as secretary to the committee.
Advisers to the committee
A review of the committee’s independent adviser was undertaken in 2014 and, following a competitive tender process, the committee
appointed PwC as its independent adviser. PwC provides wide-ranging advice and services across the Group on matters including
transactions, tax, internal audit and IT security. In its capacity as adviser to the committee, PwC works with management to prepare
recommendations for the committee’s consideration and provides advice to the committee on benchmarking of total remuneration
packages for the executive directors and other senior employees, the design of short-term and long-term incentive arrangements
(including for employees of subsidiary companies), updating the committee on corporate governance best practice, advice in relation to
the measurement of performance for incentive purposes and other matters within the committee’s terms of reference. PwC also provides
advice to management on remuneration matters. The committee undertakes a review of the advice it receives to assess whether it is
objective and independent; it also satisfies itself that there are no conflicts of interest arising between it, the advisers and the Company.
PwC is a signatory to the Remuneration Consultants’ Group Code of Conduct. Work undertaken by PwC for the committee is charged
on a time basis and for 2017 was £212,300 (2016: £209,699) excluding VAT.
Ian Luke (Group Head of Reward) and Rex Tomlinson (Group Chief of Staff) assisted the committee during the year. Group Human
Resources provided supporting materials for matters that came before the committee, including comparative data and justifications for
proposed base pay, benefits, annual incentive plans, share awards and criteria for performance targets and appraisals against those
targets. Patrick O’Sullivan, Bruce Hemphill, and Sue Kean, the Group’s Chief Risk Officer, gave advice to the committee in assessing the
performance of the Group Chief Executive, other members of the plc Executive committee and business CEOs, and the assessment of
risk, respectively.
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Old Mutual plc Annual Report and Accounts 2017Governance
Old Mutual plc
Annual Report and Accounts 2017
Directors’ Remuneration Report
continued
Voting at General Meetings
The voting results at AGMs and GMs on resolutions relating to our Directors’ Remuneration Reports, the Directors’ Remuneration Policy,
and other remuneration-related resolutions over the last three years were as follows:
Year of
report
2016
2015
2014
Type
Directors’
Remuneration
Report
Directors’
Remuneration
Report
New Policy
Adoption of
the Managed
Separation
Incentive Plan
Directors’
Remuneration
Report
Date of
AGM/GM
25 May 17
Votes
for
2,611,810,916
Votes
for %
72.03
Votes
against
1,014,151,915
Votes
against %
Total votes
cast (excluding
votes withheld)
27.97 3,625,962,831
Votes
withheld
47,844,913
28 Jun 16
3,345,897,363
93.17
245,393,581
6.83 3,591,290,944
10,467,799
28 Jun 16
28 Jun 16
2,933,954,378
2,909,574,894
81.71
81.11
656,580,062
677,784,311
18.29 3,590,534,440
18.89 3,587,359,205
25,437,978
28,613,213
14 May 15
3,166,003,379
94.21
194,559,265
5.79 3,360,562,644
11,506,850
The committee is mindful of shareholder feedback and the voting result for the 2016 Directors’ Remuneration Report, demonstrating
that a significant minority of shareholders had concerns about the 2016 Directors’ Remuneration report. The committee therefore took
this feedback into account in assessing the outcome of the plans for 2017. 2017 outcomes were assessed against internal targets, peer
group performance and external macro-economic measures, assuring the committee that the outcomes of the plans were appropriate
for the performance delivered over the period. This approach is consistent with our commitment to align executive remuneration with
stakeholder interests.
Consideration of shareholder views
In developing the revised policy and the MSIP in 2016, we consulted with our largest shareholders and also shared a substantial amount
of information about the proposals with major shareholder representative bodies in the UK such as ISS and the Investment Association.
The feedback received during the consultation period was reflected in the policy and the design of the MSIP.
Approved and signed on behalf of the Board of directors.
Danuta Gray
Chairman of the Remuneration Committee
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Index to the financial statements
Index to the financial statements
Contents
129−339
Contents
129−339
130 Statement of directors' responsibilities in respect of the Annual
Report and Accounts and financial statements
131 Independent Auditor's report to the members of Old Mutual plc
130 Statement of directors' responsibilities in respect of the Annual
142 Consolidated income statement
Report and Accounts and financial statements
143 Consolidated statement of comprehensive income
131 Independent Auditor's report to the members of Old Mutual plc
144 Statement of adjusted operating profit
142 Consolidated income statement
148 Consolidated statement of financial position
143 Consolidated statement of comprehensive income
149 Consolidated statement of cash flows
144 Statement of adjusted operating profit
150 Consolidated statement of changes in equity
148 Consolidated statement of financial position
149 Consolidated statement of cash flows
150 Consolidated statement of changes in equity
154 Notes to the consolidated financial statements
154 A: Significant accounting policies
170 B: Segment information
154 Notes to the consolidated financial statements
180 C: Other key performance information
154 A: Significant accounting policies
189 D: Other consolidated income statement notes
170 B: Segment information
198 E: Financial assets and liabilities
180 C: Other key performance information
216 F: Capital and financial risk management
189 D: Other consolidated income statement notes
224 G: Analysis of financial assets and liabilities
198 E: Financial assets and liabilities
259 H: Non-financial assets and liabilities
216 F: Capital and financial risk management
275
224 G: Analysis of financial assets and liabilities
arrangements
259 H: Non-financial assets and liabilities
288 J: Other notes
I: Interests in subsidiaries, associates and joint
275
300 K: Accounting policies on financial assets and liabilities
arrangements
306 L: Related undertakings of the Group
288 J: Other notes
330 Financial statements of the Company
300 K: Accounting policies on financial assets and liabilities
306 L: Related undertakings of the Group
330 Financial statements of the Company
I: Interests in subsidiaries, associates and joint
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Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Statement of Directors’ responsibilities in respect of the
Annual Report and Accounts and the Financial Statements
The Directors are responsible for preparing the Annual Report and Accounts and the Group and parent Company financial statements
in accordance with applicable law and regulations.
Company law requires the directors to prepare Group and parent Company financial statements for each financial year. Under that law
they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted
by the European Union (IFRSs as adopted by the EU) and applicable law and have elected to prepare the parent Company financial
statements on the same basis.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent
Company financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable, relevant and reliable;
state whether they have been prepared in accordance with IFRSs as adopted by the EU;
assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going
concern; and
use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's
transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure
that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors' Report, Directors'
Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's
website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
Responsibility statement of the directors in respect of the annual financial report
We confirm that to the best of our knowledge:
the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
the strategic report includes a fair review of the development and performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that
they face.
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's position and performance, business model and strategy.
Bruce Hemphill
Group Chief Executive
14 March 2018
Ingrid Johnson
Group Finance Director
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Independent Auditor’s Report to the Members
of Old Mutual plc
1 Our opinion is unmodified
We have audited the financial statements of Old Mutual plc (“the Company”) for the year ended 31 December 2017 which comprise the
Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of
Financial Position, the Consolidated and Company Statements of Cash Flows, the Consolidated and Company Statements of Changes
in Equity, the Statement of Adjusted Operating Profit and the related notes, including the accounting policies.
In our opinion:
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2017 and
of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU);
the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in
accordance with the provisions of the Companies Act 2006; and;
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is
consistent with our report to the Group Audit Committee.
We were appointed as auditor of the Company by the Directors following its incorporation on 26 June 1998. Subsequent to the Company’s listing
of its shares on the London Stock Exchange on 12 July 1999, we were reappointed as auditor of Old Mutual plc by the shareholders at its AGM
on 18 May 2000. The period of total uninterrupted engagement is for the 18 years 8 months ended 31 December 2017 (17 years 7 months since
the Company’s listing). We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK
ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that
standard were provided.
2 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We
summarise below the key audit matters (changed from 2016 to include Assets and liabilities held for sale and distribution and remove Investment
in Ecobank Transnational Incorporated), in decreasing order of audit significance, in arriving at our audit opinion above, together with our key
audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were
addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial
statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate
opinion on these matters.
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Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Independent Auditor’s Report to the Members
of Old Mutual plc continued
Life insurance contract liabilities
Continuing: (£9,520 million; 2016: £9,982 million), classified as held for sale and distribution: (£625 million, 2016: £10 million).
Risk vs 2016: ◄►
Refer to page 81 (Report from the Group Audit Committee), pages 239 to 243 (accounting policy) and the disclosures in notes A3, A4,
E and G6 to the financial statements.
The risk
Our response
Subjective valuation
Within the life businesses in Emerging Markets and Old Mutual
Wealth, judgement is required over the variety of uncertain future
outcomes affecting the valuation of policyholder liabilities, including
the estimation of economic assumptions, such as investment
return, discount rates, and operating assumptions such as,
expenses, tax, mortality and persistency and the policy for
creating and releasing discretionary margins held.
Our procedures included:
Control design: Evaluating controls over the measurement and
management of the Group’s calculation of insurance liabilities
including their operating effectiveness.
Our sector experience: Assessing the appropriateness
of methodologies and assumptions used against our own
knowledge of the regulations, industry standards and
market practice.
Our actuarial expertise: Using our own actuarial specialists to
assist us in challenging certain assumptions and methodology
used and the process followed for setting and updating these
assumptions, particularly around mortality, morbidity, expense
and persistency assumptions. This included assessing the data
used in the Group’s analysis prepared to set the assumptions,
in the context of our own industry knowledge, external data
and our views of experience to date, an understanding of which
was enhanced through our attendance at the Group’s own
internal Independent Review Committee meetings. Further,
we assess the Group’s analysis of movement in the results
and, where appropriate, perform independent recalculations
of specific liabilities.
Assessing transparency: Assessing whether the disclosures
in relation to the life insurance contract liabilities are compliant
with IFRS and with the methodologies applied by the directors.
Our results
We found the valuation of policyholder liabilities to be
acceptable (2016: acceptable).
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Gross loans and advances
Continuing: (£1,456 million; 2016: £44,237 million), classified as held for sale and distribution: (£43,284 million, 2016: £nil).
Provisions for impairment
Continuing: (£174 million; 2016: £1,129 million), classified as held for sale and distribution: (£717 million, 2016: £nil).
Risk vs 2016: ▲
Refer to page 81 (Report from the Group Audit Committee), pages 224 and 300 to 305 (accounting policy) and the disclosures in notes
A3, E and G1 to the financial statements.
The risk
Our response
Subjective estimate
The loans and advances impairment assessment requires
judgement and subjective assumptions, particularly the estimated
stream of future cash flows and credit losses on the unsecured
and commercial lending portfolios at Nedbank and Old Mutual
Finance within Emerging Markets.
Collective impairments are calculated using models which rely
on expert judgement and large historical datasets. Overlays may
be applied to model outputs to cater for additional factors, and
the valuation of these overlays can be highly subjective
within Nedbank.
The Group’s loans and advances are primarily held in South Africa
and the ongoing volatility of the wider economy in South Africa
increases the risk of estimation uncertainty as well as
macroeconomic issues such as the price of oil.
Our procedures included:
Control design: Evaluating controls over the identification
of impairment losses, the governance processes in place for
credit models, inputs and overlays, the credit forums where
key judgements are considered, and how the directors ensure
they have appropriate oversight over allowances for loan
impairments and other credit risk allowances including their
operating effectiveness where possible.
Assessing forecasts: Testing the historical accuracy of
impairment provision models by assessing the historical
projections versus actual credit losses.
Our credit expertise and benchmarking assumptions:
Our Nedbank and Emerging Markets component teams
involved their own internal credit specialists to assist us in
assessing significant impairment models employed by the
Group and challenging the Group’s assumptions by comparing
them to externally available data in relation to key inputs such
as historical default rates, recovery rates, collateral valuation,
and economic growth rates.
Our sector experience and tests of detail: Performing
detailed testing over the specific provisions held against
a sample of loans and advances by inspecting latest
correspondence Credit Committee and Risk Committee
minutes, challenging assumptions where relevant and
assessing collateral values. We also attended the key
Nedbank Credit Committee and Emerging Markets Risk
Committee meetings.
Assessing transparency: Assessing whether the adequacy
of the disclosures made in relation to loan loss provisioning
is consistent with IFRS and with the methodologies applied
by the directors.
Our results
We found the level of provisions for impairment made
and valuation of loans and advances to be acceptable
(2016: acceptable).
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Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Independent Auditor’s Report to the Members
of Old Mutual plc continued
Goodwill and other intangibles
Continuing: (£397 million; 2016: £2,471 million), classified as held for sale and distribution: (£2,063 million, 2016: £1,294 million).
Risk vs 2016: ▼
Refer to page 81 (Report from the Group Audit Committee), pages 259 to 263 (accounting policy) and the disclosures in notes
A3, A4 and H1 to the financial statements.
The risk
Our response
Forecast-based valuation
Goodwill and other intangible assets (both acquired and internally
generated) represent 0.2% (2016: 1.4%) of total assets of the
Group and the determination of their recoverable amount is
complex and typically requires a high level of judgement, taking
into account the different economic environments in which the
Group operates. Goodwill and other intangibles classified as held
for sale and distribution represent 1.6% (2016: 15.1%) of total
assets classified as held for sale and distribution. The most
significant judgements arise over the forecast cash flows, discount
rate and growth rate applied in the value-in-use valuation models.
The risk has decreased in the current year due to significant
goodwill impairments recognised by Emerging Markets
management in both the prior year and the period ended
30 June 2017. There have been no impairment reversals
in the year and hence there is headroom at year end,
resulting in a lower risk assessment.
Our procedures included:
Our sector experience: Challenging the cash flow forecasts
and the corresponding assumptions, such as discount rates
and growth rates based on our understanding of the relevant
business and the industry and economic environment in which
it operates. Additionally, comparing forecasts to business plans
and also previous forecasts to actual results to assess the
performance of the business and the accuracy of forecasting
and considered the appropriateness of the scenarios used,
in the context of our wider business understanding.
Sensitivity analysis: Performing sensitivity analyses on the
key assumptions in Old Mutual Wealth and the cash generating
units in Emerging Markets.
Our valuation expertise: Our Emerging Markets component
team involved their own valuation specialists to assist us in
evaluating the key assumptions and methodologies used by the
Group, in particular those relating to discount rates, and growth
rates, with reference to our own independent expectations,
which were based on our industry knowledge and experience.
Assessing transparency: Assessing the adequacy of the
disclosures regarding the sensitivity of the relevant financial
statement items to changes in the respective key assumptions
appropriately reflect the associated risks and comply with the
requirements of relevant accounting standards.
Our results
We found that the resulting estimate of the recoverable amount
of goodwill was acceptable (2016: acceptable).
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Old Mutual plc
Annual Report and Accounts 2017
Investments and securities
Continuing: (£43,102 million; 2016: £100,388 million), classified as held for sale and distribution: (£73,818 million, 2016: £6,354 million).
Risk vs 2016: ▲
Refer to page 82 (Report from the Group Audit Committee), pages 300 to 305 (accounting policy) and the disclosures in notes A4,
E and G2 to the financial statements.
The risk
Our response
Subjective valuation
We do not consider investment and securities to include a high
risk of significant misstatement, or to be subject to a significant
level of judgement. However, due to their materiality in the
context of the financial statements as a whole, they are
considered to be one of the areas which had the greatest
effect on our overall audit strategy and allocation of resources
in planning and completing our audit. The determination of the
fair value of certain financial instruments, held at fair value,
is a key source of estimation uncertainty. This applies to both
individual financial instruments and also to portfolio valuation
adjustments. At 31 December 2017, investments and
securities at fair value through profit or loss represented 23.8%
(2016: 61.4% which is not required to be restated for those
assets held for sale and distribution at 31 December 2017) of
total assets, and available-for-sale assets represented 0.03%
(2016: 0.6% which is not required to be restated for those
assets held for sale and distribution at 31 December 2017) of
total assets. At 31 December 2017, investments and securities
at fair value through profit or loss classified as held for sale and
distribution represented 60.6% (2016: nil%) of total assets
classified as held for sale and distribution, and available-for-
sale assets classified as held for sale and distribution
represented 0.9% (2016: nil%) of total assets classified as held
for sale and distribution. The estimation uncertainty is higher
for those instruments that are classified as level 3 instruments
under the relevant accounting standard, as significant
elements of the valuation are not observable. Of the financial
instruments carried at fair value, 2.8% (2016: 1.5%) were
classified as level 3. Of the financial instruments carried at fair
value classified as held for sale and distribution, 1.8% (2016:
nil%) were classified as level 3.
The risk has increased in the current year due to the ongoing
volatility of the wider economy in South Africa increasing the
risk of estimation uncertainty as well as macroeconomic issues
such as the price of oil.
Our procedures included:
Benchmarking assumptions and our sector experience:
At 31 December 2017, level 1 and level 2 instruments primarily
comprise listed equity and debt securities and unlisted equity
and debt securities respectively. For these we selected a
sample of these instruments and checked their prices or other
observable inputs to independent sources. At 31 December
2017, level 3 instruments primarily comprise unlisted private
equity investments and investment securities.
Our valuation expertise: Our Nedbank and Emerging
Markets component teams involved their own valuation
specialists to challenge the key inputs and assumptions
such as estimated cash flows and discount rates which
drive the valuation, and to critically assess the valuation
methodologies against current market best practice.
We considered sensitivities to key factors including:
Assessing the appropriateness of the pricing multiples
available from comparable listed companies, adjusted
for comparability differences, size and liquidity; and
Assessing the reasonableness of the cash flows and
discount rates used by comparing them to similar
instruments.
Assessing transparency: Assessing the adequacy of
the disclosures including the description of the fair value
measurement process and whether the sensitivity to key
inputs appropriately reflects the Group’s exposure to
financial instruments valuation risk
Our results
We found the valuation of investments and securities
to be acceptable (2016: acceptable).
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Group financial statements
Independent Auditor’s Report to the Members
of Old Mutual plc continued
Assets and liabilities held for sale and distribution
Assets (£130,603 million; 2016: £8,570 million)
Liabilities (£121,968 million; 2016: £7,046 million)
Risk vs 2016: ▲ (new key audit matter)
Refer to page 81 (Report from the Group Audit Committee), page 154 and 160 (accounting policy) and the disclosures in note
A4 to the financial statements.
The risk
Our response
Subjective outcome
The application of accounting standards to determine the
treatment of Nedbank and Old Mutual Wealth as held for
distribution, is inherently subjective, particularly in determining
whether the distribution is highly probable.
The risk has increased from the prior year as it was not the
directors’ intention to distribute either Nedbank or Old Mutual
Wealth within twelve months of the previous year end.
Our procedures included:
Evaluating directors' intent: Assessing and challenging the
directors’ assumptions and judgements made behind their
classification of both Nedbank and Old Mutual Wealth as held
for distribution against the relevant criteria within the relevant
accounting standard, including whether the distributions are
highly probable to occur within twelve months of 31 December
2017 by evaluating the assumptions and judgements against
our own expectations based on our knowledge of the Group and
intent of the directors by attending and questioning key Board
committee members. We reviewed supporting documentation
to consider whether the high probability assessment was met
at 31 December 2017, including the potential impacts that the
remaining execution risks have on both distributions.
Enquiry of senior management and key Board committees:
Performing enquiries with senior management and key Board
committees on all significant assumptions made including
whether Nedbank and Old Mutual Wealth are available for
immediate distribution in their present condition and whether it is
highly probable that the distributions will occur within 12 months
of the balance sheet date and corroborating these assumptions
by reviewing management’s accounting papers, including
project plans, timelines, presentations to institutional investors
and key Board committee meeting minutes such as the
Managed Separation Steering Committee. Additionally,
assessing whether the information obtained from the
enquiries are consistent with our understanding of the
directors’ intent or whether any disconfirming evidence exists.
Assessing transparency: Assessing the adequacy of the
disclosures made in relation to the treatment of both Nedbank
and Old Mutual Wealth as held for distribution.
Our results
We found the group’s assessment of both Nedbank and
Old Mutual Wealth being classified as held for distribution
to be acceptable (2016: not applicable).
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Old Mutual plc
Annual Report and Accounts 2017
Parent Company risks: Investments in Group subsidiaries
(£4,150 million; 2016: £5,457 million)
Risk vs 2016: ◄►
Refer to page 82 (Report from the Group Audit Committee), pages 154 to 155 and 334 (accounting policy) and the disclosures in note 2
to the Company financial statements.
The risk
Our response
Subjective valuation
The carrying amount of the Parent Company’s investments
in subsidiaries represents 57.4% (2016: 52.4%) of the Parent
Company’s total assets. Their recoverability is not at a high risk
of significant misstatement or subject to significant judgement.
However, due to their materiality in the context of the Parent
Company financial statements, this is considered to be the area
that had the greatest effect on our overall Parent Company audit.
Our procedures included:
Tests of detail: Comparing the carrying amount of a sample of
the highest value investments, representing 65% (2016: 100%)
of the total investment balance with the relevant subsidiaries’
draft balance sheets to identify whether their net assets, being
an approximation of their minimum recoverable amount, were
in excess of their carrying amount. Assessing the recoverable
value for investments, representing 35% (2016: nil%) of the total
investment balance using value-in-use models. Procedures
performed over value-in-use models are described in the
section on Goodwill and other intangibles above.
Assessing subsidiary audits: As Group auditors, assessing
the work performed by the subsidiary audit teams over the net
assets of those subsidiaries by reviewing subsidiary audit teams
audit procedures and findings.
Our results
We found the Company’s assessment of the recoverability
of the investments in Group subsidiaries to be acceptable
(2016: acceptable).
We continue to perform procedures over Investment in Ecobank Transnational Incorporated. However, as the investment market value
exceeded carrying value and management concluded that no objective indicators of further impairment or reversal of impairment existed at
31 December 2017, we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately
identified in our report this year.
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Group financial statements
Independent Auditor’s Report to the Members
of Old Mutual plc continued
3 Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at £80 million (2016: £69 million), determined with reference to a benchmark
of normalised Group profit before tax from continuing and discontinued operations of £2,037 million (2016: £1,667 million). As detailed in note
C1 of the Group financial statements, this represents the Group’s profit before tax from continuing operations adjusted for the following items:
the effects of short-term market volatility such as short-term fluctuations in investment return and revaluation of Institutional Asset Management
equity plans;
the effect of strategic choices and inorganic activity such as goodwill impairment, the impact of acquisition accounting and net profit/loss on
disposal of subsidiaries, associated undertakings and strategic investments, dividends declared to holders of perpetual preferred callable
securities, credit-related fair value losses on Group debt instruments, managed separation and business standalone costs, income/(expense)
from resolution of plc Head Office pre-existing items, voluntary remediation to customers; and
the impact of significant one-off investments in organic growth such as Old Mutual Wealth restructuring expenditure.
For those items excluded from normalised Group profit before tax, the component teams performed procedures on such items relating
to their components.
The Group is in the process of executing a managed separation into four independent businesses and at an appropriate point in the future, the
Group, in its current structure, will no longer exist. We have not identified risks of material misstatement arising from the execution of managed
separation for the audit of the financial statements for the year ended 31 December 2017 however, we consider the impact of managed
separation in assessing our materiality. Materiality represents 3.9% (2016: 4.1%) of normalised Group profit before tax. Materiality was
reassessed on a regular basis and this reassessment considered the impact of the execution of the managed separation of the Group
on its normalised Group profit before tax.
Materiality for the Parent Company financial statements as a whole was set at £20 million (2016: £20 million), based on component materiality.
This is lower than the materiality we would otherwise have determined by reference to total assets, and represents 0.3% (2016: 0.2%) of the
Parent Company’s total assets.
We agreed to report to the Group Audit Committee any corrected or uncorrected identified misstatements exceeding £4 million
(2016: £3.4 million), in addition to other identified misstatements that warranted reporting on qualitative grounds.
Scope – Group
Of the group’s six (2016: six) reporting components, being Emerging Markets, Old Mutual Wealth, Nedbank, Old Mutual Bermuda, plc Head
Office businesses and OMLAC(SA) branches (2016: Emerging Markets, Old Mutual Wealth, Nedbank, Institutional Asset Management, Old
Mutual Bermuda and plc Head Office businesses), we subjected six (2016: six) to full scope audits for group purposes. The component audit
teams at each of the components undertook their own scoping exercises, with oversight from the Group team, to gain sufficient audit coverage
to support their own reporting to the Group team. The component teams performed procedures on those items excluded from normalised Group
profit before tax. The components scoped in for Group reporting purposes accounted for 100% (2016: 100%) of total Group revenues; 100%
(2016: 100%) of Group profit before tax; and 100% (2016: 100%) of Group total assets.
The Group team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed above and
the information to be reported back. The Group team approved the component materialities, which ranged from £20 million to £45 million
(2016: £20 million to £45 million), having regard to the mix of size and risk profile of the Group across the components. The work on six
of the six components (2016: six of the six components) was performed by component auditors.
The Group team visited four component locations in Cape Town, Johannesburg and two in London (2016: four component locations in Cape
Town, Johannesburg and two in London and met one component from the US in the UK for planning and risk assessment meetings) to assess
the audit risk and strategy. The group audit team maintained regular communication with the component auditors at these locations throughout
the audit cycle to discuss work progress and identify matters of relevance to our audit of the Group financial statements. At these visits and
meetings, the findings and status of any issues reported to the Group team was discussed in detail, and any further work required by the Group
team was then performed by the component auditor. The Senior Statutory Auditor, in conjunction with other senior staff in the Group team, also
attended Group Audit Committee meetings held at the significant components to understand key risks and audit issues at a component level
which may have affected the Group financial statements. Telephone conference meetings were also held with these component auditors
and all the others that were not physically visited.
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Old Mutual plc
Annual Report and Accounts 2017
Scope – disclosure of IFRS 9 effect
The Group is adopting IFRS 9 Financial Instruments from 1 January 2018 and has included an estimate of the financial impact of the change in
accounting standard, for the parts of the Group most affected, in accordance with IAS 8 Changes in Accounting Estimates and Errors as set out
in note A7 on pages 166 to 169. This disclosure notes that the Group continues to refine its expected credit loss model and embed its operational
processes which may change the actual impact on adoption. While further testing of the financial impact will be performed as part of our 2018
year end audit, we have performed sufficient audit procedures for the purposes of assessing the disclosures made in accordance with IAS 8.
Specifically for Nedbank, we have:
considered the appropriateness of key technical decisions, judgements, assumptions and elections made by management;
considered key classification and measurement decisions, including business model assessments and Solely Payment of Principal and Interest
(SPPI) outcomes;
involved credit risk modelling and economic specialists in the consideration of credit risk modelling decisions and macroeconomic
variables, including forward economic guidance and generation of multiple economic scenarios; and
considered transitional controls and governance processes related to the valuation and approval of the estimated transitional impact.
4 We have nothing to report on going concern
We are required to report to you if:
we have anything material to add or draw attention to in relation to the directors’ statement in note A1 to the financial statements on the use of
the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and the Parent Company’s
use of that basis for a period of at least twelve months from the date of approval of the financial statements; or
the related statement under the Listing Rules set out on pages 92 to 93 is materially inconsistent with our audit knowledge.
We have nothing to report in these respects.
5 We have nothing to report on the other information in the Annual Report and Accounts
The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the
financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information
therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not
identified material misstatements in the other information.
Strategic Report and Directors' Report
Based solely on our work on the other information:
we have not identified material misstatements in the Strategic Report and the Directors’ Report;
in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors' Remuneration Report
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw attention to in relation to:
the directors’ confirmation within the Directors’ Viability Statement on pages 92 to 93 that they have carried out a robust assessment of
the principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity;
the Principal Risks disclosures describing these risks and explaining how they are being managed and mitigated; and
the directors’ explanation in the Directors’ Viability Statement of how they have assessed the prospects of the Group, over what period they
have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.
Under the Listing Rules we are required to review the Directors’ Viability Statement. We have nothing to report in this respect.
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Annual Report and Accounts 2017
Group financial statements
Independent Auditor’s Report to the Members
of Old Mutual plc continued
Corporate governance disclosures
We are required to report to you if:
we have identified material inconsistencies between the knowledge we acquired during our financial statements audit and the directors’
statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy; or
the section of the annual report describing the work of the Group Audit Committee does not appropriately address matters communicated
by us to the Group Audit Committee.
We are required to report to you if the Corporate Governance Statement does not properly disclose a departure from the eleven provisions
of the UK Corporate Governance Code specified by the Listing Rules for our review.
We have nothing to report in these respects.
6 We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from
branches not visited by us; or
the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
7 Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 130, the directors are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless
they either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or other irregularities (see below), or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities.
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Old Mutual plc
Annual Report and Accounts 2017
Irregularities – ability to detect
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from out sector
experience, through discussion with the directors and other management (as required by auditing standards), and from inspection of the Group’s
regulatory, and legal correspondence.
We had regard to laws and regulations in areas that directly affect the financial statements including financial reporting (including related company
legislation) and taxation legislation. We considered the extent of compliance with those laws and regulations as part of our procedures on the
related financial statement items.
In addition we considered the impact of laws and regulations in the specific areas of regulatory capital and liquidity, conduct and financial crime
recognising the financial and regulated nature of the Group’s activities. With the exception of any known or possible non-compliance, and as
required by auditing standards, our work in respect of these was limited to enquiry of directors and other management and inspection of regulatory
correspondence. We considered the effect of any known or possible non-compliance in these areas as part of our procedures on the related
financial statement items.
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the
audit. This included communication from the Group to component audit teams with a request to report on any instances of non-compliance with
laws and regulations including illegal acts at the component or Group level.
As with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls.
8 The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s 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 and
the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Jonathan Holt (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
14 March 2018
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Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Consolidated income statement
For the year 31 December
Continuing operations
Revenue
Gross earned premiums
Outward reinsurance
Net earned premiums
Investment return (non-banking)
Banking interest and similar income
Banking trading, investment and similar income
Fee and commission income, and income from service activities
Other income
Total revenue
Expenses
Claims and benefits (including change in insurance contract provisions)
Reinsurance recoveries
Net claims and benefits incurred
Change in investment contract liabilities
Credit impairment charges
Finance costs
Banking interest payable and similar expenses
Fee and commission expenses, and other acquisition costs
Change in third-party interest in consolidated funds
Other operating and administrative expenses
Total expenses
Share of associated undertakings' and joint ventures' profit after tax
Profit on disposal of subsidiaries, associated undertakings and strategic investments
Profit before tax
Income tax expense
Profit from continuing operations after tax
Discontinued operations
Profit from discontinued operations after tax
Profit after tax for the financial year
Attributable to
Equity holders of the parent
Non-controlling interests
Ordinary shares
Preferred securities
Profit after tax for the financial year
Earnings per ordinary share
Basic earnings per share – continuing operations (pence)
Basic earnings per share – discontinued operations (pence)
Basic earnings per ordinary share (pence)
Diluted earnings per share – continuing operations (pence)
Diluted earnings per share – discontinued operations (pence)
Diluted basic earnings per ordinary share (pence)
Notes
2017
£m
2016
(Restated)¹
B2
D2
D3
D4
D5
D6
D7
D8
D9
I2(a)
C1(c)
D1(a)
A4.1(a)
H10(a)(i)
H10(a)(ii)
C2(a)
C2(b)
4,225
(391)
3,834
5,477
256
6
673
110
10,356
(5,350)
315
(5,035)
(1,770)
(42)
(234)
(75)
(524)
(665)
(1,576)
(9,921)
9
173
617
(240)
377
881
1,258
909
315
34
1,258
8.0
11.3
19.3
7.9
11.0
18.9
3,726
(314)
3,412
1,879
229
14
565
63
6,162
(3,483)
222
(3,261)
(545)
(44)
(128)
(90)
(425)
(117)
(1,269)
(5,879)
10
13
306
(142)
164
681
845
570
253
22
845
3.5
8.5
12.0
3.5
8.2
11.7
1 Other operating and administrative expenses for the year ended 31 December 2016 of £80 million have been reallocated from other operating and administrative expenses to fee
and commission expenses, and other acquisition costs. In addition, the earnings per share amounts for the year ended 31 December 2016 have been restated in relation to own
shares held by consolidated investment funds. Refer to note B1 for more information. The year ended 31 December 2016 has also been re-presented to reflect Nedbank and
Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Consolidated statement of comprehensive income
Consolidated statement of comprehensive income
Property revaluations
Property revaluations
Continuing operations
Profit after tax for the financial year
Other comprehensive income for the financial year
Continuing operations
Items that will not be reclassified subsequently to profit or loss
Profit after tax for the financial year
Fair value movements
Other comprehensive income for the financial year
Items that will not be reclassified subsequently to profit or loss
Measurement losses on defined benefit plans
Fair value movements
Shadow accounting2
Income tax on items that will not be reclassified subsequently to profit or loss
Measurement losses on defined benefit plans
Shadow accounting2
Items that may be reclassified subsequently to profit or loss
Income tax on items that will not be reclassified subsequently to profit or loss
Fair value movements
Net investment hedge
Items that may be reclassified subsequently to profit or loss
Available-for-sale investments
Fair value movements
Fair value gain/(losses)
Net investment hedge
Currency translation differences on translating foreign operations
Available-for-sale investments
Exchange differences and other reserves recycled to profit or loss on disposal of businesses
Fair value gain/(losses)
Realisation of net investment hedge on sale of a subsidiary
Currency translation differences on translating foreign operations
Other movements
Exchange differences and other reserves recycled to profit or loss on disposal of businesses
Income tax on items that may be reclassified subsequently to profit or loss
Realisation of net investment hedge on sale of a subsidiary
Other movements
Total other comprehensive income for the financial year from continuing operations
Income tax on items that may be reclassified subsequently to profit or loss
Discontinued operations
Total other comprehensive income for the financial year from discontinued operations after tax
Total other comprehensive income for the financial year from continuing operations
Total other comprehensive income for the financial year
Discontinued operations
Total other comprehensive income for the financial year from discontinued operations after tax
Total comprehensive income for the financial year
Total other comprehensive income for the financial year
Notes
Notes
D1(c)
D1(c)
A4.1(b)
A4.1(b)
£m
2016
(Re-presented)¹
£m
2016
845
(Re-presented)¹
845
6
(6)
(7)
6
2
(6)
(5)
(7)
2
(5)
(104)
(1)
(104)
2,049
–
(1)
–
2,049
(8)
–
4
–
1,940
(8)
1,935
4
1,940
(182)
1,935
1,753
(182)
2,598
1,753
2,598
1,798
2017
1,258
2017
1,258
8
(56)
(9)
8
(6)
(56)
(63)
(9)
(6)
(63)
26
3
26
(54)
(149)
3
156
(54)
(15)
(149)
3
156
(30)
(15)
(93)
3
(30)
5
(93)
(88)
5
1,170
(88)
1,170
813
i
i
F
n
a
n
c
F
a
n
s
a
n
c
a
s
i
l
l
i
Attributable to
Total comprehensive income for the financial year
Equity holders of the parent
Non-controlling interests
Attributable to
Ordinary shares
Equity holders of the parent
Preferred securities
Non-controlling interests
Total comprehensive income for the financial year
Ordinary shares
778
1,798
22
2,598
778
22
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A2 and note A4 for
2,598
Total comprehensive income for the financial year
2 Shadow accounting is an adjustment, permitted by IFRS 4 ‘Insurance contracts’, to allow for the impact of recognising unrealised gains or losses on insurance assets and liabilities
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A2 and note A4 for
in a consistent manner to the recognition of the unrealised gain or loss on financial assets that have a direct effect on the measurement of the related insurance assets and liabilities.
more information
323
813
34
1,170
323
34
1,170
Preferred securities
more information
2 Shadow accounting is an adjustment, permitted by IFRS 4 ‘Insurance contracts’, to allow for the impact of recognising unrealised gains or losses on insurance assets and liabilities
in a consistent manner to the recognition of the unrealised gain or loss on financial assets that have a direct effect on the measurement of the related insurance assets and liabilities.
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Statement of adjusted operating profit
Statement of adjusted operating profit
Adjusted operating profit (AOP) after tax attributable to
ordinary equity holders of the parent
ordinary equity holders of the parent
Core operations
Adjusted operating profit (AOP) after tax attributable to
Emerging Markets
Nedbank
Core operations
Old Mutual Wealth
Emerging Markets
Nedbank
Institutional Asset Management
Old Mutual Wealth
plc Head Office
Old Mutual plc finance costs
Institutional Asset Management
Corporate costs (before recharges)
plc Head Office
Other net shareholder expenses
Old Mutual plc finance costs
Adjusted operating profit before tax
Corporate costs (before recharges)
Tax on adjusted operating profit
Other net shareholder expenses
Adjusted operating profit after tax
Adjusted operating profit before tax
Non-controlling interests – ordinary shares
Tax on adjusted operating profit
Non-controlling interests – preferred securities
Adjusted operating profit after tax
Adjusted operating profit after tax attributable to ordinary equity holders of the parent
Non-controlling interests – ordinary shares
Adjusted weighted average number of shares (millions)
Non-controlling interests – preferred securities
Adjusted operating earnings per share (pence)
Adjusted operating profit after tax attributable to ordinary equity holders of the parent
Adjusted weighted average number of shares (millions)
Adjusted operating earnings per share (pence)
Reconciliation of adjusted operating profit to profit after tax attributable
to the equity holders of the parent
Notes
B3
Notes
B3
B3
B3
B3
B3
B3
B3
B3
D1(d)
B3
D1(d)
C2(a)
C2(c)
C2(a)
C2(c)
Notes
to the equity holders of the parent
Adjusted operating profit after tax attributable to ordinary equity holders of the parent
Reconciliation of adjusted operating profit to profit after tax attributable
Adjusting items net of tax and non-controlling interest
Non-core operations
Adjusted operating profit after tax attributable to ordinary equity holders of the parent
Profit after tax attributable to the equity holders of the parent
Adjusting items net of tax and non-controlling interest
Non-core operations
1 The statement of adjusted operating profit for year ended 31 December 2016 has been re-presented to be on a consistent basis with the year ended 31 December 2017.
Profit after tax attributable to the equity holders of the parent
1 The statement of adjusted operating profit for year ended 31 December 2016 has been re-presented to be on a consistent basis with the year ended 31 December 2017.
During the current year, the results of Institutional Asset Management have been disclosed separately from core operations. The long-term investment return on excess assets
(2017: £20 million; 2016: £20 million), previously shown as a separate item within the AOP of plc Head Office is now included in AOP of Emerging Markets for all years. Corporate
costs are now presented before recharges to the businesses (2017: £4 million; 2016: £19 million) and the related recharge income for the plc Head Office is now included within
During the current year, the results of Institutional Asset Management have been disclosed separately from core operations. The long-term investment return on excess assets
Other net shareholder income/(expenses). These changes did not affect the total AOP of the Group as previously reported. All of these changes are intended to improve the
(2017: £20 million; 2016: £20 million), previously shown as a separate item within the AOP of plc Head Office is now included in AOP of Emerging Markets for all years. Corporate
transparency of the impact of managed separation on the operating result. Further explanation of these presentational changes can be found in the basis of preparation of
costs are now presented before recharges to the businesses (2017: £4 million; 2016: £19 million) and the related recharge income for the plc Head Office is now included within
adjusted operating profit.
Other net shareholder income/(expenses). These changes did not affect the total AOP of the Group as previously reported. All of these changes are intended to improve the
transparency of the impact of managed separation on the operating result. Further explanation of these presentational changes can be found in the basis of preparation of
adjusted operating profit.
C1(a)
Notes
B3
C1(a)
B3
£m
2016
(Re-presented)¹
£m
2016
639
(Re-presented)¹
799
260
639
1,698
799
141
260
1,698
(88)
141
(79)
(5)
(88)
1,667
(79)
(398)
(5)
1,269
1,667
(319)
(398)
(22)
1,269
928
(319)
4,773
(22)
19.4
928
4,773
£m
19.4
2016
(Re-presented)¹
£m
928
2016
(353)
(Re-presented)¹
(5)
928
570
(353)
(5)
570
2017
777
2017
963
363
777
2,103
963
64
363
2,103
(66)
64
(58)
(6)
(66)
2,037
(58)
(477)
(6)
1,560
2,037
(364)
(477)
(34)
1,560
1,162
(364)
4,776
(34)
24.3
1,162
4,776
24.3
2017
1,162
(277)
2017
24
1,162
909
(277)
24
909
144
138
138
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Basis of preparation of adjusted operating profit (AOP)
Purpose of AOP
Adjusted operating profit (AOP) is an Alternative Profit Measure used alongside IFRS profit to assess underlying business performance.
It is a non-IFRS measure of profitability that reflects the Directors’ view of the underlying long-term performance of the Group.
The calculation of AOP adjusts the IFRS profit for a number of items as detailed in note C1.
AOP is one of the key performance indicators by which operational performance is monitored and managed, and it is one of a range
of measures by which management performance and remuneration is assessed. Further detail of the performance measures applied
in determining management remuneration is available in the remuneration report in pages 97 to 128 of the 2017 Annual Report
and Accounts.
Management believes that AOP is an appropriate alternative basis by which to assess the underlying operating results of these
businesses and the Group as a whole and that it enhances the comparability and understanding of the financial performance of the Group.
The adjustments applied to the IFRS profit of the Group in order to calculate AOP remove the impact of strategic activity, fluctuation in
shareholder revalued investments, certain IFRS accounting treatments, significant one-off expenses related to implementing managed
separation, resolution of pre-existing plc Head Office items and actions to provide customer redress in light of the recommendations of
the Financial Conduct Authority (FCA) thematic review in the United Kingdom.
The adjustments to IFRS profit intends to remove the impact of strategic activities and include the exclusion of the impairment of goodwill,
the impact of accounting for intangible assets acquired in a business combination, costs related to completed acquisitions, impairments
of investments in associated undertakings and the profit or loss on disposal of subsidiaries. Further detail can be found in notes C1(b)
and C1(c).
The adjustment to reflect long-term shareholder investment returns is described in note C1(d). A description of the adjustment to exclude
fair value gains and losses on Group debt instruments is included in note C1(h). More details on the revaluations of put options related to
long-term incentive schemes in IAM is included in note C1(g).
Certain IFRS accounting treatments that are not deemed to be reflective of the underlying operating performance of the business are
excluded from the determination of AOP. These include the inclusion of dividends declared to holders of perpetual preferred callable
securities (note C1(f)), short-term fluctuations in investment return on shareholder assets (note C1(d)) and the inclusion of returns on
investments held by life and consolidated investment funds in Group equity and debt instruments (note C1(e)).
Old Mutual Wealth business transformation costs related to the development of Old Mutual Wealth platform capability and outsourcing
of UK business administration and continue to be excluded from AOP. These costs are excluded from AOP because management is
of the view that this investment in operational capability is capital in nature, and is not reflective of the long-term cost. (note C1(k)).
The Group Audit Committee regularly reviews the approach to determining AOP to confirm that it remains an appropriate basis on which
to analyse the operating performance of the businesses. The Committee assesses refinements to the policy on a case-by-case basis,
and where possible the Group seeks to minimise such changes and maintain consistency over time.
145
139
i
F
n
a
n
c
a
s
i
l
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Statement of adjusted operating profit continued
Statement of adjusted operating profit continued
Scope of businesses included in AOP
AOP excludes the results of non-core operations. At the current time the only such operation is that of Old Mutual Bermuda. Old Mutual
Bermuda is closed to new business and in run off and as such its activity is not envisaged to form part of the of the underlying long-term
Scope of businesses included in AOP
operating performance of the Group. Refer to note B1 for further information on the basis of segmentation.
AOP excludes the results of non-core operations. At the current time the only such operation is that of Old Mutual Bermuda. Old Mutual
Bermuda is closed to new business and in run off and as such its activity is not envisaged to form part of the of the underlying long-term
The results of Old Mutual Wealth and Nedbank that are currently classified as held for distribution and as discontinued operations in
operating performance of the Group. Refer to note B1 for further information on the basis of segmentation.
the IFRS consolidated income statement, have been included in the determination of AOP as it reflects the contribution made by these
businesses to the Group result for the year. The consolidated result (from 1 January 2017 to 19 May 2017) and equity accounted results
The results of Old Mutual Wealth and Nedbank that are currently classified as held for distribution and as discontinued operations in
(20 May 2017 to 30 June 2017) of Institutional Asset Management have been included in the determination of AOP up to and including
the IFRS consolidated income statement, have been included in the determination of AOP as it reflects the contribution made by these
the date that the investment in the associate was classified as held for sale on 30 June 2017.
businesses to the Group result for the year. The consolidated result (from 1 January 2017 to 19 May 2017) and equity accounted results
(20 May 2017 to 30 June 2017) of Institutional Asset Management have been included in the determination of AOP up to and including
In the context of the managed separation strategy for the business, the Directors believe the continued inclusion of the results of the
the date that the investment in the associate was classified as held for sale on 30 June 2017.
businesses presented as discontinued operations in AOP assists with the comparability of year-on-year performance.
In the context of the managed separation strategy for the business, the Directors believe the continued inclusion of the results of the
Changes in AOP presentation during the year
businesses presented as discontinued operations in AOP assists with the comparability of year-on-year performance.
AOP is presented on a consistent basis with the year ended 31 December 2016, except for the following:
Changes in AOP presentation during the year
The results of Institutional Asset Management has been disclosed separately from core businesses in the statement of adjusted
AOP is presented on a consistent basis with the year ended 31 December 2016, except for the following:
The results of Institutional Asset Management has been disclosed separately from core businesses in the statement of adjusted
The long-term investment return on excess assets, previously shown as a separate item within the AOP of plc Head Office is now
operating profit (AOP statement). This provides improved transparency of the results of the continuing businesses that will be separately
listed following the execution of the managed separation strategy.
operating profit (AOP statement). This provides improved transparency of the results of the continuing businesses that will be separately
included in the AOP of Emerging Markets for all periods presented. This is consistent with where the excess assets are managed and
listed following the execution of the managed separation strategy.
where returns will be recognised following managed separation.
The long-term investment return on excess assets, previously shown as a separate item within the AOP of plc Head Office is now
Corporate costs are now presented before recharges to the businesses. The related recharge income received by the Old Mutual plc
included in the AOP of Emerging Markets for all periods presented. This is consistent with where the excess assets are managed and
Head Office is now included within other net shareholder income/(expenses).
where returns will be recognised following managed separation.
Head Office is now included within other net shareholder income/(expenses).
Corporate costs are now presented before recharges to the businesses. The related recharge income received by the Old Mutual plc
Comparative information was re-presented to be consistent with the treatment of the items described above. These re-presentations
of AOP do not alter the AOP result as previously reported.
Comparative information was re-presented to be consistent with the treatment of the items described above. These re-presentations
of AOP do not alter the AOP result as previously reported.
146
140
140
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Changes in AOP policy during the year
For the year ended 31 December 2017, managed separation and business standalone costs recognised in the IFRS income statement
have been excluded from the calculation of AOP on the basis that these items are one-off in nature and are not reflective of the underlying
operating activity of the Group. These costs include the cost of winding down the plc Head Office, preparing the businesses for being
standalone businesses and transaction advice. Comparative information has not been re-presented in respect of similar costs incurred
during the year ended 31 December 2016 totalling £31 million. Further disclosure on managed separation costs is included in note C1(i)
of these financial statements.
For the year ended 31 December 2017, income/(expenses) from resolution of pre-existing plc Head Office items recognised in the IFRS
income statement have been excluded from the calculation of AOP. These items are one-off in nature and are not reflective of the
underlying operating activity of the Group. Comparative information has not been re-presented (2016: £nil). Further disclosure of the
income/(expenses) related to resolution of pre-existing plc Head Office items is included in note C1(j).
As detailed in note F5, the Group has provided £69 million (2016: £nil) in respect of voluntary customer remediation following the
recommendations of a thematic review by the Financial Conduct Authority (FCA). The provision for these costs has been recognised
in the IFRS consolidated statement of financial position on the basis that the business is demonstrably committed to these costs.
For the purposes of AOP, these costs have been excluded on the basis that they relate to redress for charges levied in the past,
rather than reductions in future customer charges (note C1(l)).
Adjusted Operating Profit per share
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 is adjusted to exclude 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.
147
141
i
F
n
a
n
c
a
s
i
l
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Consolidated statement of financial position
Group financial statements
Consolidated statement of financial position
Consolidated statement of financial position
At 31 December
At 31 December
2017
Notes
Notes
H1
H1
Notes
H2(a)
H2(b)
H2(a)
H1
H7
H2(b)
I2
H7
H2(a)
H3
I2
H2(b)
G6
H3
H7
G1
G6
I2
G2
G1
H3
G2
G6
H4
G1
G4
H4
G2
G4
A4.2
H4
A4.2
G4
At 31 December
Assets
Goodwill and other intangible assets
Assets
Mandatory reserve deposits with central banks
Goodwill and other intangible assets
Property, plant and equipment
Mandatory reserve deposits with central banks
Assets
Investment property
Property, plant and equipment
Goodwill and other intangible assets
Deferred tax assets
Investment property
Mandatory reserve deposits with central banks
Investments in associated undertakings and joint ventures
Deferred tax assets
Property, plant and equipment
Deferred acquisition costs
Investments in associated undertakings and joint ventures
Investment property
Reinsurers' share of policyholder liabilities
Deferred acquisition costs
Deferred tax assets
Loans and advances
Reinsurers' share of policyholder liabilities
Investments in associated undertakings and joint ventures
Investments and securities
Loans and advances
Deferred acquisition costs
Current tax receivable
Investments and securities
Reinsurers' share of policyholder liabilities
Trade, other receivables and other assets
Current tax receivable
Loans and advances
Derivative financial instruments
Trade, other receivables and other assets
Investments and securities
Cash and cash equivalents
Derivative financial instruments
Current tax receivable
Assets held for sale and distribution
Cash and cash equivalents
Trade, other receivables and other assets
Total assets
Assets held for sale and distribution
Derivative financial instruments
Total assets
Cash and cash equivalents
Liabilities
Assets held for sale and distribution
Life insurance contract liabilities
Liabilities
Total assets
Investment contract liabilities
Life insurance contract liabilities
Property & casualty liabilities
Investment contract liabilities
Liabilities
Third-party interests in consolidated funds
Property & casualty liabilities
Life insurance contract liabilities
Borrowed funds
Third-party interests in consolidated funds
Investment contract liabilities
Provisions and accruals
Borrowed funds
Property & casualty liabilities
Deferred revenue
Provisions and accruals
Third-party interests in consolidated funds
Deferred tax liabilities
Deferred revenue
Borrowed funds
Current tax payable
Deferred tax liabilities
Provisions and accruals
Trade, other payables and other liabilities
Current tax payable
Deferred revenue
Amounts owed to bank depositors
Trade, other payables and other liabilities
Deferred tax liabilities
Derivative financial instruments
Amounts owed to bank depositors
Current tax payable
Liabilities held for sale and distribution
Derivative financial instruments
Trade, other payables and other liabilities
Total liabilities
Liabilities held for sale and distribution
Amounts owed to bank depositors
Net assets
Total liabilities
Derivative financial instruments
Net assets
Liabilities held for sale and distribution
Shareholders' equity
Total liabilities
Equity attributable to equity holders of the parent
Shareholders' equity
Net assets
Non-controlling interests
Equity attributable to equity holders of the parent
Ordinary shares
Non-controlling interests
Shareholders' equity
Preferred securities
Ordinary shares
Equity attributable to equity holders of the parent
Total non-controlling interests
Preferred securities
Non-controlling interests
Total equity
Total non-controlling interests
Ordinary shares
Total equity
Preferred securities
1 During 2017 the Group performed a further analysis of the investment and securities held by consolidated investment funds which resulted in the identification of 64 million Old
Total non-controlling interests
1 During 2017 the Group performed a further analysis of the investment and securities held by consolidated investment funds which resulted in the identification of 64 million Old
Total equity
£m
2016
£m
(Restated)¹
2016
(Restated)¹
£m
2,471
2016
1,111
2,471
(Restated)¹
892
1,111
1,697
892
2,471
96
1,697
1,111
542
96
892
756
542
1,697
3,115
756
96
43,108
3,115
542
100,388
43,108
756
74
100,388
3,115
2,416
74
43,108
1,340
2,416
100,388
4,847
1,340
74
8,570
4,847
2,416
171,423
8,570
1,340
171,423
4,847
8,570
9,982
171,423
77,599
9,982
482
77,599
7,981
482
9,982
4,694
7,981
77,599
160
4,694
482
290
160
7,981
440
290
4,694
144
440
160
5,112
144
290
45,309
5,112
440
1,161
45,309
144
7,046
1,161
5,112
160,400
7,046
45,309
11,023
160,400
1,161
11,023
7,046
160,400
7,909
11,023
7,909
2,773
341
2,773
7,909
3,114
341
11,023
3,114
2,773
11,023
341
3,114
Mutual plc shares at 31 December 2017 (2016: 61 million; 2015: 51 million shares) held by these funds. These shares in Old Mutual plc have been treated as treasury shares and
consequentially resulted in a direct decrease in the value of equity and the value of investment and securities of £163 million (2016: £145 million). Comparative information in the
11,023
Mutual plc shares at 31 December 2017 (2016: 61 million; 2015: 51 million shares) held by these funds. These shares in Old Mutual plc have been treated as treasury shares and
consolidated statement of financial position, consolidated statement of changes in equity and Comparative information in the consolidated statement of financial position – segment
consequentially resulted in a direct decrease in the value of equity and the value of investment and securities of £163 million (2016: £145 million). Comparative information in the
information at 31 December 2016 (note B4) have been restated accordingly. An opening adjustment of £116 million was recognised directly in reserves at 1 January 2016. Related
consolidated statement of financial position, consolidated statement of changes in equity and Comparative information in the consolidated statement of financial position – segment
amounts in the consolidated income statement for the year ended 31 December 2016 have not been restated.
Mutual plc shares at 31 December 2017 (2016: 61 million; 2015: 51 million shares) held by these funds. These shares in Old Mutual plc have been treated as treasury shares and
information at 31 December 2016 (note B4) have been restated accordingly. An opening adjustment of £116 million was recognised directly in reserves at 1 January 2016. Related
consequentially resulted in a direct decrease in the value of equity and the value of investment and securities of £163 million (2016: £145 million). Comparative information in the
amounts in the consolidated income statement for the year ended 31 December 2016 have not been restated.
consolidated statement of financial position, consolidated statement of changes in equity and Comparative information in the consolidated statement of financial position – segment
information at 31 December 2016 (note B4) have been restated accordingly. An opening adjustment of £116 million was recognised directly in reserves at 1 January 2016. Related
amounts in the consolidated income statement for the year ended 31 December 2016 have not been restated.
2017
397
6
397
2017
482
6
1,904
482
397
65
1,904
6
107
65
482
184
107
1,904
252
184
65
1,282
252
107
43,102
1,282
184
63
43,102
252
1,304
63
1,282
245
1,304
43,102
1,836
245
63
130,603
1,836
1,304
181,832
130,603
245
181,832
1,836
130,603
9,520
181,832
28,740
9,520
494
28,740
4,868
494
9,520
1,126
4,868
28,740
142
1,126
494
82
142
4,868
304
82
1,126
102
304
142
2,529
102
82
742
2,529
304
268
742
102
121,968
268
2,529
170,885
121,968
742
10,947
170,885
268
10,947
121,968
170,885
8,128
10,947
8,128
2,442
377
2,442
8,128
2,819
377
10,947
2,819
2,442
10,947
377
2,819
10,947
The consolidated financial statements on pages 142 to 329 were approved by the Board of Directors on 14 March 2018.
The consolidated financial statements on pages 142 to 329 were approved by the Board of Directors on 14 March 2018.
A4.2
G6
G6
G6
G6
G6
G6
G6
G7
G6
H5
G7
G6
H6
H5
H7
H6
G7
H7
H5
H8
H6
G8
H8
H7
G4
G8
A4.2
G4
H8
A4.2
G8
G4
A4.2
1 During 2017 the Group performed a further analysis of the investment and securities held by consolidated investment funds which resulted in the identification of 64 million Old
H10(b)(i)
H10(b)(ii)
H10(b)(i)
H10(b)(ii)
H10(b)(i)
H10(b)(ii)
The consolidated financial statements on pages 142 to 329 were approved by the Board of Directors on 14 March 2018.
Bruce Hemphill
Bruce Hemphill
Group Chief Executive
Group Chief Executive
Bruce Hemphill
Group Chief Executive
Ingrid Johnson
Ingrid Johnson
Group Finance Director
Group Finance Director
Ingrid Johnson
Group Finance Director
142
148
142
142
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Consolidated statement of cash flows
Consolidated statement of cash flows
For the year ended 31 December
For the year ended 31 December
Cash flows from operating activities
Profit before tax
Non-cash movements in profit before tax
Cash flows from operating activities
Net changes in working capital
Profit before tax
Taxation paid
Non-cash movements in profit before tax
Net cash inflow from operating activities – continuing operations
Net changes in working capital
Cash flows from investing activities
Taxation paid
Net acquisitions of financial investments
Net cash inflow from operating activities – continuing operations
Acquisition of investment properties
Cash flows from investing activities
Proceeds from disposal of investment properties
Net acquisitions of financial investments
Dividends received from associated undertakings
Acquisition of investment properties
Acquisition of property, plant and equipment
Proceeds from disposal of investment properties
Proceeds from disposal of property, plant and equipment
Dividends received from associated undertakings
Acquisition of intangible assets
Acquisition of property, plant and equipment
Acquisition of interests in subsidiaries, associated undertakings
Proceeds from disposal of property, plant and equipment
Acquisition of intangible assets
Proceeds from the disposal of interests in subsidiaries, associated
Acquisition of interests in subsidiaries, associated undertakings
undertakings joint ventures and strategic investments
joint ventures and strategic investments
joint ventures and strategic investments
Notes
Notes
£m
2016
(Re-presented)¹
£m
2016
306
(Re-presented)¹
335
168
306
(201)
335
608
168
(201)
(446)
608
(83)
8
(446)
1
(83)
(38)
8
2
1
(29)
(38)
2
(61)
(29)
2017
617
2017
871
(489)
617
(229)
871
770
(489)
(229)
(294)
770
(358)
4
(294)
4
(358)
(39)
4
14
4
(44)
(39)
14
(90)
(44)
i
i
F
n
a
n
c
F
a
n
s
a
n
c
a
s
i
l
i
l
undertakings joint ventures and strategic investments
Net cash outflow from investing activities – continuing operations
Proceeds from the disposal of interests in subsidiaries, associated
Cash flows from financing activities
Dividends paid to:
Net cash outflow from investing activities – continuing operations
Ordinary equity holders of the Company
Cash flows from financing activities
Non-controlling interests and preferred security interests
Dividends paid to:
Interest paid (excluding banking interest paid)
Ordinary equity holders of the Company
Proceeds from issue of ordinary shares
Non-controlling interests and preferred security interests
Net disposal/(acquisition) of treasury shares – ordinary shares
Interest paid (excluding banking interest paid)
Redemption of perpetual preferred callable securities
Proceeds from issue of ordinary shares
Proceeds from issue of subordinated and other debt
Net disposal/(acquisition) of treasury shares – ordinary shares
Subordinated and other debt repaid
Redemption of perpetual preferred callable securities
Net cash outflow from financing activities – continuing operations
Proceeds from issue of subordinated and other debt
Net cash outflow – continuing operations
Subordinated and other debt repaid
Net cash inflow from discontinued operations
Net cash outflow from financing activities – continuing operations
Effects of exchange rate changes on cash and cash equivalents
Net cash outflow – continuing operations
Cash and cash equivalents at beginning of the year
Net cash inflow from discontinued operations
Cash and cash equivalents at end of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at beginning of the year
Consisting of:
Cash and cash equivalents at end of the year
Cash and cash equivalents
Mandatory reserve deposits with central banks
Consisting of:
Included within assets held for sale and distribution
Cash and cash equivalents
Cash and cash equivalents
Mandatory reserve deposits with central banks
Mandatory reserve deposits with central banks
Included within assets held for sale and distribution
Total
Cash and cash equivalents
Mandatory reserve deposits with central banks
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
Total
Cash and cash equivalents in the cash flow statement above include mandatory reserve deposits in line with market practice in South
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
Africa. Except for mandatory reserve deposits with central banks of £1,153 million (2016: £1,111 million) and cash and cash equivalents
consolidated as part of the consolidation of funds of £1,306 million (2016: £976 million), management do not consider that there are any
Cash and cash equivalents in the cash flow statement above include mandatory reserve deposits in line with market practice in South
material amounts of cash and cash equivalents which are not available for use in the Group's day-to-day operations. The £1,306 million
Africa. Except for mandatory reserve deposits with central banks of £1,153 million (2016: £1,111 million) and cash and cash equivalents
of cash and cash equivalents included in consolidation of funds at 31 December 2017 includes £920 million held by Old Mutual Wealth
consolidated as part of the consolidation of funds of £1,306 million (2016: £976 million), management do not consider that there are any
and shown within assets held for sale and distribution.
material amounts of cash and cash equivalents which are not available for use in the Group's day-to-day operations. The £1,306 million
of cash and cash equivalents included in consolidation of funds at 31 December 2017 includes £920 million held by Old Mutual Wealth
and shown within assets held for sale and distribution.
599
(90)
(204)
599
(204)
(330)
(23)
(60)
(330)
18
(23)
13
(60)
(287)
18
100
13
(651)
(287)
(1,220)
100
(654)
(651)
596
(1,220)
(8)
(654)
6,055
596
5,989
(8)
6,055
5,989
1,836
6
1,836
3,000
6
1,147
5,989
3,000
1,147
5,989
183
(61)
(463)
183
(463)
(426)
(24)
(69)
(426)
2
(24)
(33)
(69)
–
2
126
(33)
(157)
–
(581)
126
(436)
(157)
326
(581)
1,018
(436)
5,147
326
6,055
1,018
5,147
6,055
4,847
1,111
4,847
97
1,111
–
6,055
97
–
6,055
A4.2
A4.2
A4.2
A4.2
A4.1
A4.1
149
143
143
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Consolidated statement of changes in equity
Consolidated statement of changes in equity
For the year ended 31 December 2017
For the year ended 31 December 2017
profit or loss
Year ended 31 December 2017
Shareholders' equity at beginning of the year
Total comprehensive income for the financial year
Year ended 31 December 2017
Profit after tax for the financial year
Shareholders' equity at beginning of the year
Other comprehensive income
Total comprehensive income for the financial year
Items that will not be reclassified subsequently to
Profit after tax for the financial year
Other comprehensive income
Fair value gains/(losses)
Items that will not be reclassified subsequently to
Property revaluations
profit or loss
Measurement loss on defined benefit plans
Fair value gains/(losses)
Shadow accounting5
Property revaluations
Income tax on items that will not be reclassified
Measurement loss on defined benefit plans
Shadow accounting5
Income tax on items that will not be reclassified
Items that may be reclassified subsequently
subsequently to profit or loss
subsequently to profit or loss
to profit or loss
Fair value gains/(losses)
Items that may be reclassified subsequently
Net investment hedge
to profit or loss
Available-for-sale investments
Fair value gains/(losses)
Fair value (losses)/gains1
Net investment hedge
Currency translation differences on translating
Available-for-sale investments
foreign operations1
Fair value (losses)/gains1
Exchange differences and other reserves recycled
Currency translation differences on translating
to profit or loss on disposal of business2
foreign operations1
Millions
Number of
shares
Millions
issued and
Number of
fully paid
shares
4,930
issued and
fully paid
–
4,930
Notes
Notes
Share
capital
563
Share
capital
–
563
Share
premium
1,042
Share
premium
–
1,042
Merger
reserve
1,252
Merger
reserve
–
1,252
Available-
for-sale
reserve
Available-
38
for-sale
reserve
–
38
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4
–
–
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5)
–
–
–
(5)
C3
C3
subsequently to profit or loss
to profit or loss on disposal of business2
Realisation of net investment hedge on sale of a subsidiary2
Exchange differences and other reserves recycled
Other movements
Share of other comprehensive income of investments
Realisation of net investment hedge on sale of a subsidiary2
accounted for using the equity method1
Other movements
Income tax on items that may be reclassified
Share of other comprehensive income of investments
subsequently to profit or loss
3
–
accounted for using the equity method1
–
–
2
–
Total comprehensive income for the financial year
Income tax on items that may be reclassified
Transactions with the owners of the Company
3
–
Contributions and distributions
2
–
Total comprehensive income for the financial year
Dividends for the year
–
–
Transactions with the owners of the Company
Tax relief on dividends paid
–
–
Contributions and distributions
Equity share-based payment transactions
–
–
Dividends for the year
–
–
Transfer between reserves3
–
–
Tax relief on dividends paid
–
–
Proceeds from BEE transactions
–
13
Equity share-based payment transactions
–
–
Merger reserve released
–
–
Transfer between reserves3
–
–
Additional Tier 1 capital instruments issued4
–
–
Proceeds from BEE transactions
–
13
Preferred securities repurchased
–
–
Merger reserve released
–
–
Other movements in share capital6
–
4
Additional Tier 1 capital instruments issued4
–
–
–
17
Total contributions and distributions
Preferred securities repurchased
–
–
Changes in ownership
Other movements in share capital6
–
4
Disposal of a non-controlling interest in
–
17
Total contributions and distributions
OM Asset Management plc
–
–
Changes in ownership
Change in participation in subsidiaries
–
–
Disposal of a non-controlling interest in
–
–
Total changes in ownership
OM Asset Management plc
–
–
–
17
Total transactions with the owners of the Company
Change in participation in subsidiaries
–
–
40
1,059
Shareholders' equity at end of the year
–
–
Total changes in ownership
1 Included in share of other comprehensive income of investments is a gain of £43 million relating to Ecobank Transnational Incorporated (ETI)
–
17
Total transactions with the owners of the Company
2 A net gain of £130 million was realised and recycled to profit or loss on the disposal of OM Asset Management plc (OMAM) comprising £(21) million other reserves, and £151 million
40
1,059
Shareholders' equity at end of the year
foreign currency translation gains. A gain of £19 million was realised from the recycling of foreign currency reserves relating to the disposal of Old Mutual Wealth Italy. In addition a
1 Included in share of other comprehensive income of investments is a gain of £43 million relating to Ecobank Transnational Incorporated (ETI)
£156 million net investment hedge reserve loss was realised
2 A net gain of £130 million was realised and recycled to profit or loss on the disposal of OM Asset Management plc (OMAM) comprising £(21) million other reserves, and £151 million
3 Transfers between reserves comprise a transfer from the share-based payment reserve to retained earnings as a result of the disposal of OMAM (£61 million) and a transfer for fully
foreign currency translation gains. A gain of £19 million was realised from the recycling of foreign currency reserves relating to the disposal of Old Mutual Wealth Italy. In addition a
vested share based-payments within plc Head Office (£58 million)
£156 million net investment hedge reserve loss was realised
classified as equity. Interest is payable quarterly in arrears at a floating rate of 3-month JIBAR plus 5.65%. Refer to note A2 for more information.
vested share based-payments within plc Head Office (£58 million)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3
–
3
–
3
3
–
–
–
–
3
–
4,933
–
3
4,933
4 On 30 June 2017, Nedbank Limited issued R600 million additional Tier 1 capital instruments under its R10 billion Domestic Medium Term Note Programme which has been
3 Transfers between reserves comprise a transfer from the share-based payment reserve to retained earnings as a result of the disposal of OMAM (£61 million) and a transfer for fully
–
–
–
–
–
–
–
–
–
–
–
–
–
(104)
–
–
–
–
(104)
–
–
(104)
–
–
(104)
–
–
–
–
(104)
–
1,148
–
(104)
1,148
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
–
1
–
1
1
–
–
–
–
1
–
564
–
1
564
4 On 30 June 2017, Nedbank Limited issued R600 million additional Tier 1 capital instruments under its R10 billion Domestic Medium Term Note Programme which has been
classified as equity. Interest is payable quarterly in arrears at a floating rate of 3-month JIBAR plus 5.65%. Refer to note A2 for more information.
150
144
144
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Property
revaluation
reserve
Property
182
revaluation
reserve
–
182
Share-based
payments
reserve
Share-based
409
payments
reserve
–
409
Other
reserves1
17
Other
reserves1
–
17
Foreign
currency
translation
Foreign
reserve
currency
(1,008)
translation
reserve
–
(1,008)
Perpetual
preferred
callable
Perpetual
securities
preferred
273
callable
securities
15
273
Attributable
to equity
holders of the
Attributable
parent
to equity
7,909
holders of the
parent
909
7,909
Retained
earnings
5,141
Retained
earnings
894
5,141
Total non-
controlling
£m
£m
Total non-
3,114
controlling
interests Total equity
11,023
interests Total equity
1,258
11,023
349
3,114
–
19
–
(9)
19
–
(7)
(9)
3
(7)
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
26
–
26
(87)
–
894
15
909
349
1,258
(5)
(39)
–
(5)
(39)
(2)
–
(46)
(2)
(46)
–
(2)
–
–
(2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14
(39)
(9)
14
(39)
(9)
(9)
(43)
(9)
(43)
26
2
26
(87)
2
5
14
–
5
14
(6)
–
13
(6)
13
–
2
–
19
(25)
(9)
19
(25)
(15)
(9)
(30)
(15)
(30)
26
4
26
(42)
2
(129)
4
i
i
F
n
a
n
c
F
a
n
s
a
n
c
a
s
i
l
l
i
–
–
–
–
–
–
–
–
–
–
3
–
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3
–
3
–
3
3
–
–
–
–
3
–
188
–
3
188
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(38)
–
(119)
–
–
(38)
–
(119)
–
–
–
–
–
–
(157)
–
–
(157)
–
–
–
–
(157)
–
252
–
(157)
252
21
–
–
–
21
43
–
–
–
43
64
–
64
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(22)
–
(22)
–
(22)
(22)
–
–
–
–
(22)
–
59
–
(22)
59
(170)
(87)
156
–
(170)
–
156
–
–
–
(75)
–
(75)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,083)
–
–
(1,083)
(9)
–
–
(13)
(9)
(19)
–
(13)
(1)
(19)
804
(1)
804
(330)
–
31
(330)
119
–
–
31
104
119
–
–
(14)
104
5
–
(85)
(14)
5
(85)
–
41
41
–
(44)
41
5,901
41
(44)
5,901
–
–
–
–
–
–
–
–
–
–
15
–
15
(15)
–
–
(15)
–
–
–
–
–
–
–
–
(273)
–
–
–
(288)
(273)
–
(288)
–
–
–
–
(288)
–
–
–
(288)
–
(158)
(87)
156
(18)
(158)
24
156
(18)
2
24
813
2
813
(345)
–
(7)
(345)
–
–
13
(7)
–
–
–
13
(287)
–
(9)
–
(635)
(287)
(9)
(635)
–
41
41
–
(594)
41
8,128
41
(594)
8,128
9
(42)
–
6
9
19
–
6
1
19
357
1
357
(211)
–
–
(211)
–
–
–
–
–
–
35
–
–
–
–
35
(176)
–
–
(176)
(550)
74
(476)
(550)
(652)
74
2,819
(476)
(652)
2,819
(149)
(129)
156
(12)
(149)
43
156
(12)
3
43
1,170
3
1,170
(556)
–
(7)
(556)
–
–
13
(7)
–
–
35
13
(287)
–
(9)
35
(811)
(287)
(9)
(811)
(550)
115
(435)
(550)
(1,246)
115
10,947
(435)
(1,246)
10,947
5 Shadow accounting is an adjustment, permitted by IFRS 4 ‘Insurance contracts’, to allow for the impact of recognising unrealised gains or losses on insurance assets
and liabilities in a consistent manner to the recognition of the unrealised gain or loss on financial assets that have a direct effect on the measurement of the related
insurance assets and liabilities
5 Shadow accounting is an adjustment, permitted by IFRS 4 ‘Insurance contracts’, to allow for the impact of recognising unrealised gains or losses on insurance assets
6 Other movements in share capital includes a movement in retained earnings of £22 million (2016: £31 million) relating to own shares held by consolidated investment
and liabilities in a consistent manner to the recognition of the unrealised gain or loss on financial assets that have a direct effect on the measurement of the related
funds. These own shares are treated as treasury shares in the consolidated financial statements.
insurance assets and liabilities
6 Other movements in share capital includes a movement in retained earnings of £22 million (2016: £31 million) relating to own shares held by consolidated investment
funds. These own shares are treated as treasury shares in the consolidated financial statements.
151
145
145
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Consolidated statement of changes in equity continued
Consolidated statement of changes in equity continued
For the year ended 31 December 2016 (Restated)1
Millions
For the year ended 31 December 2016 (Restated)1
Property revaluations
Property revaluations
Shareholders' equity at beginning of the year
Total comprehensive income for the financial year
Profit after tax for the financial year
Shareholders' equity at beginning of the year
Other comprehensive income
Total comprehensive income for the financial year
Profit after tax for the financial year
Measurement gains on defined benefit plans
Other comprehensive income
Shadow accounting
Income tax on items that will not be reclassified
Measurement gains on defined benefit plans
Shadow accounting
Income tax on items that will not be reclassified
Net investment hedge
subsequently to profit or loss
Fair value gains
Currency translation differences on translating
Net investment hedge
foreign operations
Fair value gains
subsequently to profit or loss
Notes
Notes
D1(c)
D1(c)
Number of
shares
Millions
issued and
Number of
shares
4,929
issued and
fully paid Share capital
563
fully paid Share capital
–
563
–
4,929
Share
premium
1,040
Share
premium
–
1,040
Merger
reserve
1,252
Merger
reserve
–
1,252
Available-
for-sale
reserve
Available-
40
for-sale
reserve
–
40
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
C3
C3
D1(c)
D1(c)
subsequently to profit or loss
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
–
1
–
1
–
1
Other movements
Currency translation differences on translating
Share of other comprehensive income of investments
foreign operations
accounted for using the equity method
Other movements
Income tax on items that may be reclassified
Share of other comprehensive income of investments
subsequently to profit or loss
accounted for using the equity method
Total comprehensive income for the financial year
Income tax on items that may be reclassified
Transactions with the owners of the Company
Contributions and distributions
Total comprehensive income for the financial year
Dividends for the year
Transactions with the owners of the Company
Tax relief on dividends paid
Contributions and distributions
Equity share-based payment transactions
Dividends for the year
OM Asset Management plc shares buyback
Tax relief on dividends paid
Additional Tier 1 capital instruments issued
Equity share-based payment transactions
Preferred securities repurchased
OM Asset Management plc shares buyback
Other movements in share capital
Additional Tier 1 capital instruments issued
Total contributions and distributions
Preferred securities repurchased
Changes in ownership
Other movements in share capital
Acquisition of shareholding in Banco Unico
Total contributions and distributions
Disposal of a non-controlling interest in OM Asset
Changes in ownership
Management plc
Acquisition of shareholding in Banco Unico
Change in participation in subsidiaries
Disposal of a non-controlling interest in OM Asset
Total changes in ownership
Total transactions with owners of the Company
Change in participation in subsidiaries
Shareholders' equity at end of the year
Total changes in ownership
Total transactions with owners of the Company
1 During 2017 the Group performed a further analysis of the investment and securities held by consolidated investment funds which resulted in the identification of 64 million
Shareholders' equity at end of the year
–
–
–
–
–
–
–
38
–
–
38
Old Mutual plc shares at 31 December 2017 (2016: 61 million; 2015: 51 million shares) held by these funds. These shares in Old Mutual plc have been treated as treasury shares
and consequentially resulted in a direct decrease in the value of equity and the value of investment and securities of £163 million (2016: £145 million). Comparative information in the
consolidated statement of financial position, consolidated statement of changes in equity and Comparative information in the consolidated statement of financial position – segment
Old Mutual plc shares at 31 December 2017 (2016: 61 million; 2015: 51 million shares) held by these funds. These shares in Old Mutual plc have been treated as treasury shares
information at 31 December 2016 (note B4) have been restated accordingly. An opening adjustment of £116 million was recognised directly in reserves at 1 January 2016. Related
and consequentially resulted in a direct decrease in the value of equity and the value of investment and securities of £163 million (2016: £145 million). Comparative information in the
amounts in the consolidated income statement for the year ended 31 December 2016 have not been restated.
consolidated statement of financial position, consolidated statement of changes in equity and Comparative information in the consolidated statement of financial position – segment
information at 31 December 2016 (note B4) have been restated accordingly. An opening adjustment of £116 million was recognised directly in reserves at 1 January 2016. Related
amounts in the consolidated income statement for the year ended 31 December 2016 have not been restated.
1 During 2017 the Group performed a further analysis of the investment and securities held by consolidated investment funds which resulted in the identification of 64 million
–
–
–
–
–
1
–
4,930
–
1
4,930
–
–
–
–
–
2
–
1,042
–
2
1,042
–
–
–
–
–
–
–
1,252
–
–
1,252
–
–
–
–
–
–
–
563
–
–
563
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
–
2
–
2
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Management plc
–
–
–
–
–
–
–
–
–
–
–
(5)
–
–
–
(5)
1
–
–
1
2
–
(2)
2
(2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
152
146
146
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Property
revaluation
reserve
Property
184
revaluation
–
reserve
–
184
–
7
–
–
(7)
7
–
–
(7)
–
–
–
–
–
–
–
–
(2)
–
–
(2)
–
–
(2)
–
(2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Share-based
payments
Share-based
367
payments
–
–
367
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
42
–
–
–
–
42
–
–
–
–
42
–
–
–
42
reserve Other reserves
30
–
reserve Other reserves
–
30
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(12)
(1)
–
(12)
–
(1)
(13)
–
(13)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
182
–
–
182
–
–
–
–
–
42
–
409
–
42
409
–
–
–
–
–
–
–
17
–
–
17
Foreign
currency
translation
Foreign
reserve
currency
(2,243)
translation
–
reserve
–
(2,243)
–
–
–
–
–
–
–
–
–
–
(104)
–
–
–
(104)
1,365
–
–
–
1,365
–
–
–
1,261
–
1,261
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1)
–
(25)
(1)
–
(26)
(25)
(26)
–
(1,008)
(26)
(26)
(1,008)
Perpetual
preferred
callable
Perpetual
securities
preferred
273
callable
–
securities
14
273
–
–
14
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14
–
14
(17)
3
–
(17)
–
3
–
–
–
–
–
–
(14)
–
–
–
(14)
Attributable to
equity holders
of the parent
Attributable to
6,564
equity holders
–
of the parent
570
6,564
–
6
570
(18)
(7)
6
(18)
5
(7)
(14)
(104)
5
(3)
(14)
(104)
1,365
(3)
(17)
(1)
1,365
(17)
2
(1)
1,798
2
1,798
(443)
3
38
(443)
(8)
3
–
38
–
(8)
(64)
–
(474)
–
(64)
(7)
(474)
–
–
–
–
–
(14)
–
273
–
(14)
273
13
(7)
15
21
13
(453)
15
7,909
21
(453)
7,909
Total non-
controlling
interests
Total non-
2,254
controlling
–
interests
275
2,254
–
1
275
(9)
–
1
(9)
3
–
(5)
–
3
(2)
(5)
–
536
(2)
(6)
–
536
(6)
2
–
800
2
800
(171)
–
5
(171)
(3)
–
95
5
(26)
(3)
–
95
(100)
(26)
–
7
(100)
153
7
–
160
153
60
–
3,114
160
60
3,114
£m
£m
Total
equity
8,818
Total
–
equity
845
8,818
–
7
845
(27)
(7)
7
(27)
8
(7)
(19)
(104)
8
(5)
(19)
(104)
1,901
(5)
(23)
(1)
1,901
(23)
4
(1)
2,598
4
2,598
(614)
3
43
(614)
(11)
3
95
43
(26)
(11)
(64)
95
(574)
(26)
(64)
–
(574)
166
–
15
181
166
(393)
15
11,023
181
(393)
11,023
Retained
earnings1
5,058
Retained
–
earnings1
556
5,058
–
(1)
556
(18)
–
(1)
(18)
5
–
(14)
–
5
2
(14)
–
–
2
(4)
–
–
(4)
–
–
540
–
540
(426)
–
(4)
(426)
(8)
–
–
(4)
–
(8)
(66)
–
(504)
–
(66)
(6)
(504)
38
(6)
15
47
38
(457)
15
5,141
47
(457)
5,141
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Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements
Notes to the consolidated financial statements
A: Significant accounting policies
A1: Basis of preparation
A: Significant accounting policies
Statement of compliance
A1: Basis of preparation
Old Mutual plc ('the Company' or 'plc') is a company incorporated in England and Wales and is the ultimate Parent Company of the Group
companies. Plc Head Office collectively refers to the plc Parent Company and the other centre companies of the Group, which typically
Statement of compliance
own and manage the Group's interests across the Group.
Old Mutual plc ('the Company' or 'plc') is a company incorporated in England and Wales and is the ultimate Parent Company of the Group
companies. Plc Head Office collectively refers to the plc Parent Company and the other centre companies of the Group, which typically
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the 'Group') and equity
own and manage the Group's interests across the Group.
account the Group's interest in associates and joint ventures (other than those held by life assurance funds which are accounted for
as investments at fair value through profit or loss). The Parent Company financial statements present information about the Company
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the 'Group') and equity
as a separate entity and not about the Group.
account the Group's interest in associates and joint ventures (other than those held by life assurance funds which are accounted for
as investments at fair value through profit or loss). The Parent Company financial statements present information about the Company
Both the Parent Company financial statements and the Group financial statements have been prepared and approved by the directors
as a separate entity and not about the Group.
in accordance with IFRS as adopted by the EU. On publishing the Parent Company financial statements here together with the Group
financial statements, the Company is taking advantage of the exemption in section 408 of the Companies Act 2006 not to present its
Both the Parent Company financial statements and the Group financial statements have been prepared and approved by the directors
individual income statement and related notes that form a part of these approved financial statements.
in accordance with IFRS as adopted by the EU. On publishing the Parent Company financial statements here together with the Group
financial statements, the Company is taking advantage of the exemption in section 408 of the Companies Act 2006 not to present its
The accounting policies adopted by the Company and Group, unless otherwise stated, have been applied consistently to all periods
individual income statement and related notes that form a part of these approved financial statements.
presented in these consolidated financial statements.
The accounting policies adopted by the Company and Group, unless otherwise stated, have been applied consistently to all periods
The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value
presented in these consolidated financial statements.
or modified historic cost: derivative financial instruments, financial assets and liabilities designated as fair value through profit or loss or as
available-for-sale, owner-occupied property and investment property, cash-settled share-based payments, pension scheme assets and
The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value
insurance and investment contract liabilities. Assets and disposal groups held for sale and distribution are stated at the lower of the
or modified historic cost: derivative financial instruments, financial assets and liabilities designated as fair value through profit or loss or as
carrying amount prior to disposal and the fair value less costs to sell.
available-for-sale, owner-occupied property and investment property, cash-settled share-based payments, pension scheme assets and
insurance and investment contract liabilities. Assets and disposal groups held for sale and distribution are stated at the lower of the
The Parent Company financial statements are prepared in accordance with these accounting policies, other than for investments
carrying amount prior to disposal and the fair value less costs to sell.
in subsidiary undertakings and associates, which are stated at cost less impairments in accordance with IAS 27.
The Parent Company financial statements are prepared in accordance with these accounting policies, other than for investments
The Company and Group financial statements have been prepared on the going concern basis which the directors believe to be
in subsidiary undertakings and associates, which are stated at cost less impairments in accordance with IAS 27.
appropriate having taken into consideration the points as set out in the Directors Report in the section headed Going Concern.
The Company and Group financial statements have been prepared on the going concern basis which the directors believe to be
The Group has prepared the financial statements in accordance with its detailed accounting policies which can be found at
appropriate having taken into consideration the points as set out in the Directors Report in the section headed Going Concern.
www.oldmutualplc.com/ir. The significant accounting policies are contained in the financial statements and are included in the specific
notes to which they relate. The significant accounting policies on financial assets and liabilities are included in note K. Judgements made
The Group has prepared the financial statements in accordance with its detailed accounting policies which can be found at
by the directors in the applications of these accounting policies that have a significant effect on the financial statements, and estimates
www.oldmutualplc.com/ir. The significant accounting policies are contained in the financial statements and are included in the specific
with a significant risk of material adjustment in the next year, are discussed in note A3.
notes to which they relate. The significant accounting policies on financial assets and liabilities are included in note K. Judgements made
by the directors in the applications of these accounting policies that have a significant effect on the financial statements, and estimates
Assets and liabilities classified as held for sale and distribution and discontinued operations
with a significant risk of material adjustment in the next year, are discussed in note A3.
In anticipation of the execution of the Group’s managed separation strategy through distribution of Old Mutual Wealth shares and
the planned subsequent distribution of a significant portion of the Group’s stake in Nedbank (resulting in the probable loss of control
Assets and liabilities classified as held for sale and distribution and discontinued operations
of these businesses), the Group’s interests in the assets and liabilities of these businesses have been classified as held for distribution
In anticipation of the execution of the Group’s managed separation strategy through distribution of Old Mutual Wealth shares and
in the consolidated statement of financial position at 31 December 2017. Consistent with the requirements of accounting standards, the
the planned subsequent distribution of a significant portion of the Group’s stake in Nedbank (resulting in the probable loss of control
comparative information in the consolidated statement of financial position has not been re-presented for businesses classified as held
of these businesses), the Group’s interests in the assets and liabilities of these businesses have been classified as held for distribution
for distribution. In addition, these businesses have been presented as discontinued operations in the consolidated income statement,
in the consolidated statement of financial position at 31 December 2017. Consistent with the requirements of accounting standards, the
consolidated statement of comprehensive income and consolidated statement of cash flows for the year ended 31 December 2017.
comparative information in the consolidated statement of financial position has not been re-presented for businesses classified as held
Consistent with the requirements of accounting standards, comparative information in the consolidated income statement, consolidated
for distribution. In addition, these businesses have been presented as discontinued operations in the consolidated income statement,
statement of comprehensive income and consolidated statement of cash flows for the year ended 31 December 2016 have been
consolidated statement of comprehensive income and consolidated statement of cash flows for the year ended 31 December 2017.
re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations.
Consistent with the requirements of accounting standards, comparative information in the consolidated income statement, consolidated
statement of comprehensive income and consolidated statement of cash flows for the year ended 31 December 2016 have been
re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations.
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Old Mutual plc
Annual Report and Accounts 2017
Accounting policy elections
The following significant accounting policy elections have been made by the Group:
Property and equipment
Land and buildings are stated at revalued amounts. Revaluation surpluses are
Investment in venture capital divisions and
investment-linked insurance funds
Financial instruments
Investment properties
Investments in subsidiaries, associate companies
and joint arrangements
recognised through other comprehensive income.
In venture capital divisions and investment-linked insurance funds, the Group
has elected to carry associate and joint-venture entities at fair value through
profit or loss.
The Group has elected to designate certain fixed-rate financial assets and
liabilities at fair value through profit or loss to reduce an accounting mismatch.
Regular way purchases or sales of financial assets are recognised and
derecognised using trade date accounting.
The Group has elected to recognise all investment properties at fair value,
with changes in fair value being recognised in profit or loss for the year.
The Group has elected to recognise these investments at cost in the Company
financial statements.
Translation of foreign operations
The assets and liabilities of foreign operations are translated from their respective functional currencies into the Group's presentation
currency using the year-end exchange rates, and their income and expenses using the average exchange rates for the year. 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 hedged net investments, is recognised in profit or loss.
Cumulative translation gains and losses up to 1 January 2004, being the effective date of the Group's conversion to IFRS, were
reset to zero.
The exchange rates used to translate the operating results, assets and liabilities of key foreign business segments to pounds sterling are:
Rand
US dollars
Euro
Year ended
31 December 2017
Statement of
financial
position
(closing rate)
16.7565
1.3524
1.1249
Year ended
31 December 2016
Statement of
financial
position
(closing rate)
16.9551
1.2345
1.1705
Income
statement
(average rate)
19.9305
1.3558
1.2251
Income
statement
(average rate)
17.1493
1.2884
1.1407
A2: Significant corporate activity and business changes during the year
Acquisitions completed during the year
Win Twice Properties (Pty) Limited and Bedford Square Properties (Pty) Limited
On 6 October 2017, Old Mutual Life Assurance Company (South Africa) Limited (OMLAC(SA)), part of Emerging Markets, acquired 98.9%
of Bedford Square Properties (Pty) Ltd and 96.8% of Win Twice Properties (Pty) Ltd, as these two companies own the land and buildings
which comprises the Bedford Shopping Centre.
The purchase price of £54 million (R900 million) has been allocated based on a provisional estimate of the fair value of assets acquired
and liabilities assumed at the date of acquisition determined in accordance with IFRS 3 'Business Combinations'. The provisional
allocation required significant assumptions and it is possible that the preliminary estimates may change materially as the purchase price
allocations are finalised. The transaction also includes a contingent consideration payable or receivable, based on turnover and operating
income reaching certain milestones within twelve months of acquisition date.
The carrying value of assets and liabilities in OMLAC(SA)'s consolidated statement of financial position on acquisition date approximates
the fair value of these items determined by the Group. Goodwill of £4 million (R72 million) was recognised on the acquisition, which is
attributable to expected future synergies and includes the carrying amount of the contingent consideration.
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
A: Significant accounting policies continued
A2: Significant corporate activity and business changes during the year continued
A: Significant accounting policies continued
Acquisitions completed during the year
A2: Significant corporate activity and business changes during the year continued
Caerus Capital Group Limited (Caerus)
Acquisitions completed during the year
On 1 June 2017, Old Mutual Wealth, completed the acquisition of 100% of the share capital of Caerus, a UK based adviser network
that operates in a similar manner to Intrinsic and which has approximately £4 billion of funds under advice and over 300 advisers.
Caerus Capital Group Limited (Caerus)
On 1 June 2017, Old Mutual Wealth, completed the acquisition of 100% of the share capital of Caerus, a UK based adviser network
The total consideration of £24 million includes £15 million cash consideration and £3 million that has been deferred for two years and
that operates in a similar manner to Intrinsic and which has approximately £4 billion of funds under advice and over 300 advisers.
£6 million that has been deferred for three years. The deferred consideration has been included as part of the cost of the acquisition as
there is no continuing employment condition applying to the sellers of the business. The deferred consideration payable is dependent
The total consideration of £24 million includes £15 million cash consideration and £3 million that has been deferred for two years and
on turnover targets post-acquisition and is potentially reduced by the amount of any relevant claims arising from in-force business
£6 million that has been deferred for three years. The deferred consideration has been included as part of the cost of the acquisition as
existing prior to the payment dates.
there is no continuing employment condition applying to the sellers of the business. The deferred consideration payable is dependent
on turnover targets post-acquisition and is potentially reduced by the amount of any relevant claims arising from in-force business
The purchase price has been allocated based on a provisional estimate of the fair value of assets acquired and liabilities assumed
existing prior to the payment dates.
at the date of acquisition determined in accordance to IFRS 3 'Business Combinations'. The provisional allocation required significant
assumptions and it is possible that the preliminary estimates may change materially as the purchase price allocations are finalised.
The purchase price has been allocated based on a provisional estimate of the fair value of assets acquired and liabilities assumed
The accounting must be finalised within 12 months of the acquisition date.
at the date of acquisition determined in accordance to IFRS 3 'Business Combinations'. The provisional allocation required significant
assumptions and it is possible that the preliminary estimates may change materially as the purchase price allocations are finalised.
The carrying value of assets and liabilities in Caerus's consolidated statement of financial position on acquisition date approximates the fair
The accounting must be finalised within 12 months of the acquisition date.
value of these items determined by the Group. In addition, the Group recognised identified intangible assets of £10 million. The intangible
assets recognised relate to customer distribution channels. The value of the intangible assets was determined by applying cash flows
The carrying value of assets and liabilities in Caerus's consolidated statement of financial position on acquisition date approximates the fair
to standard industry valuations models. Goodwill of £10 million was recognised on the acquisition and is attributable to the delivery
value of these items determined by the Group. In addition, the Group recognised identified intangible assets of £10 million. The intangible
of significant cost and revenue synergies that cannot be linked to identifiable intangible assets.
assets recognised relate to customer distribution channels. The value of the intangible assets was determined by applying cash flows
to standard industry valuations models. Goodwill of £10 million was recognised on the acquisition and is attributable to the delivery
Transaction costs incurred of £1 million relating to the acquisition have been recognised within other operating expenses in the
of significant cost and revenue synergies that cannot be linked to identifiable intangible assets.
consolidated income statement, but not included within adjusted operating profit.
Transaction costs incurred of £1 million relating to the acquisition have been recognised within other operating expenses in the
Old Mutual Private Client Advisers (PCA)
consolidated income statement, but not included within adjusted operating profit.
During 2017, the Group completed the acquisition of eight adviser businesses as part of the expansion of its PCA business that was
launched in October 2015. The aim is to develop an Old Mutual Wealth branded, employed adviser business focused upon servicing
Old Mutual Private Client Advisers (PCA)
upper affluent and high net worth clients, offering a centrally-defined restricted advice proposition focused upon Group's investment
During 2017, the Group completed the acquisition of eight adviser businesses as part of the expansion of its PCA business that was
solutions and platform.
launched in October 2015. The aim is to develop an Old Mutual Wealth branded, employed adviser business focused upon servicing
upper affluent and high net worth clients, offering a centrally-defined restricted advice proposition focused upon Group's investment
The purchase price for each acquisition has been allocated based on a provisional estimate of the fair value of assets acquired and
solutions and platform.
liabilities assumed at the dates of acquisition determined in accordance to IFRS 3 'Business Combinations'. The provisional allocations
required significant assumptions and it is possible that the preliminary estimates may change materially as the purchase price allocations
The purchase price for each acquisition has been allocated based on a provisional estimate of the fair value of assets acquired and
are finalised. The accounting must be finalised within 12 months of the acquisition dates.
liabilities assumed at the dates of acquisition determined in accordance to IFRS 3 'Business Combinations'. The provisional allocations
required significant assumptions and it is possible that the preliminary estimates may change materially as the purchase price allocations
The estimated consideration payable is £20 million, of which £10 million was cash consideration and up to £10 million in relation to
are finalised. The accounting must be finalised within 12 months of the acquisition dates.
deferred payments. The amount of deferred consideration is dependent upon the meeting of certain performance targets, generally
relating to the value of funds under management and levels of on-going fee income. The deferred consideration has been included
The estimated consideration payable is £20 million, of which £10 million was cash consideration and up to £10 million in relation to
as part of the cost of the acquisition. Total other intangible assets of £10 million in respect of customer relationships were recognised
deferred payments. The amount of deferred consideration is dependent upon the meeting of certain performance targets, generally
as a result of the acquisitions, together with goodwill of £5 million.
relating to the value of funds under management and levels of on-going fee income. The deferred consideration has been included
as part of the cost of the acquisition. Total other intangible assets of £10 million in respect of customer relationships were recognised
Transaction costs incurred of £1 million relating to the acquisitions have been recognised within other operating expenses in the
as a result of the acquisitions, together with goodwill of £5 million.
consolidated income statement, but not included within adjusted operating profit.
Transaction costs incurred of £1 million relating to the acquisitions have been recognised within other operating expenses in the
consolidated income statement, but not included within adjusted operating profit.
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Attivo Investment Management Limited (AIM)
On 29 March 2017, Old Mutual Wealth, completed the acquisition of 100% of the share capital of AIM, a UK based investment
management business offering a comprehensive investment management service.
The fair value of the total estimated consideration was £8 million, of which £4 million was cash consideration and £4 million was deferred
for two years. The deferred consideration is included within the cost of the acquisition because it is dependent on levels of assets under
management being maintained, with no requirement for continuing employment applied to the sellers of the business.
The book value of total assets and total net assets of the acquired business were both less than £1 million.
The purchase price has been allocated based on a provisional estimate of the fair value of assets acquired and liabilities assumed
at the date of acquisition determined in accordance to IFRS 3 'Business Combinations'. The provisional allocation required significant
assumptions and it is possible that the preliminary estimates may change materially as the purchase price allocations are finalised.
The accounting must be finalised within 12 months of the acquisition date.
The carrying value of assets and liabilities in AIM's statement of financial position on acquisition date approximates the fair value of these
items determined by the Group. Other intangible assets of £7 million, relating to customer relationships, were recognised as a result of the
acquisition. No goodwill was recognised on this transaction.
Transaction costs incurred of £0.5m relating to the acquisition have been recognised within other operating expenses in the consolidated
income statement, but not included within adjusted operating profit.
Disposals completed during the year
Sale of OM Asset Management plc (OMAM)
During the year, the following transactions involving the Group's ownership of OMAM shares were completed:
on 12 May 2017, OM Group (UK) Limited (OMGUK), a wholly owned subsidiary of Old Mutual plc, sold 11.4 million OMAM shares
to HNA Capital US at a price of $15.30 per share;
on 19 May 2017, following the closing of a public offering, OMGUK sold 17.3 million OMAM shares at a price of $14.55 per share.
Pursuant to this, on 14 June 2017, the underwriters of the public offer exercised their right to purchase 2.6 million shares at the same
price less an underwriting discount;
on 19 May 2017, OMAM repurchased 5.0 million ordinary shares directly from OMGUK at a price of $14.55 per share. Consequently,
from 19 May 2017, the Group no longer considered that it held a controlling interest in OMAM.
on 10 November 2017, OMGUK sold 16.0 million OMAM shares to HNA Capital US at a price of $15.75 per share
on 18 November 2017, following the closing of a secondary public offering, OMGUK sold 6.0 million OMAM shares at a price
of $15.50 per share.
Following the completion of these transactions, the Group currently owns 1,000 ordinary shares in OMAM, representing 0.0008%
of its share capital at 31 December 2017.
The total net cash proceeds arising from these transactions, after underwriting and other transaction costs, were £667 million and
a combined profit on disposal of £83 million, was recognised in profit or loss. Included in the profit on disposal are foreign currency
translation reserve gains recycled to profit or loss of £151 million and the release of net investment hedge reserve losses of £182 million.
The profit on disposal of OMAM also includes a £42million ($56 million) charge as a result of the write down of part of the original
consideration, being the Deferred Tax Asset Deed (DTA) that it would receive from the business upon utilisation of the asset. The write
down is due to the reduction of the US corporate tax rate and other provisions of the Tax Cuts and Jobs Act (the Tax Act) enacted on
22 December 2017. There remains a possibility for further payments from OMAM of up to £33 million ($44 million) pending clarification
of the Tax Act’s impact on the value of the DTA. Since 30 June 2017 no additional payments have been made under the DTA. In addition,
the Group purchased insurance against the provisions of the DTA that allows OMAM to claw back amounts paid in the event that deferred
tax assets are not recovered by the OMAM business.
Sale of Kotak Mahindra Old Mutual Life Insurance Limited (Kotak)
On 13 October 2017, the Group completed the sale of its 26% stake in Kotak to its joint venture partner Kotak Mahindra Bank Limited.
The net consideration was approximately INR 11,700 million (£138 million). The conclusion of the transaction also terminated the joint
venture arrangement, extinguishing the respective put and call option arrangements between the parties relating to a 23% stake in the
joint venture. A profit on disposal of £81 million was recognised on the transaction. In addition, Old Mutual plc recognised a profit of
£7 million on the cancellation of the put option it held in relation to 23% of the issued shares of Kotak.
Disposal of Old Mutual Wealth Italy
On 9 January 2017, the Group completed the disposal of Old Mutual Wealth Italy, part of the Old Mutual Wealth business for cash
consideration of £210 million, net of transaction costs. The profit on disposal was £24 million, comprising a gain of £5 million relating
to the unwind of a forward currency contract used to hedge the value of the proceeds to be received and a gain of £19 million from the
recycling of foreign currency reserves. Merger reserves of £104 million created on the original acquisition of Old Mutual Wealth Italy were
transferred to retained earnings and became distributable. During 2016, an impairment of £46 million was incurred against the carrying
value of Old Mutual Wealth Italy's goodwill to reflect the expected realisable value.
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
A: Significant accounting policies continued
A2: Significant corporate activity and business changes during the year continued
A: Significant accounting policies continued
Disposals completed during the year continued
A2: Significant corporate activity and business changes during the year continued
Sale of a minority stake in Credit Guarantee Insurance Company (CGIC)
Disposals completed during the year continued
On 1 April 2017, Emerging Markets completed the sale of 25% of CGIC to Atradius N.V. for R494 million (£29 million). A gain on disposal
of R280 million (£17 million) was recognised directly in equity on completion of the sale.
Sale of a minority stake in Credit Guarantee Insurance Company (CGIC)
On 1 April 2017, Emerging Markets completed the sale of 25% of CGIC to Atradius N.V. for R494 million (£29 million). A gain on disposal
Disposals announced during the year, but not yet completed
of R280 million (£17 million) was recognised directly in equity on completion of the sale.
Sale of the Single Strategy asset management business of Old Mutual Wealth
Disposals announced during the year, but not yet completed
On 19 December 2017, the Group announced that it has agreed to sell the Old Mutual Wealth Single Strategy asset management
business to a special purpose vehicle ultimately owned by funds managed by TA Associates and certain members of the Single Strategy
Sale of the Single Strategy asset management business of Old Mutual Wealth
management team, for an expected total consideration of in the region of £600 million, comprising cash consideration of £570 million
On 19 December 2017, the Group announced that it has agreed to sell the Old Mutual Wealth Single Strategy asset management
payable on or before completion, with approximately £30 million anticipated to be payable thereafter, paid primarily in 2019 to 2021 as
business to a special purpose vehicle ultimately owned by funds managed by TA Associates and certain members of the Single Strategy
surplus capital associated with the separation from Old Mutual Wealth is released in the business. This deferred consideration is not
management team, for an expected total consideration of in the region of £600 million, comprising cash consideration of £570 million
subject to performance conditions.
payable on or before completion, with approximately £30 million anticipated to be payable thereafter, paid primarily in 2019 to 2021 as
surplus capital associated with the separation from Old Mutual Wealth is released in the business. This deferred consideration is not
The proposed transaction is subject to customary closing conditions, including regulatory approvals. At 31 December 2017, the related
subject to performance conditions.
assets and liabilities have been classified as held for sale. Refer to note A4 for more information.
The proposed transaction is subject to customary closing conditions, including regulatory approvals. At 31 December 2017, the related
Financing activities completed during the year
assets and liabilities have been classified as held for sale. Refer to note A4 for more information.
Emerging Markets
Financing activities completed during the year
On 20 November 2017, Old Mutual Insure issued R500 million Unsecured Subordinated Callable Floating Rate Notes under its R1 billion
Unsecured Subordinated Callable Note Programme. Interest is payable at a floating rate of 3 Month JIBAR plus 209 bps on 22 February,
Emerging Markets
22 May, 22 August and 22 November each year until 22 November 2022. From this date, the floating rate increases to 3 Month JIBAR
On 20 November 2017, Old Mutual Insure issued R500 million Unsecured Subordinated Callable Floating Rate Notes under its R1 billion
plus 313.5 bps until the final maturity date of 22 November 2027. The first interest payment date is 22 February 2018.
Unsecured Subordinated Callable Note Programme. Interest is payable at a floating rate of 3 Month JIBAR plus 209 bps on 22 February,
22 May, 22 August and 22 November each year until 22 November 2022. From this date, the floating rate increases to 3 Month JIBAR
Nedbank
plus 313.5 bps until the final maturity date of 22 November 2027. The first interest payment date is 22 February 2018.
On 30 June 2017, Nedbank Limited issued R600 million additional Tier 1 capital instruments under its R10 billion Domestic Medium Term
Note Programme. Interest is payable quarterly in arrears at a floating rate of 3 Month JIBAR plus 5.65%. The first interest payment date is
Nedbank
1 October 2017 and the first call date in 1 July 2022.
On 30 June 2017, Nedbank Limited issued R600 million additional Tier 1 capital instruments under its R10 billion Domestic Medium Term
Note Programme. Interest is payable quarterly in arrears at a floating rate of 3 Month JIBAR plus 5.65%. The first interest payment date is
Old Mutual plc
1 October 2017 and the first call date in 1 July 2022.
On 24 November 2017, Old Mutual plc repurchased £389 million of its outstanding £450 million 7.875 per cent subordinated debt
securities (Tier 2 subordinated 2025 securities) and £159 million of its outstanding £500 million 8 per cent subordinated debt securities
Old Mutual plc
(Tier 2 subordinated 2021 securities) through tender offers. All repurchased securities were cancelled on 24 November 2017. Following
On 24 November 2017, Old Mutual plc repurchased £389 million of its outstanding £450 million 7.875 per cent subordinated debt
cancellation of these securities, the aggregate principal amounts outstanding of the £450 million securities was £61 million and the
securities (Tier 2 subordinated 2025 securities) and £159 million of its outstanding £500 million 8 per cent subordinated debt securities
aggregate principal amount outstanding of £500 million securities was £341 million. The difference of £102 million between the cash
(Tier 2 subordinated 2021 securities) through tender offers. All repurchased securities were cancelled on 24 November 2017. Following
paid to repurchase and redeem £389 million of Tier 2 subordinated 2025 securities and £159 million nominal of Tier 2 subordinated 2021
cancellation of these securities, the aggregate principal amounts outstanding of the £450 million securities was £61 million and the
securities and the IFRS book value of this debt at the date of repurchase has been recognised in profit or loss. Refer to note D6 and note
aggregate principal amount outstanding of £500 million securities was £341 million. The difference of £102 million between the cash
G7 for more information.
paid to repurchase and redeem £389 million of Tier 2 subordinated 2025 securities and £159 million nominal of Tier 2 subordinated 2021
securities and the IFRS book value of this debt at the date of repurchase has been recognised in profit or loss. Refer to note D6 and note
On 3 February 2017, Old Mutual plc repurchased all of the £273 million Tier 1 preferred perpetual callable securities using cash from
G7 for more information.
the Group's existing resources. In addition to repaying the nominal value of the securities, £29 million was paid to holders of the securities
for accrued interest and a premium in excess of nominal value. The premium was recognised directly in equity.
On 3 February 2017, Old Mutual plc repurchased all of the £273 million Tier 1 preferred perpetual callable securities using cash from
the Group's existing resources. In addition to repaying the nominal value of the securities, £29 million was paid to holders of the securities
for accrued interest and a premium in excess of nominal value. The premium was recognised directly in equity.
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Old Mutual plc
Annual Report and Accounts 2017
Other activities during the year
Old Mutual plc Legacy Pension Schemes
During the year, bulk annuity arrangements for two legacy defined benefit schemes, the Old Mutual Staff Pension Fund and the G&N
Retirement Benefits Scheme, were agreed with Legal & General Assurance Society Limited. The agreements resulted in the buy-in of the
benefits of the two schemes with effect from 13 June 2017. This was converted to a full buy-out into individual annuity policies in October
2017 and wind-up of both schemes completed on 30 November 2017.
In order to effect the transaction, Old Mutual plc made a one off contribution of £27 million into the two schemes, which together with
derecognising of the combined existing surplus for the schemes, resulted in a £57 million charge in the consolidated statement of
comprehensive income.
Old Mutual plc no longer has any liability in respect of these two schemes, including administration and funding. Old Mutual plc had
previously been contributing £7 million of cash funding annually to the two schemes.
A3: Critical accounting estimates and judgements
In the preparation of these financial statements, the Group is required to make estimates and judgements that affect items reported
in the consolidated income statement, statement of financial position, 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. This requires assumptions and predictions of future events and actions. There have
been no significant methodology changes to the critical accounting estimates and judgements that the Group applied at 31 December
2016. The significant accounting policies are described in the relevant notes.
In the current year, the Group applied significant judgement determining whether Nedbank and Old Mutual Wealth should be classified
as discontinued operations and as assets and liabilities held for sale and distribution. However, these classifications did not have any
valuation impact on the underlying assets and liabilities. Refer to note A4 for more information.
The key areas of the Group's business that typically require such estimates and the relevant accounting policies and notes are as follows:
Area
Valuation of financial assets and liabilities
Loans and advances
Life assurance contract provisions
Intangible assets and goodwill
Investments in subsidiaries and associated undertakings and joint ventures
Tax
Policy note
K
G1
G6
H1
I1
D1
More detail
E1/E2/E3
G1
G6
H1
I1/I2/I3
D1/H7/J4
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
A: Significant accounting policies continued
A4: Discontinued operations and disposal groups held for sale
A: Significant accounting policies continued
The Group announced at its preliminary results announcement in 2016, and in various subsequent updates, that the long-term interests of
its shareholders and other stakeholders would be best served by a managed separation of the Group into its four constituent businesses:
A4: Discontinued operations and disposal groups held for sale
The Group announced at its preliminary results announcement in 2016, and in various subsequent updates, that the long-term interests of
Emerging Markets, the South African incorporated emerging markets financial services business with a focus on Africa;
its shareholders and other stakeholders would be best served by a managed separation of the Group into its four constituent businesses:
Nedbank Limited (Nedbank), the South African incorporated retail and corporate bank with a significant presence in Africa;
Old Mutual Wealth, the UK incorporated wealth and asset management business; and
Emerging Markets, the South African incorporated emerging markets financial services business with a focus on Africa;
OM Asset Management plc (OMAM), the US incorporated asset management business.
Nedbank Limited (Nedbank), the South African incorporated retail and corporate bank with a significant presence in Africa;
Old Mutual Wealth, the UK incorporated wealth and asset management business; and
As described in note A2, the disposal of the majority of the Group's shareholding in OMAM was completed on 18 November 2017
OM Asset Management plc (OMAM), the US incorporated asset management business.
and managed separation of the other businesses is planned to be achieved through the execution of the following remaining steps:
As described in note A2, the disposal of the majority of the Group's shareholding in OMAM was completed on 18 November 2017
the distribution of the Old Mutual Wealth shares to existing Old Mutual shareholders and the listing of Old Mutual Wealth, which it is
and managed separation of the other businesses is planned to be achieved through the execution of the following remaining steps:
intended will incorporate a secondary public offering. Old Mutual Wealth will have a premium listing on the LSE and a secondary listing
on the JSE.
the distribution of the Old Mutual Wealth shares to existing Old Mutual shareholders and the listing of Old Mutual Wealth, which it is
the creation of a new South African holding company, Old Mutual Limited (OML), which will acquire Old Mutual plc (consisting primarily
intended will incorporate a secondary public offering. Old Mutual Wealth will have a premium listing on the LSE and a secondary listing
of Emerging Markets and Nedbank pursuant to a scheme of arrangement under UK law).
on the JSE.
the distribution of the OML shares to existing Old Mutual plc shareholders and the listing of OML. OML will be primary listed on the JSE
the creation of a new South African holding company, Old Mutual Limited (OML), which will acquire Old Mutual plc (consisting primarily
with a standard listing on the LSE and secondary listings on the ZSE, NSX and MSE.
of Emerging Markets and Nedbank pursuant to a scheme of arrangement under UK law).
after the listing of OML and a period thereafter to allow for the share register to settle, OML anticipates unbundling (in terms of SA law)
the distribution of the OML shares to existing Old Mutual plc shareholders and the listing of OML. OML will be primary listed on the JSE
to its shareholders a significant portion of its shareholding in Nedbank, whilst retaining a strategic minority interest. Nedbank is primary
with a standard listing on the LSE and secondary listings on the ZSE, NSX and MSE.
listed on the JSE and secondary listed on the NSX.
after the listing of OML and a period thereafter to allow for the share register to settle, OML anticipates unbundling (in terms of SA law)
to its shareholders a significant portion of its shareholding in Nedbank, whilst retaining a strategic minority interest. Nedbank is primary
listed on the JSE and secondary listed on the NSX.
Nedbank and Old Mutual Wealth comprised two of the Groups reported segments. In anticipation of the execution of the Group's
managed separation strategy through distribution of Old Mutual Wealth shares and the planned subsequent distribution of a significant
portion of the Group's stake in Nedbank (resulting in the probable loss of control of these businesses), the Group's entire interests in the
Nedbank and Old Mutual Wealth comprised two of the Groups reported segments. In anticipation of the execution of the Group's
assets and liabilities of these businesses have been classified as held for distribution in the consolidated statement of financial position at
managed separation strategy through distribution of Old Mutual Wealth shares and the planned subsequent distribution of a significant
31 December 2017. In addition, these businesses have been presented as discontinued operations in the consolidated income statement,
portion of the Group's stake in Nedbank (resulting in the probable loss of control of these businesses), the Group's entire interests in the
consolidated statement of comprehensive income and consolidated statement of cash flows for the year ended 31 December 2017, as
assets and liabilities of these businesses have been classified as held for distribution in the consolidated statement of financial position at
required by IFRS. Comparative information have been re-presented accordingly.
31 December 2017. In addition, these businesses have been presented as discontinued operations in the consolidated income statement,
consolidated statement of comprehensive income and consolidated statement of cash flows for the year ended 31 December 2017, as
This judgement was done based on the facts and circumstances which existed at 31 December 2017 when the Directors made a formal
required by IFRS. Comparative information have been re-presented accordingly.
assessment of whether the businesses should be classified as held for distribution. It was determined that although a number of minor
internal reorganisations remained to be implemented, as at 31 December 2017, the businesses in their current state could have been
This judgement was done based on the facts and circumstances which existed at 31 December 2017 when the Directors made a formal
distributed. The Directors considered that it was highly probable that the Nedbank and Old Mutual Wealth business would be distributed
assessment of whether the businesses should be classified as held for distribution. It was determined that although a number of minor
within a period of twelve months based on interactions with South African and UK regulators, positive interactions with the relevant tax
internal reorganisations remained to be implemented, as at 31 December 2017, the businesses in their current state could have been
authorities and interactions with the South African government. The Directors have also taken into account the likelihood of the Court
distributed. The Directors considered that it was highly probable that the Nedbank and Old Mutual Wealth business would be distributed
approval of the scheme in concluding that the businesses should be classified as held for distribution.
within a period of twelve months based on interactions with South African and UK regulators, positive interactions with the relevant tax
authorities and interactions with the South African government. The Directors have also taken into account the likelihood of the Court
Note that following the planned distribution of Nedbank shares, the Group will revalue its residual associate interest at the market value
approval of the scheme in concluding that the businesses should be classified as held for distribution.
prevailing at the time and will commence equity accounting of its interest as a continuing operation from that date.
Note that following the planned distribution of Nedbank shares, the Group will revalue its residual associate interest at the market value
The phased reduction of the Group's majority stake in OMAM began in 2016. In addition, on 31 May 2016, the Group sold its interest
prevailing at the time and will commence equity accounting of its interest as a continuing operation from that date.
in Rogge Global Partners Limited (Rogge). These two businesses comprised one of the Group's reported segments, Institutional Asset
Management (IAM). As a consequence of the plans to dispose of these businesses, IAM was classified as held for sale in the consolidated
The phased reduction of the Group's majority stake in OMAM began in 2016. In addition, on 31 May 2016, the Group sold its interest
statement of financial position at 31 December 2016. In addition IAM was presented as a discontinued operation in the consolidated
in Rogge Global Partners Limited (Rogge). These two businesses comprised one of the Group's reported segments, Institutional Asset
income statement, consolidated statement of comprehensive income and consolidated statement of cash flows for the year ended
Management (IAM). As a consequence of the plans to dispose of these businesses, IAM was classified as held for sale in the consolidated
31 December 2016, as required by IFRS. From 18 November 2017, the Group's remaining 0.0008% stake in OMAM was accounted
statement of financial position at 31 December 2016. In addition IAM was presented as a discontinued operation in the consolidated
at fair value within investments and securities. More information about the accounting treatment following each tranche of the sell down
income statement, consolidated statement of comprehensive income and consolidated statement of cash flows for the year ended
of the Groups stake in OMAM can be found in note B1.
31 December 2016, as required by IFRS. From 18 November 2017, the Group's remaining 0.0008% stake in OMAM was accounted
at fair value within investments and securities. More information about the accounting treatment following each tranche of the sell down
Further information on discontinued operations is provided in note A4.1 and further information on assets and liabilities classified as
of the Groups stake in OMAM can be found in note B1.
held for sale and distribution is provided in note A4.2. Due to the material contribution of Nedbank and Old Mutual Wealth to the Group's
consolidated financial statements, the Group elected to present disclosures of certain material assets and liabilities classified as held for
Further information on discontinued operations is provided in note A4.1 and further information on assets and liabilities classified as
distribution within the respective notes that they relate to. Information on other held for sale assets and liabilities have been included in
held for sale and distribution is provided in note A4.2. Due to the material contribution of Nedbank and Old Mutual Wealth to the Group's
note A4.2.2.
consolidated financial statements, the Group elected to present disclosures of certain material assets and liabilities classified as held for
distribution within the respective notes that they relate to. Information on other held for sale assets and liabilities have been included in
note A4.2.2.
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A4.1: Discontinued operations
The following tables present the income statement from discontinued operations, after the elimination of intercompany transactions
(note A4.1(a)), the statement of comprehensive income from discontinued operations (note A4.1(b)) and net cash flows from discontinued
operations (note 4.1(c)) for the year ended 31 December 2017. Comparative information for the year ended 31 December 2016 has
been re-presented as required by IFRS.
(a) Income statement from discontinued operations
Year ended
31 December
2017
Notes
£m
Year ended
31 December
2016
Revenue
Gross earned premiums
Outward reinsurance
Net earned premiums
Investment return (non-banking)
Banking interest and similar income
Banking trading, investment and similar income
Fee and commission income, and income from service activities
Other income
Total revenue
Expenses
Claims and benefits (including change in insurance contract provisions)
Reinsurance recoveries
Net claims and benefits incurred
Change in investment contract liabilities
Credit impairment charges
Finance costs
Banking interest payable and similar expenses
Fee and commission expenses, and other acquisition costs
Change in third-party interest in consolidated funds
Other operating and administrative expenses
Total expenses
Share of associated undertakings' and joint ventures' (losses)/profits after tax
Profit on disposal of subsidiaries, associated undertakings and strategic investments
Profit before tax from discontinued operations
Income tax expense
Profit after tax from discontinued operations
Attributable to:
Equity holders of the parent
Non-controlling interests
Ordinary shares
Preferred securities
Profit after tax from discontinued operations
148
(87)
61
5,174
4,382
283
2,577
12
12,489
(155)
139
(16)
(4,308)
(193)
(6)
(2,731)
(361)
(644)
(2,988)
(11,247)
(45)
24
1,221
(340)
881
524
323
34
881
142
(84)
58
6,446
3,677
241
2,570
42
13,034
(199)
169
(30)
(5,671)
(228)
(6)
(2,311)
(409)
(574)
(2,773)
(12,002)
5
6
1,043
(362)
681
394
265
22
681
D1(e)
161
155
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Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
A: Significant accounting policies continued
A4: Discontinued operations and disposal groups held for sale continued
A: Significant accounting policies continued
A4.1: Discontinued operations continued
A4: Discontinued operations and disposal groups held for sale continued
(b) Statement of comprehensive income from discontinued operations
A4.1: Discontinued operations continued
(b) Statement of comprehensive income from discontinued operations
Profit after tax from discontinued operations
Items that will not be reclassified subsequently to profit or loss
Fair value movements – property revaluation
Profit after tax from discontinued operations
Net measurement gains/(losses) on defined benefit plans
Items that will not be reclassified subsequently to profit or loss
Income tax on items that will not be reclassified to profit or loss
Fair value movements – property revaluation
Net measurement gains/(losses) on defined benefit plans
Items that may be reclassified subsequently to profit or loss
Income tax on items that will not be reclassified to profit or loss
Available-for-sale investments – fair value gains/(losses)
Currency translation differences/exchange differences on translating foreign operations
Items that may be reclassified subsequently to profit or loss
Share of other comprehensive income of investments accounted for using the equity method
Available-for-sale investments – fair value gains/(losses)
Other movements
Currency translation differences/exchange differences on translating foreign operations
Share of other comprehensive income of investments accounted for using the equity method
Total other comprehensive income for the financial year from discontinued operations
Other movements
Total comprehensive income for the financial year from discontinued operations
Total other comprehensive income for the financial year from discontinued operations
Attributable to:
Equity holders of the parent
Total comprehensive income for the financial year from discontinued operations
Non-controlling interests
Attributable to:
Ordinary shares
Equity holders of the parent
Preferred securities
Non-controlling interests
Ordinary shares
Preferred securities
(c) Net cash flows from discontinued operations
(c) Net cash flows from discontinued operations
Operating activities
Investing activities
Financing activities1
Operating activities
Net cash flows from discontinued operations
Investing activities
Financing activities1
1 Excludes dividend and financing payments made with Old Mutual plc.
Net cash flows from discontinued operations
1 Excludes dividend and financing payments made with Old Mutual plc.
Year ended
31 December
2017
Year ended
881
31 December
2017
11
881
31
(9)
11
33
31
(9)
1
33
(75)
43
1
3
(75)
(28)
43
5
3
(28)
886
5
£m
Year ended
31 December
£m
2016
Year ended
681
31 December
2016
1
681
(21)
6
1
(14)
(21)
6
(4)
(14)
(148)
(1)
(4)
(15)
(148)
(168)
(1)
(182)
(15)
(168)
499
(182)
528
886
324
528
34
886
324
34
886
290
499
187
290
22
499
187
22
499
Year ended
31 December
2017
Year ended
6,076
31 December
(5,285)
2017
(195)
6,076
596
(5,285)
(195)
596
£m
Year ended
31 December
£m
2016
Year ended
4,190
31 December
(4,330)
2016
466
4,190
326
(4,330)
466
326
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Old Mutual plc
Annual Report and Accounts 2017
A4.2: Assets and liabilities held for sale and distribution
The following table presents detail of the assets and liabilities that have been classified as held for sale and distribution at 31 December
2017. More information on material assets and liabilities held for distribution can be found in the notes to which they relate and information
on other held for sale assets and liabilities can be found in note A4.2.2. Accounting standards do not require comparative periods to be
re-presented for assets and liabilities classified as held for sale and distribution. The comparative information at 31 December 2016 as
presented in the consolidated statement of financial position therefore includes the assets and liabilities of the Group on a line-by-line
basis. Note A4.2 should be read in conjunction with the consolidated statement of financial position to obtain a comparable view of the
Group's assets and liabilities at 31 December 2017.
At 31 December 2017
Held for distribution
Held for sale
Notes
Nedbank
Old Mutual
Wealth
Emerging
Markets
Nedbank
Old Mutual
Wealth
Assets
Goodwill and other intangible assets
Mandatory reserve deposits with
central banks
Property, plant and equipment
Investment property
Deferred tax assets
Investments in associated undertakings
and joint ventures
Deferred acquisition costs
Reinsurers' share of policyholder
liabilities
Loans and advances
Investments and securities
Current tax receivable
Trade, other receivables and
other assets
Derivative financial instruments
Cash and cash equivalents
Total assets
Liabilities
Life insurance contract liabilities
Investment contract liabilities
Third-party interests in
consolidated funds
Borrowed funds
Provisions and accruals
Deferred revenue
Deferred tax liabilities
Current tax payable
Trade, other payables and other liabilities
Amounts owed to bank depositors
Derivative financial instruments
Inter-segment funding – liabilities
Total liabilities
Net assets
H1
664
1,201
H7(a)
H3
G6.1
G1.1
G2.1
G4.1
G6.1
G6.1
G7.1
H5
H6
H7(b)
G8.1
G4.1
1,147
531
–
11
401
–
6
42,391
9,468
13
1,044
1,785
1,009
58,470
136
1,082
–
3,078
–
–
38
15
1,425
46,047
1,395
–
53,216
5,254
–
18
–
22
3
555
2,908
199
64,350
–
499
87
1,970
71,812
489
59,139
7,605
–
104
214
200
38
1,334
–
433
782
70,338
1,474
–
–
–
43
–
–
–
–
–
–
–
–
–
–
43
–
–
–
–
–
–
–
–
–
–
–
–
–
43
–
–
23
–
–
–
–
–
–
–
–
–
–
–
23
–
–
–
–
–
–
–
–
–
–
–
–
–
23
198
–
–
–
9
–
4
–
–
–
–
204
–
147
562
–
–
–
–
–
–
–
33
186
–
–
–
219
343
Elimination
of intra-
segment
balances
–
–
–
–
–
–
–
£m
Total
2,063
1,147
572
43
42
404
559
–
(23)
–
–
(128)
(30)
(126)
(307)
2,914
42,567
73,818
13
1,619
1,842
3,000
130,603
–
–
625
60,221
–
(47)
–
–
–
–
(662)
(281)
(33)
(782)
(1,805)
1,498
7,605
3,031
104
214
238
86
2,283
45,766
1,795
–
121,968
8,635
163
157
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
A: Significant accounting policies continued
A4: Discontinued operations and disposal groups held for sale continued
A: Significant accounting policies continued
A4.2: Assets and liabilities held for sale and distribution continued
A4: Discontinued operations and disposal groups held for sale continued
The following table show the assets and liabilities that have been classified as held for sale at 31 December 2016. Refer to note A4.2.2 for
more information:
A4.2: Assets and liabilities held for sale and distribution continued
The following table show the assets and liabilities that have been classified as held for sale at 31 December 2016. Refer to note A4.2.2 for
At 31 December 2016
£m
more information:
Institutional
Asset
Management
Institutional
Asset
1,216
Management
–
32
1,216
247
–
32
29
247
32
165
29
155
32
83
165
1,959
155
83
–
1,959
–
319
–
3
–
–
319
4
3
67
–
388
4
781
67
1,178
388
781
1,178
£m
Total
1,294
Total
116
53
1,294
250
116
53
29
250
95
6,354
29
282
95
97
6,354
8,570
282
97
10
8,570
6,154
319
10
6
6,154
5
319
25
6
67
5
460
25
7,046
67
1,524
460
7,046
1,524
At 31 December 2016
Assets
Goodwill and other intangible assets
Investment properties
Assets
Property, plant and equipment
Goodwill and other intangible assets
Deferred tax assets
Investment properties
Investments in associated undertakings
Property, plant and equipment
and joint ventures
Deferred tax assets
Deferred acquisition costs
Investments in associated undertakings
Investments and securities
and joint ventures
Other assets
Deferred acquisition costs
Cash and balances with central banks
Investments and securities
Total assets
Other assets
Liabilities
Cash and balances with central banks
Life insurance contract liabilities
Total assets
Investment contract liabilities
Liabilities
Borrowed funds
Life insurance contract liabilities
Provisions
Investment contract liabilities
Deferred revenue
Borrowed funds
Deferred tax liabilities
Provisions
Current tax payable
Deferred revenue
Other liabilities
Deferred tax liabilities
Total liabilities
Current tax payable
Net assets
Other liabilities
Total liabilities
Net assets
Emerging
Markets
Emerging
–
Markets
116
3
–
–
116
3
–
–
–
–
–
–
–
–
–
119
–
–
–
119
–
–
–
–
–
–
–
–
–
–
–
1
–
1
–
118
1
1
118
Nedbank
–
Nedbank
–
17
–
–
–
17
–
–
–
–
–
–
–
–
–
17
–
–
–
17
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
17
–
–
17
Old Mutual
Wealth
Old Mutual
78
Wealth
–
1
78
3
–
1
–
3
63
6,189
–
127
63
14
6,189
6,475
127
14
10
6,475
6,154
–
10
3
6,154
5
–
21
3
–
5
71
21
6,264
–
211
71
6,264
211
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A4.2.1: Impairment testing relating to the assets held for sale and distribution
At 31 December 2017, no impairment losses have been recognised for the Nedbank and Old Mutual Wealth businesses, which have been
classified and presented as discontinued operations in the consolidated income statement and as held for distribution in the consolidated
statement of financial position in terms of the requirements of IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations'.
This reflects the fact that fair value less cost to distribute of each business was determined to be in excess of the carrying value of each
business at 31 December 2017.
The fair value less cost to distribute of Nedbank was determined by reference to its quoted market price and the ZAR/GBP foreign
exchange rate as at 31 December 2017. At 31 December 2017, the fair value less cost to distribute exceeded the carrying value of
Nedbank. The Group therefore concluded that goodwill and other intangible assets related to the Nedbank are not impaired. The fair
value less cost to distribute of Old Mutual Wealth is not observable in a quoted active market and accordingly it has been determined by
reference to external broker valuation reports and an internal valuation performed for goodwill impairment testing. As such, the conclusion
of this matter has required significant judgement and the use of estimates.
At 31 December 2017, the Group has concluded that the fair value less costs to distribute exceeded the carrying value of Old Mutual
Wealth and therefore no impairment losses of goodwill and other intangible assets have been recognised.
In addition, no other impairments for property, plant and equipment, investment properties or other intangible assets have been recognised
as a result of classifying these businesses as held for distribution.
A4.2.2: Analysis of other held for sale assets and liabilities
The following provides details of other significant held for sale assets and liabilities not analysed elsewhere in these consolidated financial
statements:
Emerging Markets
Current and prior year
At 31 December 2017, Emerging Markets classified as held for sale investment properties with a carrying value of £43 million (December
2016: £116 million) as it is expected that they will be sold within 12 months of the reporting date. Transfer of these properties is expected
to complete within the next 12 months of the reporting date.
Nedbank
Current and prior year
Following an internal review of its own office space requirements, at 31 December 2017, Nedbank classified as held for sale buildings with
a carrying value of £23 million (2016: £17 million) that are no longer required and which are being marketed for sale.
Old Mutual Wealth
On 19 December 2017, the Group announced that it has agreed to sell the Single Strategy asset management business of Old Mutual
Wealth to the Single Strategy Management team and funds managed by TA Associates. The proposed transaction is subject to customary
closing conditions, including regulatory approvals and conditions relating to the transfer of the Multi-asset business to be retained by Old
Mutual Wealth. At 31 December 2017, the related assets and liabilities have been classified as held for sale. Refer to note A2 for more
information.
No impairment loss was recognised in profit or loss for the year ended 31 December 2017, as the expected net proceeds of in the region
of £600 million is in excess of the fair value of less cost to sell.
Prior year
On 9 August 2016, the Group announced that it had agreed to sell Old Mutual Wealth Italy, part of the Old Mutual Wealth business, to
ERGO Italia (now renamed Phlavia Investimenti), subject to regulatory approval. From this date the business was disclosed as held for
sale. The principal financial assets and liabilities included within these amounts were investments and securities of £6,189 million and
investment contract liabilities of £6,164 million, all of which were classified as Level 1 in terms of the fair value hierarchy.
A goodwill impairment loss of £46 million was recognised in profit or loss for the year ended 31 December 2016 as the net asset value
of the business exceeded the net proceeds. The sale was completed on 9 January 2017.
Institutional Asset Management
Current and prior year
On 9 March 2016, the Group announced its managed separation strategy, which included the phased reduction of its majority stake in
OM Asset Management plc (OMAM), part of the Institutional Asset Management segment. As such, the assets and liabilities of OMAM
were classified as held for sale at 31 December 2016.
At 31 December 2016, the market value of the Group's investment in OMAM, based on its quoted share price, was £863 million,
compared to a carrying value of £602 million. The Group therefore concluded that the goodwill related to OMAM was not impaired.
At 31 December 2017, the Group held 1,000 shares in OMAM. Refer to note A2 for more information.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
A: Significant accounting policies continued
A5: Liquidity analysis of the consolidated statement of financial position
A: Significant accounting policies continued
The Group's consolidated statement of financial position is in order of liquidity as is permitted by IAS 1 'Presentation of Financial
Statements'. In order to satisfy the requirements of IAS 1, the following analysis is given to describe how the consolidated statement
A5: Liquidity analysis of the consolidated statement of financial position
of financial position lines are categorised between current and non-current balances, applying the principles laid out in IAS 1.
The Group's consolidated statement of financial position is in order of liquidity as is permitted by IAS 1 'Presentation of Financial
Statements'. In order to satisfy the requirements of IAS 1, the following analysis is given to describe how the consolidated statement
The following consolidated statement of financial position captions are generally classified as current – cash and cash equivalents, non-
of financial position lines are categorised between current and non-current balances, applying the principles laid out in IAS 1.
current assets held for sale, current tax receivable, third-party interests in the consolidation of funds, current tax payable, liabilities under
acceptances and non-current liabilities held for sale. The following balances are generally classified as non-current – goodwill and other
The following consolidated statement of financial position captions are generally classified as current – cash and cash equivalents, non-
intangible assets, mandatory reserve deposits with central banks, property, plant and equipment, investment property, deferred tax assets,
current assets held for sale, current tax receivable, third-party interests in the consolidation of funds, current tax payable, liabilities under
investments in associated undertakings and joint ventures, deferred acquisition costs, deposits held with reinsurers, provisions, deferred
acceptances and non-current liabilities held for sale. The following balances are generally classified as non-current – goodwill and other
revenue and deferred tax liabilities.
intangible assets, mandatory reserve deposits with central banks, property, plant and equipment, investment property, deferred tax assets,
investments in associated undertakings and joint ventures, deferred acquisition costs, deposits held with reinsurers, provisions, deferred
The following balances include both current and non-current portions – reinsurers' shares of life assurance and property & casualty
revenue and deferred tax liabilities.
business policyholder liabilities, loans and advances, investments and securities, other assets, derivative financial assets and liabilities,
life assurance and property & casualty policyholder liabilities, borrowed funds, amounts owed to bank depositors and other liabilities.
The following balances include both current and non-current portions – reinsurers' shares of life assurance and property & casualty
The split between the current and non-current portions for these assets and liabilities is given either by way of a footnote to the relevant
business policyholder liabilities, loans and advances, investments and securities, other assets, derivative financial assets and liabilities,
note to the accounts or by way of a maturity analysis (in respect of major financial liability captions).
life assurance and property & casualty policyholder liabilities, borrowed funds, amounts owed to bank depositors and other liabilities.
The split between the current and non-current portions for these assets and liabilities is given either by way of a footnote to the relevant
A6: Standards, amendments to standards, and interpretations adopted in the 2017 annual
note to the accounts or by way of a maturity analysis (in respect of major financial liability captions).
financial statements
A6: Standards, amendments to standards, and interpretations adopted in the 2017 annual
The following amendments to the accounting standards, issued by the IASB and endorsed by the EU, have been adopted by the Group
from 1 January 2017 with no material impact on the Group's consolidated results, financial position or disclosures:
financial statements
The following amendments to the accounting standards, issued by the IASB and endorsed by the EU, have been adopted by the Group
Amendments to IAS 12 'Income Taxes', recognition of deferred tax assets for unrealised losses, effective for annual periods beginning
from 1 January 2017 with no material impact on the Group's consolidated results, financial position or disclosures:
on or after 1 January 2017
Amendments to IAS 7 'Statement of Cash Flows', disclosure initiative, effective for annual periods beginning on or after 1 January 2017;
Amendments to IAS 12 'Income Taxes', recognition of deferred tax assets for unrealised losses, effective for annual periods beginning
and
on or after 1 January 2017
Amendments to IFRS 12 'Disclosure of Interests in other entities' (part of Improvements to IFRS 2014 to 2016 Cycle).
Amendments to IAS 7 'Statement of Cash Flows', disclosure initiative, effective for annual periods beginning on or after 1 January 2017;
and
A7: Future standards, amendments to standards and interpretations not early-adopted in the 2017
Amendments to IFRS 12 'Disclosure of Interests in other entities' (part of Improvements to IFRS 2014 to 2016 Cycle).
annual financial statements
A7: Future standards, amendments to standards and interpretations not early-adopted in the 2017
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2017 reporting
periods and have not been early adopted by the Group:
annual financial statements
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2017 reporting
IFRS 9: 'Financial Instruments'
periods and have not been early adopted by the Group:
IFRS 15: ‘Revenue from Contracts with Customers’
IFRS 16: ‘Leases’
IFRS 9: 'Financial Instruments'
IFRS 17: ‘Insurance Contracts’
IFRS 15: ‘Revenue from Contracts with Customers’
IFRS 16: ‘Leases’
There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current
IFRS 17: ‘Insurance Contracts’
or future reporting periods and on foreseeable future transactions.
There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current
One of the Group's associate investments, ETI, held by its' 55% percent subsidiary, Nedbank, will report results for the year ended
or future reporting periods and on foreseeable future transactions.
31 December 2017 subsequent to the release of the Group's audited consolidated financial statements. As allowed by IAS 28, the Group
uses ETI's most recent public information (the quarter ended 30 September 2017) to determine its share of ETI's earnings. As ETI's most
One of the Group's associate investments, ETI, held by its' 55% percent subsidiary, Nedbank, will report results for the year ended
recent public information does not include the transitional impact of IFRS 9 and IFRS 15, the Group's disclosure of the transitional impact
31 December 2017 subsequent to the release of the Group's audited consolidated financial statements. As allowed by IAS 28, the Group
of these standards excludes our share of ETI's transitional impact.
uses ETI's most recent public information (the quarter ended 30 September 2017) to determine its share of ETI's earnings. As ETI's most
recent public information does not include the transitional impact of IFRS 9 and IFRS 15, the Group's disclosure of the transitional impact
of these standards excludes our share of ETI's transitional impact.
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IFRS 9 'Financial Instruments'
IFRS 9: 'Financial Instruments' (IFRS 9) was issued in July 2014 and will replace IAS 39: Financial Instruments: Recognition and
Measurement. The standard is effective and will be implemented by the Group from 1 January 2018. The final version of this standard
incorporates amendments to the classification and measurement, hedge accounting guidance, as well as the accounting requirements
for the impairment of financial assets measured at amortised cost and fair value through other comprehensive income. IFRS 7's enhanced
disclosure requirements, as a result of the adoption if IFRS 9, will result in improved credit risk disclosures and increased transparency
with respect to impairment judgements and estimates.
The business that is most impacted by the implementation of IFRS 9 is Nedbank, which has been classified as held for distribution
at 31 December 2017.
As permitted by the transitional provisions of IFRS 9, the Group has elected not to restate comparative figures. Any adjustments to the
carrying amount of financial assets and financial liabilities at the date of transition will be recognised in the opening retained earnings and
other reserves at 1 January 2018. The Group has elected to continue to apply the hedge accounting requirements of IAS 39 on adoption
of IFRS 9. Furthermore, on the adoption of IFRS 9, the Group has adopted the amendment to IFRS 9 'Prepayment Features with
Negative Compensation'.
Classification and measurement
Financial assets are classified based on (i) the business model within which the financial assets are held and managed and (ii) the
contractual cash flow characteristics of the financial assets, whether the cash flows represent 'solely payments of principal and interest'.
Financial assets are measured at amortised cost if they are held within a business model whose objective is to hold those assets for the
purpose of collecting contractual cashflows and those cashflows comprise solely payments of principal and interest ('hold to collect'
business model).
Financial assets are measured at fair value through other comprehensive income (FVOCI) if they are held within a business model
whose objective is achieved by both collecting contractual cashflows and selling financial assets and those contractual cashflows comprise
solely payments of principal and interest ('hold to collect and sell' business model'). Movements in the carrying amount of these financial
assets should be taken through other comprehensive income (OCI), except for impairment gains or losses, interest revenue and foreign
exchange gains or losses, which are recognised in profit or loss. Where the financial asset is derecognised, the cumulative gain or
loss previously recognised in OCI is reclassified from equity to profit or loss.
The remaining financial assets are measured at fair value through profit or loss (FVTPL). All derivative instruments that are either financial
assets or financial liabilities will continue to be classified as held for trading and measured at fair value through profit or loss.
The accounting for financial liabilities is largely unchanged, except for financial liabilities designated at FVTPL. Changes in the fair
value of these financial liabilities that are attributable to the Group's own credit risk are recognised in OCI. Where the financial liability
is derecognised, the cumulative gain or loss previously recognised in OCI is not reclassified from equity to profit or loss. However,
it may be reclassified within equity.
For equity investments that are neither held for trading nor contingent consideration, the Group may irrevocably elect to present
subsequent changes in fair value of these equity investments in other comprehensive income (OCI). Where the equity investment
is derecognised, the cumulative gain or loss previously recognised in OCI is not reclassified from equity to profit or loss. However,
it may be reclassified within equity. Alternatively where the Group does not make the aforementioned election, fair value changes
are recognised in profit or loss. This election is made on an investment by investment basis.
On the initial application of IFRS 9, an entity may revoke its previous designation of financial assets and financial liabilities measured at
fair value through profit or loss (fair value option) with the loans being reclassified into amortised cost or FVOCI depending on the entity's
business model for the asset.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
A: Significant accounting policies continued
A7: Future standards, amendments to standards and interpretations not early-adopted in the 2017
A: Significant accounting policies continued
annual financial statements continued
A7: Future standards, amendments to standards and interpretations not early-adopted in the 2017
IFRS 9 'Financial Instruments' continued
annual financial statements continued
Impairments
IFRS 9 'Financial Instruments' continued
Impairments in terms of IFRS 9 will be determined based on an expected credit loss (ECL) model rather than the current incurred loss
model required by IAS 39. The Group will be required to recognise an allowance for either 12-month or lifetime ECLs, depending on
Impairments
whether there has been a significant increase in credit risk since initial recognition.
Impairments in terms of IFRS 9 will be determined based on an expected credit loss (ECL) model rather than the current incurred loss
model required by IAS 39. The Group will be required to recognise an allowance for either 12-month or lifetime ECLs, depending on
The measurement of ECLs reflects a probability-weighted outcome, the time value of money and the entity's best available forward-looking
whether there has been a significant increase in credit risk since initial recognition.
information. The aforementioned probability-weighted outcome must consider the possibility that a credit loss occurs and the possibility
that no credit loss occurs, even if the possibility of a credit loss occurring is low.
The measurement of ECLs reflects a probability-weighted outcome, the time value of money and the entity's best available forward-looking
information. The aforementioned probability-weighted outcome must consider the possibility that a credit loss occurs and the possibility
The ECL model applies to financial assets measured at amortised cost and FVOCI, lease receivables and certain loan commitments
that no credit loss occurs, even if the possibility of a credit loss occurring is low.
as well as financial guarantee contracts.
The ECL model applies to financial assets measured at amortised cost and FVOCI, lease receivables and certain loan commitments
The IFRS 9 impairment implementation progressed during 2017. The following were the main areas of focus for 2017:
as well as financial guarantee contracts.
Finalisation of the IFRS 9 impairment model methodology
The IFRS 9 impairment implementation progressed during 2017. The following were the main areas of focus for 2017:
Implementation of an IT framework facilitating efficient model execution and management
Development, build and testing of IFRS 9 impairment models with respect to a substantial portion of the Group's portfolios, leveraging
Finalisation of the IFRS 9 impairment model methodology
Implementation of an IT framework facilitating efficient model execution and management
Documentation and implementation of the relevant control environment and related governance processes.
Development, build and testing of IFRS 9 impairment models with respect to a substantial portion of the Group's portfolios, leveraging
off the aforementioned IT framework; and
off the aforementioned IT framework; and
Transitional impact
Documentation and implementation of the relevant control environment and related governance processes.
The implementation of the IFRS 9 ECL requirements increases balance sheet impairments, predominantly in loans and advances,
at 1 January 2018 by approximately £244 million with reserves decreasing by approximately £176 million on an after-tax basis. The
Transitional impact
following areas will continue to receive attention as the implementation of IFRS 9 progresses during the 2018 financial reporting period:
The implementation of the IFRS 9 ECL requirements increases balance sheet impairments, predominantly in loans and advances,
at 1 January 2018 by approximately £244 million with reserves decreasing by approximately £176 million on an after-tax basis. The
The embedding of the IT framework into the operations of the business
following areas will continue to receive attention as the implementation of IFRS 9 progresses during the 2018 financial reporting period:
Further refinement of certain models
the documentation; implementation of the relevant control environment and related governance processes
The embedding of the IT framework into the operations of the business
Finalisation of the reporting and disclosure framework, and completion of the supporting business rules; and
Further refinement of certain models
Observing local and international industry trends with respect to IFRS 9 adoption.
the documentation; implementation of the relevant control environment and related governance processes
Finalisation of the reporting and disclosure framework, and completion of the supporting business rules; and
The majority of the impact of the adoption of IFRS 9 ECL requirements will be in Nedbank, which is the Group's 55% owned subsidiary.
Observing local and international industry trends with respect to IFRS 9 adoption.
Nedbank has reported that they are expecting increases in balance sheet impairments at 1 January 2018 by approximately £190 million
with reserves decreasing by approximately £137 million on an after-tax basis.
The majority of the impact of the adoption of IFRS 9 ECL requirements will be in Nedbank, which is the Group's 55% owned subsidiary.
Nedbank has reported that they are expecting increases in balance sheet impairments at 1 January 2018 by approximately £190 million
The impact on reserves of the new impairment requirements is management's best estimate and this could change when the financial
with reserves decreasing by approximately £137 million on an after-tax basis.
statements are presented for the year ending 31 December 2018.
The impact on reserves of the new impairment requirements is management's best estimate and this could change when the financial
The Group has implemented the following classification and measurement changes on adoption of IFRS 9:
statements are presented for the year ending 31 December 2018.
Revocation of the fair value through profit or loss designation for certain loans and advances, amounts owed to depositors and long-
The Group has implemented the following classification and measurement changes on adoption of IFRS 9:
Revocation of the fair value through profit or loss designation for certain loans and advances, amounts owed to depositors and long-
term debt instruments to facilitate the implementation of macro fair-value hedge accounting of interest rate risk and hedge accounting
of inflation risk. It is anticipated that the aforementioned changes will reduce accounting volatility experienced with respect to fair value
through profit or loss accounting;
term debt instruments to facilitate the implementation of macro fair-value hedge accounting of interest rate risk and hedge accounting
of inflation risk. It is anticipated that the aforementioned changes will reduce accounting volatility experienced with respect to fair value
mismatch;
through profit or loss accounting;
Classified certain debt instruments as Fair Value through Profit or loss in order to eliminate or significantly reduce an accounting
Reclassified certain loans from amortised cost including the IFRS 9 ECL impact above to FVOCI and FVTPL due to the Group's
Classified certain debt instruments as Fair Value through Profit or loss in order to eliminate or significantly reduce an accounting
business models for the affected portfolios; and
mismatch;
Reviewed the effective interest rate calculation for certain loans based on the additional guidance provided in IFRS 9.
Reclassified certain loans from amortised cost including the IFRS 9 ECL impact above to FVOCI and FVTPL due to the Group's
business models for the affected portfolios; and
Reviewed the effective interest rate calculation for certain loans based on the additional guidance provided in IFRS 9.
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The current estimates of the impact of the implementation of the IFRS 9 classification and measurement requirements decreases reserves
at 1 January 2018 by approximately £27 million, £12 million of which relating to the businesses classified as held for distribution and
£15 million relating to the continuing businesses.
Ongoing work is continuing in the group to finalise the implementation of classification and measurement. Therefore, these estimates
are based on current information available and accounting policies, assumptions, judgements and estimation techniques which will be
regularly reviewed and assessed during the year in preparation for the financial statements for the year ending 31 December 2018.
The impact of the adoption in the standards is not expected to result in the capital ratios of the businesses being below their
statutory minimum.
IFRS 15 'Revenue from Contracts with Customers'
IFRS 15 'Revenue from Contracts with Customers' (IFRS 15)replaces all existing revenue requirements in IFRS and applies to all revenue
arising from contracts with clients, unless the contracts are in the scope of the standards on leases, insurance contracts and financial
instruments. The standard is effective and will be implemented by the Group from 1 January 2018. The Group has applied the standard
retrospectively with the cumulative effect of initial application recognised in opening retained earnings at 1 January 2018 and accordingly
the Group will not restate comparative figures.
The core principle of the standard is that revenue recognised reflects the consideration to which the company expects to be entitled
in exchange for the transfer of promised goods or services to the client. The standard incorporates a five-step analysis to determine
the amount and timing of revenue recognition.
Nedbank performed an assessment to determine the impact of the new standard on the Group's statement of financial position and
performance, which has to date resulted in the measurement of the Group's customer loyalty programmes being reviewed.
Nedbank has concluded that loyalty points awarded to clients represent consideration payable to our customer's customer in terms of
IFRS 15's guidance. IFRS 15 requires revenue to be decreased by the amount expected to be payable to customers, which is recognised
as a liability until payment is affected. The liability for the amount expected to be paid to customers under the loyalty programme increases
by approximately £18 million on transition and £13 million on an after-tax basis.
Based on a high level evaluation by the other businesses the Group has assessed that there should be no material impacts on the
adoption of the standard although this work, principally in the asset management business, is ongoing.
IFRS 16 'Leases'
IFRS 16 'Leases' (IFRS 16) was issued in January 2016 and replaces IAS 17 Leases and its related interpretations for reporting periods
beginning on or after 1 January 2019. All of the Group's businesses will be impacted by the adoption of IFRS 16.
The Group as lessee: IFRS 16 introduces a 'right of use' model whereby the lessee recognises a right-of-use asset and an associated
financial obligation to make lease payments for all leases with a term of more than 12 months. The asset will be amortised over the lease
term and the financial liability measured at amortised cost with interest recognised in profit or loss using the effective interest rate method.
The Group as lessor: IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues
to classify and account for its leases as operating leases or finance leases.
The Group is in the process of assessing the impact of IFRS 16 and which transitional approach it will follow.
IFRS 17 'Insurance Contracts'
The IASB issued IFRS 17 'Insurance Contracts' (IFRS 17) in May 2017 as a replacement for IFRS 4 Insurance Contracts. The adoption
of this standard will primarily impact the Emerging Markets and Old Mutual Wealth businesses.
The new IFRS 17 standard is effective for reporting periods beginning on or after 1 January 2021. The new rules will affect the financial
statements and key performance indicators of all entities in the Group that issue insurance contracts or investment contracts with
discretionary participation features.
The Group will commence assessing the impact of IFRS 17 during 2018.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
B: Segment information
B1: Basis of segmentation
B: Segment information
Segment presentation
B1: Basis of segmentation
Composition of segments
Segment presentation
The Group's reported segments are Emerging Markets, Nedbank, Old Mutual Wealth, Institutional Asset Management (IAM) and plc
Head Office, (which includes the plc Parent Company and the other centre companies of the Group, which typically own and manage
Composition of segments
the Group's interests). In determining the Group's adjusted operating profit (AOP), all these businesses have been classified as core
The Group's reported segments are Emerging Markets, Nedbank, Old Mutual Wealth, Institutional Asset Management (IAM) and plc
operations for all reporting periods. For all reporting periods, Old Mutual Bermuda is classified as non-core in determining the
Head Office, (which includes the plc Parent Company and the other centre companies of the Group, which typically own and manage
Group's AOP.
the Group's interests). In determining the Group's adjusted operating profit (AOP), all these businesses have been classified as core
operations for all reporting periods. For all reporting periods, Old Mutual Bermuda is classified as non-core in determining the
For the years ended 31 December 2017 and 31 December 2016, Emerging Markets and plc Head Office and Old Mutual Bermuda
Group's AOP.
have been classified as continuing operations in the IFRS consolidated income statement, while Nedbank and Old Mutual Wealth have
been classified as discontinued operations for the years ended 31 December 2017 and 31 December 2016. IAM was classified as a
For the years ended 31 December 2017 and 31 December 2016, Emerging Markets and plc Head Office and Old Mutual Bermuda
discontinued operation in the IFRS consolidated income statement for the year ended 31 December 2016. The classification of these
have been classified as continuing operations in the IFRS consolidated income statement, while Nedbank and Old Mutual Wealth have
businesses as discontinued operations is consistent with the requirements of IFRS, given the Group's stated strategic intentions.
been classified as discontinued operations for the years ended 31 December 2017 and 31 December 2016. IAM was classified as a
discontinued operation in the IFRS consolidated income statement for the year ended 31 December 2016. The classification of these
Nedbank and Old Mutual Wealth have further been classified as held for distribution in the consolidated statement of financial position
businesses as discontinued operations is consistent with the requirements of IFRS, given the Group's stated strategic intentions.
at 31 December 2017. IAM was classified as held for sale at 31 December 2016. Refer to note A4 for more information.
Nedbank and Old Mutual Wealth have further been classified as held for distribution in the consolidated statement of financial position
Consolidation adjustments comprise the consolidation of investment funds and eliminations of inter-segment transactions.
at 31 December 2017. IAM was classified as held for sale at 31 December 2016. Refer to note A4 for more information.
Segmental treatment of businesses classified as discontinued operations
Consolidation adjustments comprise the consolidation of investment funds and eliminations of inter-segment transactions.
Consistent with the Group's AOP policy as described in the basis of preparation of adjusted operating profit on page 145, the Group has
continued to recognise Nedbank, Old Mutual Wealth's and IAM operating results within the Group's AOP despite these businesses being
Segmental treatment of businesses classified as discontinued operations
classified as discontinued operations in the IFRS consolidated income statement. The results of IAM have been included in 2016 and
Consistent with the Group's AOP policy as described in the basis of preparation of adjusted operating profit on page 145, the Group has
2017 to the extent that it was a subsidiary or an associate.
continued to recognise Nedbank, Old Mutual Wealth's and IAM operating results within the Group's AOP despite these businesses being
classified as discontinued operations in the IFRS consolidated income statement. The results of IAM have been included in 2016 and
During the year, the Group sold down its holding in IAM through a number of separate transactions which were completed on 18
2017 to the extent that it was a subsidiary or an associate.
November 2017. As a result of these transactions the IAM operating segment for the year ended 31 December 2017 includes the
consolidated operating results of OMAM for the period from 1 January 2017 to 19 May 2017, at which time Group ceased to have a
During the year, the Group sold down its holding in IAM through a number of separate transactions which were completed on 18
controlling interest, and exerted significant influence over OMAM. Consistent with accounting guidance applicable where an associate
November 2017. As a result of these transactions the IAM operating segment for the year ended 31 December 2017 includes the
investment is classified as held for sale, the Group’s remaining investment in OMAM was recorded as an investment in securities from
consolidated operating results of OMAM for the period from 1 January 2017 to 19 May 2017, at which time Group ceased to have a
19 May 2017 to 30 June 2017. From 1 July 2017 to 18 November 2017, the Group’s remaining interest in OMAM was reflected as
controlling interest, and exerted significant influence over OMAM. Consistent with accounting guidance applicable where an associate
an investment in securities. On 18 November 2017, the Group’s stake in OMAM further reduced to 1,000 shares which are currently
investment is classified as held for sale, the Group’s remaining investment in OMAM was recorded as an investment in securities from
recorded as investments and securities within the plc Head Office segment. Refer to note A2 for more information. The operating result
19 May 2017 to 30 June 2017. From 1 July 2017 to 18 November 2017, the Group’s remaining interest in OMAM was reflected as
of IAM for the year ended 31 December 2016 also includes Rogge Global Partners Limited up to the date of disposal on 31 May 2016.
an investment in securities. On 18 November 2017, the Group’s stake in OMAM further reduced to 1,000 shares which are currently
Amendments to the segmental basis of preparation of AOP during the year.
recorded as investments and securities within the plc Head Office segment. Refer to note A2 for more information. The operating result
of IAM for the year ended 31 December 2016 also includes Rogge Global Partners Limited up to the date of disposal on 31 May 2016.
The long-term investment return on excess assets, previously shown within plc Head Office segment is now included in AOP of the
Amendments to the segmental basis of preparation of AOP during the year.
Emerging Markets segment for all periods. This is consistent with where the excess assets are managed and will be managed in the
future. Comparative information in the adjusted operating profit statement – segment information for the year ended 31 December 2016
The long-term investment return on excess assets, previously shown within plc Head Office segment is now included in AOP of the
has been re-presented accordingly.
Emerging Markets segment for all periods. This is consistent with where the excess assets are managed and will be managed in the
future. Comparative information in the adjusted operating profit statement – segment information for the year ended 31 December 2016
Effective 1 January 2017, management of Old Mutual Life Assurance Company (South Africa) Limited offshore branches and OMI-
has been re-presented accordingly.
Guernsey, previously reported in the Old Mutual Wealth segment, have been transferred to Emerging Markets as part of the execution
of the Group's managed separation strategy. Comparative information in the consolidated statement of financial position – segment
Effective 1 January 2017, management of Old Mutual Life Assurance Company (South Africa) Limited offshore branches and OMI-
information at 31 December 2016 (note B4) has been re-presented by transferring total assets of £2,237 million and total liabilities of
Guernsey, previously reported in the Old Mutual Wealth segment, have been transferred to Emerging Markets as part of the execution
£2,208 million, from Old Mutual Wealth to Emerging Markets. The operating results of these segments have not been re-presented in
of the Group's managed separation strategy. Comparative information in the consolidated statement of financial position – segment
2016 as the income statement impact is considered not material. These changes did not affect the total equity, adjusted operating profit
information at 31 December 2016 (note B4) has been re-presented by transferring total assets of £2,237 million and total liabilities of
or profit after tax of the Group as previously reported.
£2,208 million, from Old Mutual Wealth to Emerging Markets. The operating results of these segments have not been re-presented in
2016 as the income statement impact is considered not material. These changes did not affect the total equity, adjusted operating profit
Other changes in segmental presentation
or profit after tax of the Group as previously reported.
During 2017 the Group performed a further analysis of the investment and securities held by consolidated investment funds which resulted
in the identification of 64 million Old Mutual plc shares at 31 December 2017 (2016: 61 million; 2015: 51 million shares) held by these
Other changes in segmental presentation
funds. These shares in Old Mutual plc have been treated as treasury shares and consequentially resulted in a direct decrease in the value
During 2017 the Group performed a further analysis of the investment and securities held by consolidated investment funds which resulted
of equity and the value of investment and securities of £163 million (2016: £145 million). Comparative information in the consolidated
in the identification of 64 million Old Mutual plc shares at 31 December 2017 (2016: 61 million; 2015: 51 million shares) held by these
statement of financial position, consolidated statement of changes in equity and Comparative information in the consolidated statement
funds. These shares in Old Mutual plc have been treated as treasury shares and consequentially resulted in a direct decrease in the value
of financial position – segment information at 31 December 2016 (note B4) have been restated accordingly. An opening adjustment
of equity and the value of investment and securities of £163 million (2016: £145 million). Comparative information in the consolidated
of £116 million was recognised directly in reserves at 1 January 2016. The consolidated income statement for the year ended
statement of financial position, consolidated statement of changes in equity and Comparative information in the consolidated statement
31 December 2016 has not been restated as the impact is considered to be not material.
of financial position – segment information at 31 December 2016 (note B4) have been restated accordingly. An opening adjustment
of £116 million was recognised directly in reserves at 1 January 2016. The consolidated income statement for the year ended
31 December 2016 has not been restated as the impact is considered to be not material.
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Annual Report and Accounts 2017
The consolidated income statement for the year ended 31 December 2016 has been restated for the reallocation of other operating and
administrative expenses to fee and commission expenses, and other acquisition costs. This restatement had no impact on the net assets
or equity attributable to ordinary equity holders of the Group.
Assessment of performance
The Group's segmental results are analysed and reported on a basis consistent with the way that management and the Board 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.
Revenues generated by 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 (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, continuing businesses:
Emerging Markets – life assurance, property & casualty, asset management and banking
Core operations, discontinued businesses:
Nedbank – banking, asset management and life assurance
Old Mutual Wealth – life assurance and asset management
Institutional Asset Management – asset management
Non-core operations, continuing businesses:
Old Mutual Bermuda – life assurance
B2: Gross earned premiums and deposits to investment contracts
Year ended 31 December 2017
Life insurance contracts
Life assurance – investment contracts with discretionary participation features
Property & casualty
Gross earned premiums
Life assurance – unit-linked and similar contracts and other investment contracts recognised as deposits
Year ended 31 December 2016 (Re-presented)¹
Life insurance contracts
Life assurance – investment contracts with discretionary participation features
Property & casualty
Gross earned premiums
Life assurance – unit-linked and similar contracts and other investment contracts recognised as deposits
1 The year ended 31 December 2016 has been re-presented to reflect Old Mutual Wealth as a discontinued operation. Refer to note A4 for more information.
£m
Emerging
Markets
1,639
1,645
941
4,225
1,887
£m
Emerging
Markets
1,393
1,525
808
3,726
1,656
171
165
i
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n
a
n
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a
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Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
B: Segment information continued
B3: Adjusted operating profit statement – segment information for the year ended
B: Segment information continued
31 December 2017
B3: Adjusted operating profit statement – segment information for the year ended
31 December 2017
Notes
Emerging
Markets
Nedbank
B2
Notes
B2
D2
D3
D4
D2
D5
D3
D4
D5
Revenue
Gross earned premiums
Outward reinsurance
Revenue
Net earned premiums
Gross earned premiums
Investment return (non-banking)
Outward reinsurance
Banking interest and similar income
Net earned premiums
Banking trading, investment and similar income
Investment return (non-banking)
Fee and commission income, and income from service activities
Banking interest and similar income
Other income
Banking trading, investment and similar income
Total revenue2
Fee and commission income, and income from service activities
Expenses
Other income
Claims and benefits (including change in insurance contract provisions)
Total revenue2
Reinsurance recoveries
Expenses
Net claims and benefits incurred
Claims and benefits (including change in insurance contract provisions)
Change in investment contract liabilities
Reinsurance recoveries
Credit impairment charges
Net claims and benefits incurred
Finance costs
Change in investment contract liabilities
Banking interest payable and similar expenses
Credit impairment charges
Fee and commission expenses, and other acquisition costs
Finance costs
Change in third-party interest in consolidated funds
Banking interest payable and similar expenses
Other operating and administrative expenses
Fee and commission expenses, and other acquisition costs
Income tax attributable to policyholder returns
Change in third-party interest in consolidated funds
Total expenses
Other operating and administrative expenses
Share of associated undertakings' and joint ventures' profits/(losses) after tax
Income tax attributable to policyholder returns
Profit on disposal of subsidiaries, associated undertakings and strategic investments
Total expenses
Adjusted operating profit/(loss) before tax and non-controlling interests
Share of associated undertakings' and joint ventures' profits/(losses) after tax
Income tax expense
Profit on disposal of subsidiaries, associated undertakings and strategic investments
Non-controlling interests
Adjusted operating profit/(loss) before tax and non-controlling interests
Adjusted operating profit/(loss) after tax and non-controlling interests
Income tax expense
Adjusting items after tax and non-controlling interests
Non-controlling interests
Profit/(loss) after tax from continuing operations
Adjusted operating profit/(loss) after tax and non-controlling interests
Profit from discontinued operations after tax
Adjusting items after tax and non-controlling interests
Profit/(loss) after tax attributable to equity holders of the parent
Profit/(loss) after tax from continuing operations
Profit from discontinued operations after tax
1 The Basis of preparation, in note B1, explains the amendments to the segmental basis of preparation of AOP, the composition of the segments and the segmental treatment
Profit/(loss) after tax attributable to equity holders of the parent
of businesses classified as discontinued operations
2 Included within total revenue prior to consolidation adjustments are the following amounts derived from inter-segment trading: Emerging Markets: £73 million (2016: £75 million);
1 The Basis of preparation, in note B1, explains the amendments to the segmental basis of preparation of AOP, the composition of the segments and the segmental treatment
Emerging
4,225
Markets
(391)
3,834
4,225
4,804
(391)
256
3,834
6
4,804
690
256
117
6
9,707
690
117
(5,417)
9,707
315
(5,102)
(5,417)
(1,770)
315
(42)
(5,102)
(42)
(1,770)
(75)
(42)
(526)
(42)
–
(75)
(1,302)
(526)
(81)
–
(8,940)
(1,302)
10
(81)
–
(8,940)
777
10
(214)
–
(27)
777
536
(214)
58
(27)
594
536
–
58
594
594
–
594
–
Nedbank
–
–
–
–
–
4,382
–
283
–
1,101
4,382
24
283
5,790
1,101
24
–
5,790
–
–
–
–
–
(193)
–
–
–
(2,731)
(193)
(9)
–
–
(2,731)
(1,845)
(9)
–
–
(4,778)
(1,845)
(49)
–
–
(4,778)
963
(49)
(244)
–
(351)
963
368
(244)
7
(351)
375
368
–
7
375
375
–
375
Nedbank: £11 million (2016: £9 million); Old Mutual Wealth: £5 million (2016: £2 million) and Institutional Asset Management: £2 million (2016: £6 million).
of businesses classified as discontinued operations
D9
I2(a)
C1(c)
I2(a)
D1(a)
C1(c)
D6
D7
D8
D6
D7
D9
D8
D1(a)
C1(a)
A4.1
C1(a)
A4.1
2 Included within total revenue prior to consolidation adjustments are the following amounts derived from inter-segment trading: Emerging Markets: £73 million (2016: £75 million);
Nedbank: £11 million (2016: £9 million); Old Mutual Wealth: £5 million (2016: £2 million) and Institutional Asset Management: £2 million (2016: £6 million).
172
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual
Wealth
Old Mutual
148
Wealth
(87)
61
148
4,425
(87)
–
61
–
4,425
1,276
–
(2)
–
5,760
1,276
(2)
(155)
5,760
139
(16)
(155)
(4,308)
139
–
(16)
–
(4,308)
–
–
(295)
–
–
–
(712)
(295)
(66)
–
(5,397)
(712)
–
(66)
–
(5,397)
363
–
(44)
–
–
363
319
(44)
(220)
–
99
319
–
(220)
99
99
–
99
Institutional
Asset
Management
Institutional
Asset
–
Management
–
–
–
6
–
–
–
–
6
207
–
–
–
213
207
–
–
213
–
–
–
–
–
–
–
(6)
–
–
–
(5)
(6)
–
–
(147)
(5)
–
–
(158)
(147)
9
–
–
(158)
64
9
(18)
–
(20)
64
26
(18)
(14)
(20)
12
26
–
(14)
12
12
–
12
plc Head
Office1
Consolidation
adjustments1
plc Head
–
Office1
–
–
–
6
–
–
–
–
6
–
–
–
–
6
–
–
–
6
–
–
–
–
–
–
–
(66)
–
–
–
–
(66)
–
–
(70)
–
–
–
(136)
(70)
–
–
–
(136)
(130)
–
43
–
–
(130)
(87)
43
(84)
–
(171)
(87)
–
(84)
(171)
(171)
–
(171)
Consolidation
–
adjustments1
–
–
–
1,390
–
–
–
–
1,390
(12)
–
(17)
–
1,361
(12)
(17)
–
1,361
–
–
–
–
–
–
–
–
–
–
–
(70)
–
(1,309)
–
18
(70)
–
(1,309)
(1,361)
18
–
–
–
(1,361)
–
–
–
–
–
–
–
–
(24)
–
(24)
–
–
(24)
(24)
(24)
–
(24)
Adjusted
operating
profit
Adjusted
operating
4,373
profit
(478)
3,895
4,373
10,631
(478)
4,638
3,895
289
10,631
3,262
4,638
122
289
22,837
3,262
122
(5,572)
22,837
454
(5,118)
(5,572)
(6,078)
454
(235)
(5,118)
(114)
(6,078)
(2,806)
(235)
(905)
(114)
(1,309)
(2,806)
(4,058)
(905)
(147)
(1,309)
(20,770)
(4,058)
(30)
(147)
–
(20,770)
2,037
(30)
(477)
–
(398)
2,037
1,162
(477)
(277)
(398)
885
1,162
–
(277)
885
885
–
885
Adjusting
items
(note C1)
Adjusting
items
–
(note C1)
–
–
–
46
–
–
–
–
46
(12)
–
–
–
34
(12)
–
–
34
–
–
–
–
–
–
–
(126)
–
–
–
20
(126)
–
–
(491)
20
147
–
(450)
(491)
(6)
147
197
(450)
(225)
(6)
(101)
197
49
(225)
(277)
(101)
277
49
–
(277)
–
277
–
–
–
–
Non-core
operations1
Discontinued
operations1
Non-core
–
operations1
–
–
–
(26)
–
–
–
–
(26)
–
–
–
–
(26)
–
–
67
(26)
–
67
67
–
–
–
67
–
–
–
–
–
–
–
–
(15)
–
–
–
52
(15)
–
–
–
52
26
–
(2)
–
–
26
24
(2)
–
–
24
24
–
–
24
24
–
24
Discontinued
(148)
operations1
87
(61)
(148)
(5,174)
87
(4,382)
(61)
(283)
(5,174)
(2,577)
(4,382)
(12)
(283)
(12,489)
(2,577)
(12)
155
(12,489)
(139)
16
155
4,308
(139)
193
16
6
4,308
2,731
193
361
6
644
2,731
2,988
361
–
644
11,247
2,988
45
–
(24)
11,247
(1,221)
45
340
(24)
–
(1,221)
(881)
340
–
–
(881)
(881)
881
–
–
(881)
881
–
£m
IFRS
Income
£m
statement
IFRS
Income
4,225
statement
(391)
3,834
4,225
5,477
(391)
256
3,834
6
5,477
673
256
110
6
10,356
673
110
(5,350)
10,356
315
(5,035)
(5,350)
(1,770)
315
(42)
(5,035)
(234)
(1,770)
(75)
(42)
(524)
(234)
(665)
(75)
(1,576)
(524)
–
(665)
(9,921)
(1,576)
9
–
173
(9,921)
617
9
(240)
173
(349)
617
28
(240)
–
(349)
28
28
881
–
909
28
881
909
173
167
167
i
i
F
n
a
n
c
F
a
n
s
a
n
c
a
s
i
l
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Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
B: Segment information continued
B3: Adjusted operating profit statement – segment information for the year ended
B: Segment information continued
31 December 2016 (Restated)1
B3: Adjusted operating profit statement – segment information for the year ended
31 December 2016 (Restated)1
Notes
Emerging
Markets
Nedbank
B2
Notes
B2
D2
D3
D4
D2
D5
D3
D4
D5
Revenue
Gross earned premiums
Outward reinsurance
Revenue
Net earned premiums
Gross earned premiums
Investment return (non-banking)
Outward reinsurance
Banking interest and similar income
Net earned premiums
Banking trading, investment and similar income
Investment return (non-banking)
Fee and commission income, and income from service activities
Banking interest and similar income
Other income
Banking trading, investment and similar income
Total revenue
Fee and commission income, and income from service activities
Expenses
Other income
Claims and benefits (including change in insurance contract provisions)
Total revenue
Reinsurance recoveries
Expenses
Net claims and benefits incurred
Claims and benefits (including change in insurance contract provisions)
Change in investment contract liabilities
Reinsurance recoveries
Credit impairment charges
Net claims and benefits incurred
Finance costs
Change in investment contract liabilities
Banking interest payable and similar expenses
Credit impairment charges
Fee and commission expenses, and other acquisition costs
Finance costs
Change in third-party interest in consolidated funds
Banking interest payable and similar expenses
Other operating and administrative expenses
Fee and commission expenses, and other acquisition costs
Income tax attributable to policyholder returns
Change in third-party interest in consolidated funds
Total expenses
Other operating and administrative expenses
Share of associated undertakings' and joint ventures' profits/(losses) after tax
Income tax attributable to policyholder returns
Loss on disposal of subsidiaries, associated undertakings and strategic investments
Total expenses
Adjusted operating profit/(loss) before tax and non-controlling interests
Share of associated undertakings' and joint ventures' profits/(losses) after tax
Income tax expense
Loss on disposal of subsidiaries, associated undertakings and strategic investments
Non-controlling interests
Adjusted operating profit/(loss) before tax and non-controlling interests
Adjusted operating profit/(loss) after tax and non-controlling interests
Income tax expense
Adjusting items after tax and non-controlling interests
Non-controlling interests
Profit/(loss) after tax from continuing operations
Adjusted operating profit/(loss) after tax and non-controlling interests
Profit from discontinued operations after tax
Adjusting items after tax and non-controlling interests
Profit/(loss) after tax attributable to equity holders of the parent
Profit/(loss) after tax from continuing operations
Profit from discontinued operations after tax
1 The Basis of preparation, in note B1, explains the amendments to the segmental basis of preparation of AOP, the composition of the segments and the segmental treatment of
Profit/(loss) after tax attributable to equity holders of the parent
businesses classified as discontinued operations.
Emerging
3,726
Markets
(314)
3,412
3,726
1,834
(314)
229
3,412
14
1,834
588
229
64
14
6,141
588
64
(3,507)
6,141
222
(3,285)
(3,507)
(545)
222
(44)
(3,285)
(33)
(545)
(90)
(44)
(430)
(33)
–
(90)
(1,035)
(430)
(50)
–
(5,512)
(1,035)
10
(50)
–
(5,512)
639
10
(170)
–
(17)
639
452
(170)
(100)
(17)
352
452
–
(100)
352
352
–
352
–
Nedbank
–
–
–
–
–
3,677
–
241
–
922
3,677
24
241
4,864
922
24
–
4,864
–
–
–
–
–
(228)
–
–
–
(2,311)
(228)
(8)
–
–
(2,311)
(1,512)
(8)
–
–
(4,059)
(1,512)
(6)
–
–
(4,059)
799
(6)
(199)
–
(288)
799
312
(199)
(30)
(288)
282
312
–
(30)
282
282
–
282
D9
I2(a)
C1(c)
I2(a)
D1(a)
C1(c)
D6
D7
D8
D6
D7
D9
D8
D1(a)
C1(a)
A4.1
C1(a)
A4.1
1 The Basis of preparation, in note B1, explains the amendments to the segmental basis of preparation of AOP, the composition of the segments and the segmental treatment of
businesses classified as discontinued operations.
174
168
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual
Wealth
Old Mutual
142
Wealth
(84)
58
142
5,827
(84)
–
58
–
5,827
1,168
–
11
–
7,064
1,168
11
(199)
7,064
169
(30)
(199)
(5,671)
169
–
(30)
–
(5,671)
–
–
(392)
–
–
–
(617)
(392)
(94)
–
(6,804)
(617)
–
(94)
–
(6,804)
260
–
(47)
–
–
260
213
(47)
(217)
–
(4)
213
–
(217)
(4)
(4)
–
(4)
Institutional
Asset
Management
Institutional
Asset
–
Management
–
–
–
–
–
–
–
–
–
500
–
1
–
501
500
1
–
501
–
–
–
–
–
–
–
(6)
–
–
–
(9)
(6)
–
–
(356)
(9)
–
–
(371)
(356)
11
–
–
(371)
141
11
(36)
–
(36)
141
69
(36)
3
(36)
72
69
–
3
72
72
–
72
plc
Head
Office1
plc
Head
–
Office1
–
–
–
34
–
–
–
–
34
–
–
–
–
34
–
–
–
34
–
–
–
–
–
–
–
(88)
–
–
–
–
(88)
–
–
(118)
–
–
–
(206)
(118)
–
–
–
(206)
(172)
–
54
–
–
(172)
(118)
54
(9)
–
(127)
(118)
–
(9)
(127)
(127)
–
(127)
Consolidation
adjustments1
Consolidation
–
adjustments1
–
–
–
712
–
–
–
–
712
(26)
–
5
–
691
(26)
5
–
691
–
–
–
–
–
–
–
–
–
–
–
(19)
–
(691)
–
19
(19)
–
(691)
(691)
19
–
–
–
(691)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Adjusted
operating
profit
Adjusted
operating
3,868
profit
(398)
3,470
3,868
8,407
(398)
3,906
3,470
255
8,407
3,152
3,906
105
255
19,295
3,152
105
(3,706)
19,295
391
(3,315)
(3,706)
(6,216)
391
(272)
(3,315)
(127)
(6,216)
(2,401)
(272)
(858)
(127)
(691)
(2,401)
(3,619)
(858)
(144)
(691)
(17,643)
(3,619)
15
(144)
–
(17,643)
1,667
15
(398)
–
(341)
1,667
928
(398)
(353)
(341)
575
928
–
(353)
575
575
–
575
Adjusting items
(note C1)
Adjusting items
–
(note C1)
–
–
–
(69)
–
–
–
–
(69)
(17)
–
–
–
(86)
(17)
–
–
(86)
–
–
–
–
–
–
–
(7)
–
–
–
24
(7)
–
–
(407)
24
144
–
(246)
(407)
–
144
19
(246)
(313)
–
(106)
19
66
(313)
(353)
(106)
353
66
–
(353)
–
353
–
–
–
–
Non-core
operations1
Discontinued
operations1
Non-core
–
operations1
–
–
–
(13)
–
–
–
–
(13)
–
–
–
–
(13)
–
–
24
(13)
–
24
24
–
–
–
24
–
–
–
–
–
–
–
–
(16)
–
–
–
8
(16)
–
–
–
8
(5)
–
–
–
–
(5)
(5)
–
–
–
(5)
(5)
–
–
(5)
(5)
–
(5)
Discontinued
(142)
operations1
84
(58)
(142)
(6,446)
84
(3,677)
(58)
(241)
(6,446)
(2,570)
(3,677)
(42)
(241)
(13,034)
(2,570)
(42)
199
(13,034)
(169)
30
199
5,671
(169)
228
30
6
5,671
2,311
228
409
6
574
2,311
2,773
409
–
574
12,002
2,773
(5)
–
(6)
12,002
(1,043)
(5)
362
(6)
–
(1,043)
(681)
362
–
–
(681)
(681)
681
–
–
(681)
681
–
£m
IFRS
Income
£m
statement
IFRS
Income
3,726
statement
(314)
3,412
3,726
1,879
(314)
229
3,412
14
1,879
565
229
63
14
6,162
565
63
(3,483)
6,162
222
(3,261)
(3,483)
(545)
222
(44)
(3,261)
(128)
(545)
(90)
(44)
(425)
(128)
(117)
(90)
(1,269)
(425)
–
(117)
(5,879)
(1,269)
10
–
13
(5,879)
306
10
(142)
13
(275)
306
(111)
(142)
–
(275)
(111)
(111)
681
–
570
(111)
681
570
i
i
F
n
a
n
c
F
a
n
s
a
n
c
a
s
i
l
l
i
175
169
169
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
B: Segment information continued
B4: Consolidated statement of financial position – segment information at 31 December 2017
B: Segment information continued
B4: Consolidated statement of financial position – segment information at 31 December 2017
Notes
Emerging
Markets2
Nedbank
–
Nedbank
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
58,492
–
–
–
58,492
58,492
–
–
58,492
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
53,216
–
–
–
53,216
53,216
5,276
–
53,216
2,679
5,276
2,597
2,220
2,679
377
2,597
2,220
5,276
377
5,276
Assets
Goodwill and other intangible assets
Mandatory reserve deposits with central banks
Assets
Property, plant and equipment
Goodwill and other intangible assets
Investment property
Mandatory reserve deposits with central banks
Deferred tax assets
Property, plant and equipment
Investments in associated undertakings and joint ventures
Investment property
Deferred acquisition costs
Deferred tax assets
Reinsurers' share of policyholder liabilities
Investments in associated undertakings and joint ventures
Loans and advances
Deferred acquisition costs
Investments and securities
Reinsurers' share of policyholder liabilities
Current tax receivable
Loans and advances
Trade, other receivables and other assets
Investments and securities
Derivative financial instruments
Current tax receivable
Cash and cash equivalents
Trade, other receivables and other assets
Assets held for sale and distribution
Derivative financial instruments
Inter-segment funding – assets
Cash and cash equivalents
Total assets
Assets held for sale and distribution
Liabilities
Inter-segment funding – assets
Life insurance contract liabilities
Total assets
Investment contract liabilities
Liabilities
Property & casualty liabilities
Life insurance contract liabilities
Third-party interests in consolidated funds
Investment contract liabilities
Borrowed funds
Property & casualty liabilities
Provisions and accruals
Third-party interests in consolidated funds
Deferred revenue
Borrowed funds
Deferred tax liabilities
Provisions and accruals
Current tax payable
Deferred revenue
Trade, other payables and other liabilities
Deferred tax liabilities
Amounts owed to bank depositors
Current tax payable
Derivative financial instruments
Trade, other payables and other liabilities
Liabilities held for sale and distribution
Amounts owed to bank depositors
Inter-segment funding – liabilities
Derivative financial instruments
Total liabilities
Liabilities held for sale and distribution
Net assets1
Inter-segment funding – liabilities
Equity
Total liabilities
Equity attributable to equity holders of the parent
Net assets1
Non-controlling interests
Equity
Ordinary shares
Equity attributable to equity holders of the parent
Preferred securities
Non-controlling interests
Ordinary shares
Total equity
Preferred securities
H1
Notes
H2(a)
H1
H2(b)
H7(a)
H2(a)
I2(a)
H2(b)
H3
H7(a)
G6
I2(a)
G1
H3
G2
G6
G1
H4
G2
G4
H4
A4.2
G4
A4.2
G6
G6
G6
G6
G6
G7
G6
H5
H6
G7
H7(b)
H5
H6
H8
H7(b)
G8
G4
H8
A4.2
G8
G4
A4.2
H10(b)(i)
H10(b)(ii)
H10(b)(i)
H10(b)(ii)
Emerging
397
Markets2
6
482
397
1,904
6
64
482
107
1,904
185
64
439
107
1,282
185
38,944
439
17
1,282
1,159
38,944
242
17
1,511
1,159
43
242
–
1,511
46,782
43
–
9,509
46,782
28,928
494
9,509
–
28,928
688
494
109
–
83
688
304
109
91
83
2,546
304
742
91
298
2,546
–
742
–
298
43,792
–
2,990
–
43,792
2,768
2,990
222
222
2,768
–
222
222
2,990
–
of businesses classified as discontinued operations
1 The Basis of preparation, in note B1, explains the amendments to the segmental basis of preparation, the composition of the segments and the segmental treatment
Total equity
2 The net assets of Emerging Markets exclude £269 million (2016: £258 million) of investments held by policyholder funds in Group equity and debt instruments.
1 The Basis of preparation, in note B1, explains the amendments to the segmental basis of preparation, the composition of the segments and the segmental treatment
These investments are in the Company's ordinary shares and in the subordinated liabilities and preferred securities issued by Nedbank.
of businesses classified as discontinued operations
2,990
2 The net assets of Emerging Markets exclude £269 million (2016: £258 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.
176
170
170
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual
Wealth
plc
Head Office1
Non-core
operation
Consolidation
adjustments1
Old Mutual
–
Wealth
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
63,835
–
–
–
63,835
63,835
–
–
63,835
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
61,235
–
782
–
62,017
61,235
1,818
782
62,017
1,818
1,818
–
–
1,818
–
–
–
1,818
–
plc
–
Head Office1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12
–
45
–
99
12
34
45
542
99
–
34
782
542
1,514
–
782
–
1,514
–
–
–
–
–
461
–
19
–
–
461
–
19
11
–
98
–
–
11
–
98
–
–
23
–
612
–
902
23
612
902
902
–
–
902
–
–
–
902
–
Non-core
–
operation
–
–
–
–
–
1
–
–
–
–
1
–
–
–
–
54
–
1
–
2
54
2
1
72
2
–
2
23
72
155
–
23
11
155
–
–
11
–
–
–
–
14
–
–
–
–
14
–
–
6
–
–
–
–
6
–
–
–
–
31
–
124
–
31
124
124
–
–
124
–
–
–
124
–
Consolidation
–
adjustments1
–
–
–
–
–
–
–
–
–
(1)
–
(187)
–
–
(1)
4,092
(187)
–
–
44
4,092
(33)
–
(289)
44
8,233
(33)
(805)
(289)
11,054
8,233
(805)
–
11,054
(188)
–
–
4,868
(188)
(23)
–
–
4,868
(1)
(23)
–
–
–
(1)
(121)
–
–
–
(30)
(121)
7,517
–
(805)
(30)
11,217
7,517
(163)
(805)
11,217
(163)
(163)
–
–
(163)
–
–
–
(163)
–
£m
Total
£m
397
Total
6
482
397
1,904
6
65
482
107
1,904
184
65
252
107
1,282
184
43,102
252
63
1,282
1,304
43,102
245
63
1,836
1,304
130,603
245
–
1,836
181,832
130,603
–
9,520
181,832
28,740
494
9,520
4,868
28,740
1,126
494
142
4,868
82
1,126
304
142
102
82
2,529
304
742
102
268
2,529
121,968
742
–
268
170,885
121,968
10,947
–
170,885
8,128
10,947
2,819
2,442
8,128
377
2,819
2,442
10,947
377
1,818
902
124
(163)
10,947
177
171
171
i
i
F
n
a
n
c
F
a
n
s
a
n
c
a
s
i
l
l
i
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
B: Segment information continued
B4: Consolidated statement of financial position – segment information
B: Segment information continued
at 31 December 2016 (Restated)1
B4: Consolidated statement of financial position – segment information
at 31 December 2016 (Restated)1
Assets
Goodwill and other intangible assets
Mandatory reserve deposits with central banks
Assets
Property, plant and equipment
Goodwill and other intangible assets
Investment property
Mandatory reserve deposits with central banks
Deferred tax assets
Property, plant and equipment
Investments in associated undertakings and joint ventures
Investment property
Deferred acquisition costs
Deferred tax assets
Reinsurers' share of policyholder liabilities
Investments in associated undertakings and joint ventures
Loans and advances
Deferred acquisition costs
Investments and securities
Reinsurers' share of policyholder liabilities
Current tax receivable
Loans and advances
Trade, other receivables and other assets
Investments and securities
Derivative financial instruments
Current tax receivable
Cash and cash equivalents
Trade, other receivables and other assets
Assets held for sale and distribution
Derivative financial instruments
Inter-segment funding – assets
Cash and cash equivalents
Total assets
Assets held for sale and distribution
Liabilities
Inter-segment funding – assets
Life insurance contract liabilities
Total assets
Investment contract liabilities
Liabilities
Property & casualty liabilities
Life insurance contract liabilities
Third-party interests in consolidated funds
Investment contract liabilities
Borrowed funds
Property & casualty liabilities
Provisions and accruals
Third-party interests in consolidated funds
Deferred revenue
Borrowed funds
Deferred tax liabilities
Provisions and accruals
Current tax payable
Deferred revenue
Trade, other payables and other liabilities
Deferred tax liabilities
Amounts owed to bank depositors
Current tax payable
Derivative financial instruments
Trade, other payables and other liabilities
Liabilities held for sale and distribution
Amounts owed to bank depositors
Inter-segment funding – liabilities
Derivative financial instruments
Total liabilities
Liabilities held for sale and distribution
Net assets
Inter-segment funding – liabilities
Equity
Total liabilities
Equity attributable to equity holders of the parent
Net assets
Non-controlling interests
Equity
Ordinary shares
Equity attributable to equity holders of the parent
Preferred securities
Non-controlling interests
Ordinary shares
Total equity
Preferred securities
Notes
H1
Notes
H2(a)
H1
H2(b)
H7(a)
H2(a)
I2(a)
H2(b)
H3
H7(a)
G6
I2(a)
G1
H3
G2
G6
G1
H4
G2
G4
H4
A4.2
G4
A4.2
G6
G6
G6
G6
G6
G7
G6
H5
H6
G7
H7(b)
H5
H6
H8
H7(b)
G8
G4
H8
A4.2
G8
G4
A4.2
H10(b)(i)
H10(b)(ii)
H10(b)(i)
H10(b)(ii)
Emerging
Markets
Emerging
461
Markets
8
345
461
1,696
8
57
345
143
1,696
179
57
552
143
1,210
179
35,516
552
20
1,210
885
35,516
228
20
1,876
885
119
228
–
1,876
43,295
119
–
9,310
43,295
25,720
482
9,310
–
25,720
694
482
118
–
73
694
203
118
100
73
2,953
203
643
100
295
2,953
1
643
4
295
40,596
1
2,699
4
40,596
2,484
2,699
215
215
2,484
–
215
215
2,699
–
Nedbank
576
Nedbank
1,103
529
576
1
1,103
29
529
388
1
–
29
6
388
41,703
–
8,844
6
33
41,703
966
8,844
1,040
33
1,556
966
17
1,040
–
1,556
56,791
17
–
172
56,791
905
–
172
–
905
3,072
–
–
–
1
3,072
39
–
13
1
2,081
39
44,915
13
784
2,081
–
44,915
–
784
51,982
–
4,809
–
51,982
2,476
4,809
2,333
1,992
2,476
341
2,333
1,992
4,809
341
1 The Basis of preparation, in note B1, explains the amendments to the segmental basis of preparation, the composition of the segments and the segmental treatment of businesses
4,809
Total equity
classified as discontinued operations.
2,699
1 The Basis of preparation, in note B1, explains the amendments to the segmental basis of preparation, the composition of the segments and the segmental treatment of businesses
classified as discontinued operations.
178
172
172
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual
Wealth
Old Mutual
1,434
Wealth
–
18
1,434
–
–
8
18
1
–
580
8
2,863
1
220
580
48,966
2,863
21
220
568
48,966
–
21
730
568
6,475
–
–
730
61,884
6,475
–
416
61,884
51,281
–
416
–
51,281
–
–
29
–
220
–
193
29
21
220
806
193
–
21
1
806
6,264
–
785
1
60,016
6,264
1,868
785
60,016
1,868
1,868
–
–
1,868
–
–
–
1,868
–
Institutional
Asset
Management
Institutional
Asset
–
Management
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,959
–
–
–
1,959
1,959
–
–
1,959
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
781
–
85
–
866
781
1,093
85
866
527
1,093
566
566
527
–
566
566
1,093
–
Plc
Head Office1
Non-core
operations
Consolidation
adjustments1
Plc
–
Head Office1
–
–
–
–
–
–
–
10
–
–
–
–
10
–
–
309
–
–
–
157
309
31
–
611
157
–
31
874
611
1,992
–
874
–
1,992
–
–
–
–
–
1,017
–
6
–
–
1,017
5
6
10
–
226
5
–
10
39
226
–
–
58
39
1,361
–
631
58
1,361
631
631
–
–
631
–
–
–
631
–
Non-core
–
operations
–
–
–
–
–
2
–
–
–
–
2
–
–
–
–
53
–
–
–
3
53
27
–
22
3
–
27
58
22
165
–
58
84
165
–
–
84
–
–
–
–
7
–
–
–
–
7
–
–
6
–
–
–
–
6
–
–
–
–
97
–
68
–
97
68
68
–
–
68
–
–
–
68
–
Consolidation
–
adjustments1
–
–
–
–
–
–
–
–
–
(3)
–
(306)
–
(25)
(3)
6,700
(306)
–
(25)
(163)
6,700
14
–
52
(163)
–
14
(932)
52
5,337
–
(932)
–
5,337
(307)
–
–
7,981
(307)
(89)
–
–
7,981
(4)
(89)
–
–
–
(4)
(960)
–
(249)
–
42
(960)
–
(249)
(932)
42
5,482
–
(145)
(932)
5,482
(145)
(145)
–
–
(145)
–
–
–
(145)
–
£m
£m
Total
2,471
Total
1,111
892
2,471
1,697
1,111
96
892
542
1,697
756
96
3,115
542
43,108
756
100,388
3,115
74
43,108
2,416
100,388
1,340
74
4,847
2,416
8,570
1,340
–
4,847
171,423
8,570
–
9,982
171,423
77,599
482
9,982
7,981
77,599
4,694
482
160
7,981
290
4,694
440
160
144
290
5,112
440
45,309
144
1,161
5,112
7,046
45,309
–
1,161
160,400
7,046
11,023
–
160,400
7,909
11,023
3,114
2,773
7,909
341
3,114
2,773
11,023
341
1,868
1,093
631
68
(145)
11,023
179
173
173
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Notes
consolidated investment funds
consolidated investment funds
C: Other key performance information
C1: Operating profit adjusting items
C: Other key performance information
(a) Summary of adjusting items for determination of adjusted operating profit (AOP)
C1: Operating profit adjusting items
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
(a) Summary of adjusting items for determination of adjusted operating profit (AOP)
and after tax.
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
£m
and after tax.
Year ended
31 December
£m
2016
Year ended
31 December
(278)
2016
19
(26)
(278)
19
(43)
(26)
17
(20)
(43)
(24)
17
–
(20)
–
(24)
(102)
–
–
–
(457)
(102)
38
–
66
(457)
(353)
38
66
(353)
(Expense)/income
Goodwill impairment and impact of acquisition accounting
Net profit on disposal of subsidiaries, associated undertakings and strategic investments
(Expense)/income
Short-term fluctuations in investment return
Goodwill impairment and impact of acquisition accounting
Investment return adjustment for Group equity and debt instruments held in policyholder and
Net profit on disposal of subsidiaries, associated undertakings and strategic investments
Short-term fluctuations in investment return
Dividends declared to holders of perpetual preferred callable securities
Investment return adjustment for Group equity and debt instruments held in policyholder and
Institutional Asset Management equity plans
Credit-related fair value losses on Group debt instruments
Dividends declared to holders of perpetual preferred callable securities
Managed separation and business standalone costs
Institutional Asset Management equity plans
Income/(expenses) from resolution of plc Head Office pre-existing items
Credit-related fair value losses on Group debt instruments
Old Mutual Wealth business transformation costs
Managed separation and business standalone costs
Voluntary customer remediation provision
Income/(expenses) from resolution of plc Head Office pre-existing items
Total adjusting items before tax and non-controlling interests
Old Mutual Wealth business transformation costs
Tax on adjusting items
Voluntary customer remediation provision
Non-controlling interest on adjusting items
Total adjusting items before tax and non-controlling interests
Total adjusting items after tax and non-controlling interests
Tax on adjusting items
Non-controlling interest on adjusting items
(b) Goodwill impairment and impact of acquisition accounting
Total adjusting items after tax and non-controlling interests
The application of acquisition accounting results in deferred acquisition costs and deferred revenue existing in the acquired entity at the
point of acquisition that are not recognised under IFRS. These are reversed on acquisition in the consolidated statement of financial
(b) Goodwill impairment and impact of acquisition accounting
position and are replaced by goodwill and other intangible assets, including the value of the acquired present value of in-force business
The application of acquisition accounting results in deferred acquisition costs and deferred revenue existing in the acquired entity at the
(acquired PVIF). In determining AOP, the Group recognises deferred revenue, acquisition costs and deferred revenue in relation to
point of acquisition that are not recognised under IFRS. These are reversed on acquisition in the consolidated statement of financial
businesses sold by acquired businesses prior to the acquisition date. The Group excludes the impairment of goodwill, the impairment
position and are replaced by goodwill and other intangible assets, including the value of the acquired present value of in-force business
of investments in associated undertakings, the amortisation and impairment of acquired other intangible assets, acquired PVIF and the
(acquired PVIF). In determining AOP, the Group recognises deferred revenue, acquisition costs and deferred revenue in relation to
movements in certain acquisition date provisions from the determination of AOP. Costs incurred on completed acquisitions are also
businesses sold by acquired businesses prior to the acquisition date. The Group excludes the impairment of goodwill, the impairment
excluded from AOP.
of investments in associated undertakings, the amortisation and impairment of acquired other intangible assets, acquired PVIF and the
movements in certain acquisition date provisions from the determination of AOP. Costs incurred on completed acquisitions are also
Certain deferred consideration recognised as compensation expenses under accounting rules is excluded from the determination of AOP
excluded from AOP.
where these payments meet the criteria that suggest they are capital in nature.
Certain deferred consideration recognised as compensation expenses under accounting rules is excluded from the determination of AOP
The net effect of these adjustments to determine AOP are summarised below:
where these payments meet the criteria that suggest they are capital in nature.
Year ended
31 December
2017
Year ended
31 December
(186)
2017
197
125
(186)
197
(79)
125
2
(33)
(79)
(128)
2
(100)
(33)
(27)
(128)
(74)
(100)
(69)
(27)
(372)
(74)
46
(69)
49
(372)
(277)
46
49
(277)
C1(b)
Notes
C1(c)
C1(d)
C1(b)
C1(c)
C1(e)
C1(d)
C1(f)
C1(g)
C1(e)
C1(h)
C1(f)
C1(i)
C1(g)
C1(j)
C1(h)
C1(k)
C1(i)
C1(l)
C1(j)
C1(k)
D1(d)
C1(l)
D1(d)
Year ended 31 December 2017
The net effect of these adjustments to determine AOP are summarised below:
Continuing Operations
Year ended 31 December 2017
and revenue
Impairment of goodwill and other intangible assets
Amortisation of acquired PVIF
Amortisation of acquired deferred costs
Impairment of goodwill and other intangible assets
Amortisation of acquired PVIF
Amortisation of other acquired intangible assets
Amortisation of acquired deferred costs
Change in acquisition date provisions
and revenue
Acquisition costs
Amortisation of other acquired intangible assets
Deferred consideration and other acquisition
Change in acquisition date provisions
Acquisition costs
Deferred consideration and other acquisition
date provisions
date provisions
plc
Emerging
Continuing Operations
Markets
Head Office
–
(85)
plc
Emerging
–
(2)
Head Office
Markets
–
(85)
–
–
–
(2)
–
(13)
–
1
–
–
–
–
–
(13)
–
1
–
11
–
–
–
(88)
–
11
–
(88)
180
174
174
Discontinued operations
Institutional
Asset
Discontinued operations
Management
Institutional
–
Asset
–
Management
–
–
–
(2)
–
–
–
(2)
–
–
–
(2)
–
(2)
Old Mutual
Wealth
(1)
Old Mutual
(37)
Wealth
(1)
8
(37)
(39)
(1)
8
(12)
(39)
(1)
(21)
(12)
(103)
(21)
(103)
Nedbank
–
–
Nedbank
–
–
–
(1)
–
–
–
(1)
–
8
–
7
8
7
£m
£m
Total
(86)
(39)
Total
(86)
8
(39)
(55)
–
8
(12)
(55)
–
(2)
(12)
(186)
(2)
(186)
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Year ended 31 December 2016
Impairment of goodwill and other intangible assets
Impairment of investment in associated
undertakings
Amortisation of acquired PVIF
Amortisation of acquired deferred costs
and revenue
Amortisation of other acquired intangible assets
Acquisition costs
Deferred consideration and other acquisition
date provisions
Continuing Operations
Emerging
Markets
(64)
plc
Head Office
–
Nedbank
–
Discontinued operations
Institutional
Asset
Management
–
Old Mutual
Wealth
(46)
–
(3)
–
(14)
–
6
(75)
–
–
–
–
–
(7)
(7)
(50)
–
–
–
–
–
(50)
–
(45)
7
(39)
(17)
–
(140)
–
–
–
(2)
(4)
–
(6)
£m
Total
(110)
(50)
(48)
7
(55)
(21)
(1)
(278)
The impairment of goodwill and other intangible assets and impairment of investment in associated undertakings relate to:
Emerging Markets
Of the goodwill impairment charge of £85 million (2016: £64 million) recognised during the year, £69 million (2016: £64 million) relates
to the UAP (East Africa cash generating unit) and £16 million (2016: £nil) relates to the Aiva business in Uruguay. Refer to note H1 for
more information.
Old Mutual Wealth
On 9 January 2017, the Group completed the disposal of Old Mutual Wealth Italy. During the year ended 31 December 2016, a goodwill
impairment of £46 million was recognised being the excess of the net asset value of the business compared with the expected net
proceeds. Refer to note A2 for further information.
Nedbank
For the year ended 31 December 2016 an impairment loss of £50 million was recognised in relation to Nedbank's investment in
Ecobank Transnational Incorporated (ETI), an associated undertaking. No further impairment was recognised during the year ended
31 December 2017.
(c) Net profit on disposal of subsidiaries, associated undertakings and strategic investments
The net profit on disposal of subsidiaries, associated undertakings and strategic investments is analysed below:
Continuing operations
Emerging Markets
plc Head Office
Discontinued operations
Nedbank
Old Mutual Wealth
Institutional Asset Management
Total net profit on disposal of subsidiaries, associated undertakings
and strategic investments
Year ended
31 December
2017
Notes
£m
Year ended
31 December
2016
81
92
173
–
24
–
197
3
10
13
(12)
–
18
19
181
175
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
C: Other key performance information continued
C1: Operating profit adjusting items continued
C: Other key performance information continued
(c) Net profit on disposal of subsidiaries, associated undertakings and strategic investments continued
C1: Operating profit adjusting items continued
Emerging Markets
(c) Net profit on disposal of subsidiaries, associated undertakings and strategic investments continued
Current year transactions
Emerging Markets
Sale of Kotak Mahindra Old Mutual Life Insurance Limited (Kotak)
Current year transactions
On 13 October 2017, the Emerging Markets completed the sale of its 26% stake in Kotak Mahindra Old Mutual Life Insurance Limited
(Kotak) to its joint venture partner Kotak Mahindra Bank Limited. A profit on disposal of £81 million was recognised on this transaction.
Sale of Kotak Mahindra Old Mutual Life Insurance Limited (Kotak)
On 13 October 2017, the Emerging Markets completed the sale of its 26% stake in Kotak Mahindra Old Mutual Life Insurance Limited
Refer to note A2 for more information.
(Kotak) to its joint venture partner Kotak Mahindra Bank Limited. A profit on disposal of £81 million was recognised on this transaction.
Prior year transactions
Refer to note A2 for more information.
During the year ended 31 December 2016, Emerging Markets reduced or disposed of its holdings in a number of associated undertakings
resulting in a net profit on disposal of £3 million.
Prior year transactions
During the year ended 31 December 2016, Emerging Markets reduced or disposed of its holdings in a number of associated undertakings
Plc Head Office
resulting in a net profit on disposal of £3 million.
Current year transactions
Plc Head Office
Sale of OM Asset Management plc (OMAM)
Current year transactions
During the year ended 31 December 2017, plc Head Office sold 58.3 million ordinary shares in OMAM through a number of separate
transactions. As a consequence, the Group's effective interest in OMAM's equity decreased from 51.7% to 0.0008%. A total profit on
Sale of OM Asset Management plc (OMAM)
disposal of £83 million was recognised on these transactions. Refer to note A2 for more information.
During the year ended 31 December 2017, plc Head Office sold 58.3 million ordinary shares in OMAM through a number of separate
transactions. As a consequence, the Group's effective interest in OMAM's equity decreased from 51.7% to 0.0008%. A total profit on
Sale of Kotak Mahindra Old Mutual Life Insurance Limited (Kotak)
disposal of £83 million was recognised on these transactions. Refer to note A2 for more information.
Old Mutual plc recognised a profit of £7 million on the cancellation of the put option it held in relation to 23% of the issued shares of Kotak.
Sale of Kotak Mahindra Old Mutual Life Insurance Limited (Kotak)
Other individually immaterial transactions
Old Mutual plc recognised a profit of £7 million on the cancellation of the put option it held in relation to 23% of the issued shares of Kotak.
During the year ended 31 December 2017, plc Head Office disposed of a number of individually immaterial businesses that resulted
in a total net profit on disposal of £2 million.
Other individually immaterial transactions
During the year ended 31 December 2017, plc Head Office disposed of a number of individually immaterial businesses that resulted
Prior year transactions
in a total net profit on disposal of £2 million.
During the year ended 31 December 2016, plc Head Office received £10 million from Skandia Liv in respect of various matters relating
to the completion of the separation of the Skandia Nordic business from the Group.
Prior year transactions
During the year ended 31 December 2016, plc Head Office received £10 million from Skandia Liv in respect of various matters relating
Nedbank
to the completion of the separation of the Skandia Nordic business from the Group.
Prior year transactions
Nedbank
On 3 October 2016, Nedbank acquired an additional 10.9% stake in Banco Unico. The accounting related to the step up in ownership from
38.3% to 50% plus one share is such that it effectively requires a simultaneous sale of 38.3% followed by an acquisition of the fair value of
Prior year transactions
50% plus one share of the business. Consequently a loss of £11 million, comprising of a loss on step up acquisition of the associate and a
On 3 October 2016, Nedbank acquired an additional 10.9% stake in Banco Unico. The accounting related to the step up in ownership from
release of foreign currency translation reserves, was realised on the transaction.
38.3% to 50% plus one share is such that it effectively requires a simultaneous sale of 38.3% followed by an acquisition of the fair value of
50% plus one share of the business. Consequently a loss of £11 million, comprising of a loss on step up acquisition of the associate and a
In addition, a loss of £1 million was recognised on conversion of preference shares to ordinary shares by ETI. Consistent with usual Group
release of foreign currency translation reserves, was realised on the transaction.
practice, these losses were recognised in profit or loss but excluded from the determination of AOP.
In addition, a loss of £1 million was recognised on conversion of preference shares to ordinary shares by ETI. Consistent with usual Group
Old Mutual Wealth
practice, these losses were recognised in profit or loss but excluded from the determination of AOP.
Current year transactions
Old Mutual Wealth
On 9 January 2017, the Group completed the disposal of Old Mutual Wealth Italy. A profit on disposal of £24 million, was recognised
on the transaction. Refer to note A2 for more information.
Current year transactions
On 9 January 2017, the Group completed the disposal of Old Mutual Wealth Italy. A profit on disposal of £24 million, was recognised
Institutional Asset Management
on the transaction. Refer to note A2 for more information.
Prior year transactions
Institutional Asset Management
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. A profit on disposal of £10 million was recognised reflecting the directors' assessment of the likely final
Prior year transactions
amount recoverable.
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. A profit on disposal of £10 million was recognised reflecting the directors' assessment of the likely final
amount recoverable.
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
During the year ended 31 December 2016, Institutional Asset Management received additional income of £8 million from earn-outs
on affiliates disposed in prior periods.
(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 investment 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.
Long-term investment rates
Emerging Markets
Old Mutual Insure1 (2017 & 2016: Cash: 90%; Equities: 10%)
Old Mutual South Africa – (2017 & 2016: Cash: 75%; Equities: 25%)
Rest of Africa – (2016 & 2017: Cash: 57%; Equities: 43%)
Old Mutual Wealth – (2017: Cash: 94%; Equities: 6%; 2016: Cash: 80%; Equities: 20%)
1 The long-term investment rate for Old Mutual Insure relates solely to its South African property & casualty businesses.
Analysis of short-term fluctuations in investment return
Year ended 31 December 2017
Actual shareholder investment return
Less: Long-term investment return
Short-term fluctuations in investment return
Year ended 31 December 2016 (Re-presented)¹
Actual shareholder investment return
Less: Long-term investment return
Short-term fluctuations in investment return
Year ended
31 December
2017
%
Year ended
31 December
2016
7.4
8.0
8.5
1.0
Emerging
Markets
300
173
127
Old Mutual
Wealth
5
7
(2)
Emerging
Markets
(Re-presented)1
120
147
(27)
Old Mutual
Wealth
7
6
1
7.4
8.0
8.5
1.0
£m
Total
305
180
125
£m
Total
127
153
(26)
1 Long-term investment return on excess assets (2016: £20 million), previously shown within the AOP of plc Head Office is now included in AOP of Emerging Markets for all periods.
As a result, the related actual shareholder investment return (2016: £9 million) and short-term fluctuations in investment return (December 2016: £(11) million) on these excess
assets, previously show within the AOP adjusting items of plc Head Office, are now included in the AOP adjusting items of Emerging Markets for all reporting periods.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
C: Other key performance information continued
C1: Operating profit adjusting items continued
C: Other key performance information continued
(e) Investment return adjustment for Group equity and debt instruments held in policyholder and
C1: Operating profit adjusting items continued
consolidated investment funds
(e) Investment return adjustment for Group equity and debt instruments held in policyholder and
AOP includes investment returns on policyholder investments in Group equity and debt instruments held by the Group's life funds
and consolidated investment funds. These include investments in the Company's ordinary shares and the subordinated liabilities and
consolidated investment funds
ordinary shares issued by the Group. These investment returns are eliminated within the consolidated income statement in arriving at
AOP includes investment returns on policyholder investments in Group equity and debt instruments held by the Group's life funds
profit before tax, but are included in AOP. This ensures consistency of treatment with the measures of the related policyholder liability.
and consolidated investment funds. These include investments in the Company's ordinary shares and the subordinated liabilities and
During the year ended 31 December 2017, the investment return adjustment increased AOP by £79 million (year ended
ordinary shares issued by the Group. These investment returns are eliminated within the consolidated income statement in arriving at
31 December 2016: £43 million increase).
profit before tax, but are included in AOP. This ensures consistency of treatment with the measures of the related policyholder liability.
During the year ended 31 December 2017, the investment return adjustment increased AOP by £79 million (year ended
(f) Dividends declared to holders of perpetual preferred callable securities
31 December 2016: £43 million increase).
Dividends declared to the holders of the Group's perpetual preferred callable securities on an AOP basis were £2 million for the year
ended 31 December 2017 (year ended 31 December 2016: £17 million). For the purpose of determining AOP, these are recognised
(f) Dividends declared to holders of perpetual preferred callable securities
in finance costs on an accrual basis. In accordance with IFRS, the total cash distribution is recognised directly in equity.
Dividends declared to the holders of the Group's perpetual preferred callable securities on an AOP basis were £2 million for the year
ended 31 December 2017 (year ended 31 December 2016: £17 million). For the purpose of determining AOP, these are recognised
(g) Institutional Asset Management equity plans
in finance costs on an accrual basis. In accordance with IFRS, the total cash distribution is recognised directly in equity.
Institutional Asset Management has a number of long-term incentive arrangements with senior employees in its asset
management affiliates.
(g) Institutional Asset Management equity plans
Institutional Asset Management has a number of long-term incentive arrangements with senior employees in its asset
As part of the incentive schemes in the Institutional Asset Management business, the Group has granted put options over the equity of
management affiliates.
certain affiliates to senior affiliate employees. The impact of revaluing these instruments in accordance with IFRS, is excluded from AOP.
At 19 May 2017, the date that OMAM was deconsolidated from the Group, these instruments were revalued, the impact of which was
As part of the incentive schemes in the Institutional Asset Management business, the Group has granted put options over the equity of
a loss of £33 million (year ended 31 December 2016: loss of £20 million). Refer to note A2 and note B1 for more information.
certain affiliates to senior affiliate employees. The impact of revaluing these instruments in accordance with IFRS, is excluded from AOP.
At 19 May 2017, the date that OMAM was deconsolidated from the Group, these instruments were revalued, the impact of which was
(h) Credit-related fair value losses on Group debt instruments
a loss of £33 million (year ended 31 December 2016: loss of £20 million). Refer to note A2 and note B1 for more information.
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
(h) Credit-related fair value losses on Group debt instruments
causing losses to be recognised in the consolidated income statement. In the directors' view, such movements are not reflective of the
The widening of the credit spread on the Group's debt instruments can cause the market value of these instruments to decrease, resulting
underlying performance of the Group and will reverse over time. Therefore they have been excluded from AOP. For the year ended
in gains being recognised in profit or loss. Conversely, if the credit spread narrows the market value of debt instruments will increase
31 December 2017, due to narrowing of credit spreads, a net loss of £26 million was recognised (year ended 31 December 2016:
causing losses to be recognised in the consolidated income statement. In the directors' view, such movements are not reflective of the
net loss of £24 million).
underlying performance of the Group and will reverse over time. Therefore they have been excluded from AOP. For the year ended
31 December 2017, due to narrowing of credit spreads, a net loss of £26 million was recognised (year ended 31 December 2016:
The difference of £102 million between the cash paid to repurchase and redeem £389 million of Tier 2 subordinated 2025 securities and
net loss of £24 million).
£159 million nominal of Tier 2 subordinated 2021 securities and the IFRS book value of this debt at the date of repurchase has been
recognised in profit or loss.
The difference of £102 million between the cash paid to repurchase and redeem £389 million of Tier 2 subordinated 2025 securities and
£159 million nominal of Tier 2 subordinated 2021 securities and the IFRS book value of this debt at the date of repurchase has been
(i) Managed separation and business standalone costs
recognised in profit or loss.
For the year ended 31 December 2017, one-off costs related to the implementation of managed separation recognised in the IFRS
income statement have been excluded from AOP on the basis that they are not representative of the operating activity of the Group.
(i) Managed separation and business standalone costs
These costs relate to the wind-down of the Old Mutual plc Head Office, to capacitate the businesses in readiness to operate as standalone
For the year ended 31 December 2017, one-off costs related to the implementation of managed separation recognised in the IFRS
businesses and the execution of various transactions required to implement the managed separation strategy. They are not expected to
income statement have been excluded from AOP on the basis that they are not representative of the operating activity of the Group.
persist in the long term as they relate to a fundamental restructuring of the Group, which is not operational in nature, rather than more
These costs relate to the wind-down of the Old Mutual plc Head Office, to capacitate the businesses in readiness to operate as standalone
routine reorganisations and project activity which would be seen as part of the usual course of business. The treatment and the disclosure
businesses and the execution of various transactions required to implement the managed separation strategy. They are not expected to
of these costs as an adjusting item is also intended to make these costs more visible to the readers of the financial statements in the
persist in the long term as they relate to a fundamental restructuring of the Group, which is not operational in nature, rather than more
context of publicly disclosed estimates previously given in relation to these items.
routine reorganisations and project activity which would be seen as part of the usual course of business. The treatment and the disclosure
of these costs as an adjusting item is also intended to make these costs more visible to the readers of the financial statements in the
The table below summarises the managed separation and business standalone costs incurred for the year ended 31 December 2017:
context of publicly disclosed estimates previously given in relation to these items.
The table below summarises the managed separation and business standalone costs incurred for the year ended 31 December 2017:
Plc wind-down costs
Business standalone costs
Advisory costs
Plc wind-down costs
Transaction costs
Business standalone costs
Total managed separation and business standalone costs
Advisory costs
Transaction costs
Total managed separation and business standalone costs
184
178
178
£m
Year ended
31 December
£m
2017
Year ended
(31)
31 December
(32)
2017
(34)
(31)
(3)
(32)
(100)
(34)
(3)
(100)
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
AOP in prior periods has not been re-presented for managed separation and business standalone costs. The table below summarises the
equivalent costs incurred during the year ended 31 December 2016, which were included in AOP:
Plc wind-down costs
Business standalone costs
Transaction advisory costs
Total managed separation and business standalone costs
£m
Year ended
31 December
2016
(8)
(5)
(18)
(31)
(j) Income/(expense) from resolution of plc Head Office pre-existing items
For the year ended 31 December 2017, income/(expense) from resolution of plc Head Office pre-existing items recognised in the IFRS
income statement have been excluded from the calculation of AOP. These items relate to the crystallisation of plc Head Office pre-existing
matters and the related income and costs are deemed not to be reflective of the underlying operating activity of the Group.
The table below summarises the income/(expense) from resolution of plc Head Office pre-existing items for the year ended
31 December 2017:
Insurance and indemnity costs
Income/(expense) from resolution of plc Head Office pre-existing items
£m
Year ended
31 December
2017
(27)
(27)
Expenses of £20 million were incurred on insuring and de-risking certain indemnities associated with businesses previously owned by the
Group. In addition, costs of £7 million were incurred in disposing of the Group’s captive insurance entitiy which covered plc Head Office
and subsidiary companies.
No amounts related to the resolution of plc Head Office pre-existing items were recorded in the comparative period.
(k) Old Mutual Wealth business transformation costs
In 2013, Old Mutual Wealth UK business embarked on a significant programme to develop new platform capabilities and to outsource
UK business administration. This involved replacing many aspects of the existing UK platform, and on completion the outsourcing of
associated business processing under a long-term outsourcing agreement. Contracts related to the UK Platform Transformation with
IFDS and DST were ended by mutual agreement effective as of 2 May 2017. At the same time, Old Mutual Wealth announced a
contract with FNZ to complete the delivery the UK Platform Transformation Programme.
Under IFRS requirements, these costs and the costs of decommissioning existing technology and migrating of services to FNZ are
included in IFRS profit or loss. However, long-term costs that are directly attributable to the programme are excluded from AOP on
the basis that this significant near term investment relates to a fundamental reorganisation of the business and is not reflective of the
underlying costs of the business.
For the year ended 31 December 2017, platform transformation costs totalled £74 million (year ended 31 December 2016: £102 million).
(l) Voluntary customer remediation provision
As detailed in note H5, the Group has provided £69 million (2016: £nil) in respect of voluntary customer remediation following the
recommendations of a thematic review by the Financial Conduct Authority (FCA). The provision has been recognised in the IFRS
consolidated statement of financial position on the basis that the business is demonstrably committed to these costs. For the purposes
of AOP, these costs have been excluded on the basis that they relate to redress for charges levied in the past, rather than reductions
in future customer charges.
185
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
C: Other key performance information continued
C2: Earnings and earnings per share
C: Other key performance information continued
C2: Earnings and earnings per share
Basic earnings per share
Diluted earnings per share
Adjusted operating earnings per share
Basic earnings per share
Diluted earnings per share
Headline earnings per share
Adjusted operating earnings per share
Diluted headline earnings per share
Headline earnings per share
1 Basic, diluted, headline and diluted headline earnings per share for the year ended 31 December 2016 have been restated to reflect the consolidation adjustments related to own
Diluted headline earnings per share
Source of guidance
IFRS
IFRS
Source of guidance
Group policy
IFRS
IFRS
JSE Listing Requirements
Group policy
JSE Listing Requirements
JSE Listing Requirements
JSE Listing Requirements
Notes
C2(a)
C2(b)
Notes
C2(c)
C2(a)
C2(b)
C2(d)
C2(c)
C2(d)
C2(d)
C2(d)
shares held by consolidated investment funds. Refer to note B1 for more information.
shares held by consolidated investment funds. Refer to note B1 for more information.
(a) Basic earnings per share
1 Basic, diluted, headline and diluted headline earnings per share for the year ended 31 December 2016 have been restated to reflect the consolidation adjustments related to own
Basic earnings per share is calculated by dividing the profit for the financial year 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
(a) Basic earnings per share
Share Ownership Plan Trusts (ESOP), Black Economic Empowerment trusts and other consolidated related undertakings. These shares
Basic earnings per share is calculated by dividing the profit for the financial year attributable to ordinary equity shareholders of the parent
are regarded as treasury shares.
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 consolidated related undertakings. These shares
The table below reconciles the profit attributable to equity holders of the parent to profit attributable to ordinary equity holders:
are regarded as treasury shares.
Year ended
31 December
2017
Year ended
19.3
31 December
18.9
2017
24.3
19.3
18.9
16.5
24.3
16.1
16.5
16.1
Pence
Year ended
31 December
Pence
2016
Year ended
(Restated)1
31 December
12.0
2016
11.7
(Restated)1
19.4
12.0
11.7
14.1
19.4
13.8
14.1
13.8
The table below reconciles the profit attributable to equity holders of the parent to profit attributable to ordinary equity holders:
£m
Year ended
31 December
£m
2016
Year ended
(Re-presented)¹
31 December
2016
176
(Re-presented)¹
Year ended
31 December
2017
Year ended
31 December
385
2017
Notes
Notes
A4.1
Profit for the financial year attributable to equity holders of the parent from
continuing operations
Profit for the financial year attributable to equity holders of the parent from
Profit for the financial year attributable to equity holders of the parent from
discontinued operations
continuing operations
discontinued operations
Profit for the financial year attributable to equity holders of the parent
Profit for the financial year attributable to equity holders of the parent from
Dividends paid to holders of perpetual preferred callable securities, net of tax credits
Profit attributable to ordinary equity holders
Profit for the financial year attributable to equity holders of the parent
Dividends paid to holders of perpetual preferred callable securities, net of tax credits
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
Profit attributable to ordinary equity holders
Total dividends paid to holders of perpetual preferred callable securities of £15 million for the year ended 31 December 2017 (year ended
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
31 December 2016: £14 million) are stated net of tax credits of £nil (year ended 31 December 2016: £3 million).
Total dividends paid to holders of perpetual preferred callable securities of £15 million for the year ended 31 December 2017 (year ended
31 December 2016: £14 million) are stated net of tax credits of £nil (year ended 31 December 2016: £3 million).
A4.1
524
385
909
(15)
524
894
909
(15)
894
394
176
570
(14)
394
556
570
(14)
556
186
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Annual Report and Accounts 2017
The table below summarises the calculation of the weighted average number of ordinary shares for the purposes of calculating basic
earnings per share:
Weighted average number of ordinary shares in issue
Shares held in charitable foundations and trusts
Shares held in ESOP and similar trusts
Adjusted weighted average number of ordinary shares
Shares held in policyholder and consolidated investment funds
Shares held in Black Economic Empowerment trusts
Weighted average number of ordinary shares used to calculate basic earnings per share
Basic earnings per ordinary share (pence)
Year ended
31 December
2017
4,931
(21)
(134)
4,776
(141)
(2)
4,633
Millions
Year ended
31 December
2016
(Restated)¹
4,929
(21)
(135)
4,773
(131)
(7)
4,635
19.3
12.0
1 The weighted average number of ordinary shares used to calculate basic earnings per share and basic earnings per ordinary share (pence) for the year ended 31 December 2016
have been restated to reflect the consolidation adjustments related to own shares held by consolidated investment funds. Refer to note B1 for more information.
(b) Diluted earnings per share
Diluted earnings per share 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 year.
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:
Profit attributable to ordinary equity holders (£m)
Dilution effect on profit relating to share options issued by subsidiaries (£m)
Diluted profit attributable to ordinary equity holders of the parent (£m)
Weighted average number of ordinary shares (millions)
Adjustments for share options held by ESOP and similar trusts (millions)
Adjustments for shares held in Black Economic Empowerment trusts (millions)
Weighted average number of ordinary shares used to calculate diluted earnings
per share (millions)
Diluted earnings per ordinary share (pence)
Notes
C2(a)
Year ended
31 December
2017
894
(7)
887
4,633
69
3
Year ended
31 December
2016
(Restated)¹
556
(7)
549
4,635
59
7
4,705
18.9
4,701
11.7
1 The weighted average number of ordinary shares used in to calculate diluted earnings per share and diluted earnings per ordinary share (pence) for the year ended 31 December
2016 have been restated to reflect the consolidation adjustments related to own shares held by consolidated investment funds. Refer to note B1 for more information.
(c) Adjusted operating earnings per share
The following table presents a reconciliation of profit for the financial year to adjusted operating profit after tax attributable to ordinary equity
holders and summarises the calculation of adjusted operating earnings per share:
Profit for the financial year attributable to equity holders of the parent
Adjusting items
Tax on adjusting items
Non-core operations
Non-controlling interest on adjusting items
Adjusted operating profit after tax attributable to ordinary equity holders (£m)
Adjusted weighted average number of ordinary shares used to calculate adjusted
operating earnings per share (millions)
Adjusted operating earnings per share (pence)
Notes
C1(a)
D1(d)
B3
C2(a)
Year ended
31 December
2017
909
372
(46)
(24)
(49)
1,162
£m
Year ended
31 December
2016
570
457
(38)
5
(66)
928
4,776
24.3
4,773
19.4
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
C: Other key performance information continued
C2: Earnings and earnings per share continued
C: Other key performance information continued
(d) Headline earnings per share
C2: Earnings and earnings per share continued
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
(d) Headline earnings per share
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
The Group is required to calculate headline earnings per share (HEPS) in accordance with the JSE Limited (JSE) Listing Requirements,
is a commonly used measure of earnings in South Africa. The table below reconciles the profit for the financial year attributable to equity
determined by reference to the South African Institute of Chartered Accountants' circular 02/2015 'Headline Earnings'. The table below
holders of the parent to headline earnings and summarises the calculation of basic HEPS:
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:
Year ended
31 December 2017
Net of tax
Year ended
and non-
31 December 2017
controlling
Net of tax
interests
and non-
controlling
909
interests
Gross
Gross
Notes
Notes
£m
Year ended
31 December 2016
£m
(Restated)¹
Year ended
Net of tax
31 December 2016
and non-
(Restated)¹
controlling
Net of tax
interests
and non-
controlling
570
interests
Gross
Gross
Profit for the financial year attributable to equity holders
of the parent
Dividends paid to holders of perpetual preferred
Profit for the financial year attributable to equity holders
callable securities
callable securities
of the parent
(14)
570
556
Profit attributable to ordinary equity holders
Dividends paid to holders of perpetual preferred
Adjustments:
(14)
Impairments of goodwill and other intangible assets (IAS36)
89
556
Profit attributable to ordinary equity holders
Impairment of investment in associated undertakings (IAS28)
28
Adjustments:
Loss on disposal of property and equipment (IAS16)
1
Impairments of goodwill and other intangible assets (IAS36)
89
Profit on disposal of subsidiaries, associated undertakings and
28
Impairment of investment in associated undertakings (IAS28)
strategic investments (including amounts recycled from the
1
Loss on disposal of property and equipment (IAS16)
foreign currency translation reserve) (IFRS3)
(20)
Profit on disposal of subsidiaries, associated undertakings and
1
Other adjustments
strategic investments (including amounts recycled from the
655
Headline earnings
(20)
foreign currency translation reserve) (IFRS3)
Dilution effect on earnings relating to share options issued
1
Other adjustments
(7)
by subsidiaries
655
Headline earnings
648
Diluted headline earnings (£m)
Dilution effect on earnings relating to share options issued
4,635
Weighted average number of ordinary shares (millions)
(7)
Diluted weighted average number of ordinary
648
Diluted headline earnings (£m)
4,701
4,635
Weighted average number of ordinary shares (millions)
14.1
Headline earnings per share (pence)
Diluted weighted average number of ordinary
13.8
Diluted headline earnings per share (pence)
4,701
14.1
Headline earnings per share (pence)
1 The weighted average number of ordinary shares (millions), diluted weighted average number of ordinary shares (millions), headline earning per share and diluted headline earnings
13.8
Diluted headline earnings per share (pence)
per share (pence) for the year ended 31 December 2016 have been restated to reflect the consolidation adjustments related to own shares held by consolidated investment funds.
Refer to note B1 for more information.
(15)
909
894
(15)
59
894
–
1
59
–
1
(193)
4
765
(193)
4
(7)
765
758
4,633
(7)
758
4,705
4,633
16.5
16.1
4,705
16.5
16.1
86
–
3
86
–
3
(197)
10
(98)
(197)
10
(98)
113
50
2
113
50
2
(19)
1
147
(19)
1
147
shares (millions)
shares (millions)
by subsidiaries
C2(b)
C2(a)
C2(a)
C2(b)
1 The weighted average number of ordinary shares (millions), diluted weighted average number of ordinary shares (millions), headline earning per share and diluted headline earnings
per share (pence) for the year ended 31 December 2016 have been restated to reflect the consolidation adjustments related to own shares held by consolidated investment funds.
Refer to note B1 for more information.
C3: Dividends
C3: Dividends
2015 Second interim dividend paid – 6.25p per 11 3/7p ordinary share
2016 Interim dividend paid – 2.67p per 11 3/7p ordinary share
2016 Second interim dividend paid – 3.39p per 11 3/7p ordinary share
2015 Second interim dividend paid – 6.25p per 11 3/7p ordinary share
2017 Interim dividend paid – 3.53p per 11 3/7p ordinary share
2016 Interim dividend paid – 2.67p per 11 3/7p ordinary share
Dividends to ordinary equity holders
2016 Second interim dividend paid – 3.39p per 11 3/7p ordinary share
Dividends paid to holders of perpetual preferred callable securities
2017 Interim dividend paid – 3.53p per 11 3/7p ordinary share
Dividend payments for the year
Dividends to ordinary equity holders
Dividends paid to holders of perpetual preferred callable securities
Dividend payments for the year
Ordinary dividend
payment date
26 April 2016
Ordinary dividend
28 October 2016
payment date
28 April 2017
26 April 2016
31 October 2017
28 October 2016
28 April 2017
31 October 2017
Year ended
31 December
2017
Year ended
–
31 December
–
2017
161
–
169
–
330
161
15
169
345
330
15
345
£m
Year ended
31 December
£m
2016
Year ended
299
31 December
127
2016
–
299
–
127
426
–
17
–
443
426
17
443
188
182
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Old Mutual plc
Annual Report and Accounts 2017
The total dividend paid to ordinary equity holders is calculated using the number of shares in issue at the record date less own shares held
in ESOP trusts, life funds of Group entities, Black Economic Empowerment trusts and related undertakings.
As a consequence of the exchange control arrangements in place in certain African territories, dividends to ordinary equity holders on the
branch registers of those countries (or, in the case of Namibia, the Namibian section of the principal register) are settled through Dividend
Access Trusts established for that purpose.
A second interim dividend of 3.57 pence (or its equivalent in other applicable currencies) per ordinary share in the Company has been
declared by the directors. The second interim dividend will be paid on 30 April 2018 to shareholders on the register at the close of
business on 6 April 2018. The dividend will absorb an estimated £171 million of shareholders' funds.
On 3 February 2017, all of the Group's outstanding perpetual preferred callable securities were redeemed. At this date a final dividend
payment of £15 million was made to the holders of the securities.
D: Other consolidated income statement notes
Except where otherwise indicated, other consolidated income statement notes, included in section D, are presented for continuing
operations only. Following the classification of Nedbank and Old Mutual Wealth as discontinued operations, on 31 December 2017,
as described in note A4, the income statement line items attributable to these businesses have been represented in a single line in the
consolidated income statement. Unless expressly stated otherwise, the comparative information in the consolidated income statement
and the related notes have been re-presented in accordance with the requirements of IFRS, to exclude discontinued operations.
D1: Income tax expense
This note analyses separately, the income tax expense recognised in profit or loss for the year from both continuing and discontinued
operations and the various factors that have contributed to the composition of the charge for both continuing and discontinued operations.
Current tax
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
reporting date, and includes any adjustment to income tax payable in respect of previous years.
Deferred tax
Deferred taxation is provided using the temporary difference method. Temporary differences are differences between the carrying
amounts of assets and liabilities for financial reporting purposes and their tax base. The amount of deferred taxation provided is based on
the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively
enacted at the reporting date in the specific jurisdiction. Deferred taxation is charged to profit or loss except to the extent that it relates
to a transaction that is recognised directly in other comprehensive income, or a business combination that is an acquisition. The effect on
deferred taxation of any changes in tax rates is recognised in profit or loss, except to the extent that it relates to items previously charged
or credited directly to other comprehensive income. A deferred tax asset is recognised only to the extent that it is probable that future
taxable income will be available, against which the unutilised tax losses and deductible temporary differences can be used. Deferred tax
assets are reduced to the extent that it is no longer probable that the related tax benefits will be realised.
In certain circumstances, as permitted by accounting guidance, deferred tax balances are not recognised. In particular where the
liability relates to the initial recognition of goodwill, or transactions that are not a business combination and at the time of their occurrence
affect neither accounting nor taxable profit. Note H7 includes further detail of circumstances in which the Group does not recognise
temporary differences.
Critical accounting estimates and judgements – Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to
the extent that it relates to items recognised directly in other comprehensive income or equity, in which case it is recognised in other
comprehensive income and the statement of changes in equity respectively.
The Group is subject to income taxes in numerous jurisdictions and the calculation of the Group's tax charge and worldwide provisions
for income tax necessarily involves a degree of estimation and judgement. At any given time the Group typically has a number of open
tax returns with various tax authorities and engages in active dialogue to resolve this. Taxation provisions relating to these open items
are recognised based on the Group's estimate of the most likely outcome, after taking into account external advice where appropriate.
Where the final tax outcome of these matters is different from the amounts that were initially recorded such differences will impact profit
or loss, current and deferred income tax assets and liabilities in the period such determination is made.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
D: Other consolidated income statement notes continued
D1: Income tax expense continued
D: Other consolidated income statement notes continued
(a) Analysis of total income tax expense
D1: Income tax expense continued
The total income tax expense for the year from continuing operations comprises:
(a) Analysis of total income tax expense
The total income tax expense for the year from continuing operations comprises:
£m
Year ended
31 December
£m
2016
Year ended
(Re-presented)¹
31 December
2016
(23)
(Re-presented)¹
Year ended
31 December
2017
Year ended
31 December
(45)
2017
Continuing operations
Current tax
United Kingdom
Continuing operations
Overseas tax
Current tax
United Kingdom
Overseas tax
– South Africa
– Rest of Africa
– Rest of the world2
– South Africa
Withholding taxes
– Rest of Africa
Adjustments to current tax in respect of prior years
– Rest of the world2
Total current tax
Withholding taxes
Deferred tax
Adjustments to current tax in respect of prior years
Deferred tax expense/(income) relating to the origination and reversal of temporary differences
Total current tax
Effect on deferred tax of changes in tax rates
Deferred tax
Recognition of previously unrecognised deferred tax assets
Deferred tax expense/(income) relating to the origination and reversal of temporary differences
Adjustments to deferred tax in respect of prior years
Effect on deferred tax of changes in tax rates
Total deferred tax
Recognition of previously unrecognised deferred tax assets
Total income tax expense
Adjustments to deferred tax in respect of prior years
Total deferred tax
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information
Total income tax expense
2 Rest of the world includes taxes originating in India, Latin America and the United States.
160
(45)
27
27
160
9
27
(17)
27
161
9
(17)
82
161
–
1
82
(4)
–
79
1
240
(4)
79
240
186
(23)
20
9
186
9
20
(19)
9
182
9
(19)
(60)
182
20
–
(60)
–
20
(40)
–
142
–
(40)
142
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information
(b) Reconciliation of total income tax expense
2 Rest of the world includes taxes originating in India, Latin America and the United States.
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
continuing operations from the different tax jurisdictions had been taxed at the UK standard corporation tax rate. The difference in the
(b) Reconciliation of total income tax expense
effective rate of the continuing operations is explained below:
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
continuing operations from the different tax jurisdictions had been taxed at the UK standard corporation tax rate. The difference in the
effective rate of the continuing operations is explained below:
£m
Year ended
31 December
£m
2016
Year ended
(Re-presented)¹
31 December
306
2016
61
(Re-presented)¹
42
306
(103)
61
73
42
(19)
(103)
30
73
–
(19)
20
30
1
–
37
20
142
1
37
142
Continuing operations
Profit before tax
Tax at UK standard rate of 19.25% (2016: 20.0%)
Continuing operations
Different tax rate or basis on overseas operations
Profit before tax
Untaxed and low taxed income2
Tax at UK standard rate of 19.25% (2016: 20.0%)
Disallowable expenses
Different tax rate or basis on overseas operations
Adjustments to current tax in respect of prior years
Untaxed and low taxed income2
Net movement on deferred tax assets not recognised
Disallowable expenses
Adjustments to deferred tax in respect of prior years
Adjustments to current tax in respect of prior years
Effect on deferred tax of changes in tax rates
Net movement on deferred tax assets not recognised
Withholding taxes
Adjustments to deferred tax in respect of prior years
Income tax attributable to policyholder returns
Effect on deferred tax of changes in tax rates
Total income tax expense
Withholding taxes
Income tax attributable to policyholder returns
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information
Total income tax expense
2 This includes capital gains taxed at a lower rate than the corporate tax rate.
Year ended
31 December
2017
Year ended
617
31 December
119
2017
67
617
(108)
119
115
67
(17)
(108)
13
115
(4)
(17)
–
13
1
(4)
54
–
240
1
54
240
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information
2 This includes capital gains taxed at a lower rate than the corporate tax rate.
190
184
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Annual Report and Accounts 2017
(c) Income tax relating to components of other comprehensive income
The following table presents a reconciliation of profit for the financial year to adjusted operating profit after tax attributable to ordinary equity
holders and summarises the calculation of adjusted operating earnings per share:
Measurement gains on defined benefit plans
Property revaluation
Income tax on items that will not be reclassified subsequently to profit or loss
Available-for-sale reserves
Income tax on items that may be reclassified subsequently to profit or loss
Income tax expense relating to components of other comprehensive income
Year ended
31 December
2017
8
7
15
(3)
(3)
12
£m
Year ended
31 December
2016
(8)
–
(8)
(4)
(4)
(12)
(d) Reconciliation of income tax expense in the IFRS income statement to income tax on adjusted
operating profit
Continuing and discontinued operations
Income tax expense – continuing operations
Income tax expense – discontinued operations
Tax on adjusting items
Goodwill impairment and impact of acquisition accounting
Net profit on disposal of subsidiaries, associates and strategic investments
Short-term fluctuations in investment return
Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity
Institutional Asset Management equity plans
Credit-related fair value losses on Group debt instruments
Managed separations and business standalone costs
Old Mutual Wealth business transformation costs
Old Mutual Wealth voluntary customer remediation provision
Total tax on adjusting items
Income tax attributable to policyholders returns
Tax on non-core operations
Income tax on adjusted operating profit
£m
Year ended
31 December
2016
(Re-presented)¹
142
362
Year ended
31 December
2017
240
340
11
(13)
(14)
–
10
20
4
14
14
46
(147)
(2)
477
19
(3)
–
(3)
6
–
–
19
–
38
(144)
–
398
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
(e) Discontinued operations: Analysis of total income tax expense
The total income tax expense for the year from discontinued operations comprises:
Discontinued operations
Current tax
United Kingdom
Overseas tax
– South Africa
– Rest of Africa
– Europe
– Rest of the world1
Adjustments to current tax in respect of prior years
Total current tax
Deferred tax
Deferred tax expense/(income) relating to the origination and reversal of temporary differences
Effect on deferred tax of changes in tax rates
Adjustments to deferred tax in respect of prior years
Total deferred tax
Total income tax expense
1 Rest of the world includes taxes originating in the United States.
Year ended
31 December
2017
£m
Year ended
31 December
2016
94
244
11
3
7
(3)
356
(11)
(1)
(4)
(16)
340
79
215
8
15
13
(1)
329
34
1
(2)
33
362
191
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
D: Other consolidated income statement notes continued
D1: Income tax expense continued
D: Other consolidated income statement notes continued
(f) Discontinued operations: Reconciliation of total income tax expense
D1: Income tax expense continued
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 of discontinued
(f) Discontinued operations: Reconciliation of total income tax expense
operations is explained below:
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 of discontinued
operations is explained below:
Discontinued operations
Profit before tax
Tax at UK standard rate of 19.25% (2016: 20%)
Discontinued operations
Different tax rate or basis on overseas operations
Profit before tax
Untaxed and low taxed income
Tax at UK standard rate of 19.25% (2016: 20%)
Disallowable expenses
Different tax rate or basis on overseas operations
Adjustments to current tax in respect of prior years
Untaxed and low taxed income
Net movement on deferred tax assets not recognised1
Disallowable expenses
Adjustments to deferred tax in respect of prior years
Adjustments to current tax in respect of prior years
Effect on deferred tax of changes in tax rates
Net movement on deferred tax assets not recognised1
Withholding taxes
Adjustments to deferred tax in respect of prior years
Income tax attributable to policyholder returns
Effect on deferred tax of changes in tax rates
Total income tax expense
Withholding taxes
Income tax attributable to policyholder returns
1 This includes recognition of a deferred tax asset in Old Mutual Wealth (£15 million) previously unrecognised.
Total income tax expense
D2: Investment return (non-banking)
1 This includes recognition of a deferred tax asset in Old Mutual Wealth (£15 million) previously unrecognised.
This note analyses the investment return from the non-banking activities of the Group's continuing operations.
D2: Investment return (non-banking)
This note analyses the investment return from the non-banking activities of the Group's continuing operations.
Year ended
31 December
2017
Year ended
1,221
31 December
235
2017
74
1,221
(7)
235
(3)
74
(3)
(7)
(14)
(3)
(4)
(3)
(1)
(14)
1
(4)
62
(1)
340
1
62
340
£m
Year ended
31 December
£m
2016
Year ended
1,043
31 December
209
2016
73
1,043
(23)
209
22
73
(1)
(23)
4
22
(2)
(1)
1
4
1
(2)
78
1
362
1
78
362
Continuing operations
Interest and similar income
Loans and advances
Continuing operations
Investments and securities
Interest and similar income
Cash and cash equivalents
Loans and advances
Total interest and similar income
Investments and securities
Dividend income – investments and securities
Cash and cash equivalents
Fair value gains recognised in income
Total interest and similar income
Rental income from investment properties
Dividend income – investments and securities
Fair value gains on the revaluation of investment property
Fair value gains recognised in income
Foreign currency (losses)/gains
Rental income from investment properties
Total amounts recognised in profit or loss
Fair value gains on the revaluation of investment property
Foreign currency (losses)/gains
Total interest income for assets not at fair value through profit or loss
Total amounts recognised in profit or loss
The fair value gains/(losses) shown above are analysed according to their IAS 39 categorisations
Total interest income for assets not at fair value through profit or loss
as follows:
Year ended
31 December
2017
Year ended
31 December
1
2017
1,305
82
1
1,388
1,305
380
82
3,528
1,388
159
380
26
3,528
(4)
159
5,477
26
(4)
18
5,477
18
as follows:
Held-for-trading (including derivatives)
The fair value gains/(losses) shown above are analysed according to their IAS 39 categorisations
Designated at fair value through profit or loss
Held-for-trading (including derivatives)
Designated at fair value through profit or loss
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
(26)
3,554
3,528
(26)
3,554
3,528
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
192
186
186
£m
Year ended
31 December
£m
2016
Year ended
(Re-presented)¹
31 December
2016
1
(Re-presented)¹
990
75
1
1,066
990
389
75
189
1,066
125
389
92
189
18
125
1,879
92
18
13
1,879
13
(12)
201
189
(12)
201
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
D3: Banking interest and similar income
This note analyses the interest earned on loans and advances from the banking activities of the Group's continuing operations.
Continuing operations
Loans and advances
Mortgage loans
Overdrafts
Term loans and other2
Investments and securities
Government and government-guaranteed securities
Other debt securities, preference shares and debentures
Total interest and similar income
£m
Year ended
31 December
2016
(Re-presented)¹
217
51
6
160
12
1
11
Year ended
31 December
2017
244
53
6
185
12
9
3
256
229
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information
2 Term loans and other includes commercial mortgages, deposits placed under repurchase agreements, preference shares and debentures and other term loans.
D4: Banking trading, investment and similar income
This note analyses the investment return from the banking activities of the Group's continuing operations.
Continuing operations
Rental income from investment property
Net exchange and other non-interest income
Net trading income2
Total banking trading, investment and similar income
£m
Year ended
31 December
2016
(Re-presented)¹
1
1
12
14
Year ended
31 December
2017
1
1
4
6
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information
2 Net trading income comprises all gains and losses from changes in the fair value of financial assets and financial liabilities held-for-trading, together with the related interest,
expense, costs and dividends of the Group's continuing banking operations.
D5: Fee and commission income, and income from service activities
This note analyses the fees and commission, earned by the Group's continuing operations, from negotiating, or participating in the
negotiation of a transaction for third-parties, transaction and performance fees earned and movements in deferred origination fees.
Year ended 31 December 2017
Continuing operations
Fee and commission income
Transaction and performance fees
Change in deferred revenue
Year ended 31 December 2016 (Re-presented)¹
Continuing operations
Fee and commission income
Transaction and performance fees
Change in deferred revenue
Life and
savings
245
1
11
257
Asset
management
290
9
(1)
298
Life and
savings
231
1
7
239
Asset
management
233
6
(4)
235
Banking
45
24
–
69
Banking
36
18
–
54
Property &
casualty
49
–
–
49
Property &
casualty
34
–
3
37
£m
Total
629
34
10
673
£m
Total
534
25
6
565
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
Fee and commission income, and income from service activities include £144 million (2016: £122 million) related to trust and
fiduciary fees.
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Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
D: Other consolidated income statement notes continued
D6: Finance costs
D: Other consolidated income statement notes continued
Finance costs relate to the borrowed funds in the Group's continuing operations, excluding those relating to banking activities. These
finance costs include interest payable, and gains and losses on revaluation of these funds and on those derivative instruments which
D6: Finance costs
are used to hedge these funds in the Group's continuing operations.
Finance costs relate to the borrowed funds in the Group's continuing operations, excluding those relating to banking activities. These
finance costs include interest payable, and gains and losses on revaluation of these funds and on those derivative instruments which
are used to hedge these funds in the Group's continuing operations.
Continuing operations
Interest payable on borrowed funds
Senior debt and term loans
Continuing operations
Subordinated debt
Interest payable on borrowed funds
Interest rate swaps
Senior debt and term loans
Fair value gains and losses on borrowed funds
Subordinated debt
Borrowed funds2
Interest rate swaps
Derivative instruments used as economic hedges
Fair value gains and losses on borrowed funds
Borrowed funds2
Total finance costs excluding banking activities
Derivative instruments used as economic hedges
Finance costs from banking activities
Total Group finance costs on debt instruments
Total finance costs excluding banking activities
Finance costs from banking activities
The fair value gains and (losses) shown above are analysed according to their IAS 39
Total Group finance costs on debt instruments
categorisations as follows:
Designated at fair value through profit or loss
The fair value gains and (losses) shown above are analysed according to their IAS 39
Note
Note
D7
D7
Year ended
31 December
2017
Year ended
102
31 December
–
2017
115
102
(13)
–
132
115
116
(13)
16
132
116
234
16
19
253
234
19
253
132
categorisations as follows:
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information
Designated at fair value through profit or loss
2 Fair value gains and losses on borrowed funds for the year ended 31 December 2017 includes £102 million relating to the difference between the cash paid to repurchase
and redeem £389 million of Tier 2 subordinated 2025 securities and £159 million nominal of Tier 2 subordinated 2021 securities and the IFRS book value of this debt at the
date of repurchase.
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information
2 Fair value gains and losses on borrowed funds for the year ended 31 December 2017 includes £102 million relating to the difference between the cash paid to repurchase
and redeem £389 million of Tier 2 subordinated 2025 securities and £159 million nominal of Tier 2 subordinated 2021 securities and the IFRS book value of this debt at the
date of repurchase.
D7: Banking interest payable and similar expense
This note analyses the interest and similar expenses from the banking activities of the Group's continuing operations.
D7: Banking interest payable and similar expense
This note analyses the interest and similar expenses from the banking activities of the Group's continuing operations.
132
Continuing operations
Amounts owed to bank depositors
Deposits and loan accounts
Continuing operations
Current and savings accounts
Amounts owed to bank depositors
Negotiable certificates of deposit
Deposits and loan accounts
Long-term debt instruments
Current and savings accounts
Negotiable certificates of deposit
Total interest payable and similar expenses
Long-term debt instruments
Year ended
31 December
2017
Year ended
75
31 December
16
2017
17
75
23
16
19
17
23
75
19
Notes
Notes
D6
D6
£m
Year ended
31 December
£m
2016
Year ended
(Re-presented)¹
31 December
102
2016
7
(Re-presented)¹
108
102
(13)
7
26
108
34
(13)
(8)
26
34
128
(8)
30
158
128
30
158
26
26
£m
Year ended
31 December
£m
2016
Year ended
(Re-presented)¹
31 December
90
2016
19
(Re-presented)¹
19
90
22
19
30
19
22
90
30
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as a discontinued operations. Refer to note A4 for more information.
Total interest payable and similar expenses
75
90
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as a discontinued operations. Refer to note A4 for more information.
194
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Old Mutual plc
Annual Report and Accounts 2017
D8: Fee and commission expenses, and other acquisition costs
This note analyses the fee and commission expenses and other acquisition costs from the Group's continuing operations.
Year ended 31 December 2017
Continuing operations
Fee and commission expenses
Change in deferred acquisition costs
Other acquisition costs
Year ended 31 December 2016 (Restated)¹
Continuing operations
Fee and commission expenses
Change in deferred acquisition costs
Other acquisition costs
Life and
savings
185
9
141
335
Asset
management
44
(2)
–
42
Property &
casualty
146
1
–
147
Life and
savings
194
1
57
252
Asset
management
49
(1)
(5)
43
Property &
casualty
127
3
–
130
£m
Total
375
8
141
524
£m
Total
370
3
52
425
1 Fee and commission expenses (Life and savings) for the year ended 31 December 2016 of £80 million have been restated for the reallocation from other operating and
administrative expenses. Refer to note B1 for more information. In addition the year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth
as discontinued operations. Refer to note A4 for more information.
Fee and commission expenses, and other acquisition costs include £10 million (2016: £10 million) related to trust and fiduciary fees.
D9: Other operating and administrative expenses
This note gives further detail on the items included within other operating and administrative expenses of the Group's continuing
operations as well as an analysis of the operating segments our employees work in.
(a)(i) Other operating and administrative expenses include:
Continuing operations
Staff costs
Amortisation of present value of acquired in-force business and other intangible assets
Impairment of goodwill and other intangible assets
Operating lease rentals – banking
Operating lease rentals – non-banking
Depreciation
Computer, software and processing costs
Marketing and communications and travel costs
Other operating and administrative expenses
Notes
D9(b)
Year ended
31 December
2017
649
26
86
9
7
33
10
75
681
1,576
£m
Year ended
31 December
2016
(Restated)¹
545
25
67
6
6
25
8
75
512
1,269
1 Other operating and administrative expenses for the year ended 31 December 2016 of £80 million have been restated for the reallocation from other operating and administrative
expenses to fee and commission expenses, and other acquisition costs. Refer to note B1 for more information. In addition the year ended 31 December 2016 has been re-presented
to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
Operating lease payments principally represent rentals payable by the Group for the rental of buildings and equipment.
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
D: Other consolidated income statement notes continued
D9: Other operating and administrative expenses
D: Other consolidated income statement notes continued
(a)(ii) Analysis of underlying Emerging Markets other operating and administrative expenses
D9: Other operating and administrative expenses
The table below provides an analysis of underlying Emerging Markets operating and administrative expenses.
(a)(ii) Analysis of underlying Emerging Markets other operating and administrative expenses
The table below provides an analysis of underlying Emerging Markets operating and administrative expenses.
Notes
D9(a)(i)
Notes
D9(a)(i)
Total other operating and administrative expenses
Exclude:
plc Head Office and Old Mutual Bermuda
Total other operating and administrative expenses
Consolidation of funds
Exclude:
Elimination of transactions with discontinued operations and non-AOP costs
plc Head Office and Old Mutual Bermuda
Emerging Markets operating and administrative expenses
Consolidation of funds
Expenses excluded from cost base
Elimination of transactions with discontinued operations and non-AOP costs
Emerging Markets operating and administrative expenses
Operational finance costs
Expenses excluded from cost base
Impairment of other intangible assets
Investment management expenses excluded from operating and
Impairment of other intangible assets
administrative expenses
Operational finance costs
One-off business standalone costs
Investment management expenses excluded from operating and
Underlying Emerging Markets operating and administrative expenses
administrative expenses
One-off business standalone costs
(b) Staff costs
Underlying Emerging Markets operating and administrative expenses
(b) Staff costs
Wages and salaries
Social security costs
Defined contribution plans
Wages and salaries
Defined benefit plans
Social security costs
Other retirement benefits
Defined contribution plans
Bonus and incentive remuneration
Defined benefit plans
Share-based payments
Other retirement benefits
Cash settled
Bonus and incentive remuneration
Equity settled
Share-based payments
Other
Cash settled
Equity settled
Other
Note
Note
J1(b)
J1(b)
J1(b)
J1(b)
J2(e)
J2(e)
J2(e)
J2(e)
Continuing
operations
453
Continuing
6
operations
10
453
1
6
(2)
10
111
1
(2)
4
111
17
49
4
649
17
49
649
Discontinued
operations
916
Discontinued
50
operations
85
916
(11)
50
12
85
357
(11)
12
12
357
49
125
12
1,595
49
125
1,595
Total
1,369
56
Total
95
1,369
(10)
56
10
95
468
(10)
10
16
468
66
174
16
2,244
66
174
2,244
Continuing
operations
394
Continuing
7
operations
9
394
2
7
(1)
9
89
2
(1)
–
89
13
32
–
545
13
32
545
Year ended
31 December
2017
Year ended
1,576
31 December
2017
(85)
1,576
(30)
(159)
(85)
1,302
(30)
(159)
(1)
1,302
(64)
(1)
(127)
(64)
(14)
1,096
(127)
(14)
1,096
Discontinued
operations
808
Discontinued
41
operations
70
808
(9)
41
7
70
344
(9)
7
6
344
51
107
6
1,425
51
107
1,425
£m
Year ended
31 December
£m
2016
Year ended
1,269
31 December
2016
(134)
1,269
(26)
(74)
(134)
1,035
(26)
(74)
(3)
1,035
(44)
(3)
(82)
(44)
–
906
(82)
–
906
£m
£m
Total
1,202
48
Total
79
1,202
(7)
48
6
79
433
(7)
6
6
433
64
139
6
1,970
64
139
1,970
Year ended 31 December 2017
Year ended 31 December 2016
Year ended 31 December 2017
Year ended 31 December 2016
196
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Old Mutual plc
Annual Report and Accounts 2017
(b)(i) Average number of employees
The average number of persons employed by the Group is as follows:
Emerging Markets
plc Head Office
Non-core operations (Old Mutual Bermuda)
Total – continuing operations
Old Mutual Wealth
Nedbank
Institutional Asset Management
Total – discontinued operations
Total
Year ended
31 December
2017
Number
Year ended
31 December
2016
28,145
150
18
28,313
3,832
32,752
498
37,082
65,395
28,565
263
18
28,846
3,649
34,875
1,157
39,681
68,527
(c) Fees to Group's auditors
Included in other operating and administrative expenses are fees paid to the Group's auditors, which is analysed between continuing
and discontinued operations as follows:
Fees for audit services
Group
Subsidiaries
Pension schemes
Total audit fees
Fees for non-audit services
Audit-related assurance
Taxation compliance
Corporate finance transactions
Other non-audit services
Total non-audit services
Total Group auditors' remuneration
Continuing
operations
Year ended 31 December 2017
Discontinued
operations
Total
Continuing
operations
£m
Year ended 31 December 2016
Discontinued
operations
Total
2.0
5.2
–
7.2
0.2
–
0.2
0.1
0.5
7.7
–
10.7
0.2
10.9
1.0
0.2
–
0.1
1.3
12.2
2.0
15.9
0.2
18.1
1.2
0.2
0.2
0.2
1.8
19.9
1.6
3.5
0.1
5.2
0.5
0.1
–
0.5
1.1
6.3
–
9.8
0.1
9.9
0.4
1.2
–
1.0
2.6
12.5
1.6
13.3
0.2
15.1
0.9
1.3
–
1.5
3.7
18.8
In addition to the above, fees of £4.3 million (2016: £3.3 million) were payable to other auditors in respect of joint audit arrangements
of Nedbank.
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
E: Financial assets and liabilities
E1: Categories of financial instruments
E: Financial assets and liabilities
The analysis of assets and liabilities of the Group's continuing operations into their categories as defined in IAS 39 'Financial Instruments:
E1: Categories of financial instruments
Recognition and Measurement' is set out in the table below. Assets and liabilities of a non-financial nature, or financial assets and liabilities
The analysis of assets and liabilities of the Group's continuing operations into their categories as defined in IAS 39 'Financial Instruments:
that are specifically excluded from the scope of IAS 39, are reflected in the non-financial assets and liabilities category.
Recognition and Measurement' is set out in the table below. 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.
The categories of financial instruments classified as held for sale and distribution at 31 December 2017 is presented in note E7(a).
Consistent with the requirements of accounting standards, the comparative period has not been re-presented for assets and liabilities
The categories of financial instruments classified as held for sale and distribution at 31 December 2017 is presented in note E7(a).
classified as held for sale and distribution.
Consistent with the requirements of accounting standards, the comparative period has not been re-presented for assets and liabilities
classified as held for sale and distribution.
The comparative information presented at 31 December 2017, therefore includes the categories of financial assets and liabilities for the
composition of the Group as at 31 December 2016. This note should be read in conjunction with Note E7(a) to obtain a comparable view
The comparative information presented at 31 December 2017, therefore includes the categories of financial assets and liabilities for the
of the Group's categories of financial instruments at 31 December 2017.
composition of the Group as at 31 December 2016. This note should be read in conjunction with Note E7(a) to obtain a comparable view
of the Group's categories of financial instruments at 31 December 2017.
All gains and losses on measuring the financial assets and liabilities at each reporting date are included in the determination of profit or
loss, with the exception of unrealised gains or losses on financial assets classified as available-for-sale, which are recognised in other
All gains and losses on measuring the financial assets and liabilities at each reporting date are included in the determination of profit or
comprehensive income.
loss, with the exception of unrealised gains or losses on financial assets classified as available-for-sale, which are recognised in other
comprehensive income.
At 31 December 2017
Measurement basis
At 31 December 2017
Measurement basis
£m
Fair value (note E3)
Available-
Fair value (note E3)
for-sale
Available-
financial
for-sale
assets
financial
assets
Held-for-
Held-for-
trading Designated
trading Designated
Held-to-
maturity
Held-to-
investments
maturity
investments
Amortised cost (note E5)
Financial
Amortised cost (note E5)
liabilities
Financial
amortised
liabilities
cost
amortised
cost
Loans and
receivables
Loans and
receivables
£m
Non-
financial
Non-
assets and
financial
liabilities
assets and
liabilities
Assets
Mandatory reserve deposits with
Assets
Mandatory reserve deposits with
Investments in associated undertakings
central banks
central banks
and joint ventures1
Investments in associated undertakings
Reinsurers' share of policyholder
and joint ventures1
liabilities
liabilities
other assets
Reinsurers' share of policyholder
Loans and advances
Investments and securities
Loans and advances
Trade, other receivables and
Investments and securities
Trade, other receivables and
Derivative financial instruments
Cash and cash equivalents
Derivative financial instruments
Total assets that include financial
Cash and cash equivalents
Total assets that include financial
Assets held for sale and
other assets
instruments
instruments
distribution (note E7(a))
Assets held for sale and
Total other non-financial assets
distribution (note E7(a))
Total assets
Total other non-financial assets
Total assets
Liabilities
Life insurance contract liabilities
Liabilities
Investment contract liabilities
Life insurance contract liabilities
Third-party interest in consolidation
Investment contract liabilities
of funds
Third-party interest in consolidation
Borrowed funds
of funds
Trade, other payables and other
Borrowed funds
liabilities
Trade, other payables and other
Amounts owed to bank depositors
Derivative financial instruments
Amounts owed to bank depositors
Total liabilities that include financial
Derivative financial instruments
Total liabilities that include financial
Liabilities held for sale and distribution
instruments
liabilities
Total
Total
6
6
107
107
252
1,282
252
43,102
1,282
43,102
1,304
245
1,304
1,836
245
1,836
48,134
48,134
130,603
3,095
130,603
181,832
3,095
181,832
9,520
28,740
9,520
28,740
4,868
1,126
4,868
1,126
2,529
742
2,529
268
742
268
47,793
–
–
–
–
–
–
–
–
–
–
–
245
–
–
245
–
245
245
–
–
–
245
–
245
–
–
–
–
–
–
–
–
–
–
–
268
–
268
268
–
–
–
–
–
–
–
43,047
–
43,047
–
–
–
–
–
–
43,047
43,047
–
–
–
43,047
–
43,047
–
17,197
–
17,197
4,868
787
4,868
787
122
–
122
–
–
–
22,974
–
–
–
–
–
–
–
55
–
55
–
–
–
–
–
–
55
55
–
–
–
55
–
55
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
instruments
(note E7(a))
47,793
121,968
Liabilities held for sale and distribution
Total other non-financial liabilities
1,124
(note E7(a))
121,968
170,885
Total liabilities
Total other non-financial liabilities
1,124
1 Investments in associated undertakings and joint ventures classified as non-financial assets and liabilities are equity accounted.
170,885
Total liabilities
22,974
–
–
–
22,974
–
22,974
268
–
–
–
268
–
268
–
–
–
–
–
–
–
1 Investments in associated undertakings and joint ventures classified as non-financial assets and liabilities are equity accounted.
198
192
192
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
6
–
–
1
1,282
1
–
1,282
–
1,234
–
1,234
1,836
–
1,836
4,359
4,359
–
–
–
4,359
–
4,359
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
339
–
339
1,816
742
1,816
–
742
–
2,897
2,897
–
–
–
2,897
–
2,897
–
–
107
107
251
–
251
–
–
–
70
–
70
–
–
–
428
428
130,603
3,095
130,603
134,126
3,095
134,126
9,520
11,543
9,520
11,543
–
–
–
–
591
–
591
–
–
–
21,654
21,654
121,968
1,124
121,968
144,746
1,124
144,746
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
At 31 December 2016 (Restated)1,2,3,4
Measurement basis
Assets
Mandatory reserve deposits with central
banks
Investments in associated undertakings
and joint ventures5
Reinsurers' share of policyholder
liabilities6
Loans and advances2,3
Investments and securities1
Trade, other receivables and other assets
Derivative financial instruments
Cash and cash equivalents
Total assets that include financial
instruments
Assets held for sale and distribution
Total other non-financial assets
Total assets
Liabilities
Life insurance contract liabilities
Investment contract liabilities
Third-party interest in consolidation of
funds
Borrowed funds
Trade, other payables and other liabilities
Amounts owed to bank depositors4
Derivative financial instruments
Total liabilities that include financial
instruments
Liabilities held for sale and distribution
Total other non-financial liabilities
Total liabilities
Total
1,111
542
3,115
43,108
100,388
2,416
1,340
4,847
156,867
8,570
5,986
171,423
9,982
77,599
7,981
4,694
5,112
45,309
1,161
151,838
7,046
1,516
160,400
Fair value (note E3)
Available-
for-sale
financial
assets
Held-for-
trading Designated
Amortised cost (note E5)
Financial
liabilities
amortised
cost
Loans and
receivables
Held-to-
maturity
investments
£m
Non-
financial
assets and
liabilities
–
–
–
1,264
3,183
268
1,340
–
6,055
–
–
6,055
–
139
2,560
3,592
92,970
–
–
–
99,261
–
–
99,261
–
–
–
67,515
–
–
1,293
446
1,161
2,900
–
–
2,900
7,981
935
620
3,240
–
80,291
–
–
80,291
–
–
–
2
957
–
–
–
959
–
–
959
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,278
–
–
–
3,278
–
–
3,278
1,111
–
7
38,239
–
1,429
–
4,847
45,633
–
–
45,633
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,759
2,049
41,623
–
47,431
–
–
47,431
–
403
548
11
–
719
–
–
1,681
8,570
5,986
16,237
9,982
10,084
–
–
1,150
–
–
21,216
7,046
1,516
29,778
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1 Investments and securities of £46 million were included in the previous year as designated at fair value through profit or loss, whereas these instruments were classified and
measured as held for trading. Accordingly, the designated at fair value through profit or loss and held-for-trading and categories have been restated to reflect the correct
classification. In addition, investments and securities has been restated for the elimination of own shares held by consolidated investment funds (£145 million) that was identified
in the current year.
2 Loans and advances of £801 million were included in the previous year as held-for-trading assets, whereas these instruments were classified and measured as loans and
receivables. Accordingly, the held-for-trading and loans and receivables categories have been restated to reflect the correct classification
3 Loans and advances of £197 million were included in the previous year as designated at fair value through profit or loss, whereas these instruments were classified and measured
as loans and receivables. Accordingly, the designated at fair value through profit or loss and loans and receivables categories have been restated to reflect the correct classification
4 Amounts owed to depositors of £550 million were included in the previous year as designated at fair value through profit or loss, whereas these instruments were classified and
measured as financial liabilities at amortised cost. Accordingly, the designated at fair value through profit or loss and financial liabilities at amortised cost categories have been
restated to reflect the correct classification
5 Investments in associated undertakings and joint ventures classified as non-financial assets and liabilities are equity accounted
6 Reinsurers' share of policyholder liabilities categorised as designated at fair value through profit or loss of £2,560 million relate to investment contracts of Old Mutual Wealth where
management of assets are ceded to third parties through a reinsurance arrangements. Due to the nature of these arrangements, there is no transfer of insurance risk.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
E: Financial assets and liabilities continued
E2: Fair values of financial assets and liabilities
E: Financial assets and liabilities continued
The description of the determination of fair value and the fair value hierarchies of financial assets and liabilities described in this section
applies to financial assets and liabilities for all the businesses.
E2: Fair values of financial assets and liabilities
The description of the determination of fair value and the fair value hierarchies of financial assets and liabilities described in this section
(a) Determination of fair value
applies to financial assets and liabilities for all the businesses.
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.
(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
In general, the following inputs are taken into account when evaluating the fair value of financial instruments:
active, or quoted prices cannot be obtained without undue effort, another valuation technique is used.
Assessing whether instruments are trading with sufficient frequency and volume, that they can be considered liquid
In general, the following inputs are taken into account when evaluating the fair value of financial instruments:
The inclusion of a measure of the counterparties' non-performance risk in the fair-value measurement of loans and advances, which
Assessing whether instruments are trading with sufficient frequency and volume, that they can be considered liquid
The inclusion of credit valuation adjustment (CVA) and debit valuation adjustment (DVA) in the fair-value measurement of derivative
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
instruments
involves the modelling of dynamic credit spreads
The inclusion of own credit risk in the calculation of the fair value of financial liabilities.
The inclusion of credit valuation adjustment (CVA) and debit valuation adjustment (DVA) in the fair-value measurement of derivative
instruments
There have been no significant changes in the valuation techniques applied when valuing financial instruments. The general principles
The inclusion of own credit risk in the calculation of the fair value of financial liabilities.
applied to those instruments measured at fair value are outlined below:
There have been no significant changes in the valuation techniques applied when valuing financial instruments. The general principles
Reinsurers' share of policyholder liabilities
applied to those instruments measured at fair value are outlined below:
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. Reinsurance contracts which cover financial risk are measured at the fair value of the
Reinsurers' share of policyholder liabilities
underlying assets contained in the related policy.
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. Reinsurance contracts which cover financial risk are measured at the fair value of the
Loans and advances
underlying assets contained in the related policy.
Loans and advances include mortgage loans, other asset-based loans, including collateralised debt obligations, and other secured and
unsecured loans.
Loans and advances
Loans and advances include mortgage loans, other asset-based loans, including collateralised debt obligations, and other secured and
In the absence of an observable market for these instruments, the fair value is determined by using internally developed models that are
unsecured loans.
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.
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
Investments and securities
by using a credit-adjusted zero-coupon rate.
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
Investments and securities
securities treated as investments and certain other 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
Pooled investments relate to the Group's holdings of shares/units in open-ended investment companies, unit trusts, mutual funds and
securities treated as investments and certain other securities.
similar investment vehicles and are recognised at fair value. The fair value of pooled investments is based on published prices that are
regularly updated or models based on the market prices of investments held in the underlying pooled investment funds.
Pooled investments relate to the Group's holdings of shares/units in open-ended investment companies, unit trusts, mutual funds and
similar investment vehicles and are recognised at fair value. The fair value of pooled investments is based on published prices that are
Other investment and securities that are measured at fair value are measured at observable market prices where available. In the
regularly updated or models based on the market prices of investments held in the underlying pooled investment funds.
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 modelling technique.
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:
Investments in associated undertakings and joint ventures that are measured at fair value
discounted cash flows, the application of an EBITDA multiple or any other relevant modelling technique.
Investments in associated undertakings and joint ventures are valued using appropriate valuation techniques. These techniques may
include price earnings multiples, discounted cash flows or the adjusted value of similar completed transactions.
Investments in associated undertakings and joint ventures that are measured at fair value
Investments in associated undertakings and joint ventures are valued using appropriate valuation techniques. These techniques may
Derivatives
include price earnings multiples, discounted cash flows or the adjusted value of similar completed transactions.
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.
Derivatives
The fair value of derivatives is determined with reference to the exchange traded prices of the specific instruments. In situations where
Investment contract liabilities
the derivatives are traded over the counter the fair value of the instruments is determined by the utilisation of option pricing models.
The fair value of the investment contract liabilities is determined with reference to the fair value of the underlying funds that are held by
the Group.
Investment contract liabilities
The fair value of the investment contract liabilities is determined with reference to the fair value of the underlying funds that are held by
the Group.
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Old Mutual plc
Annual Report and Accounts 2017
Third-party interest in consolidation of funds
Third-party interests in consolidation of funds are measured at the proportionate share of the fair value of the net assets 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 consolidated statement of financial
position, which generally reflects the amount payable on demand.
(a) Determination of fair value continued
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 (comprising cash and cash equivalents; cash with central banks; trade, other
receivables and other assets; and trade, other payables and other liabilities) reasonably approximate their carrying amounts as included
in the consolidated statement of financial position as they are short-term in nature or re-priced 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
quoted prices for identical instruments in active markets.
Level 2 – valuation techniques using observable inputs: financial
assets and liabilities with quoted prices for similar instruments in
active markets or quoted prices for identical or similar instruments
in inactive markets and financial assets and liabilities valued using
models where all significant inputs are observable.
Level 3 – valuation techniques using significant unobservable
inputs: financial assets and liabilities valued using valuation
techniques where one or more significant inputs
are unobservable.
Listed equity securities, listed government securities and other
listed debt securities and similar instruments that are actively traded,
actively traded pooled investments, certain quoted derivative assets
and liabilities, listed borrowed funds, reinsurers’ share of policyholder
liabilities and investment contract liabilities directly
linked to other Level 1 financial assets.
Unlisted equity and debt securities where the valuation is based on
models involving no significant unobservable data, with a majority
determined with reference to observable prices.
Certain loans and advances, certain privately placed debt
instruments, third-party interests in consolidated funds and amounts
owed to bank depositors.
Unlisted equity and securities with significant unobservable inputs,
securities where the market is not considered sufficiently active,
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. All businesses have significant processes in place to perform
reviews of the appropriateness of the valuation of Level 3 instruments.
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.
The determination of the fair value on an instrument does not necessarily represent the price that the Group accept for the sale of the
instrument or the price the Group would pay to exit the liability.
(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.
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Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
E: Financial assets and liabilities continued
E3: Disclosure of financial assets and liabilities measured at fair value
E: Financial assets and liabilities continued
(a) Financial assets and liabilities measured at fair value, classified according to fair value hierarchy
E3: Disclosure of financial assets and liabilities measured at fair value
The table below presents a summary of the financial assets and liabilities of the Group's continuing operations 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
(a) Financial assets and liabilities measured at fair value, classified according to fair value hierarchy
note K and in terms of the fair value hierarchy described in note E2.
The table below presents a summary of the financial assets and liabilities of the Group's continuing operations 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
The fair value hierarchy of financial assets and liabilities classified as held for sale and distribution at 31 December 2017 is presented in
note K and in terms of the fair value hierarchy described in note E2.
note E7(b). Consistent with the requirements of accounting standards, the comparative period has not been re-presented for assets and
liabilities classified as held for sale and distribution. The comparative information presented at 31 December 2017, therefore includes the
The fair value hierarchy of financial assets and liabilities classified as held for sale and distribution at 31 December 2017 is presented in
fair value hierarchy of financial assets and liabilities for the composition of the Group as at 31 December 2016. This note should be read
note E7(b). Consistent with the requirements of accounting standards, the comparative period has not been re-presented for assets and
in conjunction with Note E7(b) to obtain a comparable view of the Group's fair value hierarchy of financial assets and liabilities at
liabilities classified as held for sale and distribution. The comparative information presented at 31 December 2017, therefore includes the
31 December 2017.
fair value hierarchy of financial assets and liabilities for the composition of the Group as at 31 December 2016. This note should be read
in conjunction with Note E7(b) to obtain a comparable view of the Group's fair value hierarchy of financial assets and liabilities at
Detailed analysis
31 December 2017.
At 31 December 2017
Detailed analysis
Financial assets measured at fair value
At 31 December 2017
Held-for-trading (fair value through profit or loss)
Derivative financial instruments – assets
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss)
Designated (fair value through profit or loss)
Derivative financial instruments – assets
Level 1
Level 2
Total
Designated (fair value through profit or loss)
Available-for-sale financial assets (fair value through other
Available-for-sale financial assets (fair value through other
Investments and securities
Investments and securities
comprehensive income)
Investments and securities
comprehensive income)
Investments and securities
Total financial assets measured at fair value
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss)
Total financial assets measured at fair value
Derivative financial instruments – liabilities
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss)
Designated (fair value through profit or loss)
Derivative financial instruments – liabilities
Designated (fair value through profit or loss)
Investment contract liabilities1
Third-party interests in consolidated funds
Borrowed funds
Investment contract liabilities1
Third-party interests in consolidated funds
Borrowed funds
Other liabilities
Total financial liabilities measured at fair value
Other liabilities
£m
Level 3
£m
2
Level 3
2
2
1,217
2
1,217
1,217
1,217
–
–
–
1,219
–
245
Total
245
245
43,047
245
43,047
43,047
43,047
55
55
55
43,347
55
–
Level 1
–
–
26,199
–
26,199
26,199
26,199
55
55
55
26,254
55
243
Level 2
243
243
15,631
243
15,631
15,631
15,631
–
–
–
15,874
–
268
43,347
268
268
22,974
268
17,197
4,868
22,974
787
17,197
122
4,868
787
23,242
122
–
26,254
–
–
447
–
–
–
447
399
–
48
–
399
447
48
268
15,874
268
268
22,527
268
17,197
4,868
22,527
388
17,197
74
4,868
388
22,795
74
–
1,219
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Investment contract liabilities amount excludes £11,543 million discretionary participating investment contracts. These contracts are classified as non-financial liabilities and are not
Total financial liabilities measured at fair value
analysed according to their fair value hierarchy as permitted by IFRS 7 'Financial Instruments: Disclosures'.
23,242
22,795
447
–
1 Investment contract liabilities amount excludes £11,543 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'.
202
196
196
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
At 31 December 2016 (Restated)¹
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss)
Loans and advances
Investments and securities
Other financial assets
Derivative financial instruments – assets
Designated (fair value through profit or loss)
Investments in associated undertakings and joint ventures
Reinsurers' share of policyholder liabilities
Loans and advances
Investments and securities
Available-for-sale financial assets (fair value through other
comprehensive income)
Loans and advances
Investments and securities
Total financial assets measured at fair value
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss)
Other liabilities
Amounts owed to bank depositors
Derivative financial instruments – liabilities
Designated (fair value through profit or loss)
Investment contract liabilities2
Third-party interests in consolidated funds
Borrowed funds
Other liabilities
Amounts owed to bank depositors
Total
Level 1
Level 2
6,055
1,264
3,183
268
1,340
99,261
139
2,560
3,592
92,970
959
2
957
1,523
346
906
268
3
71,745
–
2,560
206
68,979
55
2
53
4,503
918
2,277
–
1,308
25,948
–
–
3,381
22,567
880
–
880
£m
Level 3
29
–
–
–
29
1,568
139
–
5
1,424
24
–
24
106,275
73,323
31,331
1,621
2,900
1,293
446
1,161
80,291
67,515
7,981
935
620
3,240
1,256
1,250
–
6
52,631
52,011
–
570
50
–
1,618
24
446
1,148
27,070
14,914
7,981
365
570
3,240
26
19
–
7
590
590
–
–
–
–
616
i
F
n
a
n
c
a
s
i
l
Total financial liabilities measured at fair value
83,191
53,887
28,688
1 The following adjustments have been made to the fair value hierarchy previously presented for December 2016:
loans and advances of £801 million that were presented as held-for-trading assets (Level 2) were reclassified as loans and receivables;
loans and advances of £197 million that were presented as designated at fair value through profit or loss (Level 2) were reclassified as loans and receivables;
investments and securities of £46 million that were presented as held-for-trading (Level 2) were reclassified as designated at fair value through profit or loss (Level 2);
investments and securities of £270 million that were presented as designated at fair value through profit or loss (Level 1) were reclassified as Level 2.
In addition, investments and securities designated as fair value through profit or loss (Level 1) have been restated for the elimination of own shares held by consolidated investment
funds (£145 million) that was identified in the current year;
borrowed funds of £348 million that were presented as designated fair value through profit or loss (Level 1) were reclassified as Level 2;
amounts owed to bank depositors of £550 million that were presented at fair value through profit or loss (Level 2) were reclassified as financial liabilities at amortised cost.
2 Investment contract liabilities amount excludes £10,084 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'.
203
197
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
E: Financial assets and liabilities continued
E3: Disclosure of financial assets and liabilities measured at fair value continued
E: Financial assets and liabilities continued
(b) Level 3 fair value hierarchy disclosure
E3: Disclosure of financial assets and liabilities measured at fair value continued
The tables below reconcile the opening balances of Level 3 financial assets and liabilities to closing balances at the end of the year.
Movements during the year include both continuing operations and assets and movements of assets and liabilities classified as held for
(b) Level 3 fair value hierarchy disclosure
sale and distribution. A single line item at the end of the movement table is included to reflect the carrying value transferred to assets or
The tables below reconcile the opening balances of Level 3 financial assets and liabilities to closing balances at the end of the year.
liabilities held for sale and distribution at 31 December 2017.
Movements during the year include both continuing operations and assets and movements of assets and liabilities classified as held for
sale and distribution. A single line item at the end of the movement table is included to reflect the carrying value transferred to assets or
Year ended 31 December 2017
liabilities held for sale and distribution at 31 December 2017.
Year ended 31 December 2017
Level 3 financial assets
At beginning of the year
Total net fair value (losses)/gains recognised in:
Level 3 financial assets
– profit or loss
At beginning of the year
– other comprehensive income
Total net fair value (losses)/gains recognised in:
Purchases and issues
– profit or loss
Sales and settlements
– other comprehensive income
Transfers in
Purchases and issues
Transfers out
Sales and settlements
Foreign exchange and other
Transfers in
Transferred to assets held for sale
Transfers out
Foreign exchange and other
Total Level 3 financial assets
Transferred to assets held for sale
and distribution
and distribution
Unrealised fair value (losses)/gains relating to
Total Level 3 financial assets
Unrealised fair value (losses)/gains relating to
assets held at 31 December 2017
recognised in profit or loss
assets held at 31 December 2017
recognised in profit or loss
Held-for-
trading Designated fair value through profit or loss
Held-for-
Investments
in associated
undertakings
Investments
and joint
in associated
ventures
undertakings
and joint
139
ventures
trading Designated fair value through profit or loss
Investments
and
securities
Investments
and
1,424
securities
Loans and
5
advances
Loans and
advances
29
Derivatives
Derivatives
(26)
29
1
4
(26)
(3)
1
–
4
–
(3)
(3)
–
–
–
(3)
2
–
2
(26)
1
139
–
88
1
(39)
–
–
88
–
(39)
2
–
–
(191)
2
–
(191)
–
–
3
5
–
–
3
(5)
–
–
–
–
(5)
(1)
–
–
(2)
(1)
–
(2)
–
–
53
1,424
–
806
53
(84)
–
445
806
(245)
(84)
45
445
(245)
(1,227)
45
1,217
(1,227)
1,217
72
Available-
for-sale
Available-
for-sale
Investments
and
securities
Investments
and
24
securities
–
24
–
–
–
–
–
–
–
–
–
–
–
–
(24)
–
–
(24)
–
–
£m
Total
£m
Total
1,621
31
1,621
1
898
31
(131)
1
445
898
(245)
(131)
43
445
(245)
(1,444)
43
1,219
(1,444)
1,219
46
–
–
–
46
72
At 31 December 2017, the carrying value of Level 3 assets comprised £2 million of derivative assets held by Old Mutual Bermuda
(26)
business and £1,217 million of investments and securities held by Emerging Markets. The assets held by Emerging Markets principally
comprise private company shares and unlisted pooled investments held by policyholder funds for which the bulk of the investment risk is
At 31 December 2017, the carrying value of Level 3 assets comprised £2 million of derivative assets held by Old Mutual Bermuda
borne by policyholders. As at 31 December 2017, all Level 3 assets held by Old Mutual Wealth and Nedbank had been transferred into
business and £1,217 million of investments and securities held by Emerging Markets. The assets held by Emerging Markets principally
assets held for sale and distribution and are therefore not included within the closing amounts shown above. Old Mutual Wealth's Level 3
comprise private company shares and unlisted pooled investments held by policyholder funds for which the bulk of the investment risk is
assets are held by linked funds, with policyholders bearing all of the investment risk, and are matched exactly by Level 3 investment
borne by policyholders. As at 31 December 2017, all Level 3 assets held by Old Mutual Wealth and Nedbank had been transferred into
contract liabilities.
assets held for sale and distribution and are therefore not included within the closing amounts shown above. Old Mutual Wealth's Level 3
assets are held by linked funds, with policyholders bearing all of the investment risk, and are matched exactly by Level 3 investment
Amounts shown as purchases and issues arise principally from the purchase of private company shares and unlisted pooled investments
contract liabilities.
by Old Mutual Wealth and Emerging Markets and from investments in associated undertakings by Nedbank.
Amounts shown as purchases and issues arise principally from the purchase of private company shares and unlisted pooled investments
Amounts shown as sales and settlements arise principally from the sale of private company shares and unlisted pooled investments by
by Old Mutual Wealth and Emerging Markets and from investments in associated undertakings by Nedbank.
Old Mutual Wealth and Emerging Markets and from distributions received in respect of Old Mutual Wealth's holdings in property funds.
Amounts shown as sales and settlements arise principally from the sale of private company shares and unlisted pooled investments by
Transfers into Level 3 assets principally relates to investments held by Old Mutual Wealth that were previously shown within Level 2 and
Old Mutual Wealth and Emerging Markets and from distributions received in respect of Old Mutual Wealth's holdings in property funds.
which are no longer being actively priced. Transfers out of Level 3 assets principally comprise investments held by Old Mutual Wealth that
were not being repriced and that have been transferred into Level 2 as they are now actively priced.
Transfers into Level 3 assets principally relates to investments held by Old Mutual Wealth that were previously shown within Level 2 and
which are no longer being actively priced. Transfers out of Level 3 assets principally comprise investments held by Old Mutual Wealth that
were not being repriced and that have been transferred into Level 2 as they are now actively priced.
204
198
198
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Year ended 31 December 2017
Held-for-
trading
Other
liabilities
Derivatives
Designated
fair value
through profit
or loss
Investment
contract
liabilities
Level 3 financial liabilities
At beginning of the year
Total net fair value (gains)losses recognised in profit or loss for the year
Purchases and issues
Sales and settlements
Transfers in
Transfers out
Foreign exchange and other
Transferred to liabilities held for sale and distribution
Total Level 3 financial liabilities
Unrealised fair value losses/(gains) relating to liabilities held at
31 December 2017 recognised in profit or loss
19
6
–
–
–
–
–
(25)
–
–
7
(7)
–
–
–
–
–
–
–
–
590
(23)
616
(23)
167
(152)
(8)
(1,167)
–
£m
Total
616
(24)
616
(23)
167
(152)
(8)
(1,192)
–
–
–
i
F
n
a
n
c
a
s
l
i
As at December 2017, all Level 3 liabilities held by Old Mutual Wealth and Nedbank have been transferred into liabilities held for sale and
distribution and are therefore not included in the closing amounts shown above. No Level 3 liabilities were held by any of the other Group
businesses at 31 December 2017.
Year ended 31 December 2016
Held-for-
trading
Designated at fair value through profit or loss
Available-for-
sale
£m
Total
Level 3 financial assets
At beginning of the year
Total net fair value (losses)/gains
recognised in the profit or loss
for the year
Purchases and issues
Sales and settlements
Transfers in
Transfers out
Foreign exchange and other
Transferred to held-for-sale
Total Level 3 financial assets
Unrealised fair value (losses)/gains relating to
assets held at 31 December 2016
recognised in profit or loss
Investments in
associated
undertakings
and joint
ventures
Derivatives
18
51
(4)
25
(15)
–
–
5
–
29
14
57
(10)
–
–
27
–
139
(4)
14
Loans and
advances
Investments
and securities
Investments
and securities
1
–
–
–
2
–
2
–
5
–
1,280
–
1,350
64
134
(234)
246
(59)
60
(67)
1,424
–
–
21
–
–
3
–
24
74
216
(238)
248
(59)
97
(67)
1,621
63
–
73
205
199
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
E: Financial assets and liabilities continued
E3: Disclosure of financial assets and liabilities measured at fair value continued
E: Financial assets and liabilities continued
(b) Level 3 fair value hierarchy disclosure
E3: Disclosure of financial assets and liabilities measured at fair value continued
Year ended 31 December 2016
(b) Level 3 fair value hierarchy disclosure
Year ended 31 December 2016
Level 3 financial liabilities
At beginning of the year
Total net fair value losses recognised in profit or loss for the year
Level 3 financial liabilities
Purchases and issues
At beginning of the year
Sales and settlements
Total net fair value losses recognised in profit or loss for the year
Transfers in
Purchases and issues
Transfers out
Sales and settlements
Foreign exchange and other
Transfers in
Total Level 3 financial liabilities
Transfers out
Foreign exchange and other
Unrealised fair value gains relating to liabilities held at 31 December 2016
Total Level 3 financial liabilities
recognised in profit or loss
Other
liabilities
Other
–
liabilities
2
15
–
–
2
–
15
–
–
2
–
19
–
2
19
2
Held-for-
trading
Held-for-
trading
Derivatives
4
Derivatives
7
–
4
(4)
7
–
–
–
(4)
–
–
7
–
–
7
7
Designated fair
value through
profit or loss
Designated fair
Investment
value through
contract
profit or loss
liabilities
Investment
contract
594
liabilities
13
21
594
(115)
13
188
21
(31)
(115)
(80)
188
590
(31)
(80)
590
13
£m
£m
Total
598
Total
22
36
598
(119)
22
188
36
(31)
(119)
(78)
188
616
(31)
(78)
616
22
22
2
7
13
recognised in profit or loss
Unrealised fair value gains relating to liabilities held at 31 December 2016
E3: Disclosure of financial assets and liabilities measured at Fair Value continued
(c)(i) Effect of changes in significant unobservable assumptions to reasonable possible alternatives
E3: Disclosure of financial assets and liabilities measured at Fair Value continued
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,
(c)(i) Effect of changes in significant unobservable assumptions to reasonable possible alternatives
quantification of uncertainty is judgemental.
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,
When the fair value of a financial asset or liability is affected by more than one unobservable assumption, the figures shown reflect the
quantification of uncertainty is judgemental.
most favourable or most unfavourable change from varying the assumptions individually.
When the fair value of a financial asset or liability is affected by more than one unobservable assumption, the figures shown reflect the
The valuations of the private equity investments are performed on an asset-by-asset basis using a valuation methodology appropriate
most favourable or most unfavourable change from varying the assumptions individually.
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 these multiples may
The valuations of the private equity investments are performed on an asset-by-asset basis using a valuation methodology appropriate
include multiples for comparable listed companies which have been adjusted for discounts for non-tradability and valuation multiples
to the specific investment and in line with industry guidelines. In determining the valuation of the investment the principal assumption
earned on transactions in comparable sectors.
used is the valuation multiple applied to the main financial indicators (such as adjusted earnings). The source of these multiples may
include multiples for comparable listed companies which have been adjusted for discounts for non-tradability and valuation multiples
The valuations of asset-backed securities are determined by discounted cash flow models that generate the expected value of the asset,
earned on transactions in comparable sectors.
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
The valuations of asset-backed securities are determined by discounted cash flow models that generate the expected value of the asset,
information is available.
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
Structured notes and other derivatives are generally valued using option pricing models. For structured notes and other derivatives,
information is available.
principal assumptions concern the future volatility of asset values and the future correlation between asset values. 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
Structured notes and other derivatives are generally valued using option pricing models. For structured notes and other derivatives,
correlation from comparable assets for which market data is more readily available, and examination of historical levels.
principal assumptions concern the future volatility of asset values and the future correlation between asset values. 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
Details of the valuation techniques applied to the different categories of financial instruments can be found in note E2: Fair values of
correlation from comparable assets for which market data is more readily available, and examination of historical levels.
financial assets and liabilities.
Details of the valuation techniques applied to the different categories of financial instruments can be found in note E2: Fair values of
financial assets and liabilities.
206
200
200
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
The table below summarises the significant inputs to value instruments categorised as Level 3 hierarchy in the Group's continuing
operations and their sensitivity to changes in the inputs used. The significant inputs to value instruments categorised as Level 3 hierarchy
classified as held for sale and distribution at 31 December 2017 are presented in note E7(c). Consistent with the requirements of
accounting standards, the comparative period has not been re-presented for financial assets and liabilities classified as held for sale and
distribution. The comparative information presented at 31 December 2017, therefore includes the financial assets and liabilities for the
composition of the Group as at 31 December 2016. This note should be read in conjunction with Note E7(c) to obtain a comparable view
of the Group's significant inputs to value instruments categorised as Level 3 hierarchy at 31 December 2017.
Types of financial instruments
Fair values
Significant
unobservable input
Fair value measurement sensitivity
to unobservable inputs
At
31 December
2017
£m
At
31 December
2016
£m
–
139
Valuation multiples
Assets
Investments in associated
undertakings and joint
ventures
Investments and
securities
Loans and
advances
Derivatives
Liabilities
Investment contract
liabilities
Other liabilities
Derivatives
At
31 December
2017
£m
At
31 December
2016
£m
Favourable: nil
Unfavourable: nil
Favourable: 13
Unfavourable: 16
Favourable: 110
Unfavourable: 90
Favourable: 213
Unfavourable: 223
Favourable: nil
Unfavourable: nil
Favourable: nil
Unfavourable: 1
Favourable: 1
Unfavourable: 1
Favourable: 10
Unfavourable: 9
i
F
n
a
n
c
a
s
l
i
Valuation multiples
Correlations
Volatilities
Credit spreads
Dividend growth rates
Internal rates of return,
Cost of capital
Inflation rates
Market adjusted price
Exchange price of
infrequently
traded shares
Correlations
Volatilities
Credit spreads
Interest rates
Volatilities
Interest rates
Volatilities
Valuation multiples
Volatilities
Favourable: nil
Unfavourable: nil
Favourable: nil
Unfavourable: nil
Favourable: nil
Unfavourable: nil
Favourable: 59
Unfavourable: 59
Favourable: 1
Unfavourable: 1
Favourable: 7
Unfavourable: 16
1,217
1,448
–
2
–
–
–
5
29
590
19
7
All the business segments have performed analysis of the impact of reasonable possible assumptions for unobservable inputs based on
the specific characteristics of each instrument. As all the changes in the assumptions are unique to each instrument the disclosure of the
range of changes in the assumptions would not provide the reader of the financial statements with any additional useful information as this
is general information and does not relate to a specific instrument.
207
201
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
E: Financial assets and liabilities continued
E3: Disclosure of financial assets and liabilities measured at Fair Value continued
E: Financial assets and liabilities continued
(c)(ii) Analysis of investments and securities classified as Level 3 hierarchy
E3: Disclosure of financial assets and liabilities measured at Fair Value continued
The table below summarises the categories of investments and securities classified as Level 3 hierarchy of the Group's continuing
operations only:
(c)(ii) Analysis of investments and securities classified as Level 3 hierarchy
The table below summarises the categories of investments and securities classified as Level 3 hierarchy of the Group's continuing
operations only:
At
31 December
2017
At
416
31 December
416
2017
–
416
718
416
4
–
79
718
1,217
4
79
1,217
£m
At
31 December
£m
2016
At
427
31 December
405
2016
22
427
643
405
344
22
34
643
1,448
344
34
1,448
Pooled investments
Unlisted and stale price pooled investments
Suspended funds
Pooled investments
Unlisted debt and equity
Unlisted and stale price pooled investments
Private equity investments
Suspended funds
Other
Unlisted debt and equity
Private equity investments
Other
The table below summarises the significant unobservable inputs of investments and securities categorised as Level 3 hierarchy.
Other investments
Commodity prices
Interest rates
Other investments
Inflation rates
Commodity prices
Interest rates
Inflation rates
Equity instruments
Dividend growth rate
Volatilities
Equity instruments
Internal rate of return
Dividend growth rate
Market adjusted prices
Volatilities
Internal rate of return
Market adjusted prices
Pooled investments
The table below summarises the significant unobservable inputs of investments and securities categorised as Level 3 hierarchy.
Underlying net asset value
Published fund price
Pooled investments
Credit spreads
Underlying net asset value
Market adjusted prices
Published fund price
Credit spreads
(d) Alternative assumptions
Market adjusted prices
Accounting standards require consideration of the effect of reasonable possible alternative assumptions on the fair value of Level 3
financial assets and liabilities.
(d) Alternative assumptions
Accounting standards require consideration of the effect of reasonable possible alternative assumptions on the fair value of Level 3
Alternative assumptions are assessed in terms of possible favourable and unfavourable changes in the key market inputs for the major
financial assets and liabilities.
types of Level 3 financial assets and liabilities. Changes in business risk inputs such as lapses and non-performance risk were also
considered.
Alternative assumptions are assessed in terms of possible favourable and unfavourable changes in the key market inputs for the major
types of Level 3 financial assets and liabilities. Changes in business risk inputs such as lapses and non-performance risk were also
Management believes that in aggregate, 25% (2016: 25%) of the amounts determined in the sensitivity tables represents a reasonable
considered.
possible alternative judgement in the context of the current macroeconomic environment in which the various businesses of the Group
operates. It is therefore considered that the impact of alternative assumptions will be in the range of £28 million (2016: £59 million)
Management believes that in aggregate, 25% (2016: 25%) of the amounts determined in the sensitivity tables represents a reasonable
favourable to £62 million (2016: £62 million) unfavourable on profit or loss and assets. The impact on liabilities will be in the range of
possible alternative judgement in the context of the current macroeconomic environment in which the various businesses of the Group
£nil (2016: £17 million) favourable and £nil (2016: £19 million) unfavourable.
operates. It is therefore considered that the impact of alternative assumptions will be in the range of £28 million (2016: £59 million)
favourable to £62 million (2016: £62 million) unfavourable on profit or loss and assets. The impact on liabilities will be in the range of
£nil (2016: £17 million) favourable and £nil (2016: £19 million) unfavourable.
208
202
202
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
E4: Financial instruments designated as fair value through profit or loss
Certain items in the Group's statement of financial position that would otherwise be categorised as loans and receivables under IAS 39
have been designated as fair value through profit or loss. Information relating to the change in fair value of these items as it relates to
credit risk is shown in the table below.
Consistent with the requirements of accounting standards, the comparative period has not been re-presented for assets and liabilities
classified as held for sale and distribution. The comparative information presented at 31 December 2017, therefore includes financial
instruments designated as fair value through profit or loss for the composition of the Group as at 31 December 2016.
Change in fair value due to
change in credit risk
Loans and advances
Investments and securities
At 31 December 2017
Maximum
exposure to
credit risk
–
6,998
6,998
Current
financial year
–
(3)
(3)
Cumulative
–
(15)
(15)
£m
At 31 December 2016
Maximum
exposure to
credit risk
3,609
8,064
11,673
Current financial
year
(1)
(7)
(8)
Cumulative
–
(12)
(12)
The change in fair value due to a change in credit risk shown above is determined as the amount of the change in fair value of the
instrument that is not attributable to changes in market conditions that give rise to market risk.
For loans and receivables that have been designated as at fair value through profit or loss, individual credit spreads are determined at
inception as the difference between the benchmark interest rate and the interest rate charged to the client. Subsequent changes in the
benchmark interest rate and the credit spread give rise to changes in fair value of the financial instrument. Loans and advances are
reviewed for observable changes in credit risk, and the credit spread is adjusted at subsequent dates if there has been an observable
change in credit risk relating to a particular loan or advance. No credit derivatives are used to hedge the credit risk on any of the financial
assets designated at fair value through profit or loss.
Certain items in the Group's statement of financial position, that would otherwise be categorised as financial liabilities at amortised cost
under IAS 39, have been designated as fair value through profit or loss. Information relating to the change in fair value of these items as it
relates to credit risk is shown in the table below. Consistent with the requirements of accounting standards, the comparative period has not
re-presented for assets and liabilities classified as held for sale and distribution. The comparative information therefore includes items in
the Group's statement of financial position that would otherwise be categorised as financial liabilities at amortised cost under IAS 39 for the
composition of the Group as at 31 December 2016.
i
F
n
a
n
c
a
s
l
i
Change in fair value due to
change in credit risk
Borrowed funds
Amounts owed to bank depositors
Fair value
787
–
787
Current
financial
At 31 December 2017
Contractual
maturity
amount
908
–
908
year Cumulative
124
(26)
–
–
124
(26)
Fair value
935
3,790
4,725
£m
At 31 December 2016
Contractual
maturity
amount
871
3,787
4,658
Current
financial year Cumulative
98
9
107
24
4
28
The fair values of other categories of financial liabilities designated as fair value through profit or loss do not change significantly in respect
of credit risk.
The change in fair value due to credit risk of financial liabilities designated at fair value through profit or loss has been determined as the
difference between fair values determined using a liability curve (adjusted for credit) and a risk-free liability curve. This difference is cross-
checked to market-related data on credit spreads, where available. The basis for not using credit default swaps to determine the change
in fair value due to credit risk is the unavailability of reliable market priced instruments.
209
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
E: Financial assets and liabilities continued
E5: Fair value hierarchy for assets and liabilities not measured at fair value
E: Financial assets and liabilities continued
Certain financial instruments of the Group are not carried at fair value, principally investments and securities categorised as held-to-
maturity loans and advances, certain borrowed funds and other financial assets and financial liabilities at amortised cost. The calculation
E5: Fair value hierarchy for assets and liabilities not measured at fair value
of the fair value of these financial instruments represents the Group's best estimate of the value at which these financial assets could be
Certain financial instruments of the Group are not carried at fair value, principally investments and securities categorised as held-to-
exchanged, or financial liabilities transferred, between market participants at the measurement date. The Group's estimate of fair value
maturity loans and advances, certain borrowed funds and other financial assets and financial liabilities at amortised cost. The calculation
does not necessarily represent the amount it would be able to realise on the sale of the asset or transfer the financial liability in an
of the fair value of these financial instruments represents the Group's best estimate of the value at which these financial assets could be
involuntary liquidation or distressed sale.
exchanged, or financial liabilities transferred, between market participants at the measurement date. The Group's estimate of fair value
does not necessarily represent the amount it would be able to realise on the sale of the asset or transfer the financial liability in an
The table below shows the fair value hierarchy for those assets and liabilities for which the fair value is different to the carrying value and
involuntary liquidation or distressed sale.
which is being estimated for the purpose of IFRS disclosure. Additional information regarding these and other financial instruments not
carried at fair value is provided in the narrative following the table.
The table below shows the fair value hierarchy for those assets and liabilities for which the fair value is different to the carrying value and
which is being estimated for the purpose of IFRS disclosure. Additional information regarding these and other financial instruments not
Fair value hierarchy for assets and liabilities not measured at fair value classified as held for sale and distribution at 31 December 2017,
carried at fair value is provided in the narrative following the table.
is presented separately from that of the continuing operations. Consistent with the requirements of accounting standards, the comparative
period has not been re-presented for assets and liabilities classified as held for sale and distribution. The comparative information
Fair value hierarchy for assets and liabilities not measured at fair value classified as held for sale and distribution at 31 December 2017,
presented at 31 December 2017 therefore includes the fair value hierarchy for those assets and liabilities for which the fair value is
is presented separately from that of the continuing operations. Consistent with the requirements of accounting standards, the comparative
different to the carrying value for the composition of the Group as at 31 December 2016.
period has not been re-presented for assets and liabilities classified as held for sale and distribution. The comparative information
presented at 31 December 2017 therefore includes the fair value hierarchy for those assets and liabilities for which the fair value is
different to the carrying value for the composition of the Group as at 31 December 2016.
Carrying value
Continuing operations at 31 December 2017
Financial liabilities
Borrowed funds
Continuing operations at 31 December 2017
Financial liabilities
Borrowed funds
Level 1
Level 2
Level 3
Carrying value
339
76
Level 1
277
Level 2
–
Level 3
339
76
277
–
Classified as assets and liabilities held for
sale and distribution at 31 December 2017
Financial assets
Classified as assets and liabilities held for
Loans and advances
sale and distribution at 31 December 2017
Investments and securities
Financial assets
Financial liabilities
Loans and advances
Borrowed funds
Investments and securities
Financial liabilities
Borrowed funds
At 31 December 2016 (Restated)1
Carrying value
Carrying value
Level 1
Level 2
Level 3
37,721
3,227
37,721
3,004
3,227
–
Level 1
1,432
–
1,431
1,432
–
Level 2
1,500
–
1,533
1,500
37,492
Level 3
–
37,492
–
–
3,004
1,431
1,533
–
Carrying value
Level 1
Level 2
Level 3
–
Level 2
1,983
–
1,936
1,983
–
Level 1
1,278
–
1,704
1,278
Carrying value
38,239
3,278
38,239
3,759
3,278
At 31 December 2016 (Restated)1
Financial assets
Loans and advances
Investments and securities
Financial assets
Financial liabilities
Loans and advances
Borrowed funds
Investments and securities
Financial liabilities
1 In Loans and advances of £801 million were included in the previous year as held-for-trading assets, whereas these instruments were classified and measured as financial assets at
3,640
Borrowed funds
amortised cost. Loans and advances of £197 million were included in the previous year as designated at fair value through profit or loss, whereas these instruments were classified
and measured as financial assets at amortised cost. Accordingly, the held-for-trading, designated at fair value through profit or loss and financial assets at amortised cost categories
1 In Loans and advances of £801 million were included in the previous year as held-for-trading assets, whereas these instruments were classified and measured as financial assets at
have been restated to reflect the correct classification.
amortised cost. Loans and advances of £197 million were included in the previous year as designated at fair value through profit or loss, whereas these instruments were classified
and measured as financial assets at amortised cost. Accordingly, the held-for-trading, designated at fair value through profit or loss and financial assets at amortised cost categories
have been restated to reflect the correct classification.
Investments and securities
For investments and securities shown within notes E1 and E7(a) as either held-to-maturity investments and loans and receivables in terms
of IAS 39 and therefore not carried at fair value, the fair value has been determined based either on available market prices (Level 1) or
Investments and securities
discounted cash flow analysis where an instrument is not quoted or the market is considered to be inactive (Level 2).
For investments and securities shown within notes E1 and E7(a) as either held-to-maturity investments and loans and receivables in terms
of IAS 39 and therefore not carried at fair value, the fair value has been determined based either on available market prices (Level 1) or
As at 31 December 2017, all of the assets of Nedbank had been transferred to assets held for sale and distribution, including all of the
discounted cash flow analysis where an instrument is not quoted or the market is considered to be inactive (Level 2).
Group's investments and securities classified as either held-to-maturity investments or loans and receivables. All of the Group's remaining
investments and securities were carried at fair value.
As at 31 December 2017, all of the assets of Nedbank had been transferred to assets held for sale and distribution, including all of the
Group's investments and securities classified as either held-to-maturity investments or loans and receivables. All of the Group's remaining
investments and securities were carried at fair value.
37,738
Level 3
–
37,738
–
–
1,704
1,936
3,759
–
£m
Fair value
Total
£m
Fair value
353
Total
353
£m
Fair value
£m
Total
Fair value
37,492
Total
2,932
37,492
2,964
2,932
2,964
£m
Fair value
Total
£m
Fair value
37,738
Total
3,261
37,738
3,640
3,261
210
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Loans and advances
Loans and advances shown within notes E1 and E7(a) as loans and receivables in terms of IAS 39 and therefore not carried at fair value,
principally comprise variable rate financial assets and are classified as Level 3. The interest rates on these variable rate-financial assets
are adjusted when the applicable benchmark interest rates change.
Loans and advances are not actively traded in most markets and it is therefore not possible to determine the fair value of these loans and
advances using observable market prices and market inputs. Due to the unique characteristics of the loans and advances portfolio and the
fact that there have been no recent transactions involving the disposals of such loans and advances, there is no basis to determine a price
that could be negotiated between market participants in an orderly transaction. The Group is not currently in the position of a forced sale of
such underlying loans and advances and it would therefore be inappropriate to value the loans and advances on a forced-sale basis.
For specifically impaired loans and advances, the carrying value as determined after consideration of the Group's IAS 39 credit
impairments, is considered the best estimate of fair value.
The Group has developed a methodology and model to determine the fair value of the gross exposures for the performing loans and
advances measured at amortised cost. This model incorporates the use of average interest rates and projected monthly cash flows per
product type. Future cash flows are discounted using interest rates at which similar loans would be granted to borrowers with similar credit
ratings and maturities. Inputs into the model include various assumptions utilised in the pricing of loans and advances. The determination
of such inputs is highly subjective and therefore any change to one or more of the assumptions may result in a significant change in the
determination of the fair value of loans and advances.
As at 31 December 2017, all of the assets of Nedbank were transferred to assets held for sale and distribution, representing most of the
Group's loans and advances. The remaining amount of £1,282 million is held by Emerging Markets, for which the carrying value is
considered a reasonable approximation of the fair value.
Borrowed funds
Borrowed funds are shown within notes E1 and E7(a) as financial liabilities at amortised cost in terms of IAS39, and therefore not carried
at fair value. The fair value is determined using either available market prices (Level 1), or discounted cash flow analysis where an
instrument is not quoted or the market is considered to be inactive (Level 2). During 2017 most of the Group's borrowed funds not held
at fair value were either redeemed or transferred to assets held for sale and distribution.
Fair value hierarchy for items for which carrying value is considered an approximation of fair value
Other financial assets
The carrying values of cash and cash equivalents, mandatory deposits with central banks and trade, other receivables and other assets
are considered a reasonable approximation of their respective fair values, as they are either short term in nature or are repriced to current
market rates at frequent intervals. Trade, other receivables and other assets are classified into Level 3 of the fair value hierarchy.
Amounts owed to depositors
Amounts owed to depositors principally comprises variable rate liabilities. The carrying value of the amounts owed to depositors
approximates fair value because the instruments reprice to current market rates at frequent intervals. In addition, a significant portion of
the balance is callable or is short term in nature. Amounts owed to depositors would be classified into Level 2 of the fair value hierarchy.
Other financial liabilities
The carrying values of trade, other payables, and other liabilities are considered a reasonable approximation of their respective fair values,
as they are either short-term in nature or are repriced to current market rates at frequent intervals. Trade, other payables and other
liabilities would be classified into Level 3 of the fair value hierarchy.
211
205
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n
a
n
c
a
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Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
E: Financial assets and liabilities continued
E6: Master netting or similar agreements
E: Financial assets and liabilities continued
The Group offsets financial assets and liabilities in the consolidated statement of financial position when it has a legal enforceable right to
do so and intends to settle on a net basis simultaneously. Certain master netting agreements do not provide the Group with the current
E6: Master netting or similar agreements
legally enforceable right to offset the instruments. The majority of these transactions are governed by the principles of ISDA or similar type
The Group offsets financial assets and liabilities in the consolidated statement of financial position when it has a legal enforceable right to
of agreements. These agreements aim to protect the parties in the event of default.
do so and intends to settle on a net basis simultaneously. Certain master netting agreements do not provide the Group with the current
legally enforceable right to offset the instruments. The majority of these transactions are governed by the principles of ISDA or similar type
The following table presents information on the potential effect of netting offset arrangements after taking into consideration these types
of agreements. These agreements aim to protect the parties in the event of default.
of agreements of the Group's continuing operations. Consistent with the requirements of accounting standards, the comparative period
has not been re-presented for assets and liabilities classified as held for sale and distribution. The comparative information presented
The following table presents information on the potential effect of netting offset arrangements after taking into consideration these types
at 31 December 2017, therefore includes the potential effect of netting offsetting arrangements for the composition of the Group as at
of agreements of the Group's continuing operations. Consistent with the requirements of accounting standards, the comparative period
31 December 2016.
has not been re-presented for assets and liabilities classified as held for sale and distribution. The comparative information presented
at 31 December 2017, therefore includes the potential effect of netting offsetting arrangements for the composition of the Group as at
At 31 December 2017
31 December 2016.
£m
At 31 December 2017
Financial assets
Derivative financial instruments – assets
Cash and cash equivalents
Financial assets
Financial liabilities
Derivative financial instruments – assets
Trade, other payables and other liabilities
Cash and cash equivalents
Derivative financial instruments – liabilities
Financial liabilities
Trade, other payables and other liabilities
Derivative financial instruments – liabilities
At 31 December 2016
At 31 December 2016
Amounts offset
in the
statement of
Amounts offset
financial
in the
position
statement of
financial
–
position
(31)
–
(31)
(31)
–
(31)
–
Gross amount
of financial
instrument
Gross amount
of financial
245
instrument
1,867
245
2,560
1,867
268
2,560
268
Net amounts of
financial
instruments
Net amounts of
presented in
financial
the statement
instruments
of financial
presented in
position
the statement
of financial
245
position
1,836
245
2,529
1,836
268
2,529
268
Amounts that
may be netted
off on the
Amounts that
occurrence of a
may be netted
future event¹
off on the
occurrence of a
(209)
future event¹
–
(209)
(6)
–
(209)
(6)
(209)
£m
Position not
available to be
offset
Position not
available to be
36
offset
1,836
36
2,523
1,836
59
2,523
59
£m
£m
Position not
available to be
offset
Position not
Financial assets
available to be
Loans and advances
43,108
offset
364
Derivative financial instruments – assets
Financial assets
4,847
Cash and cash equivalents
43,108
Loans and advances
Financial liabilities
364
Derivative financial instruments – assets
4,492
Trade, other payables and other liabilities
4,847
Cash and cash equivalents
Amounts owed to bank depositors
45,309
Financial liabilities
487
Derivative financial instruments – liabilities
4,492
Trade, other payables and other liabilities
45,309
Amounts owed to bank depositors
1 This represents the amounts that could be offset in the event of default and includes collateral received/pledged at the reporting date. These arrangements are typically governed by
487
Derivative financial instruments – liabilities
Gross amount of
financial
instrument
Gross amount of
financial
44,788
instrument
1,689
4,974
44,788
1,689
5,239
4,974
46,989
1,510
5,239
46,989
1,510
Amounts offset
in the statement
of financial
Amounts offset
position
in the statement
of financial
(1,680)
position
(349)
(127)
(1,680)
(349)
(127)
(127)
(1,680)
(349)
(127)
(1,680)
(349)
Amounts that
may be netted
off on the
Amounts that
occurrence of a
may be netted
future event¹
off on the
occurrence of a
–
future event¹
(976)
–
–
(976)
(620)
–
–
(674)
(620)
–
(674)
Net amounts of
financial
instruments
Net amounts of
presented in the
financial
statement of
instruments
financial position
presented in the
statement of
43,108
financial position
1,340
4,847
43,108
1,340
5,112
4,847
45,309
1,161
5,112
45,309
1,161
master netting and collateral arrangements. Details of the Group's security lending arrangements can be found in note G3, Securities Lending.
1 This represents the amounts that could be offset in the event of default and includes collateral received/pledged at the reporting date. These arrangements are typically governed by
master netting and collateral arrangements. Details of the Group's security lending arrangements can be found in note G3, Securities Lending.
212
206
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
E7: Categories of financial instruments classified as held for sale and distribution
(a) Categories of financial assets and liabilities
The following table provides an analysis of the categories of financial instruments of assets and liabilities classified as held for sale and
distribution. Refer to note A4 for more information about businesses classified as held for sale and distribution. These notes should be
read in conjunction with note E1 in order to obtain a comparable view of the Group's categories of financial instruments of assets and
liabilities classified as held for sale and distribution at 31 December 2017.
At 31 December 2017
Measurement basis
Assets
Mandatory reserve deposits with
central banks
Investments in associated undertakings
and joint ventures
Reinsurers' share of policyholder
liabilities
Loans and advances
Investments and securities
Trade, other receivables and
other assets
Derivative financial instruments
Cash and cash equivalents
Total assets that include financial
instruments
Total other non-financial assets
Total assets
Liabilities
Life insurance contract liabilities
Investment contract liabilities
Third-party interest in consolidation
of funds
Borrowed funds
Trade, other payables and other liabilities
Amounts owed to bank depositors
Derivative financial instruments
Total liabilities that include financial
instruments
Total other non-financial liabilities
Total liabilities
Total
1,147
404
2,914
42,567
73,818
1,619
1,842
3,000
127,311
3,292
130,603
625
60,221
7,605
3,031
2,283
45,766
1,795
121,326
642
121,968
Fair value (note E7(b))
Available-
for-sale
financial
assets
Held-for-
trading Designated
£m
Amortised cost
Financial
liabilities
amortised
cost
Loans and
receivables
Non-
financial
assets and
liabilities
Held-to-
maturity
investments
i
F
n
a
n
c
a
s
l
i
–
–
–
1,170
3,277
297
1,842
–
6,586
–
6,586
–
191
–
–
–
–
1,147
–
2,525
3,674
66,136
–
2
1,178
–
–
2,962
6
37,721
265
–
–
–
–
–
–
–
–
–
624
–
3,000
72,526
–
72,526
1,180
–
1,180
2,962
–
2,962
42,763
–
42,763
–
–
–
60,221
–
–
445
1,385
1,795
3,625
–
3,625
7,605
27
–
3,268
–
71,121
–
71,121
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,004
697
41,113
–
44,814
–
44,814
–
213
383
–
–
698
–
–
1,294
3,292
4,586
625
–
–
–
1,141
–
–
1,766
642
2,408
213
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Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
E: Financial assets and liabilities continued
E7: Categories of financial instruments classified as held for sale and distribution continued
E: Financial assets and liabilities continued
(b) Disclosure of financial assets and liabilities held for sale and distribution measured at fair value
E7: Categories of financial instruments classified as held for sale and distribution continued
The table below presents a summary of the Group's financial assets and liabilities included in assets and liabilities held for sale and
distribution, that are measured at fair value in the consolidated statement of financial position according to their IAS 39 classification, as
(b) Disclosure of financial assets and liabilities held for sale and distribution measured at fair value
set out in the accounting policies note K and in terms of the fair value hierarchy described in note E2. The majority of the Group's financial
The table below presents a summary of the Group's financial assets and liabilities included in assets and liabilities held for sale and
assets are measured utilising market observable inputs (Level 1) and there has been no significant change compared to the prior year.
distribution, that are measured at fair value in the consolidated statement of financial position according to their IAS 39 classification, as
This note should be read in conjunction with note E3 in order to obtain a comparable view of the Group's financial assets and liabilities
set out in the accounting policies note K and in terms of the fair value hierarchy described in note E2. The majority of the Group's financial
held for sale and distribution measured at fair value at 31 December 2017.
assets are measured utilising market observable inputs (Level 1) and there has been no significant change compared to the prior year.
This note should be read in conjunction with note E3 in order to obtain a comparable view of the Group's financial assets and liabilities
At 31 December 2017
held for sale and distribution measured at fair value at 31 December 2017.
Total
Level 1
Level 2
£m
Level 3
Financial assets held for sale and distribution
At 31 December 2017
measured at fair value
Held-for-trading (fair value through profit or loss)
Financial assets held for sale and distribution
Loans and advances
measured at fair value
Investments and securities
Held-for-trading (fair value through profit or loss)
Other financial assets
Loans and advances
Derivative financial instruments – assets
Investments and securities
Other financial assets
Designated (fair value through profit or loss)
Derivative financial instruments – assets
Investments in associated undertakings and joint ventures
Reinsurers' share of policyholder liabilities
Designated (fair value through profit or loss)
Reinsurers' share of policyholder liabilities
Available-for-sale financial assets (fair value through equity)
Loans and advances
Investments in associated undertakings and joint ventures
Investments and securities
Loans and advances
Investments and securities
Loans and advances
Investments and securities
Loans and advances
Investments and securities
measured at fair value
Available-for-sale financial assets (fair value through equity)
Total financial assets held for sale and distribution
Financial liabilities held for sale and distribution
Total financial assets held for sale and distribution
measured at fair value
measured at fair value
Held-for-trading (fair value through profit or loss)
Financial liabilities held for sale and distribution
Other liabilities
Held-for-trading (fair value through profit or loss)
Derivative financial instruments – liabilities
Other liabilities
measured at fair value
Amounts owed to bank depositors
Amounts owed to bank depositors
Designated (fair value through profit or loss)
Derivative financial instruments – liabilities
Designated (fair value through profit or loss)
Investment contract liabilities
Third-party interests in consolidated funds
Borrowed funds
Investment contract liabilities
Third-party interests in consolidated funds
Amounts owed to bank depositors
Borrowed funds
Other liabilities
Other liabilities
Total financial liabilities held for sale and distribution liabilities
Amounts owed to bank depositors
measured at fair value
Total financial liabilities held for sale and distribution liabilities
Total
6,586
1,170
3,277
6,586
297
1,170
1,842
3,277
297
72,526
1,842
191
2,525
72,526
3,674
191
66,136
2,525
3,674
1,180
66,136
2
1,178
1,180
2
1,178
80,292
80,292
3,625
445
1,385
3,625
1,795
445
1,385
71,121
1,795
60,221
7,605
71,121
27
60,221
–
7,605
3,268
27
–
3,268
74,746
Level 1
602
–
304
602
297
–
1
304
297
58,053
1
–
2,525
58,053
184
–
55,344
2,525
184
3
55,344
2
1
3
2
1
58,658
58,658
418
418
–
418
–
418
–
57,399
–
57,399
–
57,399
–
57,399
–
–
–
–
–
–
57,817
Level 2
5,984
1,170
2,973
5,984
–
1,170
1,841
2,973
–
13,053
1,841
–
–
13,053
3,488
–
9,565
–
3,488
1,153
9,565
–
1,153
1,153
–
1,153
20,190
20,190
3,182
2
1,385
3,182
1,795
2
1,385
12,555
1,795
1,655
7,605
12,555
27
1,655
–
7,605
3,268
27
–
3,268
15,737
£m
Level 3
–
–
–
–
–
–
–
–
–
1,420
–
191
–
1,420
2
191
1,227
–
2
24
1,227
–
24
24
–
24
1,444
1,444
25
25
–
25
–
25
–
1,167
–
1,167
–
1,167
–
1,167
–
–
–
–
–
–
1,192
measured at fair value
74,746
57,817
15,737
1,192
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Old Mutual plc
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(c) Effect of changes in significant unobservable assumptions to reasonable possible alternatives
The table below summarises the significant inputs to value instruments categorised as Level 3 of the fair value hierarchy and their
sensitivity to changes in the inputs used.
Types of financial instruments
Fair values
Significant unobservable
inputs
Fair value
measurement
sensitivity to
unobservable inputs
At
31 December
2017
£m
Favourable: 18
Unfavourable: 22
Favourable: 125
Unfavourable: 127
Valuation multiples
Valuation multiples
Correlations
Volatilities
Credit spreads
Market adjusted price
Exchange price of infrequently
traded shares
Credit spreads
Discount rates
Favourable: nil
Unfavourable: nil
Interest rates
Volatilities
Discount rates
Valuation multiples
Favourable: 117
Unfavourable: 117
Favourable: 2
Unfavourable: 3
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Investments in associated undertakings and joint ventures
Investments and securities
Loans and advances
Liabilities
Investment contract liabilities
Other liabilities
At
31 December
2017
£m
191
1,251
2
1,167
25
215
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
F: Capital and financial risk management
F1: Capital management
F: Capital and financial risk management
The managed separation of the Group will free the constituent parts into four strong, independent businesses, each having a capital
structure and dividend policy suitable for its own strategy. The Group position must be compliant with regulatory requirements at all times.
F1: Capital management
The Group has no appetite for regulatory intervention during managed separation, whether perceived or real. As such, we hold a buffer
The managed separation of the Group will free the constituent parts into four strong, independent businesses, each having a capital
above minimum requirements in order to remain solvent.
structure and dividend policy suitable for its own strategy. The Group position must be compliant with regulatory requirements at all times.
The Group has no appetite for regulatory intervention during managed separation, whether perceived or real. As such, we hold a buffer
The primary sources of capital used by the Group are equity shareholders' funds, subordinated debt and borrowings. Alternative resources
above minimum requirements in order to remain solvent.
are utilised where appropriate. Targets are established in relation to regulatory solvency, credit ratings, liquidity and dividend capacity and
are a key tool in managing capital in accordance with our risk appetite and the requirements of our various stakeholders.
The primary sources of capital used by the Group are equity shareholders' funds, subordinated debt and borrowings. Alternative resources
are utilised where appropriate. Targets are established in relation to regulatory solvency, credit ratings, liquidity and dividend capacity and
The Group measures its Group Solvency in accordance with the EU Solvency II Directive. At 31 December 2017, the unaudited Group
are a key tool in managing capital in accordance with our risk appetite and the requirements of our various stakeholders.
Solvency II surplus was estimated to be £1.5 billion. Further information on the Group's capital management policy is disclosed in the
Finance Review section on page 7.
The Group measures its Group Solvency in accordance with the EU Solvency II Directive. At 31 December 2017, the unaudited Group
Solvency II surplus was estimated to be £1.5 billion. Further information on the Group's capital management policy is disclosed in the
F2: Insurance risk (risk arising within insurance contracts)
Finance Review section on page 7.
For the purposes of these financial statements, insurance risk is defined as risk other than financial risk. Contracts issued by the Group
may include both insurance and financial risk. Contracts with significant insurance risk are classified as insurance contracts, while
F2: Insurance risk (risk arising within insurance contracts)
contracts with no or insignificant insurance risk are classified as investment contracts.
For the purposes of these financial statements, insurance risk is defined as risk other than financial risk. Contracts issued by the Group
may include both insurance and financial risk. Contracts with significant insurance risk are classified as insurance contracts, while
The Group assumes insurance risk by issuing insurance contracts, under which the Group agrees to compensate the policyholder or other
contracts with no or insignificant insurance risk are classified as investment contracts.
beneficiary if a specified uncertain future event (the insured event) affecting the policyholder occurs. Insurance risk includes mortality and
morbidity risk in the case of life assurance or risk of loss (from fire, accident, or other source) in the case of property & casualty.
The Group assumes insurance risk by issuing insurance contracts, under which the Group agrees to compensate the policyholder or other
beneficiary if a specified uncertain future event (the insured event) affecting the policyholder occurs. Insurance risk includes mortality and
Insurance risk arises through exposure to variable claims experience on life assurance, critical illness and other protection business and
morbidity risk in the case of life assurance or risk of loss (from fire, accident, or other source) in the case of property & casualty.
exposure to variable operating experience in respect of factors such as persistency levels and management expenses. Unfavourable
persistency, expenses and mortality and morbidity claim rates, relative to the actuarial assumptions made in the pricing process, may
Insurance risk arises through exposure to variable claims experience on life assurance, critical illness and other protection business and
prevent the Group from achieving its profit objectives.
exposure to variable operating experience in respect of factors such as persistency levels and management expenses. Unfavourable
persistency, expenses and mortality and morbidity claim rates, relative to the actuarial assumptions made in the pricing process, may
The Group has developed a risk policy which sets out the practices which are used to monitor and manage insurance risk as well as
prevent the Group from achieving its profit objectives.
management information and stress testing requirements. The policy is cascaded to all relevant entities across the Group who each have
their own risk policy suite aligned to the Group. As well as management of persistency, expense and claims experience, the risk policy
The Group has developed a risk policy which sets out the practices which are used to monitor and manage insurance risk as well as
sets requirements and standards on matters such as underwriting and claims management practices, and the use of reinsurance to
management information and stress testing requirements. The policy is cascaded to all relevant entities across the Group who each have
mitigate insurance risk.
their own risk policy suite aligned to the Group. As well as management of persistency, expense and claims experience, the risk policy
sets requirements and standards on matters such as underwriting and claims management practices, and the use of reinsurance to
The insurance risk profile and experience is closely monitored to ensure that the exposure remains acceptable.
mitigate insurance risk.
The financial impact of insurance risk events is examined by the business through stress tests carried out within the IFRS sensitivities,
The insurance risk profile and experience is closely monitored to ensure that the exposure remains acceptable.
regulatory capital sensitivities and Economic Capital assessments where applicable.
The financial impact of insurance risk events is examined by the business through stress tests carried out within the IFRS sensitivities,
Mortality and morbidity
regulatory capital sensitivities and Economic Capital assessments where applicable.
Mortality and morbidity risk is the risk that death, critical illness and disability claims are different from expected levels. Possible causes are
new and unexpected epidemics and widespread changes in lifestyle such as eating, smoking and exercise habits. Higher than expected
Mortality and morbidity
claims levels will reduce expected emerging profits. For contracts where the insured risk is survival, the most significant factor that is likely
Mortality and morbidity risk is the risk that death, critical illness and disability claims are different from expected levels. Possible causes are
to adversely impact the claims experience is continued improvement in medical science and social conditions that increase longevity.
new and unexpected epidemics and widespread changes in lifestyle such as eating, smoking and exercise habits. Higher than expected
claims levels will reduce expected emerging profits. For contracts where the insured risk is survival, the most significant factor that is likely
For unit-linked contracts, a risk charge is applied to meet the expected cost of the insured benefit (in excess of the unit value). This risk
to adversely impact the claims experience is continued improvement in medical science and social conditions that increase longevity.
charge can be altered in the event of significant changes in the expectation for future claims experience, subject to 'Treating Customers
Fairly' principles.
For unit-linked contracts, a risk charge is applied to meet the expected cost of the insured benefit (in excess of the unit value). This risk
charge can be altered in the event of significant changes in the expectation for future claims experience, subject to 'Treating Customers
The Group’s businesses operations manage mortality and morbidity risks through its underwriting policy and external reinsurance
Fairly' principles.
arrangements where the policy is to retain certain types of insurance risks within specified maximum single event loss limits. Exposures
above accepted limits are transferred to reinsurance counterparties.
The Group’s businesses operations manage mortality and morbidity risks through its underwriting policy and external reinsurance
arrangements where the policy is to retain certain types of insurance risks within specified maximum single event loss limits. Exposures
above accepted limits are transferred to reinsurance counterparties.
216
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Persistency
Persistency risk is the risk that policyholder surrenders, transfers or premium cessation on contracts occur at levels that are different
to expected.
In order to limit this risk to an acceptable level, products (including charging and commission structures) are designed to limit the financial
loss on surrender, subject to 'Treating Customers Fairly' principles.
Persistency statistics are monitored monthly and a detailed persistency analysis at a product level is carried out on an annual basis.
Management actions may be triggered if statistics show significant adverse movement or emerging trends in experience.
Expenses
Expense risk is the risk that actual expenses and expense inflation differ from expected levels. Higher expenses and expense inflation
may result in emerging profit falling below the Group's profit objectives.
Expense levels are monitored quarterly against budgets and forecasts. An activity-based costing process is used to allocate costs relating
to processes and activities to individual product lines.
Some products' structures include maintenance charges. These charges are reviewed annually in light of changes in maintenance
expense levels. This review may result in changes in charge levels, subject to 'Treating Customers Fairly' principles.
Tax
Tax risk is the risk that the projected taxation basis for basic life assurance business is incorrect, resulting in contracts being
incorrectly priced.
Tax risk also represents potential changes in the interpretation or application of prevailing tax legislation applicable to either policyholders
or shareholders, resulting in higher taxes reducing profitability or increasing shareholder tax burdens. The taxation position of the
operations is projected annually and tax changes will result in changes to new business pricing models as part of the annual control
cycle. High risk issues and emerging trends are reported internally on a quarterly basis.
F3: Financial risk management
The key focus of financial risk management for the Group is ensuring that the proceeds from its financial assets are sufficient to fund the
obligations arising from its insurance and banking operations. The most important components of financial risk are credit risk, market risk
(arising from changes in equity, bond prices, interest and foreign exchange rates) and liquidity risk.
(a) Credit risk
(i) Overall exposure to credit risk
Credit risk is defined as the risk that one party to a financial instrument will cause a financial loss to the Group by failing to discharge
an obligation to repay cash or deliver another financial asset.
Credit risk in the Group arises from a number of activities of the Group, namely banking lending, trading, investing and other activities.
The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate,
as a means of mitigating the financial loss from defaults. Credit risk is managed through research and analysis at the time of investment
or granting of the loan and then continuously monitored.
The Group is exposed to banking credit risk from lending and other financing activities, through its exposure to Nedbank and the banking
operations within Emerging Markets business. Nedbank's lending portfolio forms a substantial part of the Group's loans and advances,
as analysed in note G1. Credit risk represents the most significant risk type facing Nedbank, accounting for the majority of its economic
capital requirements. Nedbank's credit risk profile is managed in terms of the credit risk management framework, which encompasses
comprehensive credit risk policy, mandate (limits) and governance structures, and is approved by the Nedbank Board.
The Group is exposed to the risk of credit defaults and movements in credit spreads from our insurance businesses. This includes
counterparty default risk, which also arises mainly from reinsurance and hedging arrangements.
The Group has limited other credit risk exposures in respect of amounts due from policyholders and intermediaries. Loans to policyholders
are secured on the surrender value of the relevant policies.
217
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
F: Capital and financial risk management
F3: Financial risk management continued
F: Capital and financial risk management
(a) Credit risk continued
F3: Financial risk management continued
(ii) Maximum exposure to credit risk
(a) Credit risk continued
The table below represents the maximum exposure to credit risk, without taking into account the value of any collateral obtained and are
presented for the Group's continuing operations. Consistent with the requirements of accounting standards, the comparative period has
(ii) Maximum exposure to credit risk
not been re-presented for financial assets and liabilities classified as held for sale and distribution. The comparative information presented
The table below represents the maximum exposure to credit risk, without taking into account the value of any collateral obtained and are
at 31 December 2017, therefore includes the maximum exposure to credit risk for the composition of the Group as at 31 December 2016.
presented for the Group's continuing operations. Consistent with the requirements of accounting standards, the comparative period has
not been re-presented for financial assets and liabilities classified as held for sale and distribution. The comparative information presented
The maximum exposure to credit risk with regards to derivative financial instruments represents the current fair value of these instruments
at 31 December 2017, therefore includes the maximum exposure to credit risk for the composition of the Group as at 31 December 2016.
and does not take into account the impact of any positive or adverse changes in the value of the derivative financial instruments. The total
credit exposure also includes potential exposure arising from financial guarantees given by the Group and undrawn loan commitments,
The maximum exposure to credit risk with regards to derivative financial instruments represents the current fair value of these instruments
which are not yet reflected in the Group's statement of financial position.
and does not take into account the impact of any positive or adverse changes in the value of the derivative financial instruments. The total
credit exposure also includes potential exposure arising from financial guarantees given by the Group and undrawn loan commitments,
which are not yet reflected in the Group's statement of financial position.
At
31 December
2017
At
6
31 December
252
2017
1,282
6
15,174
252
5,413
1,282
5,403
15,174
4,100
5,413
258
5,403
1,119
4,100
245
258
1,836
1,119
–
245
–
1,836
75,527
–
95,441
–
75,527
95,441
£m
At
31 December
£m
2016
At
1,111
31 December
3,115
2016
43,108
1,111
25,841
3,115
7,931
43,108
13,463
25,841
4,133
7,931
314
13,463
1,782
4,133
1,340
314
4,847
1,782
1,976
1,340
5,273
4,847
258
1,976
88,651
5,273
258
88,651
Mandatory reserve deposits with central banks
Reinsurers' share of policyholder liabilities
Loans and advances
Mandatory reserve deposits with central banks
Investments and securities
Reinsurers' share of policyholder liabilities
Government and government-guaranteed securities
Loans and advances
Other debt securities, preference shares and debentures
Investments and securities
Short-term funds and securities treated as investments
Government and government-guaranteed securities
Other
Other debt securities, preference shares and debentures
Other assets
Short-term funds and securities treated as investments
Derivative financial instruments – assets
Other
Cash and cash equivalents
Other assets
Financial guarantees and other credit-related contingent liabilities
Derivative financial instruments – assets
Loan commitments and other credit-related commitments
Cash and cash equivalents
Included within assets held for sale and distribution
Financial guarantees and other credit-related contingent liabilities
Loan commitments and other credit-related commitments
Included within assets held for sale and distribution
(b) Market risk
(i) Overview
(b) Market risk
Market risk is the risk of a financial impact arising from the changes in values of financial assets or financial liabilities from changes in
equity, bond and property prices, interest rates and foreign exchange rates. Market risk arises differently across the Group's businesses
(i) Overview
depending on the types of financial assets and liabilities held.
Market risk is the risk of a financial impact arising from the changes in values of financial assets or financial liabilities from changes in
equity, bond and property prices, interest rates and foreign exchange rates. Market risk arises differently across the Group's businesses
The Group has developed risk policies which set out the practices which are used to monitor and manage market risk. These policies
depending on the types of financial assets and liabilities held.
are cascaded to businesses across the Group. Each of the Group's business has their own established set of policies, principles and
governance processes to monitor and manage market risk within their individual businesses and in accordance with their local
The Group has developed risk policies which set out the practices which are used to monitor and manage market risk. These policies
regulatory requirements.
are cascaded to businesses across the Group. Each of the Group's business has their own established set of policies, principles and
governance processes to monitor and manage market risk within their individual businesses and in accordance with their local
The sensitivity of the Group's earnings, capital position and embedded value to market risk is monitored through the Group's embedded
regulatory requirements.
value and risk appetite reporting processes.
The sensitivity of the Group's earnings, capital position and embedded value to market risk is monitored through the Group's embedded
value and risk appetite reporting processes.
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(ii) Insurance operations
For the Group's insurance operations, equity, property, volatility and interest rate risk exposure to capital and to earnings are quantified
in accordance with the businesses risk appetite framework. Additional detail is provided in the Principal Risks and Uncertainties section.
In South Africa the stock selection and investment analysis process is supported by a well-developed research function. For fixed
annuities, market risks are managed where possible by investing in fixed interest securities with a duration closely corresponding to those
liabilities. Market risk on policies that include guarantees where shareholders carry the investment risk, principally reside in the South
African guaranteed non-profit annuity book, which is closely matched with gilts and semi-gilts. Other non-profit policies are also suitably
matched based upon comprehensive investment guidelines. Market risk on with-profit policies with guarantees is managed through
appropriate asset-liability matching, which includes hedging, as per the PPFM (Principles and Practices of Financial Management).
In Old Mutual Wealth's unit-linked assurance operations, policyholders carry the full market risk, with the only risk to the Group being
asset-based fee risk from charges on policyholder funds. In respect of Old Mutual Wealth's shareholders' funds, market risk is addressed
in Old Mutual Wealth's investment policy, which provides for very limited opportunity for entities to invest their shareholder capital in
equities and other volatile assets.
For Old Mutual Bermuda, the market risk to shareholders post the sale of the business to Beechwood Bermuda Limited arises from the
retention of the Guaranteed Minimum Accumulation Benefits (GMABs), which is reinsured by Old Mutual (Bermuda) Re Limited until the
last guarantee has expired in August 2018. These GMABs are US dollar denominated guarantees. The equity market risk and currency
risk is managed through a put option hedging strategy that substantially reduces exposure to increases in GMAB funding costs.
(iii) Banking operations
The principal market risks arising in the Group's banking operations arise from:
Trading risk in Nedbank Capital and
Banking book interest rate risk from repricing and/or maturity mismatches between on- and off-balance sheet components in all banking
businesses.
A comprehensive market risk framework is used to ensure that market risks are understood and managed. Governance structures are
in place to achieve effective independent monitoring and management of market risk.
Banking operations – Trading risk
Market risk exposures from trading activities at Nedbank Capital are measured using Value-at-Risk (VaR), supplemented by sensitivity
analysis, and stress and scenario analysis. Limit structures are set accordingly.
The VaR risk measure for Nedbank estimates the potential loss in pre-tax profit over a given holding period for a specified confidence
level. The VaR methodology is a statistically defined, probability-based approach that takes into account market volatilities as well as risk
diversification by recognising offsetting positions and correlations between products and markets. Risks can be measured consistently
across all markets and products, and risk measures can be aggregated to arrive at a single risk number. The one-day 99% VaR number
used by Nedbank represents the overnight loss that has less than 1% chance of occurring under normal market conditions. By its nature,
VaR is only a single measure and cannot be relied upon on its own as a means of measuring and managing risk.
At 31 December
Historical VaR (one-day, 99%) by risk type
Foreign exchange
Interest rate
Equity product
Other
Diversification
Total VaR exposure
Average
2017
2016
Minimum
2017
2016
Maximum
2017
2016
Year-end
2017
0.3
1.3
0.2
0.6
(0.9)
1.4
0.5
1.0
0.2
0.4
(0.7)
1.5
0.1
0.7
0.1
0.4
–
0.8
0.1
0.5
0.1
0.3
–
0.6
0.7
2.3
0.8
1.0
–
2.4
1.5
2.0
0.5
0.8
–
3.0
0.2
1.9
0.2
0.8
(1.6)
1.4
£m
2016
0.2
0.7
0.1
0.5
(0.5)
1.0
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
F: Capital and Financial risk management continued
F3: Financial risk management continued
F: Capital and Financial risk management continued
(b) Market risk continued
F3: Financial risk management continued
Banking book interest rate risk
(b) Market risk continued
Banking book interest rate risk at Nedbank arises because:
Banking book interest rate risk
The bank writes a large amount of prime-linked assets and raises fewer prime-linked deposits
Banking book interest rate risk at Nedbank arises because:
Funding is prudently raised across the curve at fixed-term deposit rates that re-price only on maturity
Short-term demand-funding products re-price to different short-end base rates
The bank writes a large amount of prime-linked assets and raises fewer prime-linked deposits
Certain ambiguous maturity accounts are non-rate-sensitive
Funding is prudently raised across the curve at fixed-term deposit rates that re-price only on maturity
The bank has a mismatch in net non-rate-sensitive balances, including shareholders' funds that do not re-price for interest rate changes.
Short-term demand-funding products re-price to different short-end base rates
Certain ambiguous maturity accounts are non-rate-sensitive
The Group employs various analytical techniques to measure interest rate sensitivity monthly within the banking book on both an earnings
The bank has a mismatch in net non-rate-sensitive balances, including shareholders' funds that do not re-price for interest rate changes.
and economic value basis (where appropriate) for banking book balance sheets with the Group with material exposure to interest rate risk
in the banking book. Assets, liabilities and derivative financial instruments are modelled and reported based on their contractual repricing
The Group employs various analytical techniques to measure interest rate sensitivity monthly within the banking book on both an earnings
or maturity characteristics. Where advances are exposed to prepayments and deposits to ambiguous repricing, the Group approves the
and economic value basis (where appropriate) for banking book balance sheets with the Group with material exposure to interest rate risk
use of prepayment models for the hedging of fixed rate advances and behavioural repricing assumptions for the modelling and reporting
in the banking book. Assets, liabilities and derivative financial instruments are modelled and reported based on their contractual repricing
of ambiguous repricing deposits, where appropriate.
or maturity characteristics. Where advances are exposed to prepayments and deposits to ambiguous repricing, the Group approves the
use of prepayment models for the hedging of fixed rate advances and behavioural repricing assumptions for the modelling and reporting
At the reporting date, the net interest income sensitivity of the banking book for a one percent parallel reduction in interest rates measured
of ambiguous repricing deposits, where appropriate.
over 12 months is a decrease in net interest income of approximately £79 million (2016: £69 million), which is within the board's approved
risk limit. The Group's net interest income sensitivity exhibits very little convexity and will therefore also result in an increase in pre-tax
At the reporting date, the net interest income sensitivity of the banking book for a one percent parallel reduction in interest rates measured
net interest income of similar amounts should interest rates increase by one percent. Net interest income sensitivity is actively
over 12 months is a decrease in net interest income of approximately £79 million (2016: £69 million), which is within the board's approved
managed through on-and off-balance-sheet interest rate risk management strategies for the Group's expected interest rate view
risk limit. The Group's net interest income sensitivity exhibits very little convexity and will therefore also result in an increase in pre-tax
and impairment sensitivity.
net interest income of similar amounts should interest rates increase by one percent. Net interest income sensitivity is actively
managed through on-and off-balance-sheet interest rate risk management strategies for the Group's expected interest rate view
and impairment sensitivity.
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F4: Currency translation risk
The Group is exposed to movements in exchange rates from changes in the sterling value of surplus assets and earnings denominated
in foreign currencies. From a capital perspective, our capital is held where our risks are located and currency translation risk would only
be realised if we were to require a transfer of surplus capital between regions during a period of stress. The functional currencies of the
Group's principal overseas operations are South African rand, US dollar and euro.
Certain of the Group's business operations may undertake activities that are not in their functional currencies. These activities, such as
Nedbank, who has a functional currency of South African rand, lending in US dollar, are economically hedged by numerous activities such
as the use of currency swaps, currency borrowings and forward foreign exchange contracts.
These foreign currency translation tables below have been prepared on the basis that the values of the economic hedging instruments
are reflected at their carrying value as opposed to their notional amounts. The table below is therefore a reflection of the foreign currency
exposures in their respective currencies for the continuing businsesses. Consistent with the requirements of accounting standards, the
comparative period has not been re-presented for assets and liabilities classified as held for sale and distribution. The comparative
information presented at 31 December 2017, therefore includes the maximum exposure to credit risk for the composition of the Group
as at 31 December 2016.
At 31 December 2017
Assets
Mandatory reserve deposits with central banks
Investments in associated undertakings and joint
ventures
Reinsurers' share of policyholder liabilities
Loans and advances
Investments and securities
Trade, other receivables and other assets
Derivative financial instruments – assets
Cash and cash equivalents
Total financial assets
Assets held for sale and distribution
Total non-financial assets
Total assets
Liabilities
Life insurance contract liabilities
Investment contract liabilities
Third-party interest in consolidation of funds
Borrowed funds
Trade, other payables and other liabilities
Amounts owed to bank depositors
Derivative financial instruments – liabilities
Total financial liabilities
Liabilities held for sale and distribution
Total non-financial liabilities
Total liabilities
ZAR
GBP
USD
EUR
Other
–
–
–
–
6
85
202
580
33,047
1,105
210
935
36,164
52,296
2,240
90,700
8,922
24,082
4,868
560
2,183
–
267
40,882
47,122
853
88,857
18
–
–
567
22
33
570
1,210
64,961
46
66,217
–
121
–
461
95
–
–
677
62,499
31
63,207
1
1
495
7,600
105
2
246
8,450
8,574
388
17,412
99
3,135
–
17
63
625
1
3,940
7,432
74
11,446
–
–
–
144
–
–
2
146
1,393
–
1,539
–
–
–
–
–
–
–
–
1,291
–
1,291
3
49
207
1,744
72
–
83
2,164
3,379
421
5,964
499
1,402
–
88
188
117
–
2,294
3,624
166
6,084
£m
Total
6
107
252
1,282
43,102
1,304
245
1,836
48,134
130,603
3,095
181,832
9,520
28,740
4,868
1,126
2,529
742
268
47,793
121,968
1,124
170,885
221
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
ZAR
USD
GBP
EUR
Other
–
GBP
–
USD
–
EUR
33
Other
1,078
ZAR
ventures
ventures
£m
Total
£m
1,111
Total
F: Capital and financial risk management
F4: Currency translation risk continued
F: Capital and financial risk management
At 31 December 2016 (Restated)1
F4: Currency translation risk continued
Assets
At 31 December 2016 (Restated)1
Mandatory reserve deposits with central banks
Investments in associated undertakings and joint
Assets
Mandatory reserve deposits with central banks
Reinsurers' share of policyholder liabilities
Investments in associated undertakings and joint
Loans and advances
Investments and securities
Reinsurers' share of policyholder liabilities
Trade, other receivables and other assets
Loans and advances
Derivative financial instruments – assets
Investments and securities
Cash and cash equivalents
Trade, other receivables and other assets
Total financial assets
Derivative financial instruments – assets
Assets held for sale and distribution
Cash and cash equivalents
Total non-financial assets
Total financial assets
Total assets
Assets held for sale and distribution
Liabilities
Total non-financial assets
Life insurance contract liabilities
Total assets
Investment contract liabilities
Liabilities
Third-party interest in consolidation of funds
Life insurance contract liabilities
Borrowed funds
Investment contract liabilities
Trade, other payables and other liabilities
Third-party interest in consolidation of funds
Amounts owed to bank depositors
Borrowed funds
Derivative financial instruments – liabilities
Trade, other payables and other liabilities
Total financial liabilities
Amounts owed to bank depositors
Liabilities held for sale and distribution
Derivative financial instruments – liabilities
Total non-financial liabilities
Total financial liabilities
Total liabilities
Liabilities held for sale and distribution
Total non-financial liabilities
1 The currency translation risk table (investments in securities) at 31 December 2016 has been restated for the elimination of own shares held by consolidated investment funds
Total liabilities
481
1,078
195
38,701
481
37,496
195
1,493
38,701
1,222
37,496
2,216
1,493
82,882
1,222
133
2,216
2,910
82,882
85,925
133
2,910
8,994
85,925
22,582
4,094
8,994
3,561
22,582
3,708
4,094
40,116
3,561
1,037
3,708
84,092
40,116
1
1,037
771
84,092
84,864
1
771
84,864
27
–
2,864
495
27
46,250
2,864
732
495
77
46,250
1,854
732
52,299
77
29
1,854
2,126
52,299
54,454
29
2,126
416
54,454
44,508
3,887
416
1,017
44,508
1,097
3,887
871
1,017
92
1,097
51,888
871
25
92
487
51,888
52,400
25
487
52,400
7
–
2
2,414
7
11,983
2
116
2,414
29
11,983
400
116
14,951
29
2,513
400
412
14,951
17,876
2,513
412
148
17,876
6,768
–
148
36
6,768
73
–
2,647
36
20
73
9,692
2,647
1,335
20
57
9,692
11,084
1,335
57
11,084
–
–
–
191
–
1,244
–
–
191
9
1,244
68
–
1,512
9
5,866
68
4
1,512
7,382
5,866
4
–
7,382
1,028
–
–
–
1,028
11
–
267
–
10
11
1,316
267
5,656
10
9
1,316
6,981
5,656
9
6,981
27
33
54
1,307
27
3,415
54
75
1,307
3
3,415
309
75
5,223
3
29
309
534
5,223
5,786
29
534
424
5,786
2,713
–
424
80
2,713
223
–
1,408
80
2
223
4,850
1,408
29
2
192
4,850
5,071
29
192
5,071
542
1,111
3,115
43,108
542
100,388
3,115
2,416
43,108
1,340
100,388
4,847
2,416
156,867
1,340
8,570
4,847
5,986
156,867
171,423
8,570
5,986
9,982
171,423
77,599
7,981
9,982
4,694
77,599
5,112
7,981
45,309
4,694
1,161
5,112
151,838
45,309
7,046
1,161
1,516
151,838
160,400
7,046
1,516
160,400
(£145 million) that was identified in the current year. Comparative information at 31 December 2016 has been restated accordingly.
1 The currency translation risk table (investments in securities) at 31 December 2016 has been restated for the elimination of own shares held by consolidated investment funds
(£145 million) that was identified in the current year. Comparative information at 31 December 2016 has been restated accordingly.
222
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Old Mutual plc
Annual Report and Accounts 2017
F5: Liquidity risk
Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. Ultimate responsibility for
liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for
the management of the Group's short-, medium- and long-term funding and liquidity requirements. The Group manages liquidity by
maintaining adequate reserves and banking facilities, continuously monitoring forecast and actual cash flows, and matching the maturity
profiles of financial assets and liabilities. Individual businesses separately maintain and manage their local liquidity requirements according
to their business needs, within the overall liquidity framework established by Old Mutual plc. Under the Group's managed separation
strategy, a revised liquidity capital management policy was introduced that is designed to allow for flexibility in managing liquidity. We hold
a buffer at Group level to support this, sufficient to withstand a liquidity survival horizon of at least 12 months. We also have a multi-year
liquidity view over the managed separation horizon. The Group should be able to meet short-term plausible but extreme losses. As the
businesses transition into separate entities, management will assess their day 1 liquidity requirements, and where appropriate, we will
transition liquidity buffers currently held and funded at Old Mutual plc into the businesses.
The Group continues to meet Group and individual entity capital requirements, and day-to-day liquidity needs through the Group's
available cash resources and, if necessary, available credit facilities. The Group's liquid resources are held in large portfolios of highly
marketable securities, for example listed bonds, actively traded pooled investments, equities and cash and cash equivalents. Whilst most
of the Group's policyholder and banking liabilities are generally repayable on demand, the Group's expectation is that policyholders and
banking depositors will only require funds on an ongoing basis. However, cash resources and other liquid assets are maintained in the
event of a need for additional liquidity. Information on the nature of the investments and securities held is given in note G2.
Old Mutual plc has access to a £764 million (2016: £764 million) multi-currency revolving credit facility. £73 million of the facility matures
in August 2019, a further £73 million of the facility matures in August 2020 and the remaining £618 million of the facility matures in August
2021. At 31 December 2017 none of this facility was drawn. Further details, together with information on the Group's borrowed funds,
are given in note G7.
The key information reviewed by the Group's Executive Directors and Executive Committee is a detailed management report on the
Group's and holding company's current and planned capital and liquidity position, together with summary information on the current and
planned liquidity positions of the Group's operating segments. Forecasts are updated regularly based on new information received and
also as part of the Group's annual business planning cycle. The Group and holding company's liquidity and capital position and forecast
are presented to the Old Mutual plc Board of Directors on a regular basis. Additionally the Group conducts regular stress testing around
liquidity requirements, as referenced in the Risk Section (refer pages 58 to 69)
Group operating segments are required, both in terms of their local requirements and in accordance with direction from the holding
company, to establish their own processes for managing their liquidity and capital needs and these are subject to review by their local
oversight functions, with representation from the Group.
Further information on liquidity and the holding company cash flows is contained in the financial performance section of the Business
Review section.
The Group does not have material liquidity exposure to special purpose entities or investment funds.
The contractual maturities of the Group's financial liabilities and insurance contracts are set out in notes G4, G6, G7 and G8.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities
The analysis of financial assets and liabilities of the Group’s continuing operations are set out in the following notes. In order to provide
G: Analysis of financial assets and liabilities
further insight into significant line items in the statement of financial position for the businesses classified as held for sale and distribution
The analysis of financial assets and liabilities of the Group’s continuing operations are set out in the following notes. In order to provide
at 31 December 2017, additional information has been presented after the information presented for the continuing operations, within the
further insight into significant line items in the statement of financial position for the businesses classified as held for sale and distribution
notes to which they relate.
at 31 December 2017, additional information has been presented after the information presented for the continuing operations, within the
notes to which they relate.
The individual notes where additional information on financial assets and liabilities classified as held for sale and distribution are provided
are loans and advances (note G1.1), investment and securities (note G2.1); derivative financial investments (note G4.1), insurance and
The individual notes where additional information on financial assets and liabilities classified as held for sale and distribution are provided
investment contracts (note G6.1), borrowed funds (note G7.1) and amounts owed to bank depositors (note G8.1).
are loans and advances (note G1.1), investment and securities (note G2.1); derivative financial investments (note G4.1), insurance and
investment contracts (note G6.1), borrowed funds (note G7.1) and amounts owed to bank depositors (note G8.1).
All financial assets and liabilities notes which require a movement analysis will include the information for all items, including movements in
assets and liabilities classified as held for sale or distribution for the year. Therefore, the amounts reflected in the movement tables will not
All financial assets and liabilities notes which require a movement analysis will include the information for all items, including movements in
agree to the consolidated income statement amounts presented as the results of the discontinued operations are recognised on a single
assets and liabilities classified as held for sale or distribution for the year. Therefore, the amounts reflected in the movement tables will not
line in the consolidated income statement. At the end of the movement analysis, a single line item will indicate the value of the assets or
agree to the consolidated income statement amounts presented as the results of the discontinued operations are recognised on a single
liabilities that have been transferred to assets and liabilities held for sale or distribution.
line in the consolidated income statement. At the end of the movement analysis, a single line item will indicate the value of the assets or
liabilities that have been transferred to assets and liabilities held for sale or distribution.
Consistent with the requirements of accounting standards, the comparative period has not been re-presented for financial assets and
liabilities classified as held for sale and distribution. The comparative information presented at 31 December 2017, therefore includes the
Consistent with the requirements of accounting standards, the comparative period has not been re-presented for financial assets and
financial assets and liabilities for the composition of the Group as at 31 December 2016.
liabilities classified as held for sale and distribution. The comparative information presented at 31 December 2017, therefore includes the
financial assets and liabilities for the composition of the Group as at 31 December 2016.
The notes listed above should be read in conjunction with notes relating to the continuing operations (notes G1, G2, G4, G6, G7 and G8),
in order to obtain a comparable view of the Group's significant financial assets and liabilities at 31 December 2017.
The notes listed above should be read in conjunction with notes relating to the continuing operations (notes G1, G2, G4, G6, G7 and G8),
in order to obtain a comparable view of the Group's significant financial assets and liabilities at 31 December 2017.
G1: Loans and advances
The Group extends advances to individuals and to the corporate, commercial and public sectors through its banking operations in South
G1: Loans and advances
Africa, Namibia, Kenya and Zimbabwe.
The Group extends advances to individuals and to the corporate, commercial and public sectors through its banking operations in South
Africa, Namibia, Kenya and Zimbabwe.
Interest earned on loans and advances is analysed in note D3 Banking interest and similar income and credit impairment charges are
included in note G1(d) Provision for impairment.
Interest earned on loans and advances is analysed in note D3 Banking interest and similar income and credit impairment charges are
included in note G1(d) Provision for impairment.
Critical accounting estimates and judgements – Provisions for impairment of loans and advances
Allowances for loan impairment represent management's estimate of the losses incurred in the loans and advances portfolios at the
Critical accounting estimates and judgements – Provisions for impairment of loans and advances
reporting date.
Allowances for loan impairment represent management's estimate of the losses incurred in the loans and advances portfolios at the
reporting date.
The Group assesses its loan portfolios for impairment at each reporting date. In determining whether an impairment loss should be
recorded in the statement of comprehensive income, the Group makes judgements as to whether there is observable data indicating a
The Group assesses its loan portfolios for impairment at each reporting date. In determining whether an impairment loss should be
measurable decrease in the estimated future cashflows from a portfolio of loans before the decrease can be allocated to an individual
recorded in the statement of comprehensive income, the Group makes judgements as to whether there is observable data indicating a
loan in that portfolio. Estimates are made of the duration between the occurrence of a loss event and the identification of a loss on an
measurable decrease in the estimated future cashflows from a portfolio of loans before the decrease can be allocated to an individual
individual basis. The impairment for performing loans is calculated on a portfolio basis, based on historical loss ratios, adjusted for
loan in that portfolio. Estimates are made of the duration between the occurrence of a loss event and the identification of a loss on an
national and industry specific economic conditions and other indicators present at the reporting date that correlate with potential future
individual basis. The impairment for performing loans is calculated on a portfolio basis, based on historical loss ratios, adjusted for
defaults on the portfolio. These include early arrears and other indicators of potential default, such as changes in macroeconomic
national and industry specific economic conditions and other indicators present at the reporting date that correlate with potential future
conditions and legislation affecting credit recovery. These annual loss ratios are applied to loan balances in the portfolio and scaled
defaults on the portfolio. These include early arrears and other indicators of potential default, such as changes in macroeconomic
to the estimated-loss emergence period.
conditions and legislation affecting credit recovery. These annual loss ratios are applied to loan balances in the portfolio and scaled
to the estimated-loss emergence period.
Within portfolios, which comprise large numbers of small homogeneous assets with similar risk characteristics where credit-scoring
techniques are generally used, statistical techniques are used to calculate impairment allowances on the portfolio, based on historical
Within portfolios, which comprise large numbers of small homogeneous assets with similar risk characteristics where credit-scoring
recovery rates and assumed emergence periods. These statistical analyses use, as primary inputs, the extent to which accounts in the
techniques are generally used, statistical techniques are used to calculate impairment allowances on the portfolio, based on historical
portfolio are in arrears and historical information on the eventual losses encountered from such delinquent portfolios. There are many
recovery rates and assumed emergence periods. These statistical analyses use, as primary inputs, the extent to which accounts in the
such models in use, each tailored to a product, line of business or client category.
portfolio are in arrears and historical information on the eventual losses encountered from such delinquent portfolios. There are many
such models in use, each tailored to a product, line of business or client category.
Judgement and knowledge are needed in selecting the statistical methods to be used when the models are developed or revised.
The impairment allowance reflected in the financial statements for these portfolios is considered to be reasonable and supportable.
Judgement and knowledge are needed in selecting the statistical methods to be used when the models are developed or revised.
The impairment allowance reflected in the financial statements for these portfolios is considered to be reasonable and supportable.
For larger exposures impairment allowances are calculated on an individual basis and all relevant considerations that have a bearing
on the expected future cashflows are taken into account. For example, the business prospects for the client, the realisable value of
For larger exposures impairment allowances are calculated on an individual basis and all relevant considerations that have a bearing
collateral, the Group's position relative to other claimants, the reliability of client information and the likely cost and duration of the
on the expected future cashflows are taken into account. For example, the business prospects for the client, the realisable value of
workout process. The level of the impairment allowance is the difference between the value of the discounted expected future cashflows
collateral, the Group's position relative to other claimants, the reliability of client information and the likely cost and duration of the
(discounted at the loan's original effective-interest-rate) and its carrying amount. Subjective judgements are made in the calculation of
workout process. The level of the impairment allowance is the difference between the value of the discounted expected future cashflows
future cashflows. Furthermore, judgements change with time as new information becomes available or as workout strategies evolve,
(discounted at the loan's original effective-interest-rate) and its carrying amount. Subjective judgements are made in the calculation of
resulting in frequent revisions to the impairment allowance as individual decisions are taken. Changes in these estimates would result
future cashflows. Furthermore, judgements change with time as new information becomes available or as workout strategies evolve,
in a change in the allowances and have a direct impact on the impairments charge.
resulting in frequent revisions to the impairment allowance as individual decisions are taken. Changes in these estimates would result
in a change in the allowances and have a direct impact on the impairments charge.
224
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Old Mutual plc
Annual Report and Accounts 2017
(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:
Home loans
Commercial mortgages
Unsecured retail lending
Other term loans
Other loans to clients
Net finance leases and instalment debtors
Deposits placed under reverse purchase agreements
Overdrafts
Preference shares and debentures
Credit cards
Factoring accounts
Policyholder loans
Properties in possession
Remittances in transit
Gross loans and advances
Provisions for impairment
Specific provisions
Portfolio provisions
Total net loans and advances
Notes
G1(e)
G1(d)(ii)
G1(d)(ii)
At
31 December
2017
198
155
932
1
40
–
–
58
–
–
–
72
–
–
1,456
(174)
(146)
(28)
£m
At
31 December
2016
8,772
9,085
2,215
6,068
7,099
6,221
923
1,182
1,184
877
296
278
15
22
44,237
(1,129)
(820)
(309)
1,282
43,108
At 31 December 2017, total net loans and advances of £42,567 million attributable to Nedbank and Old Mutual Wealth have been
transferred to assets held for sale and distribution in the consolidated statement of financial position. Refer to note A4 and note G1.1 for
more information.
(a)(i) Loans and advances by sector
Individuals
Financial services, insurance and real estate
Banks
Manufacturing
Building and property development
Transport, storage and communication
Retailers, catering and accommodation
Wholesale and trade
Mining and quarrying
Agriculture, forestry and fishing
Government and public sector
Other services
Total gross loans and advances
At
31 December
2017
1,109
15
–
21
1
3
–
156
8
69
2
72
1,456
£m
At
31 December
2016
17,178
11,378
1,756
2,230
553
2,535
537
1,963
1,645
1,538
205
2,719
44,237
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Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G1: Loans and advances continued
G: Analysis of financial assets and liabilities continued
(a) Categories of loans and advances continued
G1: Loans and advances continued
(a)(ii) Loans and advances geographical analysis
(a) Categories of loans and advances continued
(a)(ii) Loans and advances geographical analysis
At
31 December
2017
At
733
31 December
708
2017
–
733
–
708
–
–
15
–
1,456
–
15
1,456
£m
At
31 December
£m
2016
At
38,727
31 December
2,891
2016
1,995
38,727
361
2,891
31
1,995
232
361
44,237
31
232
44,237
South Africa
Rest of Africa
Europe
South Africa
Asia
Rest of Africa
United States
Europe
Other
Asia
Total gross loans and advances
United States
Other
(b) Analysis of loans and advances
Total gross loans and advances
Non-performing loans included above had a book value less impairment provisions of £39 million (2016: £755 million). Loans and
advances are generally classified as non-performing, at a minimum, when the client is three complete months in arrears.
(b) Analysis of loans and advances
Non-performing loans included above had a book value less impairment provisions of £39 million (2016: £755 million). Loans and
Of the loans and advances shown above, £529 million (2016: £14,707 million) is receivable within one year of the reporting date and
advances are generally classified as non-performing, at a minimum, when the client is three complete months in arrears.
is regarded as current. £753 million (2016: £28,401 million) is regarded as non-current based on the maturity profile of the assets.
Of the loans and advances shown above, £529 million (2016: £14,707 million) is receivable within one year of the reporting date and
Of the gross loans and advances at 31 December 2017 shown above, £1,391 million (2016: £43,978 million) relates to balances held
is regarded as current. £753 million (2016: £28,401 million) is regarded as non-current based on the maturity profile of the assets.
by the Group's continuing banking operations.
Of the gross loans and advances at 31 December 2017 shown above, £1,391 million (2016: £43,978 million) relates to balances held
No impairments have been raised against policyholder loans as they are fully secured by amounts owing to policyholder liabilities.
by the Group's continuing banking operations.
(c) Credit quality of loans and advances
No impairments have been raised against policyholder loans as they are fully secured by amounts owing to policyholder liabilities.
(c)(i) Age analysis of loans and advances
(c) Credit quality of loans and advances
The table below gives an age analysis of loans and advances representing primarily the exposures of the Group's banking operations:
(c)(i) Age analysis of loans and advances
The table below gives an age analysis of loans and advances representing primarily the exposures of the Group's banking operations:
At
31 December
2017
At
1,017
31 December
167
2017
89
1,017
53
167
17
89
4
53
4
17
272
4
1,456
4
(174)
272
1,282
1,456
(174)
1,282
£m
At
31 December
£m
2016
At
41,219
31 December
1,334
2016
814
41,219
505
1,334
1
814
5
505
9
1
1,684
5
44,237
9
(1,129)
1,684
43,108
44,237
(1,129)
43,108
Neither past due nor impaired
Past due but not impaired
Neither past due nor impaired
Past due but not impaired
Past due but less than 1 month
Past due, greater than 1 month but less than 3 months
Past due, greater than 3 months but less than 6 months
Past due but less than 1 month
Past due, greater than 6 months but less than 1 year
Past due, greater than 1 month but less than 3 months
Past due more than 1 year
Past due, greater than 3 months but less than 6 months
Past due, greater than 6 months but less than 1 year
Past due more than 1 year
Impaired loans and advances individually impaired
Gross loans and advances
Provisions for impairment
Impaired loans and advances individually impaired
Total net loans and advances
Gross loans and advances
Provisions for impairment
Total net loans and advances
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Annual Report and Accounts 2017
(c)(ii) Credit rating analysis of loans neither past due nor impaired
The credit quality of neither past due nor impaired loans and advances can be further analysed by credit rating as follows:
At 31 December 2017
At 31 December 2016
Home loans
Commercial mortgages
Credit cards
Overdrafts
Policyholder loans
Other loans to clients1
Preference shares and debentures
Net finance leases and instalment debtors
Factoring accounts
Trade, other bills and bankers'
acceptances
Term loans
Remittances in transit
Deposits placed under reverse purchase
agreements
Gross loans and advances
Investment
grade
–
–
–
–
–
–
–
–
–
Sub-
investment
grade
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Internally
rated
164
118
–
47
72
616
–
–
–
–
–
–
Investment
grade
2,016
4,533
108
331
–
4,358
857
201
36
Sub-
investment
grade
5,339
4,120
622
628
–
2,291
157
5,334
245
Internally
rated
500
163
2
121
249
804
170
152
–
1
4,931
2
–
1,914
–
–
91
20
Total
164
118
–
47
72
616
–
–
–
–
–
–
£m
Total
7,855
8,816
732
1,080
249
7,453
1,184
5,687
281
1
6,936
22
–
1,017
–
1,017
617
17,991
306
20,956
–
2,272
923
41,219
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1 Other loans to clients include unsecured retail lending, term loans, foreign client lending, preference shares and debentures and other loans.
The rating scale of the loans and advances is based on local equivalent rating scales and not international scales.
(c)(iii) Collateral
Collateral is held as security against certain loans and advances detailed above, with this principally consisting of cash, properties and
letters of credit.
At 31 December 2017, the Group recognised collateral of £nil (2016: £15 million) in the consolidated statement of financial position.
These amounts are being included in the loans and advances above as properties in possession.
Financial collateral
The Group takes financial collateral to support exposures in its banking and securities and lending activities. Collateral held includes
cash and debt securities. Cash collateral is included as part of cash equivalents. These transactions are entered into under terms and
conditions that are standard industry practice to securities borrowing and lending activities.
Non-financial collateral
The Group takes other non-monetary collateral to recover outstanding lending exposures in the event of the borrower being unable or
unwilling to fulfil its obligations. This includes mortgage over property (both residential and commercial), and liens over business assets
(including, but not limited to plant, vehicles, aircraft, inventories and trade debtors) and guarantees from parties other than the borrower.
Where the Group is exposed to syndicated lending, the collateral offered by the borrower is secured by security special purpose vehicles.
Should a counterparty be unable to settle its obligations, the Group takes possession of collateral as full or part settlement of such
amounts. In general, the Group seeks to dispose of such property and other assets that are not readily convertible into cash as soon
as the market for the relevant asset permits.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G1: Loans and advances continued
G: Analysis of financial assets and liabilities continued
(d) Provision for impairments
G1: Loans and advances continued
This section analyses the provisions raised against loans and advances and the movements during the year.
(d) Provision for impairments
Specific impairments have been raised against those loans identified as impaired. Portfolio impairments are recognised against loans and
This section analyses the provisions raised against loans and advances and the movements during the year.
advances classified as neither past due nor impaired or past due but not impaired:
Specific impairments have been raised against those loans identified as impaired. Portfolio impairments are recognised against loans and
£m
advances classified as neither past due nor impaired or past due but not impaired:
Total
£m
impairment
Balance at beginning of the year
759
Total
Acquisitions through business combinations
5
impairment
Impairment charge
333
Balance at beginning of the year
759
Credit impairment charges1
272
Acquisitions through business combinations
5
Recoveries of amounts previously written off
61
Impairment charge
333
Amounts written off against the provision2
(252)
Credit impairment charges1
272
Foreign exchange and other movements
284
Recoveries of amounts previously written off
61
Transfer to assets held for sale and distribution3
–
Amounts written off against the provision2
(252)
1,129
Balance at end of the year
Foreign exchange and other movements
284
Transfer to assets held for sale and distribution3
–
1 Included in the credit impairment charge are the transfers between specific and portfolio provisions
1,129
Balance at end of the year
2 Of the £547 million specific impairment written off against the provision, £269 million relates to long outstanding loans Emerging Markets that were written off as they were deemed
Year ended 31 December 2017
Specific
impairment
Year ended 31 December 2017
820
Specific
–
impairment
298
820
228
–
70
298
(547)
228
(2)
70
(423)
(547)
146
(2)
(423)
146
Year ended 31 December 2016
Specific
impairment
Year ended 31 December 2016
529
Specific
1
impairment
338
529
277
1
61
338
(249)
277
201
61
–
(249)
820
201
–
820
Total
impairment
1,129
Total
–
impairment
305
1,129
235
–
70
305
(545)
235
2
70
(717)
(545)
174
2
(717)
174
Portfolio
impairment
309
Portfolio
–
impairment
7
309
7
–
–
7
2
7
4
–
(294)
2
28
4
(294)
28
Portfolio
impairment
230
Portfolio
4
impairment
(5)
230
(5)
4
–
(5)
(3)
(5)
83
–
–
(3)
309
83
–
309
to be irrecoverable
1 Included in the credit impairment charge are the transfers between specific and portfolio provisions
3 Amounts transferred to assets held for sale and distribution relate to Nedbank and Old Mutual Wealth that have been classified as held for distribution. Refer to note A4 for
2 Of the £547 million specific impairment written off against the provision, £269 million relates to long outstanding loans Emerging Markets that were written off as they were deemed
more information.
to be irrecoverable
3 Amounts transferred to assets held for sale and distribution relate to Nedbank and Old Mutual Wealth that have been classified as held for distribution. Refer to note A4 for
(d)(ii) Impairment of loans and advances – by classification
more information.
(d)(ii) Impairment of loans and advances – by classification
At 31 December 2017
At 31 December 2016
At 31 December 2017
Home loans
Commercial mortgages
Properties in possession
Home loans
Credit cards
Commercial mortgages
Overdrafts
Properties in possession
Other loans to clients1
Credit cards
Net finance lease and instalment debtors
Overdrafts
Total provision for impairments
Other loans to clients1
Net finance lease and instalment debtors
1 Other loans to clients include unsecured retail lending, term loans, foreign client lending, preference shares and debentures and other loans.
Total provision for impairments
Portfolio
impairment
–
Portfolio
–
impairment
–
–
–
–
–
–
28
–
–
–
28
28
–
28
Total
impairment
5
Total
4
impairment
–
5
–
4
2
–
163
–
–
2
174
163
–
174
Specific
impairment
5
Specific
4
impairment
–
5
–
4
2
–
135
–
–
2
146
135
–
146
Specific
impairment
At 31 December 2016
89
Specific
34
impairment
2
89
69
34
30
2
529
69
67
30
820
529
67
820
Portfolio
impairment
37
Portfolio
31
impairment
–
37
8
31
7
–
151
8
75
7
309
151
75
309
£m
Total
£m
impairment
126
Total
65
impairment
2
126
77
65
37
2
680
77
142
37
1,129
680
142
1,129
1 Other loans to clients include unsecured retail lending, term loans, foreign client lending, preference shares and debentures and other loans.
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(e) Finance lease and instalment debtors
The maturity of finance lease and instalment debtors are analysed as follows:
Amounts receivable under finance leases – At 31 December
Within one year
In the second to fifth years inclusive
After five years
Less: unearned finance income
Present value of minimum lease payments receivable
Minimum lease
payments receivable
2016
2,016
5,264
688
7,968
(1,747)
6,221
2017
–
–
–
–
–
–
£m
Present value of minimum lease
payments receivable
2016
1,586
4,100
535
6,221
–
6,221
2017
–
–
–
–
–
–
None of the continuing operations have entered into any finance lease agreements with customers.
G1.1: Assets held for sale and distribution: Loans and advances
(a) Categories of loans and advances classified as held for sale and distribution
The following table provides an analysis of the categories of loans and advances that are classified as assets held for sale and distribution.
The amounts presented in this table are the carrying value of the underlying assets before provisions for impairment losses:
Home loans
Commercial mortgages
Unsecured retail lending
Other term loans
Other loans to clients
Net finance leases and instalment debtors
Deposits placed under reverse purchase agreements
Overdrafts
Preference shares and debentures
Credit cards
Factoring accounts
Policyholder loans1
Properties in possession
Remittances in transit
Trade, other bills and bankers' acceptances
Gross loans and advances
Provisions for impairment
Specific provisions
Portfolio provisions
Total net loans and advances
1 Policyholder loans relate to the Old Mutual Wealth business only.
Notes
G1.1(c)(i)
G1.1(c)(i)
£m
At
31 December
2017
8,945
9,643
1,196
5,879
6,179
6,692
1,031
1,136
1,113
943
326
181
9
10
1
43,284
(717)
(423)
(294)
42,567
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G1.1: Assets held for sale and distribution: Loans and advances
G: Analysis of financial assets and liabilities continued
(a) Categories of loans and advances classified as held for sale and distribution continued
G1.1: Assets held for sale and distribution: Loans and advances
(a)(i) Loans and advances classified as held for sale and distribution – sector analysis
(a) Categories of loans and advances classified as held for sale and distribution continued
(a)(i) Loans and advances classified as held for sale and distribution – sector analysis
Individuals
Financial services, insurance and real estate
Banks
Individuals
Manufacturing
Financial services, insurance and real estate
Building and property development
Banks
Transport, storage and communication
Manufacturing
Retailers, catering and accommodation
Building and property development
Wholesale and trade
Transport, storage and communication
Mining and quarrying
Retailers, catering and accommodation
Agriculture, forestry and fishing
Wholesale and trade
Government and public sector
Mining and quarrying
Other services
Agriculture, forestry and fishing
Total gross loans and advances
Government and public sector
Other services
Total gross loans and advances
(a)(ii) Loans and advances classified as held for sale and distribution – geographical analysis
(a)(ii) Loans and advances classified as held for sale and distribution – geographical analysis
South Africa
Rest of Africa
Europe
South Africa
Asia
Rest of Africa
United States
Europe
Other
Asia
Total gross loans and advances
United States
Other
Total gross loans and advances
£m
At
31 December
£m
2017
At
15,776
31 December
12,519
2017
1,223
15,776
3,375
12,519
576
1,223
2,121
3,375
564
576
1,627
2,121
1,673
564
342
1,627
693
1,673
2,795
342
43,284
693
2,795
43,284
£m
At
31 December
£m
2017
At
39,076
31 December
2,035
2017
1,577
39,076
457
2,035
26
1,577
113
457
43,284
26
113
43,284
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Annual Report and Accounts 2017
(b) Credit quality of loans and advances classified as held for sale and distribution
(b)(i) Age analysis of loans and advances classified as held for sale and distribution
The table below gives an age analysis of loans and advances, representing primarily the exposures of the banking operations, classified
as held for sale and distribution:
Neither past due nor impaired
Past due but not impaired
Past due but less than 1 month
Past due, greater than 1 month but less than 3 months
Past due, greater than 3 months but less than 6 months
Past due, greater than 6 months but less than 1 year
Past due more than 1 year
Impaired loans and advances individually impaired
Gross loans and advances
Provisions for impairment
Total net loans and advances
£m
At
31 December
2017
40,843
1,272
270
838
122
5
37
1,169
43,284
(717)
42,567
(b)(ii) Credit rating analysis of loans and advances classified as held for sale and distribution neither past due nor impaired
The credit quality of loans and advances classified as held for sale and distribution that are neither past due nor impaired can be further
analysed by credit rating as follows:
Home loans
Commercial mortgages
Credit cards
Overdrafts
Policyholder loans
Other loans to clients
Preference shares and debentures
Net finance leases and instalment debtors
Factoring accounts
Trade, other bills and bankers' acceptances
Term loans
Deposits placed under reverse purchase agreements
Gross loans and advances
£m
At 31 December 2017
Investment
grade
3,807
3,279
98
240
–
4,025
940
208
37
–
4,689
921
18,244
Sub-
investment
grade
5,380
4,634
680
705
–
1,858
60
5,743
274
1
1,890
110
21,335
Internally
rated
199
171
4
82
181
235
113
132
–
–
147
–
1,264
Total
9,386
8,084
782
1,027
181
6,118
1,113
6,083
311
1
6,726
1,031
40,843
The rating scale of the loans and advances is based on local equivalent rating scales and not international scales.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G1.1: Assets held for sale and distribution: Loans and advances continued
G: Analysis of financial assets and liabilities continued
(c) Provision for impairments of loans and advances classified as held for sale and distribution
G1.1: Assets held for sale and distribution: Loans and advances continued
This section analyses the provisions raised against loans and advances.
(c) Provision for impairments of loans and advances classified as held for sale and distribution
Specific impairments have been raised against those loans identified as impaired. Portfolio impairments are recognised against loans and
This section analyses the provisions raised against loans and advances.
advances classified as neither past due nor impaired or past due but not impaired.
Specific impairments have been raised against those loans identified as impaired. Portfolio impairments are recognised against loans and
(c)(i) Provision for impairments of loans and advances classified as held for sale and distribution – analysis of movements
advances classified as neither past due nor impaired or past due but not impaired.
The table below reconciles the movement in provision for impairments of loans and advances classified as held for sale and distribution
for the year ended 31 December 2017:
(c)(i) Provision for impairments of loans and advances classified as held for sale and distribution – analysis of movements
The table below reconciles the movement in provision for impairments of loans and advances classified as held for sale and distribution
for the year ended 31 December 2017:
Balance at beginning of the period
Impairment charge
Credit impairment charges
Balance at beginning of the period
Recoveries of amounts previously written off
Impairment charge
Amounts written off against the provision
Credit impairment charges
Foreign exchange and other movements
Recoveries of amounts previously written off
Balance at end of the period
Amounts written off against the provision
Foreign exchange and other movements
Balance at end of the period
(c)((ii) Impairment of loans and advances classified as held for sale and distribution – by classification
£m
Year ended 31 December 2017
Total
£m
impairment
Year ended 31 December 2017
717
Total
263
impairment
193
717
70
263
(273)
193
10
70
717
(273)
10
717
Portfolio
impairment
285
Portfolio
3
impairment
3
285
–
3
2
3
4
–
294
2
4
294
Specific
impairment
432
Specific
260
impairment
190
432
70
260
(275)
190
6
70
423
(275)
6
423
(c)((ii) Impairment of loans and advances classified as held for sale and distribution – by classification
Specific
impairment
Home loans
57
Specific
Commercial mortgages
17
impairment
Properties in possession
1
Home loans
57
Credit cards
74
Commercial mortgages
17
Overdrafts
38
Properties in possession
1
Other loans to clients1
162
Credit cards
74
Net finance lease and instalment debtors
74
Overdrafts
38
423
Total provision for impairments
Other loans to clients1
162
Net finance lease and instalment debtors
74
1 Other loans to clients include unsecured retail lending, term loans, foreign client lending, preference shares and debentures and other loans.
423
Total provision for impairments
£m
At 31 December 2017
Total
£m
impairment
At 31 December 2017
82
Total
50
impairment
6
82
83
50
39
6
309
83
148
39
717
309
148
717
Portfolio
impairment
25
Portfolio
33
impairment
5
25
9
33
1
5
147
9
74
1
294
147
74
294
1 Other loans to clients include unsecured retail lending, term loans, foreign client lending, preference shares and debentures and other loans.
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G2: Investments and securities
The table below analyses the investments and securities that the Group invests in, either for its own proprietary behalf (shareholder funds)
or on behalf of third parties (either policyholder funds or pooled investments).
Government and government-guaranteed securities
Other debt securities, preference shares and debentures
Listed
Unlisted
Equity securities
Listed
Unlisted
Pooled investments
Listed
Unlisted
Short-term funds and securities treated as investments
Other
Total investments and securities
At
31 December
2017
5,413
5,403
1,682
3,721
17,391
16,626
765
10,538
6,452
4,086
4,100
257
43,102
£m
At
31 December
2016
(Restated)¹
7,931
13,971
9,436
4,535
22,614
21,071
1,543
51,426
22,761
28,665
4,133
313
100,388
1 Additional and enhanced availability of investments and securities information has resulted in the reclassification of a number items within investments and securities. These items
were previously classified as pooled investments (£2,175) and have be reclassified to other debt securities, preference shares and debentures (£507 million) and equity securities
(£1,524 million). Comparative information at 31 December 2016 has been restated accordingly. In addition, equity securities has been restated for the elimination of own shares
held by consolidated investment funds (£145 million) that was identified in the current year. Comparative information at 31 December 2016 has been restated accordingly.
At 31 December 2017, total investments and securities of £73,818 million attributable to Nedbank and Old Mutual Wealth have been
transferred to assets held for sale and distribution in the consolidated statement of financial position. Refer to note A4 and note G2.1
for more information.
Investments and securities are regarded as current and non-current assets based on the intention with which the financial assets are held,
as well as their contractual maturity profile. Of the amounts shown above, which is the amount expected to be recoverable, £8,690 million
(2016: £66,373 million) is regarded as current and £34,412 million (2016: £34,015 million) is regarded as non-current.
(a) Debt instruments and similar securities
All debt instruments and similar securities are neither past due nor impaired and are analysed in the table below.
These debt instruments and similar securities are classified according to their local credit rating (Standard & Poor's or an equivalent),
by investment grade:
At 31 December 2017
Government and government-guaranteed securities
Other debt securities, preference shares and debentures
Short-term funds and securities
Other
At 31 December 2016 (Restated)¹
Government and government-guaranteed securities
Other debt securities, preference shares and debentures
Short-term funds and securities
Other
Investment
grade (AAA to
BBB)
4,112
2,894
2,395
103
9,504
Sub-
Investment
grade (BB
and lower)
185
589
131
17
922
Included
through
consolidation
of funds
772
–
1,058
28
1,858
Internally
rated
344
1,920
516
97
2,877
Investment
grade (AAA to
BBB)
6,293
8,647
2,500
272
17,712
Sub-
investment
grade (BB and
lower)
42
685
3
–
730
Included
through
consolidation
of funds
1,472
2,003
867
12
4,354
Internally
rated
124
2,636
763
29
3,552
£m
Total
5,413
5,403
4,100
245
15,161
£m
Total
7,931
13,971
4,133
313
26,348
1 Additional and enhanced availability of investments and securities information has resulted in the reclassification of a number items within investments and securities. These items
were previously classified as pooled investments (£507 million) and have be reclassified to internally rated other debt securities, preference shares and debentures. Comparative
information for internally rated other debt securities, preference shares and debentures at 31 December 2016 has been restated accordingly.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G2: Investments and securities
G: Analysis of financial assets and liabilities continued
(b) Equity securities
G2: Investments and securities
Equity securities are used for a combination of activities. The majority of the listed securities are traded on well-established exchanges
such as the New York Stock Exchange, London Stock Exchange and Johannesburg Stock Exchange.
(b) Equity securities
Equity securities are used for a combination of activities. The majority of the listed securities are traded on well-established exchanges
The Group's holdings of unlisted equity securities arise principally from private equity investment and unlisted investment vehicles.
such as the New York Stock Exchange, London Stock Exchange and Johannesburg Stock Exchange.
G2.1: Assets held for sale and distribution – Investments and securities
The Group's holdings of unlisted equity securities arise principally from private equity investment and unlisted investment vehicles.
The table below analyses the investments and securities classified as held for sale and distribution at 31 December 2017:
G2.1: Assets held for sale and distribution – Investments and securities
The table below analyses the investments and securities classified as held for sale and distribution at 31 December 2017:
Government and government-guaranteed securities
Other debt securities, preference shares and debentures
Listed
Government and government-guaranteed securities
Unlisted
Other debt securities, preference shares and debentures
Equity securities
Listed
Listed
Unlisted
Unlisted
Equity securities
Pooled investments
Listed
Listed
Unlisted
Unlisted
Pooled investments
Short-term funds and securities treated as investments
Listed
Other
Unlisted
Total investments and securities
Short-term funds and securities treated as investments
Other
(a) Debt instruments and similar securities classified as held for sale and distribution
Total investments and securities
All debt instruments and similar securities are neither past due nor impaired and are analysed in the table below.
(a) Debt instruments and similar securities classified as held for sale and distribution
These debt instruments and similar securities are classified according to their local credit rating (Standard & Poor's or an equivalent),
All debt instruments and similar securities are neither past due nor impaired and are analysed in the table below.
by investment grade:
These debt instruments and similar securities are classified according to their local credit rating (Standard & Poor's or an equivalent),
At 31 December 2017
by investment grade:
£m
4,398
8,923
£m
8,742
4,398
181
8,923
13,122
8,742
11,784
181
1,338
13,122
46,553
11,784
17,626
1,338
28,927
46,553
426
17,626
396
28,927
73,818
426
396
73,818
Included
through
consolidation
Included
of funds
through
2,246
consolidation
1,911
of funds
–
2,246
393
1,911
4,550
–
393
4,550
£m
£m
Total
4,398
8,923
Total
426
4,398
393
8,923
14,140
426
393
14,140
At 31 December 2017
Government and government-guaranteed securities
Other debt securities, preference shares and debentures
Short-term funds and securities
Government and government-guaranteed securities
Other
Other debt securities, preference shares and debentures
Short-term funds and securities
Other
Investment
grade (AAA to
BBB)
Investment
1,705
grade (AAA to
6,177
BBB)
422
1,705
–
6,177
8,304
422
–
8,304
Sub-Investment
grade (BB and
Sub-Investment
437
grade (BB and
119
–
437
–
119
556
–
–
556
lower) Internally rated
10
716
lower) Internally rated
4
10
–
716
730
4
–
730
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G3: Securities lending
Securities lent
The Group participates in securities lending programmes where securities holdings are lent to third parties. These securities are not
derecognised from the Group's consolidated statement of financial position and are retained within the relevant investment classification.
Collateral is held in respect of the loaned securities.
The table below represents the amounts lent and the related collateral received within the continuing operations:
Assets lent under securities lending
Equity
Debt securities
Amounts received as collateral for securities lending
Cash
Debt securities
At
31 December
2017
£m
At
31 December
2016
292
16
308
286
44
330
416
60
476
474
34
508
Cash collateral has been recognised in the consolidated statement of financial position with a corresponding liability to return the collateral
included in trade, other payables and other liabilities. Of the collateral included in the table above, £44 million (2016: £34 million) can be
sold or repledged and £nil (2016: £nil) has been sold or repledged.
At 31 December 2017 and 31 December 2016, the Group provided cash collateral of £8 million and £10 million respectively for security
borrowing arrangements.
The businesses classified as held for sale and distribution routinely in the normal course of business enter into various forms of securities
lending and securities borrowing transactions.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G4: Derivative financial instruments – assets and liabilities
G: Analysis of financial assets and liabilities continued
The Group utilises derivative instruments for both hedging and trading purposes. Economic hedging occurs when a derivative financial
instrument is taken out for the management of financial risk. Only where the accounting treatment results in profit or loss volatility will the
G4: Derivative financial instruments – assets and liabilities
Group undertake hedge accounting. The derivative instruments become in-the-money or out-of-the-money as a result of fluctuations in
The Group utilises derivative instruments for both hedging and trading purposes. Economic hedging occurs when a derivative financial
market interest rates, foreign exchange rates or asset prices relative to their terms. The aggregate contractual or notional amount of
instrument is taken out for the management of financial risk. Only where the accounting treatment results in profit or loss volatility will the
derivative financial instruments on hand, the extent to which instruments are in-the-money or out-of-the-money and, therefore, the
Group undertake hedge accounting. The derivative instruments become in-the-money or out-of-the-money as a result of fluctuations in
aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time.
market interest rates, foreign exchange rates or asset prices relative to their terms. The aggregate contractual or notional amount of
derivative financial instruments on hand, the extent to which instruments are in-the-money or out-of-the-money and, therefore, the
The Group undertakes transactions involving derivative financial instruments with other financial institutions. Management has established
aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time.
limits commensurate with the credit quality of the institutions with which it deals and manages the resulting exposures such that a default
by any individual counterparty is unlikely to have a materially adverse impact on the Group.
The Group undertakes transactions involving derivative financial instruments with other financial institutions. Management has established
limits commensurate with the credit quality of the institutions with which it deals and manages the resulting exposures such that a default
The following table provides a detailed breakdown of the Group's derivative financial instruments outstanding at year-end. These
by any individual counterparty is unlikely to have a materially adverse impact on the Group.
instruments allow the Group and its customers to transfer, modify or reduce their credit, equity market, foreign exchange and interest
rate risks:
The following table provides a detailed breakdown of the Group's derivative financial instruments outstanding at year-end. These
instruments allow the Group and its customers to transfer, modify or reduce their credit, equity market, foreign exchange and interest
rate risks:
Equity derivatives
Options written
Options purchased
Equity derivatives
Futures
Options written
Exchange rate contracts
Options purchased
Exchange rate contracts
Options purchased
Forwards
Futures
Swaps
Forwards
Futures
Swaps
Options written
Options purchased
Interest rate contracts
Options written
Interest rate contracts
Options written
Futures
Swaps
Forward rate agreements
Swaps
Futures
Forward rate agreements
£m
Derivative financial instruments
Liabilities
£m
2016
2017
Derivative financial instruments
28
4
Liabilities
8
–
2016
2017
–
–
28
4
20
4
8
–
440
–
–
–
245
–
20
4
167
–
440
–
–
–
245
–
8
–
167
–
20
–
–
–
609
263
8
–
576
263
20
–
6
–
609
263
7
–
576
263
20
–
6
–
4
–
7
–
–
1
20
–
80
–
4
–
1,161
268
–
1
80
–
1,161
268
2016
36
–
2016
30
36
6
–
545
30
337
6
186
545
14
337
8
186
–
14
689
8
663
–
12
689
–
663
14
12
9
–
9
14
52
9
1,340
9
52
1,340
Assets
2017
27
Assets
–
2017
27
27
–
–
18
27
1
–
17
18
–
1
–
17
–
–
187
–
187
–
–
187
–
187
–
–
–
–
13
–
–
–
245
13
–
245
Credit default swaps
Options written
Other derivatives
Futures
Derivatives included through consolidation of funds
Credit default swaps
Total
Other derivatives
Derivatives included through consolidation of funds
The undiscounted contractual maturities of the cash flows of the derivative liabilities held are as follows:
Total
Derivative financial liabilities
The undiscounted contractual maturities of the cash flows of the derivative liabilities held are as follows:
Derivative financial liabilities
At 31 December 2017
At 31 December 2016
£m
Total
500
1,382
Total
500
At 31 December 2017
At 31 December 2017, total derivative financial assets of £1,842 million and total derivative financial liabilities of £1,795 million attributable
1,382
At 31 December 2016
to Nedbank and Old Mutual Wealth have been transferred to assets and liabilities held for sale and distribution respectively in the
consolidated statement of financial position. Refer to note A4 and note G4.1 for more information.
At 31 December 2017, total derivative financial assets of £1,842 million and total derivative financial liabilities of £1,795 million attributable
to Nedbank and Old Mutual Wealth have been transferred to assets and liabilities held for sale and distribution respectively in the
consolidated statement of financial position. Refer to note A4 and note G4.1 for more information.
More than
5 years
356
More than
681
5 years
356
681
Less than
3 months
9
Less than
134
3 months
9
134
Carrying
amount
268
Carrying
1,161
amount
268
1,161
More than
3 months less
than 1 year
More than
22
3 months less
277
than 1 year
22
277
Between
1 and 5
years
Between
113
1 and 5
290
years
113
290
£m
236
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G4.1: Assets and liabilities held for sale and distribution – Derivative financial instruments
The following table analyses the derivative assets and derivative liabilities classified as held for sale and distribution at 31 December 2017.
At 31 December 2017
Equity derivatives
Options written
Options purchased
Futures
Exchange rate contracts
Forwards
Swaps
Options purchased
Futures
Options written
Interest rate contracts
Swaps
Forward rate agreements
Options purchased
Futures
Caps
Credit default swaps
Derivatives included through consolidation of funds
Total
Assets
33
–
25
8
889
530
304
53
2
–
824
753
50
16
4
1
9
87
1,842
The undiscounted contractual maturities of the cash flows of the derivative liabilities are as follows:
Derivative financial liabilities
At 31 December 2017
Carrying
amount
1,795
Less than 3
months
740
More than 3
months less
than 1 year
327
Between 1 and
5 years
321
More than 5
years
407
£m
Liabilities
72
45
–
27
677
408
228
–
7
34
611
567
30
–
13
1
2
433
1,795
£m
Total
1,795
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G5: Hedge accounting
G: Analysis of financial assets and liabilities continued
(a) Net investment hedges
G5: Hedge accounting
The Group uses a combination of currency swaps, forward foreign exchange contracts and debt raised in the currency of the exposure to
mitigate the translation effect of holding overseas companies. The following table summarises the Group's open positions with respect to
(a) Net investment hedges
financial instruments utilised for net investment hedging purposes. There was no ineffectiveness in respect of the net investment hedges
The Group uses a combination of currency swaps, forward foreign exchange contracts and debt raised in the currency of the exposure to
during the year ended 31 December 2017 and the year ended 31 December 2016.
mitigate the translation effect of holding overseas companies. The following table summarises the Group's open positions with respect to
financial instruments utilised for net investment hedging purposes. There was no ineffectiveness in respect of the net investment hedges
The table below sets out the notional amounts of derivative contracts used as hedging instruments:
during the year ended 31 December 2017 and the year ended 31 December 2016.
The table below sets out the notional amounts of derivative contracts used as hedging instruments:
Open positions
Forward contracts
Currency swaps
Open positions
Forward contracts
Currency swaps
USD
54
USD
–
54
54
–
54
At 31 December 2017
EUR
ZAR
At 31 December 2017
3
–
EUR
ZAR
–
–
–
3
–
3
–
–
–
3
USD
109
USD
148
257
109
148
257
Fair value of financial instruments designated as net investment hedges
ZAR forward foreign exchange contracts
EUR forward foreign exchange contracts
Fair value of financial instruments designated as net investment hedges
USD forward foreign exchange contracts
ZAR forward foreign exchange contracts
USD cross currency swap
EUR forward foreign exchange contracts
USD forward foreign exchange contracts
USD cross currency swap
The ZAR and USD forward exchange contracts are designated as hedges against foreign currency risk in respect of the Group's
investments in its South African and Bermudan operations.
The ZAR and USD forward exchange contracts are designated as hedges against foreign currency risk in respect of the Group's
(b) Accounting for other economic hedges (fair value through profit or loss – designated)
investments in its South African and Bermudan operations.
Old Mutual plc has designated £341 million fixed-rate debt as fair value through profit or loss in order to reduce an accounting mismatch.
The mismatch that this reduces is the fair value movements on the £341 million of interest rate swaps. The changes in the value of the
(b) Accounting for other economic hedges (fair value through profit or loss – designated)
swaps, which are recognised as derivative financial instruments, are recognised in profit or loss. These derivative instruments change
Old Mutual plc has designated £341 million fixed-rate debt as fair value through profit or loss in order to reduce an accounting mismatch.
the interest profile of the fixed-rate debt into a variable coupon, with changes through profit or loss.
The mismatch that this reduces is the fair value movements on the £341 million of interest rate swaps. The changes in the value of the
swaps, which are recognised as derivative financial instruments, are recognised in profit or loss. These derivative instruments change
the interest profile of the fixed-rate debt into a variable coupon, with changes through profit or loss.
£m
At 31 December 2016
EUR
ZAR
£m
At 31 December 2016
199
136
EUR
ZAR
–
–
199
136
199
136
–
–
199
136
£m
At
31 December
£m
2016
At
31 December
(8)
2016
(5)
(16)
(8)
(33)
(5)
(62)
(16)
(33)
(62)
At
31 December
2017
At
31 December
–
2017
–
1
–
–
–
1
1
–
1
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G6: Insurance and investment contracts
Life assurance
Classification of contracts
Life assurance contracts are categorised into insurance contracts, contracts with a discretionary participation feature or investment
contracts, in accordance with the classification criteria set out in the paragraphs below.
For the Group's unit-linked assurance business, contracts are separated into an insurance component and an investment component
(known as unbundling) and each unbundled component is accounted for separately in accordance with the accounting policy for that
component. The treatment of these types of contracts as separate components, (unbundling), only occurs when there is a small or
insignificant of insurance risk in the contract. Other kinds of contracts are considered and categorised as a whole.
Contracts under which the Group accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the
policyholder or other beneficiary if a specified uncertain future event (the insured event) adversely affects the policyholder are classified as
insurance contracts. Insurance risk is risk other than financial risk. Contracts accounted for as insurance contracts include life assurance
contracts and savings contracts providing more than an insignificant amount of life assurance protection.
Financial risks are the risks of a possible future change in one or more of an interest rate, security price, security index, commodity price,
foreign exchange rate, index of prices or rates, a credit rating or credit index, or other variable, provided, in the case of a non-financial
variable, that the variable is not specific to a party to the contract.
Contracts with discretionary participating features are those under which the policyholder holds a contractual right to receive additional
payments as a supplement to guaranteed minimum payments. These additional payments, the amount and timing of which is at the
Group's discretion, represent a significant portion of the total contractual payments. These are contractually based on (i) the performance
of a specified pool of contracts or a specified type of contract, (ii) realised and/or unrealised investment returns on a specified pool of
assets held by the Group or (iii) the profit or loss of the Group. Investment contracts with discretionary participating features, which have
no life assurance protection in the policy terms, are accounted for in the same manner as insurance contracts.
Contracts under which the transfer of insurance risk to the Group from the policyholder is not significant (or there is no transfer of
insurance risk) and where there is no discretionary participation are classified as investment contracts. Such contracts include unit-linked
savings and/or investment contracts sold without life assurance protection and are classified as financial instruments.
Premiums on life assurance
Premiums and annuity considerations receivable under insurance contracts and investment contracts with a discretionary participating
feature are stated gross of commission and exclude taxes and levies. Premiums in respect of unit-linked insurance contracts are
recognised when the liability is established. Premiums in respect of other insurance contracts and investment contracts with a
discretionary participating feature are recognised when due for payment.
Outward reinsurance premiums are recognised when due for payment.
Amounts received under investment contracts, other than those with a discretionary participating feature and unit-linked assurance
contracts are not recorded through profit or loss, except for fee income and investment income attributable to those contracts, but are
accounted for directly through the consolidated statement of financial position as an adjustment to investment contract liabilities.
Claims paid on life assurance
Claims paid under insurance contracts and investment contracts with a discretionary participating feature include maturities, annuities,
surrenders, death and disability payments.
Maturity and annuity claims are recorded as they fall due for payment. Death and disability claims and surrenders are accounted for in
profit or loss when notified.
Reinsurance recoveries in profit or loss are recognised in profit or loss in the same period as the related claim.
Amounts paid under investment contracts other than those with a discretionary participating feature and unit-linked assurance contracts
are recorded as reductions of the investment contract liabilities.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G6: Insurance and investment contracts continued
G: Analysis of financial assets and liabilities continued
Insurance contract liabilities
G6: Insurance and investment contracts continued
Insurance contract liabilities for African businesses are computed using a gross premium valuation method. Provisions in respect of
African business are made in accordance with the Financial Soundness Valuation basis as set out in the guidelines issued by the Actuarial
Insurance contract liabilities
Society of South Africa in Standard of Actuarial Practice (SAP) 104 (2012). Under these guidelines, provisions are valued using realistic
Insurance contract liabilities for African businesses are computed using a gross premium valuation method. Provisions in respect of
expectations of future experience, with margins for prudence and deferral of profit emergence.
African business are made in accordance with the Financial Soundness Valuation basis as set out in the guidelines issued by the Actuarial
Society of South Africa in Standard of Actuarial Practice (SAP) 104 (2012). Under these guidelines, provisions are valued using realistic
Provisions for investment contracts with a discretionary participating feature are also computed using the gross premium valuation method
expectations of future experience, with margins for prudence and deferral of profit emergence.
in accordance with the Financial Soundness Valuation basis. Surplus allocated to policyholders but not yet distributed related to these
contracts is included as part of life assurance policyholder liabilities as discretionary margins.
Provisions for investment contracts with a discretionary participating feature are also computed using the gross premium valuation method
in accordance with the Financial Soundness Valuation basis. Surplus allocated to policyholders but not yet distributed related to these
Reserves for immediate annuities and other guaranteed payments are computed on the prospective deposit method, which produces
contracts is included as part of life assurance policyholder liabilities as discretionary margins.
reserves equal to the present value of future benefit payments.
Reserves for immediate annuities and other guaranteed payments are computed on the prospective deposit method, which produces
For other territories, the valuation bases adopted are in accordance with local actuarial practices and methodologies.
reserves equal to the present value of future benefit payments.
Derivative instruments embedded in an insurance contract are not separated and measured at fair value if the embedded derivative itself
For other territories, the valuation bases adopted are in accordance with local actuarial practices and methodologies.
qualifies for recognition as an insurance contract. In this case the entire contract is measured as described above.
Derivative instruments embedded in an insurance contract are not separated and measured at fair value if the embedded derivative itself
The Group performs liability adequacy testing at a business unit level on its insurance liabilities to ensure that the carrying amount of its
qualifies for recognition as an insurance contract. In this case the entire contract is measured as described above.
liabilities (less related deferred acquisition costs and intangible assets) is sufficient in view of estimated future cash flows. When performing
the liability adequacy test, the Group discounts all contractual cash flows and compares this amount to the carrying value of the liability
The Group performs liability adequacy testing at a business unit level on its insurance liabilities to ensure that the carrying amount of its
at discount rates appropriate to the business in question. Where a shortfall is identified, an additional provision is made by increasing the
liabilities (less related deferred acquisition costs and intangible assets) is sufficient in view of estimated future cash flows. When performing
liability held. The provision assumptions and estimation techniques are periodically reviewed, with any changes in estimates reflected
the liability adequacy test, the Group discounts all contractual cash flows and compares this amount to the carrying value of the liability
in profit or loss as they occur.
at discount rates appropriate to the business in question. Where a shortfall is identified, an additional provision is made by increasing the
liability held. The provision assumptions and estimation techniques are periodically reviewed, with any changes in estimates reflected
Whilst the directors consider that the gross insurance contract liabilities and the related reinsurance recoveries are fairly stated on the
in profit or loss as they occur.
basis of the information currently available to them, the ultimate liability will vary as a result of subsequent information and events and may
result in significant adjustments to the amount provided.
Whilst the directors consider that the gross insurance contract liabilities and the related reinsurance recoveries are fairly stated on the
basis of the information currently available to them, the ultimate liability will vary as a result of subsequent information and events and may
In respect of the South Africa life assurance, shadow accounting is applied to insurance contract liabilities where the underlying
result in significant adjustments to the amount provided.
measurement of the policyholder liability depends directly on the value of owner-occupied property and the unrealised gains and losses
on such property, which are recognised in other comprehensive income. The shadow accounting adjustment to insurance contract
In respect of the South Africa life assurance, shadow accounting is applied to insurance contract liabilities where the underlying
liabilities is recognised in other comprehensive income to the extent that the unrealised gains or losses on owner-occupied property
measurement of the policyholder liability depends directly on the value of owner-occupied property and the unrealised gains and losses
backing insurance contract liabilities are also recognised directly in other comprehensive income.
on such property, which are recognised in other comprehensive income. The shadow accounting adjustment to insurance contract
liabilities is recognised in other comprehensive income to the extent that the unrealised gains or losses on owner-occupied property
Financial guarantee contracts, issued in insurance contracts are recognised as part of the overall measurement of insurance contracts.
backing insurance contract liabilities are also recognised directly in other comprehensive income.
Liability adequacy testing is performed to ensure that the carrying amount of the liability for financial guarantee contracts is sufficient.
Financial guarantee contracts, issued in insurance contracts are recognised as part of the overall measurement of insurance contracts.
Investment contract liabilities
Liability adequacy testing is performed to ensure that the carrying amount of the liability for financial guarantee contracts is sufficient.
Investment contract liabilities in respect of the Group's business other than unit-linked business are recorded at amortised cost unless they
are designated at fair value through profit or loss in order to eliminate or significantly reduce a measurement or recognition inconsistency,
Investment contract liabilities
for example where the corresponding assets are recorded at fair value through profit or loss.
Investment contract liabilities in respect of the Group's business other than unit-linked business are recorded at amortised cost unless they
are designated at fair value through profit or loss in order to eliminate or significantly reduce a measurement or recognition inconsistency,
Investment contract liabilities in respect of the Group's unit-linked business are recorded at fair value. For such liabilities, including the
for example where the corresponding assets are recorded at fair value through profit or loss.
deposit component of unbundled unit-linked assurance contracts, fair value is calculated as the account balance, which is the value of the
units allocated to the policyholder, based on the bid price of the assets in the underlying fund (adjusted for tax).
Investment contract liabilities in respect of the Group's unit-linked business are recorded at fair value. For such liabilities, including the
deposit component of unbundled unit-linked assurance contracts, fair value is calculated as the account balance, which is the value of the
Investment contract liabilities measured at fair value are subject to a 'deposit floor' such that the liability established cannot be less than the
units allocated to the policyholder, based on the bid price of the assets in the underlying fund (adjusted for tax).
amount repayable on demand.
Investment contract liabilities measured at fair value are subject to a 'deposit floor' such that the liability established cannot be less than the
amount repayable on demand.
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Acquisition costs
Acquisition costs for insurance contracts comprise all direct and indirect costs arising from the sale of insurance contracts.
As the gross premium valuation method used in African territories to determine insurance contract liabilities makes implicit allowance for
the deferral of acquisition costs, no explicit deferred acquisition cost asset is recognised in the consolidated statement of financial position
for the contracts issued in these areas.
Deferral of costs on insurance business in other territories is limited to the extent that they are deemed recoverable from available
future margins.
Costs incurred in acquiring investment management service contracts
Incremental costs that are directly attributable to securing an investment management service contract are recognised as an asset if they
can be identified separately and measured reliably and it is probable that they will be recovered. Deferred acquisition costs represent the
contractual right to benefit from providing investment management services and are amortised as the related revenue is recognised. Costs
attributable to investment management service contracts in the asset management businesses are also recognised on this basis.
Revenue on investment management service contracts
Fees charged for investment management services provided in conjunction with an investment contract are recognised as revenue as the
services are provided. Initial fees, which exceed the level of recurring fees and relate to the future provision of services are deferred and
amortised over the anticipated period in which services will be provided. Fees charged for investment management service contracts by
asset management businesses are also recognised on this basis.
Property & casualty
Contracts under which the Group accepts significant insurance risk from another party and which are not classified as life insurance are
classified as property & casualty. All classes of property & casualty business are accounted for on an annual basis.
Premiums on property & casualty
Premiums are stated gross of commissions, exclude taxes and levies and are accounted for in the period in which the risk commences.
The proportion of the premiums written relating to periods of risk after the reporting date is carried forward to subsequent accounting
periods as unearned premiums as a liability, so that earned premiums relate to risks carried during the accounting period.
Claims on property & casualty
Claims incurred, which are recognised in profit or loss, comprise the settlement and handling costs of paid and outstanding claims arising
during the year and adjustments to prior year claim provisions. Outstanding claims comprise claims incurred up to, but not paid, at the end
of the accounting period, whether reported or not.
Outstanding claims do not include any provision for possible future claims where the claims arise under contracts not in existence at the
reporting date.
The Group performs liability adequacy testing at a business unit level on its claim liabilities to ensure that the carrying amount of its
liabilities (less related deferred acquisition costs and the unearned premium reserve) is sufficient in view of estimated future undiscounted
cash flows.
Whilst the directors consider that the gross provisions for claims and the related reinsurance recoveries are fairly stated on the basis of the
information currently available to them, the ultimate liability will vary as a result of subsequent information and events, and may result in
significant adjustments to the amount provided. Adjustments to the amounts of claims provisions established in prior years are reflected
in profit or loss in the financial statements for the period in which the adjustments are made, and disclosed separately if material. The
methods used and estimates made are reviewed regularly.
Acquisition costs on property & casualty
Acquisition costs, which represent commission and other related expenses, are deferred and amortised over the period in which the
related general insurance premiums are earned.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G6: Insurance and investment contracts continued
G: Analysis of financial assets and liabilities continued
Reinsurance
G6: Insurance and investment contracts continued
The Group cedes reinsurance in the normal course of business for the purpose of limiting its net loss potential through the diversification
of its risks. Assets, liabilities and income and expense arising from ceded reinsurance contracts are presented separately from the related
Reinsurance
assets, liabilities, income and expense from the related insurance contracts because the reinsurance arrangements do not relieve the
The Group cedes reinsurance in the normal course of business for the purpose of limiting its net loss potential through the diversification
Group from its direct obligations to its policyholders.
of its risks. Assets, liabilities and income and expense arising from ceded reinsurance contracts are presented separately from the related
assets, liabilities, income and expense from the related insurance contracts because the reinsurance arrangements do not relieve the
Only rights under contracts that give rise to a significant transfer of insurance risk are accounted for as reinsurance assets. Rights under
Group from its direct obligations to its policyholders.
contracts that do not transfer significant insurance risk are accounted for as financial instruments.
Only rights under contracts that give rise to a significant transfer of insurance risk are accounted for as reinsurance assets. Rights under
Reinsurance premiums for ceded reinsurance are recognised as an expense on a basis that is consistent with the recognition basis for the
contracts that do not transfer significant insurance risk are accounted for as financial instruments.
premiums on the related insurance contracts. For property & casualty business, reinsurance premiums are expensed over the period that
the reinsurance cover is provided based on the expected pattern of the reinsured risks. The unexpensed portion of ceded reinsurance
Reinsurance premiums for ceded reinsurance are recognised as an expense on a basis that is consistent with the recognition basis for the
premiums is included in reinsurance assets.
premiums on the related insurance contracts. For property & casualty business, reinsurance premiums are expensed over the period that
the reinsurance cover is provided based on the expected pattern of the reinsured risks. The unexpensed portion of ceded reinsurance
The amounts recognised as reinsurance assets are measured on a basis that is consistent with the measurement of the insurance
premiums is included in reinsurance assets.
liabilities held in respect of the related insurance contracts. Reinsurance assets include recoveries due from reinsurance companies
in respect of claims paid.
The amounts recognised as reinsurance assets are measured on a basis that is consistent with the measurement of the insurance
liabilities held in respect of the related insurance contracts. Reinsurance assets include recoveries due from reinsurance companies
Reinsurance assets are assessed for impairment at each reporting date. An asset is deemed impaired if there is objective evidence,
in respect of claims paid.
as a result of an event that occurred after its initial recognition, that the Group may not recover all amounts due, and that the event has
a reliably measurable impact on the amounts that the Group will receive from the reinsurer.
Reinsurance assets are assessed for impairment at each reporting date. An asset is deemed impaired if there is objective evidence,
as a result of an event that occurred after its initial recognition, that the Group may not recover all amounts due, and that the event has
a reliably measurable impact on the amounts that the Group will receive from the reinsurer.
Critical accounting estimates and judgements – Policyholder liabilities
Emerging Markets Financial Soundness Valuation discount rate
Critical accounting estimates and judgements – Policyholder liabilities
The calculation of the Group's South African life assurance contract liabilities is sensitive to the discount rate used to value the liabilities.
The methodology applied by the Group requires discount rates to be set according to the South African professional guidance note
Emerging Markets Financial Soundness Valuation discount rate
(SAP 104). In line with these principles, the reference rate is selected as the Bond Exchange of South Africa (BESA) bond 10-year yield.
The calculation of the Group's South African life assurance contract liabilities is sensitive to the discount rate used to value the liabilities.
The methodology applied by the Group requires discount rates to be set according to the South African professional guidance note
The reference rate was relatively volatile over 2017, ranging from 8.5% to 9.8% (2016: 8.6% to 10.0%). At 31 December 2017, the
(SAP 104). In line with these principles, the reference rate is selected as the Bond Exchange of South Africa (BESA) bond 10-year yield.
reference discount rate was 9.0% (2016: 9.1%). The volatile interest rate environment continued to have a negligible impact on the
operating profit for the South African life assurance businesses during 2017, given the continuance of the hedging program and
The reference rate was relatively volatile over 2017, ranging from 8.5% to 9.8% (2016: 8.6% to 10.0%). At 31 December 2017, the
discretionary margins put in place to mitigate these impacts.
reference discount rate was 9.0% (2016: 9.1%). The volatile interest rate environment continued to have a negligible impact on the
operating profit for the South African life assurance businesses during 2017, given the continuance of the hedging program and
The Group estimates that a 1% reduction in the reference discount rate would result in an increase in insurance contract liabilities and
discretionary margins put in place to mitigate these impacts.
a decrease in profit after tax as at 31 December 2017 of £9 million (2016: £3 million), allowing for the mitigating impacts of the hedging
programme and discretionary margins in place.
The Group estimates that a 1% reduction in the reference discount rate would result in an increase in insurance contract liabilities and
a decrease in profit after tax as at 31 December 2017 of £9 million (2016: £3 million), allowing for the mitigating impacts of the hedging
This is due to further management actions to reduce the impact of volatile interest rates on profit in 2017.
programme and discretionary margins in place.
This is due to further management actions to reduce the impact of volatile interest rates on profit in 2017.
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Old Mutual plc
Annual Report and Accounts 2017
Emerging Markets discretionary reserves
Technical provisions in South Africa are determined as the aggregate of:
Best estimate liabilities, with assumptions allowing for the best estimate of future experience and a market-consistent valuation
of financial options and guarantees
Compulsory margins, prescribed in terms of the Long Term Insurance Act, 1998 and South African professional actuarial
guidance note (SAP 104) as explicit changes to actuarial assumptions that increase the level of technical provisions held, and
Discretionary margins, permitted by the Long Term Insurance Act, 1998 and SAP 104, to allow for the uncertainty inherent in
estimates of future experience after considering available options of managing that experience over time, or to defer the release
of profits consistent with policy design or company practice.
Discretionary margins are held as either implicit or explicit margins. Explicit discretionary margins are derived as conscious changes
to assumptions used to project future experience to increase technical provisions. Implicit discretionary margins arise where the
method used to calculate overall technical provisions results in liabilities that are greater than the sum of best estimate liabilities
and compulsory margins.
Explicit discretionary margins of R8,021 million (£479 million) (1.4% of total technical provisions) were held at 31 December 2017
(2016: R7,823 million (£461 million), 1.5% of total technical provisions). This consisted largely of:
Margins held for Mass Foundation Cluster protection business, which allow for the uncertainty related to mortality experience in South
Africa, as well as future lapse experience and future investment returns, and to ensure that profit is released appropriately over the
term of the policies
Margins to allow for the uncertainty inherent in the assumptions used to value financial options and guarantees, implied volatility
assumptions in particular, which are difficult to hedge due to the short term nature of the equity option market in South Africa
Margins on non-profit annuities, due to the inability to fully match assets to liabilities as a result of the limited availability of long-dated
bonds, and to provide for longevity risk, and
Margins for the uncertainty inherent in future economic assumptions used to calculate, mainly protection product liabilities, in the
Retail Affluent and Mass Foundation Cluster businesses. Although interest rate hedging is used to manage interest rate risk on these
products, the volatility of bond yields in South Africa means that it is difficult to maintain appropriate hedging positions without incurring
significant trading costs. The discretionary margin therefore caters for the residual uncertainty present after allowing for the hedge
programme that is in place.
Old Mutual Bermuda guarantees
Old Mutual Bermuda no longer owns any underlying policies or manages any policyholder funds. The Guaranteed Minimum
Accumulation Benefits (GMAB) risk on the remaining active variable annuity contracts is to be retained until the last GMAB policy
with a Universal Guarantee Option (UGO) rider passes its 10-year anniversary, which will be no later than August 2018. All remaining
business operations, subject to regulatory approvals, are expected to be substantially wound down by 31 December 2018.
Almost all of the remaining GMAB risk relates to policies sold with UGOs. Products sold with a Capital Guarantee Option (CGO) GMAB,
a product predecessor to the UGO, hold less onerous guarantees and do not give rise to significant risk.
The GMAB UGOs guarantee policyholders a return of 120% of invested premiums and, subject to policyholder election, also a Highest
Anniversary Value (HAV) guarantee. These guarantees crystallize on the 10-year anniversary of policies, the remainder of which will
be reached in 2018. The market risk attached to the GUO guarantees, and relating to equity and foreign exchange downside risks,
is currently being managed by OTM quanto put options which covered circa 102% of the remaining equity and foreign exchange
UGO GMAB exposures as at 31 December 2017. This slightly over-hedged position was mainly due to the higher than expected
lapses in 2017.
GMAB reserves have decreased from £85 million ($104 million) at 31 December 2016 to £9 million ($12 million) at 31 December 2017,
a decrease of £76 million ($92 million), mainly due to the expiration of GMAB guarantees and favourable equity and foreign exchange
markets in 2017.
If the Group were to stress the underlying assets and liabilities, by adding 10% to the current level of volatility, it would increase the
underlying assets by £2 million and increase the value of the liability by £1 million, which would result in a net profit for the Group of circa
£1 million.
If the Group were to stress the underlying assets and liabilities, by decreasing the current level of volatility by 10%, it would decrease
the underlying assets £2 million and decrease the value of the liability by £1 million, which would result in a net loss for the Group of
£1 million.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G6: Insurance and investment contracts continued
G: Analysis of financial assets and liabilities continued
(a) Policyholder liabilities
G6: Insurance and investment contracts continued
The Group's insurance and investment contracts are analysed as follows:
(a) Policyholder liabilities
The Group's insurance and investment contracts are analysed as follows:
At 31 December 2017
At 31 December 2016
Life assurance policyholder liabilities
Total life insurance contract liabilities
Life insurance contract liabilities
Life assurance policyholder liabilities
Outstanding claims
Total life insurance contract liabilities
Life insurance contract liabilities
Investment contract liabilities
Outstanding claims
Unit-linked investment contracts and similar
Gross Reinsurance
Net
Gross Reinsurance
At 31 December 2017
9,520
(34)
Gross Reinsurance
(34)
9,379
–
141
(34)
9,520
(34)
9,379
–
28,740
–
141
9,486
Net
9,345
141
9,486
9,345
28,740
141
At 31 December 2016
9,982
(358)
Gross Reinsurance
(345)
9,844
(13)
138
(358)
9,982
(345)
9,844
(2,560)
77,599
(13)
138
£m
Net
£m
9,624
Net
9,499
125
9,624
9,499
75,039
125
contracts
–
–
–
–
–
–
(34)
–
66,543
77,599
972
10,084
66,543
972
87,581
10,084
(2,560)
(2,560)
–
–
(2,560)
–
(2,918)
–
17,125
28,740
72
11,543
17,125
72
38,226
11,543
17,125
28,740
72
11,543
17,125
72
38,260
11,543
contracts
Investment contract liabilities
Other investment contracts
Unit-linked investment contracts and similar
Discretionary participating investment contracts
Other investment contracts
Total life assurance policyholder liabilities
Discretionary participating investment contracts
Property & casualty liabilities
Claims incurred but not reported
79
38,260
Total life assurance policyholder liabilities
Unearned premiums
154
Property & casualty liabilities
Outstanding claims
261
Claims incurred but not reported
79
494
Total property & casualty liabilities
Unearned premiums
154
Total policyholder liabilities
38,754
Outstanding claims
261
494
Total property & casualty liabilities
At 31 December 2017, total gross policyholder liabilities of £60,846 million and total reinsurance share of policyholder liabilities of
38,754
Total policyholder liabilities
£2,914 million attributable to Nedbank and Old Mutual Wealth have been transferred to liabilities held for sale and distribution and
assets held for sale and distribution respectively in the consolidated statement of financial position. Refer to note A4 and note G6.1
At 31 December 2017, total gross policyholder liabilities of £60,846 million and total reinsurance share of policyholder liabilities of
for more information.
£2,914 million attributable to Nedbank and Old Mutual Wealth have been transferred to liabilities held for sale and distribution and
assets held for sale and distribution respectively in the consolidated statement of financial position. Refer to note A4 and note G6.1
Of the £252 million (2016: £3,115 million) included in reinsurer's share of life assurance policyholder and property & casualty liabilities
for more information.
is an amount of £192 million (2016: £2,919 million) which is classified as current, the remainder being non-current.
Of the £252 million (2016: £3,115 million) included in reinsurer's share of life assurance policyholder and property & casualty liabilities
is an amount of £192 million (2016: £2,919 million) which is classified as current, the remainder being non-current.
(14)
(2,918)
(76)
(107)
(14)
(197)
(76)
(3,115)
(107)
(197)
(3,115)
73
87,581
163
246
73
482
163
88,063
246
482
88,063
60
38,226
83
133
60
276
83
38,502
133
276
38,502
(19)
(34)
(71)
(128)
(19)
(218)
(71)
(252)
(128)
(218)
(252)
63,983
75,039
972
10,084
63,983
972
84,663
10,084
59
84,663
87
139
59
285
87
84,948
139
285
84,948
244
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
(b) Life insurance contracts liabilities
Movements in the amounts outstanding in respect of life assurance policyholder liabilities, other than outstanding claims, are set
out below:
Balance at beginning of the year
Income
Premium income
Investment income
Other income
Expenses
Claims and policy benefits
Operating expenses
Currency translation loss(gain)
Other charges and transfers
Taxation
Transfer to operating profit
Transfer to liabilities held for sale and distribution1
Balance at end of the year
Gross Reinsurance
(345)
9,844
At 31 December 2017
Net
9,499
£m
At 31 December 2016
Net
7,411
Gross Reinsurance
(206)
7,617
1,893
1,042
1
(1,912)
(569)
75
26
(24)
(381)
(616)
9,379
(95)
–
–
79
–
–
(90)
–
37
380
(34)
1,798
1,042
1
(1,833)
(569)
75
(64)
(24)
(344)
(236)
9,345
1,634
678
3
(1,673)
(468)
2,414
10
(10)
(352)
(9)
9,844
(88)
–
–
57
–
(13)
(115)
–
20
–
(345)
1,546
678
3
(1,616)
(468)
2,401
(105)
(10)
(332)
(9)
9,499
1 Amounts transferred to liabilities held for sale and distribution at 31 December 2017 relate to Nedbank and Old Mutual Wealth that have been classified as held distribution. Amounts
transferred to liabilities held for sale and distribution at 31 December 2016 relate to the disposal of Old Mutual Wealth Italy. Refer to note A2 and A4 for more information.
(c) Unit-linked investment contracts and similar contracts, and other investment contracts
Balance at beginning of the year
Contributions received
Maturities
Withdrawals and surrenders
Fair value movements
Foreign exchange and other movements
Transfer to liabilities held for sale and distribution1
Balance at end of the year
At
31 December
2017
67,515
12,802
(297)
(8,317)
6,309
(594)
(60,221)
17,197
£m
At
31 December
2016
60,769
10,100
(244)
(7,381)
6,296
3,855
(5,880)
67,515
1 Amounts transferred to liabilities held for sale at 31 December 2017 relate to Nedbank and Old Mutual Wealth that have been classified as held distribution. Amounts transferred to
liabilities held for sale and distribution at 31 December 2016 relate to the disposal of Old Mutual Wealth Italy. Refer to note A2 and A4 for more information.
(d) Discretionary participating investment contracts
Discretionary participating investment contracts relate to the continuing operations only. None of the businesses classified as held for sale
and distribution have issued any discretionary participating investment contracts.
At
31 December
2017
10,084
£m
At
31 December
2016
7,085
1,645
1,516
7
(1,484)
(68)
(74)
(12)
42
(113)
11,543
1,525
366
–
(1,170)
(56)
(6)
(2)
2,438
(96)
10,084
Balance at beginning of the year
Income
Premium income
Investment and other income
Other income
Expenses
Claims and policy benefits
Operating expenses
Other charges and transfers
Taxation
Currency translation losses
Transfer to operating profit
Balance at end of the year
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G6: Insurance and investment contracts continued
G: Analysis of financial assets and liabilities continued
(e) Contractual maturity analysis
G6: Insurance and investment contracts continued
The following table shows a maturity analysis of liability cash flows based on contractual maturity dates for investment contract liabilities
and discretionary participating financial instruments, and expected claim dates for insurance contracts. Investment contract policyholders
(e) Contractual maturity analysis
have the option to terminate or transfer their contracts at any time and to receive the surrender or transfer value of their policies. Although
The following table shows a maturity analysis of liability cash flows based on contractual maturity dates for investment contract liabilities
these liabilities are payable on demand, and are therefore included in the contractual maturity analysis as due in less than three months
and discretionary participating financial instruments, and expected claim dates for insurance contracts. Investment contract policyholders
and more than three months less than one year, the Group does not expect all these amounts to be paid out within one year of the
have the option to terminate or transfer their contracts at any time and to receive the surrender or transfer value of their policies. Although
reporting date.
these liabilities are payable on demand, and are therefore included in the contractual maturity analysis as due in less than three months
and more than three months less than one year, the Group does not expect all these amounts to be paid out within one year of the
The undiscounted cash flows of discretionary participating investment contracts only include amounts vested or to be vested, while their
reporting date.
carrying amount include reserves that are payable at the discretion of the Group.
The undiscounted cash flows of discretionary participating investment contracts only include amounts vested or to be vested, while their
The Group acknowledges that for property & casualty the unearned premium provision, which will be recognised as earned premium in
carrying amount include reserves that are payable at the discretion of the Group.
the future, will most likely not lead to claim cash outflows equal to this provision. The Group has estimated the potential claim outflows that
may be associated with this unearned premium.
The Group acknowledges that for property & casualty the unearned premium provision, which will be recognised as earned premium in
the future, will most likely not lead to claim cash outflows equal to this provision. The Group has estimated the potential claim outflows that
At 31 December 2017
£m
may be associated with this unearned premium.
Undiscounted cash flows
At 31 December 2017
Life assurance policyholder liabilities
Total life insurance contract liabilities
Life insurance contract liabilities
Life assurance policyholder liabilities
Outstanding claims
Total life insurance contract liabilities
Investment contract liabilities
Life insurance contract liabilities
Unit-linked investment contracts and similar
Outstanding claims
contracts
Investment contract liabilities
Other investment contracts
Unit-linked investment contracts and similar
Discretionary participating investment contracts
Other investment contracts
Total life assurance policyholder liabilities
Discretionary participating investment contracts
contracts
Property & casualty liabilities
Total life assurance policyholder liabilities
Claims incurred but not reported
Unearned premiums
Property & casualty liabilities
Outstanding claims
Claims incurred but not reported
Total property & casualty liabilities
Unearned premiums
Outstanding claims
Total policyholder liabilities
Total property & casualty liabilities
Carrying
amount
Carrying
9,520
amount
9,379
141
9,520
28,740
9,379
141
17,125
28,740
72
11,543
17,125
72
38,260
11,543
38,260
79
154
261
79
494
154
261
38,754
494
Between
Undiscounted cash flows
1 and 5 years
More than
5 years
Less than
3 months
Less than
718
3 months
577
141
718
24,690
577
141
12,694
24,690
78
11,918
12,694
78
25,408
11,918
More than
3 months less
than 1 year
More than
3 months less
1,182
than 1 year
1,182
–
1,182
35
1,182
–
13
35
17
5
13
17
1,217
5
Between
6,024
1 and 5 years
6,024
–
6,024
117
6,024
–
68
117
40
9
68
40
6,141
9
25,408
14
71
142
14
227
71
142
25,635
227
1,217
40
38
56
40
134
38
56
1,351
134
6,141
18
33
55
18
106
33
55
6,247
106
More than
20,166
5 years
20,166
–
20,166
4,981
20,166
–
4,788
4,981
3
190
4,788
3
25,147
190
25,147
7
15
8
7
30
15
8
25,177
30
£m
Total
28,090
Total
27,949
141
28,090
29,823
27,949
141
17,563
29,823
138
12,122
17,563
138
57,913
12,122
57,913
79
157
261
79
497
157
261
58,410
497
Total policyholder liabilities
38,754
25,635
1,351
6,247
25,177
58,410
246
240
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
At 31 December 2016
Life assurance policyholder liabilities
Total life insurance contract liabilities
Life insurance contract liabilities
Outstanding claims
Investment contract liabilities
Unit-linked investment contracts and similar
contracts
Other investment contracts
Discretionary participating investment contracts
Carrying
amount
Less than
3 months
More than
3 months less
than 1 year
Between
1 and 5 years
More than
5 years
Undiscounted cash flows
9,982
9,844
138
77,599
66,543
972
10,084
752
614
138
76,062
64,832
978
10,252
1,289
1,289
–
41
18
16
7
6,243
6,243
–
191
124
49
18
21,445
21,445
–
1,901
1,739
3
159
£m
Total
29,729
29,591
138
78,195
66,713
1,046
10,436
Total life assurance policyholder liabilities
87,581
76,814
1,330
6,434
23,346
107,924
Property & casualty liabilities
Claims incurred but not reported
Unearned premiums
Outstanding claims
Total property & casualty liabilities
73
163
246
482
33
34
122
189
17
65
64
146
15
47
52
114
8
18
8
34
73
164
246
483
Total policyholder liabilities
88,063
77,003
1,476
6,548
23,380
108,407
(f) Sensitivity analysis – life assurance
Changes in key assumptions used to value insurance contracts would result in increases or decreases to the insurance contract
provisions recorded, with impact on profit/(loss) and/or shareholders' equity. The effect of a change in assumption is mitigated by
the offset (partial or full) to the bonus stabilisation reserve in the case of smoothed bonus products in South Africa.
The tables below demonstrate the effect of a change in a key assumption to policyholder liabilities while other assumptions remain
unchanged:
At 31 December 2017
Assumption
Mortality and morbidity rates – assurance
Mortality rates – annuities
Discontinuance rates
Expenses maintenance
At 31 December 2016
Assumption
Mortality and morbidity rates – assurance
Mortality rates – annuities
Discontinuance rates
Expenses maintenance
%
Change
£m
Emerging
Markets
10
(10)
10
10
311
60
7
66
%
Change
£m
Emerging
Markets
£m
Old Mutual
Wealth
10
(10)
10
10
316
56
6
65
2
–
(2)
2
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G6: Insurance and investment contracts continued
G: Analysis of financial assets and liabilities continued
(f) Sensitivity analysis – life assurance continued
G6: Insurance and investment contracts continued
Emerging Markets
(f) Sensitivity analysis – life assurance continued
The changes in insurance contract liabilities shown are calculated using the specified increase or decrease to the rates, with no change
in charges paid by policyholders.
Emerging Markets
The changes in insurance contract liabilities shown are calculated using the specified increase or decrease to the rates, with no change
The insurance contract liabilities recorded for the Emerging Market business are also impacted by the valuation discount rate assumed.
in charges paid by policyholders.
Lowering this rate by 1% (with a corresponding reduction in the valuation inflation rate assumption) would result in an increase for
insurance contract liabilities and a reduction in net profit after tax of £9 million (2016: £3 million). This impact is calculated with no change
The insurance contract liabilities recorded for the Emerging Market business are also impacted by the valuation discount rate assumed.
in charges paid by policyholders. The impact in 2017 remains small due to management actions taken to reduce the impact of changing
Lowering this rate by 1% (with a corresponding reduction in the valuation inflation rate assumption) would result in an increase for
interest rates on operating profit.
insurance contract liabilities and a reduction in net profit after tax of £9 million (2016: £3 million). This impact is calculated with no change
in charges paid by policyholders. The impact in 2017 remains small due to management actions taken to reduce the impact of changing
It should be noted that where the assets and liabilities of a product are closely matched (e.g. non-profit annuity business) or where the
interest rates on operating profit.
impact of a lower valuation discount rate is hedged or partially hedged, the net effect has been shown since the asset movement fully
or partially offsets the liability movement.
It should be noted that where the assets and liabilities of a product are closely matched (e.g. non-profit annuity business) or where the
impact of a lower valuation discount rate is hedged or partially hedged, the net effect has been shown since the asset movement fully
Old Mutual Bermuda
or partially offsets the liability movement.
Post the sale of Old Mutual (Bermuda) Limited (renamed Beechwood OMNIA on 30 June 2016) on 31 December 2015, the Group does
not own any underlying policies or manage policyholder funds. Beechwood OMNIA, was renamed (OMNIA) effective 29 June 2017,
Old Mutual Bermuda
shortly before it was sold to Eli Global ("Global Bankers") on 30 June 2017. The Group continues to provide (re)insurance coverage
Post the sale of Old Mutual (Bermuda) Limited (renamed Beechwood OMNIA on 30 June 2016) on 31 December 2015, the Group does
to OMNIA) in connection with the Guaranteed Minimum Accumulation Benefit (GMAB) guarantees embedded within certain
not own any underlying policies or manage policyholder funds. Beechwood OMNIA, was renamed (OMNIA) effective 29 June 2017,
OMNIA policies.
shortly before it was sold to Eli Global ("Global Bankers") on 30 June 2017. The Group continues to provide (re)insurance coverage
to OMNIA) in connection with the Guaranteed Minimum Accumulation Benefit (GMAB) guarantees embedded within certain
Lapses and partial withdrawals of the underlying (re)insured policies have the largest impact where increased activity reduces the
OMNIA policies.
guarantee since less living benefit exposure is expected in the future. Mortality plays a much smaller part in Bermuda since the reinsured
business is a minimum guaranteed accumulation benefit. Increased deaths likewise reduce future guarantees; however the effect is
Lapses and partial withdrawals of the underlying (re)insured policies have the largest impact where increased activity reduces the
negligible due to the short term nature of the benefit. Additionally in the calculation of insurance contract liabilities for 2017, provision
guarantee since less living benefit exposure is expected in the future. Mortality plays a much smaller part in Bermuda since the reinsured
was made for projected claims management expenses. As such expense level also has an impact on Old Mutual Bermuda's
business is a minimum guaranteed accumulation benefit. Increased deaths likewise reduce future guarantees; however the effect is
insurance liabilities.
negligible due to the short term nature of the benefit. Additionally in the calculation of insurance contract liabilities for 2017, provision
was made for projected claims management expenses. As such expense level also has an impact on Old Mutual Bermuda's
This (re)insurance will extend through to the final GMAB maturity in August 2018.
insurance liabilities.
(g) Sensitivity analysis – property & casualty
This (re)insurance will extend through to the final GMAB maturity in August 2018.
An increase of 10% in the average cost of claims would require the recognition of an additional loss after tax of £51 million
(2016: £34 million) net of reinsurance. Similarly, an increase of 10% in the ultimate number of claims would result in an additional
(g) Sensitivity analysis – property & casualty
loss of £51 million (2016: £34 million) net of reinsurance.
An increase of 10% in the average cost of claims would require the recognition of an additional loss after tax of £51 million
(2016: £34 million) net of reinsurance. Similarly, an increase of 10% in the ultimate number of claims would result in an additional
The majority of the Group's property & casualty contracts are classified as 'short-tailed', meaning that any claim is settled within a year
loss of £51 million (2016: £34 million) net of reinsurance.
after the loss date. This contrasts with the 'long-tailed' classes where the claims cost take longer to materialise and settle. The Group's
property & casualty long-tailed business is generally limited to accident, third-party motor, liability and some engineering classes. In total
The majority of the Group's property & casualty contracts are classified as 'short-tailed', meaning that any claim is settled within a year
the long-tail business comprises less than five per cent of an average year's claim costs.
after the loss date. This contrasts with the 'long-tailed' classes where the claims cost take longer to materialise and settle. The Group's
property & casualty long-tailed business is generally limited to accident, third-party motor, liability and some engineering classes. In total
(h) Reinsurance assets – credit risk
the long-tail business comprises less than five per cent of an average year's claim costs.
None of the Group's reinsurance assets are either past due or impaired. Of the reinsurance assets shown in the consolidated statement
of financial position all are considered investment grade with the exception of £87 million of unrated exposures (2016: £189 million).
(h) Reinsurance assets – credit risk
Collateral is not taken against reinsurance assets or deposits held with reinsurers other than in limited circumstances.
None of the Group's reinsurance assets are either past due or impaired. Of the reinsurance assets shown in the consolidated statement
of financial position all are considered investment grade with the exception of £87 million of unrated exposures (2016: £189 million).
Collateral is not taken against reinsurance assets or deposits held with reinsurers other than in limited circumstances.
248
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Old Mutual plc
Annual Report and Accounts 2017
G6.1: Liabilities held for sale and distribution – Insurance and investment contracts
The insurance and investment contracts classified as liabilities held for sale and distribution are analysed as follows:
At 31 December 2017
Life assurance policyholder liabilities
Total life insurance contract liabilities
Life insurance contract liabilities
Outstanding claims
Investment contract liabilities
Unit-linked investment contracts and similar contracts
Other investment contracts
Gross Reinsurance
625
616
9
60,221
59,139
1,082
(388)
(380)
(8)
(2,526)
(2,526)
–
£m
Net
237
236
1
57,695
56,613
1,082
Total policyholder liabilities
60,846
(2,914)
57,932
The reinsurers' share of unit-linked investment contracts and similar contracts of £2,526 million (2016: £2,560 million) relate to investment
contracts in in Old Mutual Wealth 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.
G7: Borrowed funds
Types of securities
Senior debt securities and term loans
Term and other loan
Revolving credit facilities
Subordinated debt securities
Total Borrowed funds
Notes
G7(a)(iii)
G7(b)
G7(d)
At 31 December 2017
Old Mutual
plc
–
–
–
461
461
Emerging
Markets
210
210
67
388
665
£m
Total
210
210
67
849
1,126
At 31 December 2017, total borrowed funds of £3,031 million attributable to Nedbank have been transferred to liabilities held for sale and
distribution in the consolidated statement of financial position. Refer to note A4 and note G7.1 for more information.
Types of securities
Senior debt securities and term loans
Floating rate notes
Fixed rate notes
Term loans
Revolving credit facilities
Mortgage-backed securities
Subordinated debt securities
Total Borrowed funds
Notes Old Mutual plc
–
–
–
–
–
–
1,017
1,017
G7(a)(i)
G7(a)(ii)
G7(a)(iii)
G7(b)
G7(c)
G7(d)
At 31 December 2016
Emerging
Markets
287
–
–
287
34
–
348
669
Nedbank
2,088
1,046
1,042
–
–
153
767
3,008
£m
Total
2,375
1,046
1,042
287
34
153
2,132
4,694
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G7: Borrowed funds continued
G: Analysis of financial assets and liabilities continued
Maturity analysis
G7: Borrowed funds continued
The table below provides the maturity profile of the anticipated future cash flows, based on contractual maturity dates for borrowed funds,
including interest. It is presented on an undiscounted basis, and will therefore, differ from both the carrying value and fair value of
Maturity analysis
borrowed funds:
The table below provides the maturity profile of the anticipated future cash flows, based on contractual maturity dates for borrowed funds,
including interest. It is presented on an undiscounted basis, and will therefore, differ from both the carrying value and fair value of
borrowed funds:
£m
At
December
£m
2017
At
74
December
625
2017
685
74
1,384
625
76
685
217
1,384
6
76
299
217
1,683
6
299
£m
1,683
At
December
£m
2016
At
134
December
1,017
2016
1,206
134
2,357
1,017
485
1,206
1,705
2,357
1,120
485
3,310
1,705
5,667
1,120
3,310
5,667
Less than 1 year
Greater than 1 year and less than 5 years
Greater than 5 years
Less than 1 year
Total non-banking
Greater than 1 year and less than 5 years
Less than 1 year
Greater than 5 years
Greater than 1 year and less than 5 years
Total non-banking
Greater than 5 years
Less than 1 year
Total banking
Greater than 1 year and less than 5 years
Total
Greater than 5 years
Total banking
Total
Less than 1 year
Greater than 1 year and less than 5 years
Greater than 5 years
Less than 1 year
Total non-banking
Greater than 1 year and less than 5 years
Less than 1 year
Greater than 5 years
Greater than 1 year and less than 5 years
Total non-banking
Greater than 5 years
Less than 1 year
Total banking
Greater than 1 year and less than 5 years
Total
Greater than 5 years
Total banking
Total
Old Mutual
plc
32
Old Mutual
428
plc
75
32
535
428
–
75
–
535
–
–
–
–
535
–
–
535
Emerging
Markets
59
Emerging
235
Markets
614
59
908
235
115
614
118
908
5
115
238
118
1,146
5
238
1,146
Emerging
Markets
42
Emerging
197
Markets
610
42
849
197
76
610
217
849
6
76
299
217
1,148
6
299
1,148
Nedbank
–
–
Nedbank
–
–
–
–
370
–
1,587
–
1,115
370
3,072
1,587
3,072
1,115
3,072
3,072
Old Mutual plc
75
782
Old Mutual plc
592
75
1,449
782
–
592
–
1,449
–
–
–
–
1,449
–
–
1,449
250
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Old Mutual plc
Annual Report and Accounts 2017
Interest rate profile
The interest rate profiles of the Group's borrowed funds are analysed as follows:
Fixed rate
Floating rate
Total
Fixed rate
Floating rate
Total
Old Mutual
plc1
461
–
461
Emerging
Markets
264
401
665
Old Mutual
plc1
1,017
–
1,017
Emerging
Markets
278
391
669
Nedbank
1,042
1,966
3,008
£m
At
31 December
2017
725
401
1,126
£m
At
31 December
2016
2,337
2,357
4,694
1 Old Mutual plc has interest rate swaps related to £341 million Tier 2 debt. Old Mutual plc receives fixed interest and pays floating interest. These instruments are designated as fair
value through profit or loss.
Currency exposure
The currency exposures of the Group's borrowed funds are analysed as follows:
ZAR
GBP
USD
Other
Total
ZAR
GBP
USD
Other
Total
Old Mutual
plc
–
461
–
–
461
Emerging
Markets
597
–
29
39
665
Old Mutual
plc
–
1,017
–
–
1,017
Emerging
Markets
524
–
101
44
669
Nedbank
3,008
–
–
–
3,008
£m
At
31 December
2017
597
461
29
39
1,126
£m
At
31 December
2016
3,532
1,017
101
44
4,694
251
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G7: Borrowed funds continued
G: Analysis of financial assets and liabilities continued
Analysis of security types
G7: Borrowed funds continued
(a) Senior debt securities and term loans
Analysis of security types
(i) Floating rate notes (net of Group holdings)
(a) Senior debt securities and term loans
(i) Floating rate notes (net of Group holdings)
Maturity date
Banking – Nedbank Floating rate unsecured senior debt
R405 million at JIBAR plus 1.30%
R1,035 million at JIBAR plus 0.85%
Banking – Nedbank Floating rate unsecured senior debt
R806 million at JIBAR plus 0.90%
R405 million at JIBAR plus 1.30%
R786 million at JIBAR plus 1.30%
R1,035 million at JIBAR plus 0.85%
R241 million at JIBAR plus 1.12%
R806 million at JIBAR plus 0.90%
R472 million at JIBAR plus 1.25%
R786 million at JIBAR plus 1.30%
R1,427 million at JIBAR plus 1.30%
R241 million at JIBAR plus 1.12%
R1,427 million at JIBAR plus 1.45%
R472 million at JIBAR plus 1.25%
R1,472 million at JIBAR plus 1.45%
R1,427 million at JIBAR plus 1.30%
R612 million at JIBAR plus 1.40%
R1,427 million at JIBAR plus 1.45%
R90 million at JIBAR plus 1.45%
R1,472 million at JIBAR plus 1.45%
R80 million at JIBAR plus 2.15%
R612 million at JIBAR plus 1.40%
R476 million at JIBAR plus 1.55%
R90 million at JIBAR plus 1.45%
R830 million at JIBAR plus 1.80%
R80 million at JIBAR plus 2.15%
R1,054 million at JIBAR plus 1.80%
R476 million at JIBAR plus 1.55%
R650 million at JIBAR plus 1.30%
R830 million at JIBAR plus 1.80%
R287 million at JIBAR plus1.75%
R1,054 million at JIBAR plus 1.80%
R12 million at JIBAR plus 1.55%
R650 million at JIBAR plus 1.30%
R270 million at JIBAR plus 2.00%
R287 million at JIBAR plus1.75%
R528 million at JIBAR plus 2.00%
R12 million at JIBAR plus 1.55%
R1,980 million at JIBAR plus 2.00%
R270 million at JIBAR plus 2.00%
R500 million at JIBAR plus 2.10%
R528 million at JIBAR plus 2.00%
R750 million at JIBAR plus 2.25%
R1,980 million at JIBAR plus 2.00%
R302 million at JIBAR plus 2.20%
R500 million at JIBAR plus 2.10%
Total floating rate notes
R750 million at JIBAR plus 2.25%
R302 million at JIBAR plus 2.20%
At 31 December 2017, total floating rate notes of £1,027 million attributable to Nedbank have been transferred to liabilities held for sale
Total floating rate notes
and distribution in the consolidated statement of financial position. Refer to note A4 and note G7.1 for more information.
At 31 December 2017, total floating rate notes of £1,027 million attributable to Nedbank have been transferred to liabilities held for sale
and distribution in the consolidated statement of financial position. Refer to note A4 and note G7.1 for more information.
Repaid
Maturity date
Repaid
Repaid
Repaid
Repaid
Repaid
Repaid
Repaid
February 2018
Repaid
June 2018
Repaid
February 2019
February 2018
May 2019
June 2018
August 2019
February 2019
February 2020
May 2019
April 2020
August 2019
November 2020
February 2020
February 2021
April 2020
May 2021
November 2020
June 2021
February 2021
August 2021
May 2021
February 2022
June 2021
February 2023
August 2021
May 2023
February 2022
February 2025
February 2023
April 2026
May 2023
May 2026
February 2025
July 2026
April 2026
May 2026
July 2026
At
31 December
2017
At
31 December
–
2017
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£m
At
31 December
£m
2016
At
31 December
22
2016
61
48
22
27
61
14
48
28
27
85
14
85
28
149
85
37
85
5
149
5
37
28
5
49
5
88
28
38
49
17
88
1
38
16
17
32
1
118
16
30
32
45
118
18
30
1,046
45
18
1,046
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Old Mutual plc
Annual Report and Accounts 2017
(ii) Fixed rate notes (net of Group holdings)
Banking – Nedbank Fixed rate unsecured senior debt
R1,273 million at 11.39%
R380 million at 9.26%
R1,888 million at 8.92%
R855 million at 9.38%
R417 million at 10.68%
R500 million at 9.29%
R215 million at 8.79%
R280 million at 9.64%
R250 million at 10.66%
R334 million at 10.01%
R952 million at 10.07%
R391 million at 9.73%
R660 million at zero coupon
R2,607 million at 9.44%
R884 million at 10.69%
R800 million at 9.95%
R360 million at 11.15%
R1,739 million at 10.36%
R423 million at 10.50%
R2,000 million at 10.63%
R666 million at 10.94%
Less: held by other Group companies
Total fixed rate notes (net of Group holdings)
Maturity date
September 2019
June 2020
November 2020
March 2021
May 2021
June 2021
February 2022
June 2022
February 2023
August 2023
November 2023
March 2024
October 2024
February 2025
November 2025
April 2026
May 2026
June 2026
July 2026
July 2027
November 2027
At
31 December
2017
£m
At
31 December
2016
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
80
23
112
52
25
30
13
17
15
21
57
24
18
159
53
48
22
103
26
124
40
1,062
(20)
1,042
At 31 December 2017, total fixed rate notes (net of Group holdings) of £1,107 million attributable to Nedbank have been transferred
to liabilities held for sale and distribution in the consolidated statement of financial position. Refer to note A4 and note G7.1 for
more information.
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Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G7: Borrowed funds continued
G: Analysis of financial assets and liabilities continued
(a) Senior debt securities and term loans continued
G7: Borrowed funds continued
(iii) Term and other loans
(a) Senior debt securities and term loans continued
(iii) Term and other loans
Maturity date
Repaid
Maturity date
Reclassification7
Repaid
Repaid
July 2018
Reclassification7
July 2020
Repaid
August 2020
July 2018
March 2021
July 2020
September 2021
August 2020
July 2022
March 2021
November 2022
September 2021
July 2022
November 2022
Repaid
Repaid
Repaid
Repaid
June 2018
Repaid
June 2018
Repaid
December 2018
June 2018
April 2019
June 2018
July 2019
December 2018
May 2020
April 2019
August 2020
July 2019
October 2020
May 2020
July 2022
August 2020
August 2022
October 2020
September 2022
July 2022
June 2023
August 2022
June 2023
September 2022
June 2023
June 2023
December 2023
June 2023
June 2023
December 2023
Emerging Markets Floating rate loans
KES450 million at GOK4 182 days TB plus 2.50%1
$65 million at 3 month JIBAR plus 2.80%2
Emerging Markets Floating rate loans
KES950 million rate at KBRR1,3
KES450 million at GOK4 182 days TB plus 2.50%1
R800 million at JIBAR plus 2.75%1
$65 million at 3 month JIBAR plus 2.80%2
R1,500 million at JIBAR plus 2.75%1
KES950 million rate at KBRR1,3
KES750 million at CBR5 plus 2.50%1
R800 million at JIBAR plus 2.75%1
R66 million at 3 month JIBAR plus 5.50%2
R1,500 million at JIBAR plus 2.75%1
$31 million at 3 month LIBOR plus 3.50%2
KES750 million at CBR5 plus 2.50%1
R50 million at 3 month JIBAR plus 5.50%2
R66 million at 3 month JIBAR plus 5.50%2
KES900 million rate at GOK1,4
$31 million at 3 month LIBOR plus 3.50%2
R50 million at 3 month JIBAR plus 5.50%2
Emerging Markets Fixed rate loans
KES900 million rate at GOK1,4
$2 million at 8.24%1
$3 million at 8.72%1
Emerging Markets Fixed rate loans
$3 million at 8.31%1
$2 million at 8.24%1
KES101 million at 13.00%1
$3 million at 8.72%1
KES102 million at 13.50%1
$3 million at 8.31%1
KES607 million at 12.50%1
KES101 million at 13.00%1
$10 million at 8.31%1
KES102 million at 13.50%1
KES2,000m at 13.00%2
KES607 million at 12.50%1
KES412 million at 11.50%1
$10 million at 8.31%1
KES1,183 million at 9.20%1
KES2,000m at 13.00%2
$10 million at 8.57%1
KES412 million at 11.50%1
KES200 million at 5.00%1
KES1,183 million at 9.20%1
$20 million at 8.75%2
$10 million at 8.57%1
$5 million at 13.00%1
KES200 million at 5.00%1
$5 million at 6.50%2
$20 million at 8.75%2
$5 million at 6.50%2
$5 million at 13.00%1
$6 million at 6.50%2
$5 million at 6.50%2
$10 million at 12.00%1
$5 million at 6.50%2
Total term and other loans
$6 million at 6.50%2
Less: Term loans held by other Group companies
$10 million at 12.00%1
Total term and other loans (net of Group holding)
Total term and other loans
Total term and other loans are further analysed as:
Less: Term loans held by other Group companies
Banking
Total term and other loans (net of Group holding)
Non-banking
Total term and other loans are further analysed as:
Total term and other loans6
Banking
Non-banking
1 Banking term and other loans
Total term and other loans6
2 Non-Banking and other loans
3 Kenya Bank's Reference Rate
1 Banking term and other loans
4 Government of Kenya
2 Non-Banking and other loans
5 Central Bank Rate
3 Kenya Bank's Reference Rate
6 Emerging Markets term loan facilities totalling £53 million ($74 million) in value, with £39 million ($53 million) drawn, were identified as being in breach of covenant at 31 December
4 Government of Kenya
2017. These breaches were not considered to threaten the availability of these facilities. At 9 March 2018, waivers had been received from borrowers with facilities of £29 million
5 Central Bank Rate
($39 millon) and drawn amounts of £24 million ($32 million) had formally received waivers. The resolution of all other breaches is expected to conclude by 31 March 2018.
6 Emerging Markets term loan facilities totalling £53 million ($74 million) in value, with £39 million ($53 million) drawn, were identified as being in breach of covenant at 31 December
7 During the year this loan has been evaluated and classified as other liabilities as it does not relate to corporate borrowing. Comparative information has not been restated
2017. These breaches were not considered to threaten the availability of these facilities. At 9 March 2018, waivers had been received from borrowers with facilities of £29 million
as it is not deemed material to the consolidated statements of financial position.
($39 millon) and drawn amounts of £24 million ($32 million) had formally received waivers. The resolution of all other breaches is expected to conclude by 31 March 2018.
7 During the year this loan has been evaluated and classified as other liabilities as it does not relate to corporate borrowing. Comparative information has not been restated
At
31 December
2017
At
31 December
–
2017
–
–
–
48
–
90
–
5
48
3
90
23
5
2
3
5
23
2
5
–
–
–
–
1
–
1
–
4
1
3
1
14
4
3
3
4
14
8
3
1
4
2
8
2
1
3
2
3
2
3
3
5
3
233
3
(23)
5
210
233
(23)
180
210
53
233
180
53
233
£m
At
31 December
£m
2016
At
31 December
3
2016
55
7
3
47
55
94
7
1
47
–
94
25
1
–
–
–
25
–
–
2
5
5
2
1
5
1
5
5
1
2
1
17
5
3
2
4
17
–
3
2
4
12
–
3
2
3
12
3
3
5
3
7
3
312
5
(25)
7
287
312
(25)
192
287
120
312
192
120
312
as it is not deemed material to the consolidated statements of financial position.
254
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Annual Report and Accounts 2017
(b) Revolving credit facilities
Non-banking
Emerging Markets – R3,125 million facility at 3 month JIBAR plus 1.60%
Banking
Emerging Markets – R2,200 million facility at 3 month JIBAR plus 2.50%
N$200 million at prime overdraft rate less 1.00%
Total revolving credit facilities
Maturity date
February 2019
July 2019
November 2020
At
31 December
2017
£m
At
31 December
2016
–
58
9
67
16
18
–
34
Old Mutual plc has access to a £764 million (2016: £764 million) multi-currency revolving credit facility. £73 million facility matures in
August 2019, a further £73 million of facility matures in August 2020 and the remaining £618 million of the facility matures in August 2021.
At 31 December 2017, this facility was undrawn.
In July 2015, Emerging Markets obtained access to a R1,200 million revolving credit facility. In July 2017 the facility has been increased
to R2,200 million and its maturity extended to July 2019. At 31 December 2017, R975 million (£58 million) of this facility was drawn
(2016: R300 million (£18 million)).
In December 2015, Emerging Markets obtained access to an external R3,125 million revolving credit facility which expires in January 2019
with an option to renew for a further year. At 31 December 2017, this facility was undrawn (2016: R260 million (£16 million)).
In March 2017, Emerging Markets obtained access to an unsecured revolving credit facility from Standard Bank Namibia Limited of N$200
million. The facility bears interest at the prime overdraft rate less 1% which is repayable monthly. A commitment fee of 0.95% is payable
monthly on any undrawn capital. The capital is repayable on 24 November 2020.
Certain revolving credit facility arrangements may include guarantees by other subsidiary companies which, in the case of non-
performance by the borrower, may limit the amount of distribution the guarantor declares to its parent.
(c) Mortgage-backed securities (net of Group holdings)
Banking – Nedbank
R600 million JIBAR plus 1.34%
R300 million JIBAR plus 1.54%
R900 million (class A3) at JIBAR plus 1.54%
R110 million (class B) at JIBAR plus 1.90%
R558 million at JIBAR plus 1.20%
R100 million at JIBAR plus 1.45%
R680 million at JIBAR plus 1.55%
R80 million at JIBAR plus 2.20%
R65 million at JIBAR plus 3.00%
Total mortgage-backed securities
Less: Mortgage-backed securities held by other Group companies
Total mortgage-backed securities (net of Group holdings)
Tier
Maturity date
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
January 2028
January 2028
October 2039
October 2039
February 2042
February 2042
February 2042
February 2042
February 2042
At
31 December
2017
£m
At
31 December
2016
–
–
–
–
–
–
–
–
–
–
–
–
30
16
50
7
19
6
40
5
4
177
(24)
153
At 31 December 2017, total mortgage-backed securities (net of Group holdings) of £151 million attributable to Nedbank have been
transferred to liabilities held for sale and distribution in the consolidated statement of financial position. Refer to note A4 and note G7.1
for more information.
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Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G7: Borrowed funds continued
G: Analysis of financial assets and liabilities continued
(d) Subordinated debt securities (net of Group holdings)
G7: Borrowed funds continued
(d) Subordinated debt securities (net of Group holdings)
Tier
Maturity date
Non-banking – Old Mutual plc
£341 million at 8.00%; (2016: £500 million at 8.00%)1
£61 million at 7.88%; (2016: £450 million at 7.88%)1
Non-banking – Old Mutual plc
£341 million at 8.00%; (2016: £500 million at 8.00%)1
Non-banking – Emerging Markets
£61 million at 7.88%; (2016: £450 million at 7.88%)1
R300 million at 9.26%
R700 million at 3 month JIBAR plus 2.20%
Non-banking – Emerging Markets
R537 million at 3 month JIBAR plus 2.30%
R300 million at 9.26%
R425 million at 9.76%
R700 million at 3 month JIBAR plus 2.20%
R1,288 million at 3 month JIBAR plus 2.25%
R537 million at 3 month JIBAR plus 2.30%
R409 million at 10.32%
R425 million at 9.76%
R568 million at 10.90%
R1,288 million at 3 month JIBAR plus 2.25%
R500 million at JIBAR plus 2.09%2
R409 million at 10.32%
R1,150 million at 10.96%
R568 million at 10.90%
R623 million at 11.35%
R500 million at JIBAR plus 2.09%2
R1,150 million at 10.96%
Banking – Nedbank
R623 million at 11.35%
$100 million at 3 month USD LIBOR
R2,000 million at JIBAR plus 0.47%
Banking – Nedbank
R1,800 million at JIBAR plus 2.75%
$100 million at 3 month USD LIBOR
R1,200 million at JIBAR plus 2.55%
R2,000 million at JIBAR plus 0.47%
R450 million at JIBAR plus 10.49%
R1,800 million at JIBAR plus 2.75%
R1,737 million at 3 month JIBAR plus 2.55%
R1,200 million at JIBAR plus 2.55%
R300 million at JIBAR plus 2.75%
R450 million at JIBAR plus 10.49%
R225 million at JIBAR plus2.75%
R1,737 million at 3 month JIBAR plus 2.55%
R1,624 million at JIBAR plus 3.5%
R300 million at JIBAR plus 2.75%
R407 million at 11.29%
R225 million at JIBAR plus2.75%
R2,000 million at JIBAR plus 4.00%
R1,624 million at JIBAR plus 3.5%
R407 million at 11.29%
Less: Banking subordinated debt securities held by other Group companies
R2,000 million at JIBAR plus 4.00%
Banking subordinated securities (net of Group holdings)
Less: Banking subordinated debt securities held by other Group companies
Total subordinated debt securities
Banking subordinated securities (net of Group holdings)
Tier 2
Tier
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2 (secondary)
Tier 2
Tier 2
Tier 2 (secondary)
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
June 2021
Maturity date
November 2025
June 2021
November 2025
November 2024
November 2024
March 2025
November 2024
March 2025
November 2024
September 2025
March 2025
March 2027
March 2025
September 2027
September 2025
November 2027
March 2027
March 2030
September 2027
September 2030
November 2027
March 2030
September 2030
March 2022
July 2022
July 2023
March 2022
November 2023
July 2022
April 2024
July 2023
April 2024
November 2023
October 2024
April 2024
January 2025
April 2024
July 2025
October 2024
July 2025
January 2025
September 2026
July 2025
July 2025
September 2026
At
31 December
2017
At
31 December
400
2017
61
461
400
61
18
461
42
32
18
25
42
78
32
24
25
35
78
30
24
67
35
37
30
388
67
37
–
388
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
849
–
£m
At
31 December
£m
2016
At
31 December
569
2016
448
1,017
569
448
17
1,017
41
32
17
25
41
76
32
23
25
33
76
–
23
65
33
36
–
348
65
36
81
348
120
108
81
71
120
27
108
105
71
18
27
14
105
98
18
25
14
118
98
785
25
(18)
118
767
785
(18)
2,132
767
1 On 24 November 2017, Old Mutual plc repurchased £389 million of its outstanding £450 million 7.875 per cent subordinated debt securities (Tier 2 subordinated 2025 securities)
Total subordinated debt securities
and £159 million of its outstanding £500 million 8 per cent subordinated debt securities (Tier 2 subordinated 2021 securities) through tender offers. All repurchased securities were
cancelled on 24 November 2017. Following cancellation of these securities, the aggregate principal amounts outstanding of the £450 million securities was £61 million and the
1 On 24 November 2017, Old Mutual plc repurchased £389 million of its outstanding £450 million 7.875 per cent subordinated debt securities (Tier 2 subordinated 2025 securities)
aggregate principal amount outstanding of £500 million securities was £341 million
and £159 million of its outstanding £500 million 8 per cent subordinated debt securities (Tier 2 subordinated 2021 securities) through tender offers. All repurchased securities were
2 On 20 November 2017, Old Mutual Insure issued R500 million Unsecured Subordinated Callable Floating Rate Notes under its R1 billion Unsecured Subordinated Callable Note
cancelled on 24 November 2017. Following cancellation of these securities, the aggregate principal amounts outstanding of the £450 million securities was £61 million and the
Programme dated 13 November 2017. Interest is payable at a floating rate of 3 Month JIBAR plus 209 bps on 22 February, 22 May, 22 August and 22 November each year until
aggregate principal amount outstanding of £500 million securities was £341 million
22 November 2022, the first call date. The first interest payment date is 22 February 2018
849
2,132
2 On 20 November 2017, Old Mutual Insure issued R500 million Unsecured Subordinated Callable Floating Rate Notes under its R1 billion Unsecured Subordinated Callable Note
3 All callable subordinated debt securities have a first call date five years before the maturity date.
Programme dated 13 November 2017. Interest is payable at a floating rate of 3 Month JIBAR plus 209 bps on 22 February, 22 May, 22 August and 22 November each year until
22 November 2022, the first call date. The first interest payment date is 22 February 2018
At 31 December 2017, total subordinated debt securities of £746 million attributable to Nedbank have been transferred to liabilities held
3 All callable subordinated debt securities have a first call date five years before the maturity date.
for sale and distribution in the consolidated statement of financial position. Refer to note A4 and note G7.1 for more information.
At 31 December 2017, total subordinated debt securities of £746 million attributable to Nedbank have been transferred to liabilities held
for sale and distribution in the consolidated statement of financial position. Refer to note A4 and note G7.1 for more information.
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Annual Report and Accounts 2017
(e) Reconciliation of borrowed funds arising from financing activities
Balance at beginning of the year
Changes from financing cash flows
Proceeds from issue of new borrowed funds
Redemption of borrowed funds
Non-cash changes
Fair value changes
Effect of changes in foreign exchange rates
Transfer to liabilities held for sale and distribution
Balance at end of the year
£m
At
31 December
2017
2,132
(547)
189
(736)
(736)
(8)
18
(746)
849
G7.1: Liabilities held for sale and distribution – Borrowed funds
The table below summarises the Group's borrowed funds classified within liabilities held for sale and distribution as at 31 December 2017.
All amounts disclosed relate to the Nedbank segment and banking business.
Types of securities
Senior debt securities and term loans1
Floating rate notes
Fixed rate notes
Term and other loan
Mortgage-backed securities2
Subordinated debt securities3
Total Borrowed funds
£m
At
31 December
2017
2,134
1,027
1,107
–
151
746
3,031
1 During 2017, five senior debt securities and term loans were repaid and four senior unsecured debt instruments were issued. A sum of £36.9 million was issued with a fixed interest-
rate of 9.60%, repayable on 20 February 2024. A sum of £173 million was issued with variable-interest-rates ranging between JIBAR plus 1.29% to 1.50%, repayable by 26
February 2024
2 During 2017, seven Mortgage-backed securities were repaid and seven securitised liabilities were issued. A sum of £80 million was issued at floating interest rates ranging between
JIBAR plus 1.05% to 2.70%. These instruments are repayable by 20 February 2022
3 During 2017, two subordinated debt securities were repaid and two subordinated debt instruments were issued. A sum of £6 million was issued at a fixed interest rate of 10.82%,
which is repayable 31 July 2029. In addition, a sum of £6 million was issued at a variable interest rate of Jibar plus 2.45%, which is repayable on 2 August 2027. Two Basel III
subordinated debt securities were also issued. A sum of £149 million was issued with variable rates ranging between Jibar plus 3.75% to 3.80%. These instruments are redeemable
by 26 May 2022.
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Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
G: Analysis of financial assets and liabilities continued
G8: Amounts owed to bank depositors
G: Analysis of financial assets and liabilities continued
In the Group's banking business the Group receives cash from bank depositors. The depositors receive interest on the amounts owed
depending on the value of the amount borrowed and the terms of the deposit.
G8: Amounts owed to bank depositors
In the Group's banking business the Group receives cash from bank depositors. The depositors receive interest on the amounts owed
The table below provides the maturity profile of the anticipated future cash flows, based on contractual maturity dates for amounts owed to
depending on the value of the amount borrowed and the terms of the deposit.
bank depositors, including interest. It is presented on an undiscounted basis, and will therefore, differ from the carrying amount of amounts
owed to bank depositors:
The table below provides the maturity profile of the anticipated future cash flows, based on contractual maturity dates for amounts owed to
bank depositors, including interest. It is presented on an undiscounted basis, and will therefore, differ from the carrying amount of amounts
At 31 December 2017
£m
owed to bank depositors:
Between
1 and 5 years
2
Between
66
1 and 5 years
68
2
66
68
More than
5 years
25
More than
–
5 years
25
25
–
25
£m
Total
130
751
Total
881
130
751
£m
881
At 31 December 2017
Savings deposits
Negotiable certificates of deposit
Amounts owed to bank depositors
Savings deposits
Negotiable certificates of deposit
At 31 December 2016
Amounts owed to bank depositors
At 31 December 2016
Carrying
amount
130
Carrying
612
amount
742
130
612
742
Carrying
amount
4,681
Carrying
1,774
amount
31,896
4,681
5,814
1,774
1,144
31,896
45,309
5,814
1,144
45,309
Less than
3 months
71
Less than
588
3 months
659
71
588
659
Less than
3 months
4,636
Less than
1,770
3 months
24,370
4,636
1,632
1,770
1,145
24,370
33,553
1,632
1,145
33,553
More than
3 months less
than 1 year
More than
32
3 months less
97
than 1 year
129
32
97
129
More than
3 months less
than 1 year
More than
38
3 months less
–
than 1 year
5,235
38
3,386
–
–
5,235
8,659
3,386
–
8,659
£m
Total
4,674
1,781
Total
32,853
4,674
6,585
1,781
1,145
32,853
47,038
6,585
1,145
47,038
Between
1 and 5 years
–
Between
3
1 and 5 years
2,714
–
1,490
3
–
2,714
4,207
1,490
–
4,207
More than
5 years
–
More than
8
5 years
534
–
77
8
–
534
619
77
–
619
Current accounts
Savings deposits
Other deposits and loan accounts
Current accounts
Negotiable certificates of deposit
Savings deposits
Deposits received under repurchase agreements
Other deposits and loan accounts
Amounts owed to bank depositors
Negotiable certificates of deposit
Deposits received under repurchase agreements
At 31 December 2017, amounts owed to bank depositors of £45,766 million attributable to Nedbank have been transferred to liabilities
Amounts owed to bank depositors
held for sale and distribution in the consolidated statement of financial position. Refer to note A4 and note G8.1 for more information.
At 31 December 2017, amounts owed to bank depositors of £45,766 million attributable to Nedbank have been transferred to liabilities
G8.1: Liabilities held for sale and distribution – Amounts owed to bank depositors
held for sale and distribution in the consolidated statement of financial position. Refer to note A4 and note G8.1 for more information.
The table below provides the maturity profile of the anticipated future cash flows, based on contractual maturity dates for amounts owed
to bank depositors, including interest. It relates to amount owed to bank depositors classified as liabilities held for sale and distribution
G8.1: Liabilities held for sale and distribution – Amounts owed to bank depositors
at 31 December 2017 and is presented on an undiscounted basis that will therefore, differ from the carrying amount of amounts owed
The table below provides the maturity profile of the anticipated future cash flows, based on contractual maturity dates for amounts owed
to bank depositors:
to bank depositors, including interest. It relates to amount owed to bank depositors classified as liabilities held for sale and distribution
at 31 December 2017 and is presented on an undiscounted basis that will therefore, differ from the carrying amount of amounts owed
to bank depositors:
More than
5 years
Current accounts
–
More than
Savings deposits
–
5 years
Other deposits and loan accounts
457
Current accounts
–
Negotiable certificates of deposit
–
Savings deposits
–
Deposits received under repurchase agreements1
–
Other deposits and loan accounts
457
Amounts owed to bank depositors
457
Negotiable certificates of deposit
–
Deposits received under repurchase agreements1
–
1 The Group, through its South African banking business Nedbank, has pledged debt securities and negotiable certificates of deposit amounting to £1,761 million
457
Amounts owed to bank depositors
Between
1 and 5 years
–
Between
3
1 and 5 years
2,802
–
1,126
3
–
2,802
3,931
1,126
–
3,931
Less than
3 months
4,825
Less than
1,826
3 months
25,067
4,825
1,066
1,826
1,481
25,067
34,265
1,066
1,481
34,265
Carrying
amount
4,824
Carrying
1,830
amount
33,005
4,824
4,627
1,830
1,480
33,005
45,766
4,627
1,480
45,766
More than
3 months less
than 1 year
More than
–
3 months less
1
than 1 year
5,866
–
2,943
1
–
5,866
8,810
2,943
–
8,810
(2016: £1,128 million) as collateral for deposits received under re-purchase agreements. These amounts represent assets that have been transferred but do not qualify for
derecognition under IAS 39. These transactions are entered into under terms and conditions that are standard industry practice for securities borrowing and lending activities.
£m
Total
4,825
1,830
Total
34,192
4,825
5,135
1,830
1,481
34,192
47,463
5,135
1,481
47,463
£m
1 The Group, through its South African banking business Nedbank, has pledged debt securities and negotiable certificates of deposit amounting to £1,761 million
(2016: £1,128 million) as collateral for deposits received under re-purchase agreements. These amounts represent assets that have been transferred but do not qualify for
derecognition under IAS 39. These transactions are entered into under terms and conditions that are standard industry practice for securities borrowing and lending activities.
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H: Non-financial assets and liabilities
All non-financial assets and liabilities notes which require a movement analysis will include the information for all items, including
movements in assets and liabilities classified as held for sale or distribution for the year. Therefore, the amounts reflected in the movement
tables will not agree to the consolidated income statement amounts presented as the results of the discontinued operations are
recognised on a single line in the consolidated income statement. At the end of the movement analysis, a single line item will indicate
the value of the assets or liabilities that have been transferred to assets and liabilities held for sale or distribution.
Consistent with the requirements of accounting standards, the comparative period has not been re-presented for non-financial assets and
liabilities classified as held for sale and distribution. The comparative information presented at 31 December 2017, therefore includes the
non-financial assets and liabilities for the composition of the Group as at 31 December 2016.
H1: Goodwill and other intangible assets
Goodwill arises on the acquisition of a business and represents the premium of the amount paid over the fair value of identifiable assets
and liabilities. Goodwill is not amortised but is subject to annual impairment reviews. Other intangible assets include those assets which
were initially recognised on a business combination and software development costs relate to amounts recognised for in-house systems
development.
(a) Goodwill and goodwill impairment
Goodwill arising on the acquisition of a subsidiary undertaking is recognised as an asset at the date that control is achieved (the
acquisition date). Goodwill is measured as the excess of the fair value of the consideration paid over the net of the acquisition date
amounts of the identifiable assets acquired and the liabilities assumed. If the net fair value of the acquiree's identifiable net assets exceeds
the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer's
previously-held equity interest (if any), this excess is recognised immediately in profit or loss as a bargain purchase gain.
Goodwill is not amortised, but is reviewed for impairment at least once annually. Any impairment loss is recognised immediately in profit
or loss and is not subsequently reversed.
On loss of control of a subsidiary undertaking, any attributable goodwill is included in the determination of any profit or loss on disposal.
On disposal of a business, where goodwill on acquisition is allocated to the entire cash-generating unit (CGU), goodwill is allocated to the
disposal on a relative basis.
Goodwill is allocated to one or more CGUs, being the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or group of assets.
(b) Present value of acquired in-force for insurance and investment contract business
The present value of acquired in-force for insurance and investment contract business is capitalised in the consolidated statement
of financial position as an intangible asset.
The capitalised value is the present value of cash flows anticipated in the future from the relevant book of insurance and investment
contract policies acquired at the date of the acquisition of a business. This is calculated by performing a cash flow projection of the
associated life assurance fund and book of in-force policies in order to estimate future after tax profits attributable to shareholders.
The valuation is based on actuarial principles taking into account future premium income, mortality, disease and surrender probabilities,
together with future costs and investment returns on the assets supporting the fund. These profits are discounted at a rate of return
allowing for the risk of uncertainty of the future cash flows. The key assumptions impacting the valuation are discount rate, future
investment returns and the rate at which policies discontinue.
The asset is amortised over the expected profit recognition period on a systematic basis over the anticipated lives of the related contracts.
The amortisation charge is stated net of any unwind in the discount rate used to calculate the asset.
The recoverable amount of the asset is re-calculated at each reporting date and any impairment losses recognised accordingly.
(c) Other intangible assets acquired as part of a business combination
Contractual banking and asset management customer relationships, relationships with distribution channels and similar intangible assets,
acquired as a part of a business combination, are capitalised at their fair value, represented by the estimated net present value of the
future cash flows from the relevant relationships acquired at the date of acquisition.
Brands and similar items acquired as part of a business combination are capitalised at their fair value based on a 'relief from royalty'
valuation methodology.
Subsequent to initial recognition such acquired intangible assets, if not categorised as infinite life, are amortised on a straight-line basis
over their estimated useful lives as set out below:
Distribution channels
Customer relationships
Brands
10 years
10 years
15 – 20 years
The estimated useful life is re-evaluated annually.
Other intangible assets acquired in a business combination are impaired if the carrying value is greater than the net recoverable amount.
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Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
H: Non-financial assets and liabilities continued
H1: Goodwill and other intangible assets continued
H: Non-financial assets and liabilities continued
(d) Internally developed software
H1: Goodwill and other intangible assets continued
Internally developed software (software) is amortised over its estimated useful life, where applicable. Such assets are stated at cost less
(d) Internally developed software
accumulated amortisation and impairment losses. Software is recognised in the consolidated statement of financial position if, and only if, it is
Internally developed software (software) is amortised over its estimated useful life, where applicable. Such assets are stated at cost less
probable that the relevant future economic benefits attributable to the software will flow to the Group and its cost can be measured reliably.
accumulated amortisation and impairment losses. Software is recognised in the consolidated statement of financial position if, and only if, it is
probable that the relevant future economic benefits attributable to the software will flow to the Group and its cost can be measured reliably.
Costs incurred in the research phase are expensed in profit or loss whereas costs incurred in the development phase are capitalised
subject to meeting specific criteria, set out in the relevant accounting guidance. The main criteria being that future economic benefits can
Costs incurred in the research phase are expensed in profit or loss whereas costs incurred in the development phase are capitalised
be identified as a result of the development expenditure. Amortisation is charged to profit or loss on a straight-line basis over the estimated
subject to meeting specific criteria, set out in the relevant accounting guidance. The main criteria being that future economic benefits can
useful lives of the relevant software, which range between two and ten years, depending on the nature and use of the software.
be identified as a result of the development expenditure. Amortisation is charged to profit or loss on a straight-line basis over the estimated
(e) Subsequent expenditure
useful lives of the relevant software, which range between two and ten years, depending on the nature and use of the software.
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied
(e) Subsequent expenditure
in the specific asset to which it relates. All other expenditure is expensed as incurred.
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied
in the specific asset to which it relates. All other expenditure is expensed as incurred.
(f) Analysis of goodwill and other intangible assets
The table below shows the movements in cost, amortisation and impairment of goodwill and other intangible assets for the year ended
(f) Analysis of goodwill and other intangible assets
31 December 2017 and year ended 31 December 2016.
The table below shows the movements in cost, amortisation and impairment of goodwill and other intangible assets for the year ended
31 December 2017 and year ended 31 December 2016.
£m
Present value of
acquired in-force
business
Present value of
development
acquired in-force
costs
business
2016
development
costs
2016
982
2017
2017
Goodwill
2016
Goodwill
2016
3,129
Software
development
costs
Software
2016
development
costs
2016
598
2017
Other
intangible
assets
Other
2016
intangible
assets
2016
710
2017
2017
£m
Total
2016
Total
2016
5,419
2017
913
2017
772
2017
914
2017
2,089
2017
4,688
distribution4
distribution4
combinations1,2
2,089
19
–
19
–
–
–
–
(10)
–
(10)
(1,679)
419
(1,679)
419
(471)
–
(471)
(85)
–
–
(85)
9
–
9
394
Cost
Balance at beginning of the year
Cost
Acquisitions through business
Balance at beginning of the year
Acquisitions through business
Purchase price adjustments
combinations1,2
Additions
Purchase price adjustments
Disposals or retirements
Additions
Foreign exchange and other movements
Disposals or retirements
Transfer to assets held for sale and
Foreign exchange and other movements
Transfer to assets held for sale and
Cost at end of the year
Amortisation and impairment losses
Cost at end of the year
Balance at beginning of the year
Amortisation and impairment losses
Amortisation charge for the year
Impairment losses3
Balance at beginning of the year
Amortisation charge for the year
Disposals or retirements
Impairment losses3
Foreign exchange and other movements
Disposals or retirements
Transfer to assets held for sale and
Foreign exchange and other movements
Transfer to assets held for sale and
Accumulated amortisation and
distribution4
impairment losses at end of
Accumulated amortisation and
the year
impairment losses at end of
Carrying amount
the year
Balance at beginning of the year
Carrying amount
Balance at end of the year
Balance at beginning of the year
1 Goodwill acquired through business combinations for the year ended 31 December 2017 of £19 million relates to the acquisition of Caerus Capital Group Limited (£10 million),
Balance at end of the year
(2,217)
(15)
3,276
182
2,471
–
3,276
182
2,471
–
several acquisitions by the Old Mutual Wealth Private Client Advisors business (£5 million) and the acquisition of WinTwice Properties (Pty) Ltd and Bedford Square Properties (Pty)
Ltd (£4 million). Refer to note A2 for more information
4,688
46
–
46
187
–
(22)
187
(4)
(22)
(4)
(4,172)
723
(4,172)
723
(2,217)
(152)
(2,217)
(86)
(152)
18
(86)
2
18
2
2,109
5,419
201
5
201
141
5
(12)
141
647
(12)
647
(1,713)
4,688
(1,713)
4,688
(2,143)
(155)
(2,143)
(113)
(155)
10
(113)
(233)
10
(233)
417
3,129
124
(12)
124
–
(12)
–
–
409
–
409
(1,561)
2,089
(1,561)
2,089
(617)
–
(617)
(110)
–
–
(110)
(81)
–
(81)
337
598
1
–
1
132
–
(12)
132
194
(12)
194
–
913
–
913
(403)
(51)
(403)
(3)
(51)
10
(3)
(121)
10
(121)
–
914
–
–
–
–
–
–
–
–
–
–
(899)
15
(899)
15
(732)
(39)
(732)
–
(39)
–
(1)
–
–
(1)
757
982
–
–
–
–
–
12
–
12
(80)
914
(80)
914
(751)
(49)
(751)
–
(49)
–
–
(9)
–
(9)
77
772
27
–
27
2
–
(2)
2
(13)
(2)
(13)
(687)
99
(687)
99
(446)
(53)
(446)
–
(53)
2
–
7
2
7
421
913
–
–
–
185
–
(20)
185
19
(20)
19
(907)
190
(907)
190
(568)
(60)
(568)
(1)
(60)
16
(1)
(13)
16
(13)
537
710
76
17
76
9
17
–
9
32
–
32
(72)
772
(72)
772
(372)
(55)
(372)
–
(55)
–
–
(22)
–
(22)
3
(153)
1,618
266
1,618
266
(471)
2,512
1,618
2,512
1,618
(326)
2,471
397
2,471
397
1 Goodwill acquired through business combinations for the year ended 31 December 2017 of £19 million relates to the acquisition of Caerus Capital Group Limited (£10 million),
2 Other intangible assets acquired through business combinations for the year ended 31 December 2017 of £27 million relates to the acquisitions of Caerus Capital Group Limited
several acquisitions by the Old Mutual Wealth Private Client Advisors business (£5 million) and the acquisition of WinTwice Properties (Pty) Ltd and Bedford Square Properties (Pty)
(£10 million), Attivo Investment Management Limited (£7 million) and several acquisitions by the Old Mutual Wealth Private Client Advisors business (£10 million). Refer to note A2
Ltd (£4 million). Refer to note A2 for more information
for more information
(568)
195
345
195
345
(732)
231
182
231
182
(446)
338
326
338
326
2 Other intangible assets acquired through business combinations for the year ended 31 December 2017 of £27 million relates to the acquisitions of Caerus Capital Group Limited
3 The goodwill impairment loss of £85 million for the year ended 31 December 2017 relate to the East Africa cash generating unit (£69 million) and the Uruguay cash generating unit
(£10 million), Attivo Investment Management Limited (£7 million) and several acquisitions by the Old Mutual Wealth Private Client Advisors business (£10 million). Refer to note A2
(£16 million) within Emerging Markets. Of the impairment losses of £110 million for the year ended 31 December 2016, £46 million relates to the disposal of Old Mutual Italy, which
for more information
completed on 9 January 2017, and £64 million relates to the OMSEA Cash Generating Units within Emerging Markets. Refer to note H1(h) for more information
3 The goodwill impairment loss of £85 million for the year ended 31 December 2017 relate to the East Africa cash generating unit (£69 million) and the Uruguay cash generating unit
4 At 31 December 2017, goodwill and other intangible assets attributable to Nedbank and Old Mutual Wealth have been transferred to assets held for sale and distribution in the
(£16 million) within Emerging Markets. Of the impairment losses of £110 million for the year ended 31 December 2016, £46 million relates to the disposal of Old Mutual Italy, which
consolidated statement of financial position. Refer to note A4 for more information.
completed on 9 January 2017, and £64 million relates to the OMSEA Cash Generating Units within Emerging Markets. Refer to note H1(h) for more information
(69)
326
30
326
30
(89)
345
101
345
101
417
(2,217)
2,109
(326)
distribution4
–
(568)
77
(732)
394
(153)
337
(471)
3
(446)
421
(69)
757
(15)
537
(89)
4 At 31 December 2017, goodwill and other intangible assets attributable to Nedbank and Old Mutual Wealth have been transferred to assets held for sale and distribution in the
consolidated statement of financial position. Refer to note A4 for more information.
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(g) Allocation of goodwill to cash generating units
The carrying amount of goodwill relates to the following cash generating units (CGUs):
Emerging Markets
Latin America
Columbia Mexico
Uruguay
Old Mutual Southern and East Africa
East Africa
Namibia
Old Mutual South Africa
OM Insure
Mass Foundation segment
Corporate segment
Investment segment
Old Mutual Wealth¹
Nedbank¹
Goodwill, net of impairment losses
At
31 December
2017
266
–
51
4
–
34
4
–
3
114
6
50
–
–
266
£m
At
31 December
2016
348
70
–
–
114
–
–
164
–
–
–
–
973
297
1,618
1 At 31 December 2017, goodwill attributable to Nedbank (£297 million) and Old Mutual Wealth (£988 million) have been transferred to assets held for sale and distribution in the
consolidated statement of financial position. Refer to note A4 for more information.
Critical accounting estimates and judgements – Goodwill and intangible assets
(h) Annual impairment testing of goodwill
In accordance with the requirements of IAS 36 'Impairment of Assets', goodwill is tested annually for impairment for each Cash
Generating Units (CGU), by comparing the carrying amount of each CGU to its recoverable amount, being the higher of that CGU's
value in use or fair value less costs to sell. The appropriateness of the CGUs is evaluated on an annual basis. An impairment charge
is recognised when the recoverable amount is less than the carrying value.
Emerging Market's CGU's generate revenue through their life assurance, asset management, property & casualty and banking
businesses in several regions, but principally in Africa and Latin America.
Determination of Cash Generating Units
At 30 June 2017, the change in the operating structure prompted the separation of the previously reported single Old Mutual Southern
and East Africa (OMSEA) CGU into two CGUs for Southern Africa and East Africa. The composition of the East African CGU includes
the former Old Mutual Kenya and the recently acquired business interests in UAP and Faulu. The goodwill balance of £114 million of
the OMSEA CGU at 31 December 2016 was allocated in its entirety to the East African CGU, which is primarily located in Kenya,
on the basis that it related to the acquisitions of UAP and Faulu within that region.
At 31 December 2017, in light of managed separation and the monitoring of the performance of the business, the management of
Emerging Markets reconsidered the appropriateness of its CGU's and based on evidence concluded the lowest attributable CGU's
should be based on individual countries. The South African CGU have been further allocated into five CGU's being Retail, Mass
Foundation, Corporate, Investment and OM Insure, on which basis management have performed goodwill impairment testing.
Therefore, the results of the goodwill testing performed are not directly comparable on a year on year basis.
Value in Use models
In the performance of goodwill impairment testing the Emerging Markets used a discounted cash flow model, which incorporated
planned business performance and a risk adjusted discounted rate.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
H: Non-financial assets and liabilities continued
H1: Goodwill and other intangible assets continued
H: Non-financial assets and liabilities continued
H1: Goodwill and other intangible assets continued
Critical accounting estimates and judgements – Goodwill and intangible assets continued
(h) Annual impairment testing of goodwill
Critical accounting estimates and judgements – Goodwill and intangible assets continued
Impairment losses recognised during H1 2017
(h) Annual impairment testing of goodwill
An impairment charge of £69 million was recognised in the Emerging Markets segment at 30 June 2017. This impairment of goodwill
was principally the result of changes in the CGU definition following the simplification of the Rest of Africa businesses’ operating
Impairment losses recognised during H1 2017
structure. Weaker performance in the East Africa businesses than was anticipated at the time of the previous impairment review also
An impairment charge of £69 million was recognised in the Emerging Markets segment at 30 June 2017. This impairment of goodwill
had a minor impact. The following key assumptions were used in the goodwill impairment test performed at 30 June 2017 which
was principally the result of changes in the CGU definition following the simplification of the Rest of Africa businesses’ operating
included a risk adjusted long-term discount rate of 17.00% and cash flows in year 1 to 3 of 70.0% of the planned business performance;
structure. Weaker performance in the East Africa businesses than was anticipated at the time of the previous impairment review also
growth in cash flows of 13.0% for years 4 and five and terminal growth rate of 8.5%.
had a minor impact. The following key assumptions were used in the goodwill impairment test performed at 30 June 2017 which
included a risk adjusted long-term discount rate of 17.00% and cash flows in year 1 to 3 of 70.0% of the planned business performance;
The result of using the above assumptions resulted in the Group recognising an impairment of £69 million in profit or loss relating to
growth in cash flows of 13.0% for years 4 and five and terminal growth rate of 8.5%.
the East African CGU. The impairment of goodwill has been allocated to equity holders of the parent (£42 million) and non-controlling
interests (£27 million).
The result of using the above assumptions resulted in the Group recognising an impairment of £69 million in profit or loss relating to
the East African CGU. The impairment of goodwill has been allocated to equity holders of the parent (£42 million) and non-controlling
Impairment losses recognised during H2 2017
interests (£27 million).
A goodwill impairment charge of £16 million has been recognised in 2017 following further impairment reviews in H2 2017. This
was recognised in relation to the Aiva business in Uruguay. This impairment was reflective of the challenging business environment
Impairment losses recognised during H2 2017
in the country.
A goodwill impairment charge of £16 million has been recognised in 2017 following further impairment reviews in H2 2017. This
was recognised in relation to the Aiva business in Uruguay. This impairment was reflective of the challenging business environment
Apart for the goodwill impairment losses for East Africa and Uruguay, no other goodwill impairment losses have been recognised in
in the country.
profit or loss for the year ended 31 December 2017.
Apart for the goodwill impairment losses for East Africa and Uruguay, no other goodwill impairment losses have been recognised in
The following key assumptions have been used in the performance of goodwill impairment testing for the year ended
profit or loss for the year ended 31 December 2017.
31 December 2017:
Cash flows
The following key assumptions have been used in the performance of goodwill impairment testing for the year ended
31 December 2017:
Uruguay
Columbia Mexico
East Africa
Uruguay
Namibia
Columbia Mexico
OM Insure
East Africa
Investment segment
Namibia
Corporate segment
OM Insure
Mass Foundation segment
Investment segment
Corporate segment
Sensitivities and headroom analysis
Mass Foundation segment
The aggregated results of the goodwill testing indicated total headroom of £2,976 million at 31 December 2017. Excluding the results
of goodwill impairment testing for the Uruguay CGU, a 1% increase in the discount rate on any of the CGUs' identified would not result
Sensitivities and headroom analysis
in any goodwill impairment being recognised.
The aggregated results of the goodwill testing indicated total headroom of £2,976 million at 31 December 2017. Excluding the results
of goodwill impairment testing for the Uruguay CGU, a 1% increase in the discount rate on any of the CGUs' identified would not result
The following sensitivities on inputs used in the goodwill impairment testing have indicate that:
in any goodwill impairment being recognised.
Discount rate
14.35%
14.35%
Discount rate
17.00%
14.35%
18.56%
14.35%
13.06%
17.00%
13.06%
18.56%
13.06%
13.06%
13.06%
13.06%
13.06%
13.06%
Year 1 -3
(business plan)
100%
Year 1 -3
100%
(business plan)
85%
100%
100%
100%
100%
85%
100%
100%
100%
100%
100%
100%
100%
100%
Terminal
growth rates
1.88%
Terminal
2.87%
growth rates
8.50%
1.88%
4.00%
2.87%
2.40%
8.50%
2.40%
4.00%
2.40%
2.40%
2.40%
2.40%
2.40%
2.40%
Year 4 -5
growth rate
3.75%
Year 4 -5
5.73%
growth rate
13.00%
3.75%
8.00%
5.73%
4.80%
13.00%
4.80%
8.00%
4.80%
4.80%
4.80%
4.80%
4.80%
4.80%
Cash flows
A 1% increase in the discount rate would decrease headroom by £416 million; and
The following sensitivities on inputs used in the goodwill impairment testing have indicate that:
A 1% decrease in the discount rate would increase headroom by £509 million.
A 1% increase in the discount rate would decrease headroom by £416 million; and
Impairment losses recognised during 2016
A 1% decrease in the discount rate would increase headroom by £509 million.
A goodwill impairment charge of £64 million for the year ended 31 December 2016 was recognised for the OMSEA CGU.The following
key assumptions were used in the performance of goodwill testing for the year ended 31 December 2016:
Impairment losses recognised during 2016
A goodwill impairment charge of £64 million for the year ended 31 December 2016 was recognised for the OMSEA CGU.The following
key assumptions were used in the performance of goodwill testing for the year ended 31 December 2016:
Cash flows
Latin America
Old Mutual Southern and East Africa
Old Mutual South Africa
Latin America
Old Mutual Southern and East Africa
Old Mutual South Africa
Discount rate
14.90%
22.30%
Discount rate
14.30%
14.90%
22.30%
14.30%
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Year 1 -3
(business plan)
100%
Year 1 -3
100%
(business plan)
100%
100%
100%
100%
Cash flows
Year 4 -5
growth rate
17.00%
Year 4 -5
18.00%
growth rate
7.50%
17.00%
18.00%
7.50%
Terminal
growth rates
1.50%
Terminal
4.50%
growth rates
2.40%
1.50%
4.50%
2.40%
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Impairment testing relating to the assets held for sale and distribution
At 31 December 2017, no impairment losses have been recognised for the Nedbank and Old Mutual Wealth businesses, which have
been classified and presented as discontinued operations in the consolidated income statement and as held for distribution in the
consolidated statement of financial position in terms of the requirements of IFRS 5 'Non-current Assets Held for Sale and Discontinued
Operations'. Impairment losses are determined as the deficit between fair value less cost to distribute of each business and the carrying
value of each business at 31 December 2017.
The fair value less cost to distribute of Nedbank was determined by reference to its quoted market price and the ZAR/GBP foreign
exchange rate as at 31 December 2017. At 31 December 2017, the fair value less cost to distribute exceeded the carrying value of
Nedbank and the Group therefore concluded that goodwill and other intangible assets related to the Nedbank are not impaired. The fair
value less cost to distribute of Old Mutual Wealth is not observable in a quoted active market and accordingly it has been determined by
reference to external broker valuation reports and an internal valuation performed for goodwill impairment testing. As such, the
conclusion of this matter has required significant judgement and the use of estimates.
At 31 December 2017, the Group has concluded that the fair value less costs to distribute exceeded the carrying value of Old Mutual
Wealth and therefore no impairment losses of goodwill and other intangible assets have been recognised.
In addition, no other impairments for property, plant and equipment, investment properties or other intangible assets have been
recognised as a result of classifying these businesses as held for distribution.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
H: Non-financial assets and liabilities continued
H2: Fixed assets
H: Non-financial assets and liabilities continued
H2(a): Property, plant and equipment
H2: Fixed assets
This following table analyses land, buildings and equipment.
H2(a): Property, plant and equipment
At 31 December
This following table analyses land, buildings and equipment.
£m
Total
2016
£m
Total
1,134
2016
129
10
1,134
11
129
10
(18)
11
–
(18)
(31)
–
328
(31)
(84)
328
1,479
(84)
1,479
(434)
(102)
25
(434)
(102)
(120)
25
44
(120)
(587)
44
700
(587)
892
700
892
At 31 December
Gross carrying amount
Balance at beginning of the year
Additions
Gross carrying amount
Additions from business combinations
Balance at beginning of the year
Net increase arising from revaluation
Additions
Transfers from/(to) investment
Additions from business combinations
Net increase arising from revaluation
Reclassification within property, plant
Transfers from/(to) investment
properties
and equipment
properties
Disposals
Reclassification within property, plant
Foreign exchange and other
Disposals
Transfer to assets held for sale and
Foreign exchange and other
and equipment
movements
distribution1
movements
Transfer to assets held for sale and
Accumulated depreciation and
distribution1
impairment losses
impairment losses
Balance at beginning of the year
Accumulated depreciation and
Depreciation charge for the year
Disposals
Balance at beginning of the year
Foreign exchange and other
Depreciation charge for the year
Disposals
Transfer to assets held for sale and
Foreign exchange and other
movements
2017
113
2017
–
–
113
1
–
–
5
1
(14)
5
(1)
(14)
(3)
(1)
(57)
(3)
44
(57)
44
–
–
–
–
–
–
–
Land
2016
Land
77
2016
–
–
77
2
–
–
2
2
–
2
–
–
35
–
(3)
35
113
(3)
113
–
–
–
–
–
–
–
Buildings
2016
Buildings
501
2016
22
–
501
9
22
–
(20)
9
Plant and equipment
2016
2017
Plant and equipment
556
2016
107
10
556
–
107
10
–
–
730
2017
110
–
730
–
110
–
–
–
–
(20)
(9)
–
141
(9)
(8)
141
636
(8)
636
(81)
(24)
6
(81)
(24)
(18)
6
–
–
(25)
–
11
(25)
(587)
11
239
(587)
239
(470)
(92)
16
(470)
(92)
(10)
16
–
–
(22)
–
152
(22)
(73)
152
730
(73)
730
(353)
(78)
19
(353)
(78)
(102)
19
2017
636
2017
23
–
636
18
23
–
151
18
14
151
(14)
14
(4)
(14)
(440)
(4)
384
(440)
384
(117)
(30)
6
(117)
(30)
5
6
2017
1,479
2017
133
–
1,479
19
133
–
156
19
–
156
(40)
–
4
(40)
(1,084)
4
667
(1,084)
667
(587)
(122)
22
(587)
(122)
(5)
22
distribution1
movements
–
–
–
–
77
–
113
77
113
consolidated statement of financial position. Refer to note A4 for more information.
Balance at end of the year
Transfer to assets held for sale and
Carrying amount
distribution1
Balance at beginning of the year
Balance at end of the year
Balance at end of the year
Carrying amount
Balance at beginning of the year
1 At 31 December 2017, property, plant and equipment attributable to Nedbank and Old Mutual Wealth have been transferred to assets held for sale and distribution in the
Balance at end of the year
395
(10)
(161)
395
260
(161)
78
260
78
507
(5)
(185)
507
892
(185)
482
892
482
–
(18)
(117)
–
420
(117)
519
420
519
44
(102)
(470)
44
203
(470)
260
203
260
112
5
(24)
112
519
(24)
360
519
360
–
–
–
–
113
–
44
113
44
consolidated statement of financial position. Refer to note A4 for more information.
1 At 31 December 2017, property, plant and equipment attributable to Nedbank and Old Mutual Wealth have been transferred to assets held for sale and distribution in the
The carrying value of property, plant and equipment leased to third parties under operating leases included in the above is £52 million
(2016: £19 million) and comprises land of £13 million (2016: £3 million) and buildings of £39 million (2016: £16 million).
The carrying value of property, plant and equipment leased to third parties under operating leases included in the above is £52 million
The value of property, plant and equipment pledged as security is £19 million (2016: £23 million).
(2016: £19 million) and comprises land of £13 million (2016: £3 million) and buildings of £39 million (2016: £16 million).
The revaluation of land and buildings relates to Emerging Markets and Nedbank. In 2017, Emerging Markets made revaluation gains
The value of property, plant and equipment pledged as security is £19 million (2016: £23 million).
of £nil on land (2016: £2 million) and £7 million (2016: £5 million) on buildings. Nedbank made revaluation gains of £1 million on land
(2016: £nil) and £11 million on buildings (2016: £4 million).
The revaluation of land and buildings relates to Emerging Markets and Nedbank. In 2017, Emerging Markets made revaluation gains
of £nil on land (2016: £2 million) and £7 million (2016: £5 million) on buildings. Nedbank made revaluation gains of £1 million on land
For Emerging Markets, land and buildings are valued as at 31 December each year by internal professional valuers and external
(2016: £nil) and £11 million on buildings (2016: £4 million).
valuations are obtained once every three years. For Nedbank, valuations are performed every three years by external professional
valuers. For each business, the valuation methodology adopted is dependent upon the nature of the property. Income generating
For Emerging Markets, land and buildings are valued as at 31 December each year by internal professional valuers and external
assets are valued using discounted cash flows and vacant land and property are valued according to sales of comparable properties.
valuations are obtained once every three years. For Nedbank, valuations are performed every three years by external professional
valuers. For each business, the valuation methodology adopted is dependent upon the nature of the property. Income generating
As at 31 December 2017 all the assets of Nedbank had been reclassified as assets held for sale and distribution. As a consequence the
assets are valued using discounted cash flows and vacant land and property are valued according to sales of comparable properties.
carrying value property, plant and equipment as at 31 December 2017 relates to Emerging Markets only.
As at 31 December 2017 all the assets of Nedbank had been reclassified as assets held for sale and distribution. As a consequence the
The carrying value that would have been recognised had the land and buildings been carried under the historic cost model would be
carrying value property, plant and equipment as at 31 December 2017 relates to Emerging Markets only.
£23 million (2016: £49 million) and £37 million (2016: £311 million).
The carrying value that would have been recognised had the land and buildings been carried under the historic cost model would be
Property, plant and equipment are classified as Level 3 in terms of the fair value hierarchy. Level 3 fair value measurements are those that
£23 million (2016: £49 million) and £37 million (2016: £311 million).
include the use of significant unobservable inputs.
Property, plant and equipment are classified as Level 3 in terms of the fair value hierarchy. Level 3 fair value measurements are those that
include the use of significant unobservable inputs.
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H2(b): Investment property
Balance at beginning of the year
Additions
Disposals
Net gain from fair value adjustments
Transferred from/(to) property, plant and equipment
Foreign exchange and other movements
Transfer from/(to) assets held for sale and distribution
Balance at end of the year
Year ended
31 December
2017
1,697
358
(4)
30
(156)
(38)
17
1,904
£m
Year ended
31 December
2016
1,233
83
(8)
94
18
362
(85)
1,697
All of the Group's investment property is held by the Emerging Markets segment, principally within its policyholder funds.
The fair value of investment property leased to third parties under operating leases is as follows:
Freehold
Leasehold
Rental income from investment property
Direct operating expense arising from investment property that generated rental income
Year ended
31 December
2017
1,802
102
1,904
£m
Year ended
31 December
2016
1,499
198
1,697
160
(32)
128
126
(33)
93
The carrying amount of investment property is the fair value of the property as determined by a registered independent valuer at least
every three years, and annually by locally qualified staff, having an appropriate recognised professional qualification and recent experience
in the location and category of the property being valued. Fair values are determined having regard to recent market transactions for
similar properties in the same location as the Group's investment property. The Group's current lease arrangements, which are entered
into on an arm's length basis and which are comparable to those for similar properties in the same location, are taken into account.
All of the Group's investment properties are located in Africa.
H2(c): Fair value hierarchy of the Group's property
The fair value of the Group's properties are categorised into Level 3 of the fair value hierarchy. The table below reconciles the fair value
measurements of the investment and owner-occupied property:
Balance at beginning of the year
Additions and acquisitions
Disposals
Net gain from fair value adjustments1
Impairments and depreciation
Reclassification from / (to) other categories of property, plant and equipment
Foreign exchange and other movements
Transfer to assets held for sale and distribution
Balance at end of the year
1 These gains and losses have been included in investment return (non-banking).
Year ended
31 December
2017
2,216
381
(12)
48
(30)
9
(37)
(311)
2,264
£m
Year ended
31 December
2016
1,653
105
(11)
103
(24)
(2)
485
(93)
2,216
265
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Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
H: Non-financial assets and liabilities continued
H2: Fixed assets continued
H: Non-financial assets and liabilities continued
H2(c): Fair value hierarchy of the Group's property continued
H2: Fixed assets continued
The following table shows the valuation techniques used in the determination of the fair values for investment and owner-occupied
H2(c): Fair value hierarchy of the Group's property continued
properties, as well as the unobservable inputs used in the valuation models.
The following table shows the valuation techniques used in the determination of the fair values for investment and owner-occupied
Inter-relationship between
properties, as well as the unobservable inputs used in the valuation models.
unobservable inputs and key fair
value measurement
Inter-relationship between
The estimated fair value
unobservable inputs and key fair
would increase/ (decrease) if:
value measurement
The estimated fair value
net rental income
would increase/ (decrease) if:
increases/ (decreases) or
Type of property
Commercial, retail and
industrial properties
Type of property
Commercial, retail and
Owner-occupied property
industrial properties
Key unobservable inputs
Rental income per square
metre and capitalisation rates
Valuation approach
Discounted cash flow (market
related rentals achievable for
Valuation approach
the property, discounted at
Discounted cash flow (market
the appropriate discount rate)
related rentals achievable for
the property, discounted at
the appropriate discount rate)
Owner-occupied property
Key unobservable inputs
Rental income per square
Long-term net operating
metre and capitalisation rates
margin and capitalisation
rates
Long-term net operating
margin and capitalisation
Vacancies
rates
net rental income
capitalisation rates
increases/ (decreases) or
decrease/ (increase)
capitalisation rates
The estimated fair value
decrease/ (increase)
would increase/ (decrease) if:
The estimated fair value
long term operating margin
would increase/ (decrease) if:
increase/ (decrease); or
long term operating margin
capitalisation rates
increase/ (decrease); or
decrease/ (increase)
capitalisation rates
The estimated fair value
decrease/ (increase)
would increase/ (decrease)
if price per square metre
The estimated fair value
increase/ (decrease)
would increase/ (decrease)
if price per square metre
increase/ (decrease)
Recent sales and local
Recent sales and local
government valuation rolls
provide an indication of what
the property may be sold for
government valuation rolls
provide an indication of what
the property may be sold for
Vacancies
Holiday accommodation
Average of market
Price per square metre
Residential property
Holiday accommodation
Residential property
Near vacant properties
comparable valuations
Average of market
Replacement cost
comparable valuations
Land value
Replacement cost
Land value less the
Land value
estimated cost of demolition
Near vacant properties
Land value less the
estimated cost of demolition
Price per square metre
Recent sales of land in the
area and local government
valuation rolls adjusted for
Recent sales of land in the
estimated cost of demolition
area and local government
valuation rolls adjusted for
estimated cost of demolition
266
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
H3: Deferred acquisition costs
Deferred acquisition costs relate to costs that the Group incurred to obtain new business. These acquisition costs are capitalised in the
statement of financial position and are amortised in profit or loss over the life of the contracts. The table below analyses the movements
in deferred acquisition costs relating to insurance, investment and asset management contracts.
At 31 December
Balance at beginning of the year
New business
Amortisation
Foreign exchange and other movements
Transfer to assets held for sale and distribution1
Balance at end of the year
Insurance contracts
2016
39
5
(5)
4
–
43
2017
43
6
(5)
(1)
(10)
33
Investment contracts Asset management
2017
632
97
(116)
4
(541)
76
2016
681
113
(129)
27
(60)
632
2017
81
20
(21)
3
(8)
75
2016
64
14
(24)
56
(29)
81
Total
2017
756
123
(142)
6
(559)
184
£m
2016
784
132
(158)
87
(89)
756
i
F
n
a
n
c
a
s
l
i
1 At 31 December 2017, deferred acquisition costs attributable to Old Mutual Wealth have been transferred to assets held for sale and distribution in the consolidated statement of
financial position. At 31 December 2016, deferred acquisition costs attributable to Old Mutual Wealth Italy and Institutional Asset Management were transferred to assets held for
sale and distribution in the consolidated statement of financial position Refer to note A4 for more information.
H4: Trade, other receivables and other assets
Debtors arising from direct insurance operations
Amounts owed by policyholders
Amounts owed by intermediaries
Other
Debtors arising from reinsurance operations
Outstanding settlements
Post-employment benefits
Other receivables
Accrued interest and rent
Trading securities and spot positions
Prepayments and accrued income
Other assets
Total trade, other receivables and other assets
At
31 December
2017
Note
£m
At
31 December
2016
J1
136
44
172
352
70
157
40
128
211
–
55
291
1,304
97
44
25
166
54
522
205
442
242
268
175
342
2,416
At 31 December 2017, total trade, other receivables and other assets of £1,619 million attributable to Nedbank and Old Mutual Wealth
have been transferred to assets held for sale and distribution in the consolidated statement of financial position. Refer to note A4 for more
information.
Based on the maturity profile of the above assets, £793 million (2016: £1,649 million) is regarded as current and £511 million
(2016: £767 million) as non-current. No significant balances are past due or impaired.
267
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
H: Non-financial assets and liabilities continued
H5: Provisions and accruals
H: Non-financial assets and liabilities continued
Year ended 31 December 2017
H5: Provisions and accruals
Year ended 31 December 2017
Balance at beginning of the year
Unused amounts reversed
Charge to profit or loss
Balance at beginning of the year
Utilised during the year
Unused amounts reversed
Transfer to other liabilities
Charge to profit or loss
Foreign exchange and other movements
Utilised during the year
Transfer to liabilities held for sale and
Transfer to other liabilities
Foreign exchange and other movements
Balance at end of the year
Transfer to liabilities held for sale and
Compensation
provisions
36
Compensation
–
provisions
73
36
(6)
–
(1)
73
1
(6)
(1)
(81)
1
22
(81)
22
distribution1
distribution1
Restructuring
provisions
–
Restructuring
–
provisions
27
–
–
–
–
27
(1)
–
–
–
(1)
26
–
26
Surplus
Property
5
Surplus
–
Property
6
5
(1)
–
–
6
–
(1)
–
(4)
–
6
(4)
6
Provision for
donations
64
Provision for
(2)
donations
–
64
–
(2)
–
–
–
–
–
–
–
62
–
62
Other
55
(15)
Other
16
55
(5)
(15)
(7)
16
1
(5)
(7)
(19)
1
26
(19)
26
£m
Total
£m
160
(17)
Total
122
160
(12)
(17)
(8)
122
1
(12)
(8)
(104)
1
142
(104)
142
1 At 31 December 2017, provisions and accruals attributable to Nedbank and Old Mutual Wealth have been transferred to liabilities held for sale and distribution in the consolidated
Balance at end of the year
statement of financial position. Refer to note A4 for more information.
statement of financial position. Refer to note A4 for more information.
1 At 31 December 2017, provisions and accruals attributable to Nedbank and Old Mutual Wealth have been transferred to liabilities held for sale and distribution in the consolidated
Analysis of provisions and accruals
Compensation provisions
Analysis of provisions and accruals
At 31 December 2017, compensation provisions totalled £22 million (2016: £36 million), with £11 million (2016: £10 million) relating to
regulatory uncertainty and multiple causal events and £11 million (2016: £13 million) relating to the provision for claw-back of prescribed
Compensation provisions
claims. This provision is held to allow for the probable future payment of claims that have been previously reversed. Due to the nature of
At 31 December 2017, compensation provisions totalled £22 million (2016: £36 million), with £11 million (2016: £10 million) relating to
the provision, the timing of the expected cash outflows is uncertain. Estimates of this provision are reviewed annually and are adjusted as
regulatory uncertainty and multiple causal events and £11 million (2016: £13 million) relating to the provision for claw-back of prescribed
and when new circumstances arise.
claims. This provision is held to allow for the probable future payment of claims that have been previously reversed. Due to the nature of
the provision, the timing of the expected cash outflows is uncertain. Estimates of this provision are reviewed annually and are adjusted as
Of the total client compensation provisions, £21 million (2016: £21 million) is estimated to be payable after more than one year.
and when new circumstances arise.
Surplus property provisions
Of the total client compensation provisions, £21 million (2016: £21 million) is estimated to be payable after more than one year.
The provision for surplus properties in 2017 amounted to £6 million (2016: £5 million). These relates to onerous costs of vacant properties
leased by the Group of which £5 million (2016: £5 million) is estimated to be payable after more than one year.
Surplus property provisions
The provision for surplus properties in 2017 amounted to £6 million (2016: £5 million). These relates to onerous costs of vacant properties
Restructuring provisions
leased by the Group of which £5 million (2016: £5 million) is estimated to be payable after more than one year.
During 2017, plc Head Office and Old Mutual Bermuda recognised £13 million and £14 million restructuring provisions respectively. The
plc Head Office restructuring provision relates to redundancy costs expected to be incurred in the wind-down of its operations during 2018.
Restructuring provisions
Similar costs of £14 million are provided for Old Mutual Bermuda in relation to its wind-down.
During 2017, plc Head Office and Old Mutual Bermuda recognised £13 million and £14 million restructuring provisions respectively. The
plc Head Office restructuring provision relates to redundancy costs expected to be incurred in the wind-down of its operations during 2018.
Provisions for donations
Similar costs of £14 million are provided for Old Mutual Bermuda in relation to its wind-down.
The provision for donations is held by Emerging Markets in respect of commitments made by the South African business to the future
funding of charitable donations. The funds were made available on the closure of the Group's unclaimed shares trusts which were set up
Provisions for donations
as part of the demutualisation in 1999 and closed in 2006. £62 million (2016: £64 million) is estimated to be payable after more than one
The provision for donations is held by Emerging Markets in respect of commitments made by the South African business to the future
year due to the long-term nature of the agreements in place.
funding of charitable donations. The funds were made available on the closure of the Group's unclaimed shares trusts which were set up
as part of the demutualisation in 1999 and closed in 2006. £62 million (2016: £64 million) is estimated to be payable after more than one
Other provisions
year due to the long-term nature of the agreements in place.
Other provisions include long-term staff benefits and amounts for the resolution of legal uncertainties and the settlement of other claims
raised by contracting parties. These provisions are generally individually immaterial.
Other provisions
Other provisions include long-term staff benefits and amounts for the resolution of legal uncertainties and the settlement of other claims
Where material, provisions and accruals are discounted at discount rates specific to the risks inherent in the liability. The timing and final
raised by contracting parties. These provisions are generally individually immaterial.
amounts of payments in respect of some of the provisions, particularly those in respect of litigation claims and similar actions against the
Group, are uncertain and could result in adjustments to the amounts recorded. Of the total provisions recorded above, £97 million (2016:
Where material, provisions and accruals are discounted at discount rates specific to the risks inherent in the liability. The timing and final
£121 million) is estimated to be payable after one year.
amounts of payments in respect of some of the provisions, particularly those in respect of litigation claims and similar actions against the
Group, are uncertain and could result in adjustments to the amounts recorded. Of the total provisions recorded above, £97 million (2016:
£121 million) is estimated to be payable after one year.
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Old Mutual plc
Annual Report and Accounts 2017
Provisions and accruals classified as held for sale and held for distribution
Compensation provisions: Voluntary remediation provision
As part of its ongoing work to promote fair customer outcomes, the company has conducted product reviews consistent with the
recommendations from the FCA's thematic feedback and the FCA's guidance 'FG16/8 Fair treatment of long-standing customers in the life
insurance sector'. Following these reviews, the company has decided to commence voluntary remediation to customers in certain legacy
products, resulting in an additional provision raised during the year of £69 million, including £7 million of programme costs and £13 million
of estimated interest.
The voluntary remediation relates to early encashment charges and contribution servicing charges made on pension products and
following the re-introduction of annual reviews, compensation payable to a subset of Protection plan holders.
The redress comprises retrospective refunds and compensation, going back to 1 January 2009, and prospective 5% caps on early
encashment charges. An FCA press release (3 March 2016) stated that its investigation will focus on disclosure of exit and paid-up
charges after December 2008. From 2004 to 2007 the Financial Services Authority published a number of communications on treating
customers fairly (TCF) which made it clear that all firms were required to have regard to customers’ information needs through the life
cycle of a product. Firms were required to implement changes to complete their TCF work no later than December 2008.
The company intends to substantially complete the remediation by the end of 2018.
Key estimates and assumptions in relation to the provision are:
Protection policy sustainability period assumption of 4 years; and; and
The programme costs of carrying out the remediation activity and interest on remediation payments.
If past reviews had been carried out correctly, policies would be expected to have funds sufficient to provide up to four years’ cover from
the current reporting date, on the basis that future premium increases are not applied. This assumption has been used to determine the
cost of reconstructing the impacted Protection policies to their expected values.
The programme costs of conducting the remediation activity are highly variable and are subject to a number of uncertainties. In calculating
the best estimate of these costs, consideration has been given to such matters as the identification of impacted customers, access to and
the quality of customer files, likelihood of the customer contesting the offer, the complexity of the calculations, the level of quality
assurance and checking, the ease of contacting and communicating with customers and the level of customer interactions.
Sensitivities relating to the assumptions and uncertainties are provided in the table below:
Assumption
Protection policy sustainability period
assumption reduced to 3 years
Protection policy sustainability period
Programme cost per case of conducting
the review
Change in assumption
Protection policy sustainability period
assumption reduced to 3 years
Protection policy sustainability period
assumption increased to 5 years
+/- 20% of the cost per case
Consequential change in provision
- £3.1 million
+£3.3 million
+/- £1.4 million
The Group has not provided for any future potential enforced redress and associated penalties. Disclosure of related contingent liabilities is
included in note J4.
Of the total provisions for the businesses classified has held for sale and held for distribution of £104 million, £13 million is estimated to be
payable after one year.
H6: Deferred revenue
Deferred revenue relates to initial fees received for the future provision of services that the Group will render on investment management
contracts. These fees are capitalised in the consolidated statement of financial position and are amortised in profit or loss over the
expected life of the contracts. The table below analyses the movements in deferred revenue.
Year ended 31 December
Balance at beginning of the year
Fees and commission income deferred
Amortisation
Foreign exchange and other movements
Transfer to liabilities held for sale and
distribution1
Balance at end of the year
Life and Savings
2016
241
18
(29)
(6)
2017
220
17
(26)
18
(213)
16
(4)
220
Asset
Management
2017
55
13
(16)
1
(1)
52
2016
18
–
(12)
49
–
55
Property &
Casualty
2017
9
–
–
(1)
2016
9
–
–
–
Banking
2017
6
1
–
(1)
2016
6
–
–
–
–
8
–
9
–
6
–
6
£m
2016
274
18
(41)
43
(4)
290
Total
2017
290
31
(42)
17
(214)
82
1 At 31 December 2017, deferred revenue attributable to Old Mutual Wealth has been transferred to liabilities held for sale and distribution in the consolidated statement of financial
position. Refer to note A4 for more information.
269
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Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
H: Non-financial assets and liabilities continued
H7: Deferred tax assets and liabilities
H: Non-financial assets and liabilities continued
Deferred income taxes are calculated on all temporary differences at the tax rate applicable to the jurisdiction in which the timing
H7: Deferred tax assets and liabilities
differences arise.
Deferred income taxes are calculated on all temporary differences at the tax rate applicable to the jurisdiction in which the timing
(a) Deferred tax assets
differences arise.
Deferred tax assets are recognised for tax losses carried forward only to the extent that realisation of the related tax benefit is probable,
being where on the basis of all available evidence it is considered more likely than not that there will be suitable taxable profits against
(a) Deferred tax assets
which the reversal of the deferred tax asset can be deducted.
Deferred tax assets are recognised for tax losses carried forward only to the extent that realisation of the related tax benefit is probable,
being where on the basis of all available evidence it is considered more likely than not that there will be suitable taxable profits against
The movement on the deferred tax assets account is as follows:
which the reversal of the deferred tax asset can be deducted.
Year ended 31 December 2017
The movement on the deferred tax assets account is as follows:
Year ended 31 December 2017
Tax losses carried forward
Accelerated capital allowances
Other temporary differences
Tax losses carried forward
Deferred fee income
Accelerated capital allowances
Netted against liabilities
Other temporary differences
Deferred fee income
Netted against liabilities
Year ended 31 December 2016
Year ended 31 December 2016
At
beginning
of the year
At
25
beginning
–
of the year
137
25
5
–
(71)
137
96
5
(71)
96
At
beginning
of the year
At
27
beginning
1
of the year
323
27
(15)
1
8
323
(60)
(15)
284
8
(60)
284
Income
statement
(charge)/
Income
credit
statement
(19)
(charge)/
–
credit
27
(19)
(2)
–
4
27
10
(2)
4
10
Income
statement
(charge)/
Income
credit
statement
(7)
(charge)/
1
credit
(1)
(7)
(1)
1
(3)
(1)
5
(1)
(6)
(3)
5
(6)
Recognised in
the SOCI
–
Recognised in
–
the SOCI
(5)
–
–
–
–
(5)
(5)
–
–
(5)
Recognised in
the SOCI
–
Recognised in
–
the SOCI
4
–
–
–
–
4
–
–
4
–
–
4
Foreign
exchange
and other
Foreign
movements1
exchange
14
and other
–
movements1
79
14
(1)
–
(86)
79
6
(1)
(86)
6
Foreign
exchange
and other
Foreign
movements1
exchange
10
and other
(1)
movements1
54
10
16
(1)
–
54
(15)
16
64
–
(15)
64
Transfer to
assets held
for sale and
Transfer to
distribution2
assets held
(12)
for sale and
–
distribution2
(179)
(12)
(2)
–
151
(179)
(42)
(2)
151
(42)
Transfer to
assets held
for sale and
Transfer to
distribution2
assets held
(5)
for sale and
(1)
distribution2
(243)
(5)
–
(1)
–
(243)
(1)
–
(250)
–
(1)
(250)
£m
At
£m
end of the
year
At
8
end of the
–
year
59
8
–
–
(2)
59
65
–
(2)
£m
65
At
£m
end of the
year
At
25
end of the
–
year
137
25
–
–
5
137
(71)
–
96
5
(71)
96
Tax losses carried forward
Accelerated capital allowances
Other temporary differences
Tax losses carried forward
Policyholders tax
Accelerated capital allowances
Deferred fee income
Other temporary differences
Netted against liabilities
Policyholders tax
Deferred fee income
Netted against liabilities
1 Includes reclassification of timing differences between categories
2 At 31 December 2017, deferred tax assets attributable to Nedbank and Old Mutual Wealth have been transferred to assets held for sale and distribution in the consolidated
statement of financial position. At 31 December 2016, deferred tax assets attributable to Old Mutual Wealth Italy and Institutional Asset Management were transferred to liabilities
held for sale and distribution in the consolidated statement of financial position. Refer to note A4 for more information.
1 Includes reclassification of timing differences between categories
2 At 31 December 2017, deferred tax assets attributable to Nedbank and Old Mutual Wealth have been transferred to assets held for sale and distribution in the consolidated
statement of financial position. At 31 December 2016, deferred tax assets attributable to Old Mutual Wealth Italy and Institutional Asset Management were transferred to liabilities
held for sale and distribution in the consolidated statement of financial position. Refer to note A4 for more information.
270
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Old Mutual plc
Annual Report and Accounts 2017
The amounts for which no deferred tax asset has been recognised comprise:
Unrelieved tax losses
Expiring in less than a year
Expiring in the second to fifth years inclusive
Expiring after five years
Accelerated capital allowances
Other timing differences
Gross amount
At 31 December 2017
Tax
Gross amount
£m
At 31 December 2016
Tax
29
48
1,142
1,219
24
263
1,506
8
15
194
217
4
44
265
11
68
1,824
1,903
191
573
2,667
3
18
312
333
33
97
463
In addition to the amounts disclosed in the table above, at 31 December 2017 there was additional unrecognised deferred tax assets
totalling £866 million gross amount (£145 million tax) relating to businesses classified as held for sale and distribution.
(b) Deferred tax liabilities
The movement on the deferred tax liabilities account is as follows:
Year ended 31 December 2017
Accelerated tax depreciation
Deferred acquisition costs
PVIF
Other acquired intangibles
Available for sale securities
Other temporary differences
Capital gains tax
Policyholder tax
Netted against assets
Year ended 31 December 2016
Accelerated tax depreciation
Deferred acquisition costs
PVIF
Other acquired intangibles
Available for sale securities
Other temporary differences
Capital gains tax
Policyholder tax
Netted against assets
At
beginning
of the year
58
–
19
68
4
207
20
135
(71)
440
At
beginning
of the year
48
29
29
61
2
188
41
79
(60)
417
Income
statement
(credit)/
charge
7
4
(5)
(11)
–
26
46
1
4
72
Income
statement
(credit)/
charge
–
(4)
(7)
(9)
–
62
(32)
(28)
5
(13)
Foreign
exchange
and other
movements1
(4)
57
–
–
–
120
52
(122)
(86)
17
Transfer to
liabilities held
for sale and
distribution2
(34)
(20)
(14)
(57)
(2)
(257)
(5)
–
151
(238)
Credited to
equity
–
–
–
–
(2)
11
4
–
–
13
Foreign
exchange
and other
movements1
10
(25)
(3)
12
3
(62)
21
73
(15)
14
Transfer to
liabilities held
for sale and
distribution2
–
–
–
4
–
21
(10)
11
(1)
25
Charged to
equity
–
–
–
–
(1)
(2)
–
–
–
(3)
£m
At
end of the
year
27
41
–
–
–
107
117
14
(2)
304
£m
At
end of the
year
58
–
19
68
4
207
20
135
(71)
440
1 Includes reclassification of timing differences between categories
2 At 31 December 2017, deferred tax liabilities attributable to Nedbank and Old Mutual Wealth have been transferred to liabilities held for sale and distribution in the consolidated
statement of financial position. At 31 December 2016, deferred tax liabilities attributable to Old Mutual Wealth Italy and Institutional Asset Management were transferred to liabilities
held for sale and distribution in the consolidated statement of financial position. Refer to note A4 for more information.
The aggregate amount of temporary differences on which further tax might be due in respect of investments in subsidiaries and branches
is estimated at £4.9 billion (2016: £4.6 billion), of which £2.4 billion relates to continuing operations and £2.5 billion to discontinued
operations. It is not expected that the disposals of Wealth Management and Nedbank as a result of Managed Separation will give rise to
corporate tax charge and there is therefore no requirement to provide for any associated tax. As the Group is able to control the reversal
of temporary differences in respect of investments in the continuing operations there is no need to provide for any associated deferred
tax liabilities.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
H: Non-financial assets and liabilities continued
H8: Trade, other payables and other liabilities
H: Non-financial assets and liabilities continued
H8: Trade, other payables and other liabilities
Amounts payable on direct insurance business
Amounts payable on direct insurance business
Funds held under reinsurance business ceded
Amounts owed to policyholders
Amounts owed to intermediaries
Funds held under reinsurance business ceded
Amounts owed to policyholders
Amounts owed to intermediaries
Other direct insurance operation creditors
Note
Note
At
31 December
2017
At
31 December
–
2017
233
47
–
61
233
341
47
54
61
207
341
38
54
–
207
–
38
19
–
510
–
6
19
297
510
1,057
6
2,529
297
1,057
2,529
£m
At
31 December
£m
2016
At
31 December
14
2016
394
82
14
17
394
507
82
47
17
370
507
83
47
48
370
139
83
1,006
48
795
139
620
1,006
491
795
1,006
620
5,112
491
1,006
5,112
J1
Accounts payable on reinsurance business
Other direct insurance operation creditors
Accruals and deferred income
Post-employment benefits
Accounts payable on reinsurance business
Liability for long-service leave
Accruals and deferred income
Short trading securities, spot positions and other
Post-employment benefits
Trade creditors
Liability for long-service leave
Outstanding settlements
Short trading securities, spot positions and other
Securities sold under agreements to repurchase
Trade creditors
Obligations in relation to collateral holdings
Outstanding settlements
Other liabilities
Securities sold under agreements to repurchase
Total trade, other payables and other liabilities
Obligations in relation to collateral holdings
Other liabilities
At 31 December 2017, total trade, other payables and other liabilities of £2,283 million attributable to Nedbank and Old Mutual Wealth
Total trade, other payables and other liabilities
have been transferred to liabilities held for sale and distribution in the consolidated statement of financial position. Refer to note A4 for
more information.
At 31 December 2017, total trade, other payables and other liabilities of £2,283 million attributable to Nedbank and Old Mutual Wealth
have been transferred to liabilities held for sale and distribution in the consolidated statement of financial position. Refer to note A4 for
Included in the amounts shown above are £2,195 million (2016: £3,046 million) that are regarded as current, with the remainder regarded
more information.
as non-current.
Included in the amounts shown above are £2,195 million (2016: £3,046 million) that are regarded as current, with the remainder regarded
H9: Equity
as non-current.
J1
(a) Share capital
H9: Equity
Financial instruments issued are classified as equity when there is no contractual obligation to transfer cash, other financial assets or issue
a variable number of own equity instruments. Incremental costs directly attributable to the issue of equity instruments are shown in equity
(a) Share capital
as a deduction from the proceeds, net of tax.
Financial instruments issued are classified as equity when there is no contractual obligation to transfer cash, other financial assets or issue
a variable number of own equity instruments. Incremental costs directly attributable to the issue of equity instruments are shown in equity
£m
as a deduction from the proceeds, net of tax.
At
31 December
£m
2016
At
563
31 December
2016
563
(b) Perpetual preferred callable securities
4,932.7 million (2016: 4,929.9 million) Issued ordinary shares of 113/7p each
On 3 February 2017, the Group repurchased all of its outstanding Tier 1 preferred perpetual callable securities using cash from the
Group's existing resources. In addition to repaying the nominal value of the securities, £29 million was paid to holders of the securities
(b) Perpetual preferred callable securities
for accrued interest and a market premium in excess of nominal value. The premium was recognised directly in equity.
On 3 February 2017, the Group repurchased all of its outstanding Tier 1 preferred perpetual callable securities using cash from the
Group's existing resources. In addition to repaying the nominal value of the securities, £29 million was paid to holders of the securities
for accrued interest and a market premium in excess of nominal value. The premium was recognised directly in equity.
At
31 December
2017
At
564
31 December
2017
564
4,932.7 million (2016: 4,929.9 million) Issued ordinary shares of 113/7p each
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
H10: Non-controlling interests
(a) Profit or loss
(i) Ordinary shares
The non-controlling interests' share of profit for the financial year has been calculated on the basis of the Group's effective ownership
of the subsidiaries in which it does not own 100% of the ordinary equity. The principal subsidiaries where a non-controlling interest exists
is Nedbank, the Group's South African banking business and OM Asset Management plc, the Group's US asset management business.
For the year ended 31 December 2017 the non-controlling interests attributable to ordinary shares was £315 million (2016: £253 million).
(ii) Preferred securities
Nedbank
R3,222 million (2016: R3,222 million) non-cumulative preference shares
R2,600 million (2016: R2,000 million) subordinated callable notes
At
31 December
2017
£m
At
31 December
2016
19
15
34
18
4
22
(iii) Non-controlling interests – adjusted operating profit
The following table reconciles non-controlling interests' share of profit for the financial year to non-controlling interests' share of adjusted
operating profit:
Reconciliation of non-controlling interests' share of profit for the financial year
The non-controlling interests' share is analysed as follows:
Non-controlling interests – ordinary shares
Impact of acquisition accounting
Income attributable to Black Economic Empowerment trusts of listed subsidiaries
Attributable to Institutional Asset Management equity plans
Non-controlling interests' share of adjusted operating profit
Year ended
31 December
2017
£m
Year ended
31 December
2016
315
34
6
9
364
253
53
10
3
319
The Group uses an adjusted weighted average effective ownership interests when calculating the non-controllable interest applicable to
the adjusted operating profit of its Southern African banking businesses. These reflect the legal ownership of this business following the
implementation for Black Economic Empowerment (BEE) schemes in 2005. In accordance with IFRS accounting rules the shares issued
for BEE purposes are deemed to be, in substance, options. Therefore the effective ownership interest of the minorities reflected in arriving
at profit after tax in the consolidated income statement is lower than that applied in arriving at adjusted operating profit after tax. In 2017
the increase in adjusted operating profit attributable to non-controlling interests as a result of this was £6 million (2016: £10 million).
(b) Consolidated statement of financial position
(i) Ordinary shares
Reconciliation of movements in non-controlling interests
Balance at beginning of the year
Non-controlling interests' share of profit
Non-controlling interests' share of dividends paid
Disposal of interest in OM Asset Management plc
Change in participation in subsidiaries
Foreign exchange and other movements
Balance at end of the year
At
31 December
2017
2,773
315
(177)
(550)
74
7
2,442
£m
At
31 December
2016
1,982
253
(149)
153
–
534
2,773
273
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Old Mutual plc
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
H: Other statement of financial position notes continued
H10: Non-controlling interests continued
H: Other statement of financial position notes continued
(ii) Preferred securities
H10: Non-controlling interests continued
(ii) Preferred securities
At
31 December
2017
At
31 December
272
2017
(26)
246
272
131
(26)
377
246
131
377
£m
At
31 December
£m
2016
At
31 December
272
2016
(26)
246
272
95
(26)
341
246
95
341
Nedbank
358.3 million (2016: 358.3 million) non-cumulative preference shares
Repurchased by Nedbank subsidiaries
Nedbank
358.3 million (2016: 358.3 million) non-cumulative preference shares
R2,600 million (2016: R2,000 million) Tier 1 perpetual subordinated instruments
Repurchased by Nedbank subsidiaries
Total
R2,600 million (2016: R2,000 million) Tier 1 perpetual subordinated instruments
Preferred securities are held at the value of consideration received less unamortised issue costs and are stated net of securities held by
Total
Group companies.
Preferred securities are held at the value of consideration received less unamortised issue costs and are stated net of securities held by
Non-cumulative preference shares
Group companies.
These preference shares were issued by Nedbank Limited (Nedbank), the Group's banking subsidiary.
Non-cumulative preference shares
Each preference share confers on the holder the right to capital of the company in the form of a cash dividend prior to payment of
These preference shares were issued by Nedbank Limited (Nedbank), the Group's banking subsidiary.
dividends to any other class of shareholder. The rate is limited to 83,33% of the prevailing prime rate on a deemed value of R10 and is
never compounded.
Each preference share confers on the holder the right to capital of the company in the form of a cash dividend prior to payment of
dividends to any other class of shareholder. The rate is limited to 83,33% of the prevailing prime rate on a deemed value of R10 and is
If a preference dividend is not declared, the dividend will not accumulate and will never become payable by the company, whether in
never compounded.
preference to payments to any other class of share or otherwise.
If a preference dividend is not declared, the dividend will not accumulate and will never become payable by the company, whether in
Each preference share confers on the holder the right to a return of capital on the winding-up of the company prior to any payment to any
preference to payments to any other class of share or otherwise.
other class of share, but holders are not entitled to any further participation in the profits, assets or any surplus assets of the company in
such circumstances.
Each preference share confers on the holder the right to a return of capital on the winding-up of the company prior to any payment to any
other class of share, but holders are not entitled to any further participation in the profits, assets or any surplus assets of the company in
Preference shareholders are only entitled to vote during periods when a dividend or any part of it remains unpaid after the due date for
such circumstances.
payment or when resolutions are proposed that directly affect any rights attaching to the shares or the rights of the holders.
Preference shareholders are only entitled to vote during periods when a dividend or any part of it remains unpaid after the due date for
Tier 1 perpetual subordinated instruments
payment or when resolutions are proposed that directly affect any rights attaching to the shares or the rights of the holders.
On 20 May 2016, Nedbank Limited issued a R1,500 million new-style (Basel III-compliant) additional Tier 1 capital instrument at 3-month
JIBAR plus 7.0% with a call date of 21 May 2021.
Tier 1 perpetual subordinated instruments
On 20 May 2016, Nedbank Limited issued a R1,500 million new-style (Basel III-compliant) additional Tier 1 capital instrument at 3-month
On 25 November 2016, Nedbank Limited issued a R500 million new-style (Basel III-compliant) additional Tier 1 capital instrument at
JIBAR plus 7.0% with a call date of 21 May 2021.
3-month JIBAR plus 6.3% with a call date of 26 November 2021.
On 25 November 2016, Nedbank Limited issued a R500 million new-style (Basel III-compliant) additional Tier 1 capital instrument at
On 30 June 2017, Nedbank Limited issued a R600 million new-style (Basel III-compliant) additional Tier 1 capital instrument at 3-month
3-month JIBAR plus 6.3% with a call date of 26 November 2021.
JIBAR plus 5.65% with a call date of 1 July 2022.
On 30 June 2017, Nedbank Limited issued a R600 million new-style (Basel III-compliant) additional Tier 1 capital instrument at 3-month
These Tier 1 capital instruments are perpetual and subordinated with no redemption date. They are redeemable subject to regulatory
JIBAR plus 5.65% with a call date of 1 July 2022.
approval at the sole discretion of the issuer, Nedbank Limited from the applicable call date and following a regulatory event or following
a tax event. The payment of interest is at the discretion of the issuer and interest payments are non-cumulative. In addition, if certain
These Tier 1 capital instruments are perpetual and subordinated with no redemption date. They are redeemable subject to regulatory
conditions are reached the regulator may prohibit Nedbank from making interest payments. Accordingly the instruments are classified
approval at the sole discretion of the issuer, Nedbank Limited from the applicable call date and following a regulatory event or following
as equity instruments and disclosed as non-controlling interest.
a tax event. The payment of interest is at the discretion of the issuer and interest payments are non-cumulative. In addition, if certain
conditions are reached the regulator may prohibit Nedbank from making interest payments. Accordingly the instruments are classified
as equity instruments and disclosed as non-controlling interest.
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Old Mutual plc
Annual Report and Accounts 2017
I: Interests in subsidiaries, associates and joint arrangements
Critical accounting estimates and judgements – Investments in subsidiaries, associated
undertakings and joint arrangements
The Group has applied the following key judgements in the application of the requirements of the consolidation set of standards
(IFRS 10 'Consolidated Financial Statements' and IFRS 11 'Joint Arrangements'):
Consolidation of investment funds and securitisation vehicles
The Group acts as a fund manager to a number of investment funds. In determining whether the Group controls such a fund, it will focus
on an assessment of the aggregate economic interests of the Group (comprising any carried interests and expected management fees)
and the investor's rights to remove the fund manager. This general assessment is supplemented by an assessment of third-party rights
in the investment funds, with regards to their practical ability to allow the Group not to control the fund. The Group assesses, on an
annual basis, such interests to determine if the fund will be consolidated. The non-controlling interests in investment funds consolidated
by the Group are classified as third-party interests in consolidated funds, a financial liability, in the consolidated statement of financial
position. These interests are classified at fair value through profit or loss and measured at fair value, which is equal to the bid value
of the number of units of the investment funds' scheme not owned by the Group. Any investments held in Old Mutual plc shares are
treated as treasury shares and are eliminated as a direct decrease in the value of equity and the value of investment and securities.
The Group has sponsored certain asset backed financing (securitisation) vehicles under its securitisation programme which are run
according to pre-determined criteria that are part of the initial design of the vehicles. The Group is exposed to variability of returns from
the vehicles through its holding of junior debt securities in the vehicles. It has concluded that it controls these vehicles and therefore has
consolidated these asset backed financing vehicles.
Structured entities
The Group is required to make judgements on what constitutes a structured entity. Accounting standards define a structured entity as
an entity designed so that its activities are not governed by way of voting rights. In assessing whether the Group has power over such
investees in which it has an economic interest, the Group considers numerous factors. These factors may include the purpose and
design of the investee, its practical ability to direct the relevant activities of the investee, the nature of its relationship with the investee
and the size of its exposure to the variability of returns of the investee. The Group has evaluated all exposures and has concluded that
all investments in investment funds as well as certain securitisation vehicles and other funding vehicles represent investments in
structured entities. Information on structured entities is included in note I3.
Accounting for the investment in Zimbabwe
Following recent political developments in Zimbabwe, the current macro-economic situation remains fluid, and the market reaction
remains volatile. The current risks for our Zimbabwean businesses include the shortage of US dollars, uncertainty of the current levels
and growth of equity markets and property prices and reputational issues arising from the postponement of all bonus declarations in light
of the current market uncertainty.
The Group has total assets and total liabilities of £2,278 million (2016: £1,777million) and £1,803 million (2016: £1,406 million)
respectively in the Zimbabwean business of which £1,031 million (2016: £472 million) are listed financial assets at fair value. In addition
the Group has £1,080 million (2016: £775 million) of policyholder liabilities which are backed by primarily investment and securities held
by the Group.
The Group has concluded on the following key judgements in the preparation of the Group financial statements: the control and
functional currency of the Zimbabwean businesses and the fair value of locally listed financial assets and liabilities.
The Group has concluded that it will consolidate the Zimbabwean businesses as it still has the ability to exercise control. The functional
currency of the Zimbabwean businesses, consistent with prior years, is US Dollars. This is evidenced by trade in Zimbabwe being
principally conducted in US dollar and that all major goods and services are priced in US Dollar.
The fair value of any financial assets or liabilities was based on the unadjusted quoted prices as the Group believes the traded prices
represent fair value in an active and orderly market. The Group has evidenced this through the reviewing the volume and value of trades
conducted on the Zimbabwe Stock Exchange (ZSE).
The value of the ZSE index was 144.53 at 31 December 2016, 195.97 at 30 June 2017 and 323.98 at 31 December 2017. Subsequent
to year end the ZSE index was 294.55 at 28 February 2018.The ZSE index provides the underlying context of the investment returns
earned by the Zimbabwean business.
275
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Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
I: Interests in subsidiaries, associates and joint arrangements continued
I1: Subsidiaries
I: Interests in subsidiaries, associates and joint arrangements continued
(a) Principal subsidiaries and Group enterprises
I1: Subsidiaries
The following table lists the principal Group undertakings whose results are included in the consolidated financial statements. All shares
held are ordinary shares and, except for OM Group (UK) Limited and Old Mutual Wealth Management Limited, are held indirectly by the
(a) Principal subsidiaries and Group enterprises
Company. Refer to note L for a detailed list of the Group's related undertakings.
The following table lists the principal Group undertakings whose results are included in the consolidated financial statements. All shares
held are ordinary shares and, except for OM Group (UK) Limited and Old Mutual Wealth Management Limited, are held indirectly by the
Company. Refer to note L for a detailed list of the Group's related undertakings.
Nature of business
Name
Holding company
Old Mutual Group Holdings (SA) (Pty) Limited
Holding company
AIVA Holding Group S.A
Nature of business
Name
Lending
Faulu Microfinance Bank Limited
Holding company
Old Mutual Group Holdings (SA) (Pty) Limited
Property & casualty
Old Mutual Insure Limited
Holding company
AIVA Holding Group S.A
Nedbank Group Limited1,4
Banking
Lending
Faulu Microfinance Bank Limited
Nedbank Limited2,4
Banking
Property & casualty
Old Mutual Insure Limited
Banco Único, SA4
Banking
Nedbank Group Limited1,4
Banking
Holding company
Old Mutual (Africa) Holdings (Pty) Limited
Nedbank Limited2,4
Banking
Holding company
Old Mutual (Netherlands) B.V.
Banco Único, SA4
Banking
Holding company
Old Mutual Emerging Markets Limited
Holding company
Old Mutual (Africa) Holdings (Pty) Limited
Lending
Old Mutual Finance (Pty) Ltd
Holding company
Old Mutual (Netherlands) B.V.
Asset management
Old Mutual Investment Group (Pty) Limited
Holding company
Old Mutual Emerging Markets Limited
Holding company
Old Mutual Investment Group Holdings (Pty) Limited
Lending
Old Mutual Finance (Pty) Ltd
Life assurance
Old Mutual Life Assurance Company (Namibia) Limited
Asset management
Old Mutual Investment Group (Pty) Limited
Life assurance
Old Mutual Life Assurance Company (South Africa) Limited
Holding company
Old Mutual Investment Group Holdings (Pty) Limited
Old Mutual Wealth Management Limited4
Holding company
Life assurance
Old Mutual Life Assurance Company (Namibia) Limited
Life assurance
Old Mutual Zimbabwe Limited
Life assurance
Old Mutual Life Assurance Company (South Africa) Limited
Holding company
OM Group (UK) Limited
Old Mutual Wealth Management Limited4
Holding company
Holding company
OM Latin America Holdco UK Limited
Life assurance
Old Mutual Zimbabwe Limited
Quilter Cheviot Limited4
Asset management
Holding company
OM Group (UK) Limited
UAP Holdings Limited3
Holding company
Holding company
OM Latin America Holdco UK Limited
Quilter Cheviot Limited4
Asset management
1 Nedbank Group Limited is a publicly listed company, with its primary listing on the JSE (Johannesburg, South Africa)
UAP Holdings Limited3
Holding company
2 Nedbank Limited is a 100% subsidiary of Nedbank Group Limited. The Group's effective ownership is 55%
3 Two significant minority anchor shareholders in UAP have the rights to collectively put up to an aggregate 6% shareholding in UAP to the Group at any time before the third
1 Nedbank Group Limited is a publicly listed company, with its primary listing on the JSE (Johannesburg, South Africa)
anniversary of the effective date of the UAP shareholders agreement (i.e. in September 2018), while the Group owns less than a 66.67% shareholding in UAP at a price
2 Nedbank Limited is a 100% subsidiary of Nedbank Group Limited. The Group's effective ownership is 55%
determinable in accordance with the UAP shareholders' agreement. The exercise price of the minority anchor shareholders' put option at the Last Practicable Date is in the
3 Two significant minority anchor shareholders in UAP have the rights to collectively put up to an aggregate 6% shareholding in UAP to the Group at any time before the third
order of £24 million (R400 million)
anniversary of the effective date of the UAP shareholders agreement (i.e. in September 2018), while the Group owns less than a 66.67% shareholding in UAP at a price
4 Entities are part of the businesses classified as held for distribution.
determinable in accordance with the UAP shareholders' agreement. The exercise price of the minority anchor shareholders' put option at the Last Practicable Date is in the
order of £24 million (R400 million)
Country of incorporation
Republic of South Africa
Panama
Country of incorporation
Kenya
Republic of South Africa
Republic of South Africa
Panama
Republic of South Africa
Kenya
Republic of South Africa
Republic of South Africa
Republic of Mozambique
Republic of South Africa
Republic of South Africa
Republic of South Africa
Netherlands
Republic of Mozambique
Republic of South Africa
Republic of South Africa
Republic of South Africa
Netherlands
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Namibia
Republic of South Africa
Republic of South Africa
Republic of South Africa
England and Wales
Namibia
Zimbabwe
Republic of South Africa
England and Wales
England and Wales
England and Wales
Zimbabwe
England and Wales
England and Wales
Kenya
England and Wales
England and Wales
Kenya
Percentage
holding
100
Percentage
100
holding
67
100
100
100
55
67
100
100
50
55
100
100
100
50
100
100
75
100
100
100
100
75
100
100
100
100
100
100
75
100
100
100
100
75
100
100
61
100
100
61
All the above companies have a year-end of 31 December and their financial results have been incorporated and are included in the
4 Entities are part of the businesses classified as held for distribution.
Group financial statements from the effective date that the Group controls the entity.
All the above companies have a year-end of 31 December and their financial results have been incorporated and are included in the
There are certain funds in which the Group owns more than 50% of the equity but does not consolidate these because of certain
Group financial statements from the effective date that the Group controls the entity.
management contracts which give other parties the power to control these funds. These management contracts may include that the
ability to control is delegated to a third party with no rights of removal on similar types of contractual agreements.
There are certain funds in which the Group owns more than 50% of the equity but does not consolidate these because of certain
management contracts which give other parties the power to control these funds. These management contracts may include that the
ability to control is delegated to a third party with no rights of removal on similar types of contractual agreements.
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Annual Report and Accounts 2017
(b) Non-controlling interests in subsidiaries
The following table summarises the information relating to the Group's subsidiaries that have material non-controlling interests:
At 31 December 2017
Consolidated statement of
financial position
Total assets
Total liabilities
Net assets
Non-controlling interests
Consolidated income statement
Total revenue
Profit before tax
Income tax expense
Profit after tax for the financial year
Non-controlling interests
Nedbank
Group
Limited
OM Asset
Management
plc
Old Mutual
Finance (Pty)
Limited
UAP
Holdings
Limited1
Other
subsidiaries
Total
Emerging
Markets
£m
Total
58,492
(53,216)
5,276
2,597
5,790
966
(246)
720
346
–
–
–
–
213
30
(6)
24
2
648
(524)
124
62
214
48
(16)
32
8
417
(282)
135
80
155
16
(4)
12
(22)
6,435
(5,413)
1,022
80
1,677
266
(47)
219
15
7,500
(6,219)
1,281
222
65,992
(59,435)
6,557
2,819
2,046
330
(67)
263
1
8,049
1,326
(319)
1,007
349
1 The financial information of UAP Holdings Limited (UAP) represents the results of UAP for year ended 31 December 2017 and the consolidated statement of financial position at
31 December 2017 as consolidated by the Group. This consolidated result may vary significantly from the full year results published by UAP due to acquisition entries recognised
by the Group.
During the year ended 31 December 2017, dividends of £166 million (2016: £154 million) was paid to non-controlling interests in Nedbank
Group Limited and £4 million (2016: £10 million) was paid to the non-controlling interest in OM Asset Management plc (OMAM) up to
19 May 2017, the date OMAM was deconsolidated from the Group. Refer to note A2 for more information on the disposal of OMAM.
At 31 December 2016
Nedbank
Group Limited
OM Asset
Management
plc
Old Mutual
Finance (Pty)
Limited
UAP
Holdings
Limited
Other
subsidiaries
Total
Emerging
Markets
£m
Total
Consolidated statement of
financial position
Total assets
Total liabilities
Net assets
Non-controlling interests
Consolidated income statement
Total revenue
Profit before tax
Income tax (expense)/credit
Profit after tax for the financial year
Non-controlling interests
56,791
(51,982)
4,809
2,333
4,863
737
(199)
538
256
1,959
(867)
1,092
566
490
124
(30)
94
31
842
(629)
213
57
193
41
(15)
26
(7)
455
(315)
140
109
142
10
(2)
8
(3)
3,811
(3,469)
342
49
5,108
(4,413)
695
215
63,858
(57,262)
6,596
3,114
845
159
(26)
133
(2)
1,180
210
(43)
167
(12)
6,533
1,071
(272)
799
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Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
I: Interests in subsidiaries, associates and joint arrangements continued
I1: Subsidiaries continued
I: Interests in subsidiaries, associates and joint arrangements continued
(c) Restrictions on the Group's ability to obtain funds from its subsidiaries
I1: Subsidiaries continued
Statutory and regulatory restrictions in terms of the South African Reserve Bank controls and solvency restrictions imposed by the
Financial Services Board in South Africa to comply with statutory capital statutory requirements, restrict the amount of funds that can
(c) Restrictions on the Group's ability to obtain funds from its subsidiaries
be transferred out of South Africa to the Group. In addition, the banking subsidiary companies are restricted by Basel regulations and
Statutory and regulatory restrictions in terms of the South African Reserve Bank controls and solvency restrictions imposed by the
prudential requirements with regard to the distributions of funds to their holding company. Regulated entities may only be permitted
Financial Services Board in South Africa to comply with statutory capital statutory requirements, restrict the amount of funds that can
to remit dividends in terms of local capital requirements and/or permission being obtained from the regulator to distribute such funds.
be transferred out of South Africa to the Group. In addition, the banking subsidiary companies are restricted by Basel regulations and
prudential requirements with regard to the distributions of funds to their holding company. Regulated entities may only be permitted
The non-controlling interests do not have any ability to restrict the cash flows to the Group.
to remit dividends in terms of local capital requirements and/or permission being obtained from the regulator to distribute such funds.
(d) Guarantees provided by the Group to subsidiaries
The non-controlling interests do not have any ability to restrict the cash flows to the Group.
No significant guarantees have been provided by the Group during the financial year.
(d) Guarantees provided by the Group to subsidiaries
The Group provides financial support in certain cases where funds require seed capital and also provides liquidity funding in the case of
No significant guarantees have been provided by the Group during the financial year.
large divestments from unit trust funds.
The Group provides financial support in certain cases where funds require seed capital and also provides liquidity funding in the case of
(e) Loss of control of subsidiaries
large divestments from unit trust funds.
During the year, the Group's sold down its stake in OMAM through a series of transactions as described in note A2. As a result, the Group
no longer considered that it exercised control over the business in accordance with the requirements set out in IFRS 10 'Consolidated
(e) Loss of control of subsidiaries
Financial Statements', from 19 May 2017. This resulted in OMAM being deconsolidated from the Group financial statements from this
During the year, the Group's sold down its stake in OMAM through a series of transactions as described in note A2. As a result, the Group
date. On 18 November 2017, the Group's stake in OMAM further reduced to 1,000 shares which have been accounted for as investments
no longer considered that it exercised control over the business in accordance with the requirements set out in IFRS 10 'Consolidated
and securities within the plc Head Office segment. Refer to note A2 and note B1 for more information.
Financial Statements', from 19 May 2017. This resulted in OMAM being deconsolidated from the Group financial statements from this
date. On 18 November 2017, the Group's stake in OMAM further reduced to 1,000 shares which have been accounted for as investments
and securities within the plc Head Office segment. Refer to note A2 and note B1 for more information.
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I2: Investments in associated undertakings and joint ventures
(a) Investments in associated undertakings and joint ventures
The Group's equity accounted and fair value investments in associated undertakings and joint ventures are as follows:
At 31 December 2017
Private equity associates and associate companies
Individually immaterial associates
Unlisted
Kotak Mahindra Old Mutual Life Insurance1,6
Two Rivers Lifestyle Centre2
Squarestone Growth LLP3
Kabokweni Plaza Shareblock Proprietary Limited4
Newtown Motor Dealership (Pty) Ltd4
Other individually immaterial associates
Other
Total investment in associate undertakings
Joint ventures
Unlisted
Old Mutual Guodian Life Insurance Company Ltd5
Total investment in Joint ventures
Total investments in associates and joint ventures
Nature of activities
Percentage
holding
Measurement
method
Carrying
value
£m
Group
share of
profit
£m
Life assurance
Property
Property
Property
Property
26% Equity accounted
50% Equity accounted
32% Equity accounted
49% Equity accounted
50% Equity accounted
Life assurance
50% Equity accounted
–
31
18
6
6
12
73
34
34
107
11
(2)
1
1
–
–
11
(2)
(2)
9
1 Country of operation: India
2 Country of operation: Kenya
3 Country of operation: United Kingdom
4 Country of operation: Republic of South Africa
5 Country of operation: China
6 On 13 October 2017, the Group completed the sale of its 26% stake in Kotak to its joint venture partner Kotak Mahindra Bank Limited. The conclusion of the transaction also
terminated the joint venture arrangement, extinguishing the respective put and call option arrangements between the parties relating to a 23% stake in the joint venture. Refer to note
A2 for more information.
Of the total carrying value of associates and joint ventures, £nil (2016: £139 million) relates to those which are measured at fair value and
£107 million (2016: £403 million) relates to those which have been equity accounted.
All of the joint ventures are strategic in the Group's underlying operating model. The joint ventures are evaluated according to the Groups'
contractual rights to jointly control the entity.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
–
9
–
–
9
–
–
–
–
–
–
1
–
10
–
1
10
(2)
2
–
(2)
–
2
10
–
–
10
Group
share of
profit
Group
£m
share of
(Re-presented)1
profit
£m
(Re-presented)1
–
Carrying
value
£m
Carrying
value
£m
235
235
45
54
16
45
4
54
16
4
36
73
40
36
503
73
40
503
I: Interests in subsidiaries, associates and joint arrangements continued
I2: Investments in associated undertakings and joint ventures continued
I: Interests in subsidiaries, associates and joint arrangements continued
At 31 December 2016
I2: Investments in associated undertakings and joint ventures continued
At 31 December 2016
Percentage
Nature of activities
holding Measurement method
Nature of activities
Banking
Ecobank Transnational Incorporated
Private equity associates and associate companies
Listed
Private equity associates and associate companies
Individually immaterial associates
Listed
Unlisted
Ecobank Transnational Incorporated
Banking
Kotak Mahindra Old Mutual Life Insurance
Life assurance
Individually immaterial associates
Property
Two Rivers Lifestyle Centre
Unlisted
Masingita Property Investment Holdings (Pty) Ltd Property Development
Life assurance
Kotak Mahindra Old Mutual Life Insurance
Odyssey Developments (Pty) Ltd
Property Development
Property
Two Rivers Lifestyle Centre
Other individually immaterial associates
Masingita Property Investment Holdings (Pty) Ltd Property Development
Odyssey Developments (Pty) Ltd
Property Development
Various
Other individually immaterial associates
Various
Various
Various
Private-equity associates (property investment)
Private-equity associates (Manufacturing,
Private-equity associates (property investment)
Private-equity associates (Manufacturing,
industrial, leisure and other)
Percentage
holding Measurement method
Equity accounted
21%
21%
26%
50%
35%
26%
49%
50%
35%
49%
Equity accounted
Equity accounted
Equity accounted
Fair value
Equity accounted
Fair value
Equity accounted
Fair value
Fair value
Fair value
Fair value
Fair value
Fair value
industrial, leisure and other)
Other
Total investments in associate undertakings
Other
Joint ventures
Total investments in associate undertakings
Unlisted
Old Mutual Guodian Life Insurance Company Ltd
Joint ventures
Banco Unico, S.A.
Unlisted
Curo Fund Services
Old Mutual Guodian Life Insurance Company Ltd
Total investments in joint ventures
Banco Unico, S.A.
Total investments in associates and joint ventures
Curo Fund Services
Total investments in joint ventures
1 The Group share of profit from investments in associated undertakings and joint ventures for the year ended 31 December 2016 has been re-presented to reflect Nedbank and
Total investments in associates and joint ventures
Life assurance
Banking
Asset Management
Life assurance
Banking
Asset Management
Equity accounted
Equity accounted
Equity accounted
Equity accounted
Equity accounted
Equity accounted
Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
36
–
3
36
39
–
542
3
39
542
50%
38%
50%
50%
38%
50%
1 The Group share of profit from investments in associated undertakings and joint ventures for the year ended 31 December 2016 has been re-presented to reflect Nedbank and
Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
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(b) Aggregate financial information of material investments in associated undertakings and joint ventures
The Group's investment in Ecobank Transnational Incorporated (ETI) has been classified as assets held for sale and distribution as part
of the assets of Nedbank. The carrying value of the investment in ETI at 31 December 2017 was £198 million. The aggregate financial
information for ETI is as follows:
At 31 December
Fair-value of investment in Ecobank Transnational Incorporated
based on the closing quoted price on the
Nigerian Stock Exchange
Statement of comprehensive income
Revenue
Profit from continuing operations
Post-tax loss from discontinued operations
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Statement of financial position
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Ecobank
Transnational
Incorporated
2017
£m
Ecobank
Transnational
Incorporated
2016
215
144
1,050
147
1
81
229
8,759
6,613
7,401
6,479
1,492
1,043
158
(1)
(471)
(314)
9,678
7,238
8,309
7,037
1,570
As in previous financial years, one of the Group's associate investments, ETI, will report results for the year ended 31 December 2017
subsequent to the release of the Group's audited consolidated financial statements. Therefore, as allowed by IAS 28, the Group uses
the most recent public information of ETI as at 30 September 2017 (i.e. a quarter in arrears) to determine its share of ETI's earnings. In
addition, as required by IAS 28, the Group considers whether adjustments for significant transactions or events between 30 September
2017 and 31 December 2017 are required based on publicly available information. The resulting equity accounted earnings is translated
from US dollar to rand at the average exchange rate applicable for the quarter in which the Group accounts for the earnings. The Group's
share of the net assets of ETI is translated from US dollars to rand at the closing exchange rate.
After application of the equity method, an entity determines whether there are indicators of impairment in terms of IAS 39. If impairment
is indicated, the amount to be recognised as an impairment loss is calculated by reference to IAS 36. In terms of IAS 39 indicators of
impairment include a significant or prolonged decline in the fair value of an associate below its carrying value. In addition, information
about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in
which the associate operates are also indicators that the carrying value of the associate may not be recovered.
The carrying value of the Group’s strategic investment in ETI decreased from £235 million (R4.0 billion) to £198 million (R3.3 billion) during
the year, due to a combination of the rand strengthening against the US dollar and the Group's share of losses incurred by ETI during the
12 months to 30 September 2017.
The market value of the Group’s investment in ETI, based on its quoted share price, was £198 million (R3.6 billion) on 31 December 2017
and £252 million (R4.1 billion) on 28 February 2018. Based on the Group's 2016 value-in-use (VIU) calculation, management determined
that an impairment provision of £50 million (R1.0 billion) was appropriate. This reduced the carrying value of the Group’s investment in ETI
to £235 million (R4.0 billion) at 31 December 2016. This calculation is required to be revisited at each reporting period where the indicators
of impairment are reconsidered and the VIU calculation reassessed taking into account any future changes in estimates and assumptions.
Based on management's 2017 assessment there are no observable indicators of further impairment at 31 December 2017 and insufficient
observable indicators that the impairment loss recognised in 2016 has decreased. The £50 million (R1.0 billion) impairment recognised
in 2016 has therefore not been reversed in the current reporting period. ETI has been an important long-term investment for Nedbank,
providing our clients with a pan-African transactional banking network across 39 countries and access to dealflow in Central and West
Africa since its acquisition in 2014. The Group remains supportive of ETI’s endeavours of delivering an ROE in excess of its COE in due
course. Conditions in the key markets in which ETI operates have improved in 2017 and management expects further improvements in
2018 and beyond.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
I: Interests in subsidiaries, associates and joint arrangements continued
I2: Investments in associated undertakings and joint ventures continued
I: Interests in subsidiaries, associates and joint arrangements continued
(c) Aggregate financial information of other investment in associated undertakings and joint ventures
I2: Investments in associated undertakings and joint ventures continued
The aggregate amounts for investment in associated undertakings and joint ventures at 31 December 2017 presented in the table below
are in respect of the Group's continuing operations. Consistent with the requirements of accounting standards, the comparative period has
(c) Aggregate financial information of other investment in associated undertakings and joint ventures
not been re-presented for the aggregate amounts for investment in associated undertakings and joint ventures in respect of businesses
The aggregate amounts for investment in associated undertakings and joint ventures at 31 December 2017 presented in the table below
classified as held for distribution. The comparative information presented at 31 December 2017, therefore includes the capital
are in respect of the Group's continuing operations. Consistent with the requirements of accounting standards, the comparative period has
commitments for the composition of the Group as at 31 December 2016.
not been re-presented for the aggregate amounts for investment in associated undertakings and joint ventures in respect of businesses
classified as held for distribution. The comparative information presented at 31 December 2017, therefore includes the capital
commitments for the composition of the Group as at 31 December 2016.
Year ended
31 December
2017
Year ended
1,700
31 December
(1,193)
2017
438
1,700
(1,193)
438
£m
Year ended
31 December
£m
2016
Year ended
4,147
31 December
(3,610)
2016
699
4,147
(3,610)
699
Total assets
Total liabilities
Total revenues
Total assets
Total liabilities
Total revenues
(d) Aggregate Group investment in associated undertakings and joint ventures
The aggregate amounts for the Group's investment in associated undertakings and joint ventures are as follows:
(d) Aggregate Group investment in associated undertakings and joint ventures
The aggregate amounts for the Group's investment in associated undertakings and joint ventures are as follows:
£m
Year ended
Year ended
31 December
31 December
£m
2016
2017
Year ended
Year ended
Balance at beginning of the year
514
542
31 December
31 December
Net additions of investment in associated undertakings and joint ventures
93
61
2016
2017
Share of profit after tax
4
(36)
Balance at beginning of the year
514
542
Transfer of investments in associate companies to investments in subsidiaries
(13)
–
Net additions of investment in associated undertakings and joint ventures
93
61
Impairment provision for investments in associate companies
(50)
–
Share of profit after tax
4
(36)
Dividends paid
(19)
(4)
Transfer of investments in associate companies to investments in subsidiaries
(13)
–
Disposal of investment in associated undertakings and joint ventures
–
(58)
Impairment provision for investments in associate companies
(50)
–
Foreign exchange and other movements
39
6
Dividends paid
(19)
(4)
Transfer to assets held for sale and distribution1
(26)
(404)
Disposal of investment in associated undertakings and joint ventures
–
(58)
542
107
Balance at end of the year
Foreign exchange and other movements
39
6
Transfer to assets held for sale and distribution1
(26)
(404)
1 At 31 December 2017, investments in associated undertakings and joint ventures attributable to Nedbank and Old Mutual Wealth have been transferred to assets held for sale and
542
107
Balance at end of the year
distribution in the consolidated statement of financial position. At 31 December 2016, investments in associated undertakings and joint ventures attributable to Institutional Asset
Management were transferred to assets held for sale and distribution in the consolidated statement of financial position. Refer to note A4 for more information.
1 At 31 December 2017, investments in associated undertakings and joint ventures attributable to Nedbank and Old Mutual Wealth have been transferred to assets held for sale and
distribution in the consolidated statement of financial position. At 31 December 2016, investments in associated undertakings and joint ventures attributable to Institutional Asset
The above table includes those investments that are carried at fair value. The Group has no significant investments in which it owns less
Management were transferred to assets held for sale and distribution in the consolidated statement of financial position. Refer to note A4 for more information.
than 20% of the ordinary share capital that it accounts for using the equity method.
The above table includes those investments that are carried at fair value. The Group has no significant investments in which it owns less
(e) Restriction on the Group's ability to obtain funds from its associate undertakings and joint ventures
than 20% of the ordinary share capital that it accounts for using the equity method.
Statutory and regulatory restrictions in terms of the South African Reserve Bank controls and solvency restrictions imposed by the
Financial Service Board in South Africa to comply with statutory capital requirements restrict the amount of funds that can be transferred
(e) Restriction on the Group's ability to obtain funds from its associate undertakings and joint ventures
out of the country to the Group. In addition, the banking subsidiary companies are restricted by Basel regulations and prudential
Statutory and regulatory restrictions in terms of the South African Reserve Bank controls and solvency restrictions imposed by the
requirements with regard to the distributions of funds to their holding company. Regulated entities may only be permitted to remit
Financial Service Board in South Africa to comply with statutory capital requirements restrict the amount of funds that can be transferred
dividends in terms of local capital requirements and/or permission being obtained from the regulator to distribute such funds.
out of the country to the Group. In addition, the banking subsidiary companies are restricted by Basel regulations and prudential
requirements with regard to the distributions of funds to their holding company. Regulated entities may only be permitted to remit
No significant guarantees were provided by the Group to associated undertakings and joint ventures during the financial year.
dividends in terms of local capital requirements and/or permission being obtained from the regulator to distribute such funds.
(f) Contingent liabilities and commitments
No significant guarantees were provided by the Group to associated undertakings and joint ventures during the financial year.
At 31 December 2017 and 31 December 2016, the Group had no significant contingent liabilities or commitments relating to investments
in associated undertakings and joint ventures.
(f) Contingent liabilities and commitments
At 31 December 2017 and 31 December 2016, the Group had no significant contingent liabilities or commitments relating to investments
(g) Other Group holdings
in associated undertakings and joint ventures.
The above does not include companies whereby the Group has a holding of more than 20%, but does not have significant influence over
these companies by virtue of the Group not having any direct involvement in decision making or the other owners possessing veto rights.
(g) Other Group holdings
The above does not include companies whereby the Group has a holding of more than 20%, but does not have significant influence over
these companies by virtue of the Group not having any direct involvement in decision making or the other owners possessing veto rights.
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I3: Structured entities
(a) Group’s involvement in structured entities
In structured entities’ voting rights are not the predominant factor in deciding who controls the entity but rather the Group's exposure to
the variability of returns from these entities. The Group acts as fund manager to a number of investment funds. Determining whether the
Group controls such an investment fund usually focuses on the assessment of decision making rights as fund manager, the investor's
rights to remove the fund manager and the aggregate economic interests of the Group in the fund in the form of interest held and
exposure to variable returns.
In most instances the Group's decision-making authority, in its capacity as fund manager, with regard to these funds is regarded to be
well-defined. Discretion is exercised when decisions regarding the relevant activities of these funds are being made. For funds managed
by the Group where the investors have the right to remove the Group as fund manager without cause, the fees earned by the Group,
are considered to be market related. These agreements include only terms, conditions or amounts that are customarily present in
arrangements for similar services and level of skills negotiated on an arm's length basis. The Group has concluded that it acts as
agent on behalf of the investors in all instances.
The Group is considered to be acting as principal where the Group is the fund manager and is able to make the investment decisions
on behalf of the unit holders, earn a variable fee, and there are no kick out rights that would remove the Group as fund manager.
The Group has not provided any non-contractual support to any consolidated or unconsolidated structured entities. The Group has
committed to providing certain liquidity facilities for certain securitisation vehicles.
The table below summarises the types of structured entities the Group does not consolidate, but may have an interest in:
Type of structured entity
– Securitisation vehicles
Nature
– Finance the Group’s own
for loans and
advances
assets through the issue of
notes to investors
– Investment funds
– Manage client funds through
the investment in assets
– Securitisation vehicles
– Finance third party receivables
for third-party
receivables
– Security vehicles
and are financed through
loans from third party note
holders and bank borrowing
– Hold and realise assets as a
result of the default of a client
Purpose
– Generate:
– Funding for the Group’s lending
activities
– Margin through sale of assets
to investors
– Fees for loan servicing
– Generate fees from managing
assets on behalf of third-party
investors
– Generate fees from arranging the
structure. Interest income may be
earned on the notes held by the
Group
– These entities seek to protect the
collateral of the Group on the
default of a loan
Interest held by the Group
– Investment in senior and
junior notes issued by the
vehicles
– Investments in units issued
by the fund
– Interest in these vehicles is
through notes that are traded
in the market
– Ownership interest will be in
proportion of the lending. At
31 December 2017, the
Group held no value in
security vehicles
– Clients investment
– Hold client investment assets
– Generates various sources of
– None
entities
income for the Group
– Black Economic
– Fund the acquisition of shares
– Generates interest on the funding
– Loans to BEE schemes
Empowerment (BEE)
funding
by a BEE partner
provided.
The Group's holdings in investment vehicles are subject to the terms and conditions of the respective investment vehicle's offering
documentation and are susceptible to market price risk arising from uncertainties about future values of those investment vehicles.
All of the investment vehicles in the investment portfolios are managed by portfolio managers who are compensated by the respective
investment vehicles for their services. Such compensation generally consists of an asset-based fee and a performance based incentive
fee, and is reflected in the valuation of the investment vehicles.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
I: Interests in subsidiaries, associates, and joint arrangements continued
I3: Structured entities continued
I: Interests in subsidiaries, associates, and joint arrangements continued
(b) Securitisation vehicles consolidated in the Group's statement of financial position
I3: Structured entities continued
Nedbank Securitisations
(b) Securitisation vehicles consolidated in the Group's statement of financial position
Nedbank Group Ltd, which has been classified as held for distribution at 31 December 2017, uses securitisation primarily as a
funding diversification tool and to add flexibility in mitigating structural liquidity risk. The Group currently has four active traditional
Nedbank Securitisations
securitisation transactions:
Nedbank Group Ltd, which has been classified as held for distribution at 31 December 2017, uses securitisation primarily as a
funding diversification tool and to add flexibility in mitigating structural liquidity risk. The Group currently has four active traditional
Greenhouse Funding (RF) Limited (Greenhouse), a residential-mortgage-backed securitisation programme
securitisation transactions:
Greenhouse Funding III (RF) Limited (Greenhouse III), a residential-mortgage-backed securitisation programme
Precinct Funding 1 (RF) Limited (Precinct Funding 1), a commercial-mortgage-backed securitisation programme, and
Greenhouse Funding (RF) Limited (Greenhouse), a residential-mortgage-backed securitisation programme
Precinct Funding 2 (RF) Limited (Precinct Funding 2), a commercial-mortgage-backed securitisation programme.
Greenhouse Funding III (RF) Limited (Greenhouse III), a residential-mortgage-backed securitisation programme
Precinct Funding 1 (RF) Limited (Precinct Funding 1), a commercial-mortgage-backed securitisation programme, and
Synthesis Funding Ltd
Precinct Funding 2 (RF) Limited (Precinct Funding 2), a commercial-mortgage-backed securitisation programme.
Synthesis primarily invests in long-term rated bonds and offers capital market funding to SA corporates. These assets are funded through
the issuance of short-dated investment-grade commercial paper to institutional investors. During 2017 all the remaining assets were sold
Synthesis Funding Ltd
and the commercial paper was repaid. As at 31 December 2017 Synthesis' operations had ceased and the company was dormant.
Synthesis primarily invests in long-term rated bonds and offers capital market funding to SA corporates. These assets are funded through
the issuance of short-dated investment-grade commercial paper to institutional investors. During 2017 all the remaining assets were sold
Greenhouse Funding (RF) Limited (Greenhouse)
and the commercial paper was repaid. As at 31 December 2017 Synthesis' operations had ceased and the company was dormant.
Greenhouse was a securitisation vehicle through which the rights, title, interest and related security in respect of residential home loans
were acquired from Nedbank Limited under a segregated-series-medium-term-note programme.
Greenhouse Funding (RF) Limited (Greenhouse)
Greenhouse was a securitisation vehicle through which the rights, title, interest and related security in respect of residential home loans
During December 2007 the first Greenhouse transaction was created and £119 million (R2 billion) of home loans from Nedbank Limited
were acquired from Nedbank Limited under a segregated-series-medium-term-note programme.
were securitised. Greenhouse was subsequently restructured and refinanced on 19 November 2012 as a static amortising structure.
The proceeds from the refinance of this transaction, through the issuance of new notes and subordinated loans, were utilised to repay
During December 2007 the first Greenhouse transaction was created and £119 million (R2 billion) of home loans from Nedbank Limited
the £78 million (R1 billion) existing notes and subordinated loans on their scheduled maturity, and to acquire additional home loans from
were securitised. Greenhouse was subsequently restructured and refinanced on 19 November 2012 as a static amortising structure.
Nedbank Limited. The senior notes, which were rated by Moody's and listed on the JSE, were placed with third-party investors, and the
The proceeds from the refinance of this transaction, through the issuance of new notes and subordinated loans, were utilised to repay
junior notes and subordinated loans retained by the Group. The home loans transferred to Greenhouse had continued to be recognised
the £78 million (R1 billion) existing notes and subordinated loans on their scheduled maturity, and to acquire additional home loans from
as financial assets held by Nedbank Limited.
Nedbank Limited. The senior notes, which were rated by Moody's and listed on the JSE, were placed with third-party investors, and the
junior notes and subordinated loans retained by the Group. The home loans transferred to Greenhouse had continued to be recognised
The maturity of the Greenhouse securitisation transaction was on 25 October 2017. As such all the outstanding notes issued by
as financial assets held by Nedbank Limited.
Greenhouse have been redeemed.
The maturity of the Greenhouse securitisation transaction was on 25 October 2017. As such all the outstanding notes issued by
Greenhouse have been redeemed.
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Greenhouse Funding III (RF) Limited (Greenhouse III)
Greenhouse III is a securitisation vehicle through which the rights, title, interest and related security in respect of residential home loans
were acquired from Nedbank Limited under a segregated-series-medium-term-note programme.
Greenhouse III is a residential-mortgage-backed securitisation programme implemented during 2014. Greenhouse III securitised
£119 million (R2 billion) worth of home loans originated by Nedbank Limited through the issuance of senior notes to the capital market and
subordinated notes and a subordinated loan provided by Nedbank Limited. The notes issued by Greenhouse III are listed on the JSE and
rated by Moody's. The home loans transferred to Greenhouse III continue to be recognised as financial assets held by Nedbank Limited.
Greenhouse III makes use of an internal risk management policy, and utilises the Nedbank Group credit risk monitoring process to govern
lending activities to external parties.
Nedbank Limited provided Greenhouse III with an interest-bearing subordinated loan at the commencement of the programme to provide
part of the initial funding. Interest is payable on a quarterly basis, as part of the priority of payments. The full capital amount outstanding
plus any accrued interest will be payable in full on the final maturity date, provided that all outstanding notes have been redeemed in full
and all secured creditors have been settled.
In the Greenhouse III structure Nedbank holds the class D note, amounting to £6 million (R100 million). These notes are subordinated to
the higher-ranking notes in terms of the priority of payments.
Precinct Funding 1 (RF) Limited (Precinct Funding 1)
Precinct Funding 1 is a commercial-mortgage-backed securitisation programme (CMBS). The originator, seller and servicer of the
commercial property mortgage loan portfolio is Nedbank CIB Property Finance, the market leader in commercial property finance in SA.
The Precinct Funding 1 CMBS Programme was implemented during 2013. Precinct Funding 1 securitised £149 million (R3 billion) worth
of commercial property loans originated by Nedbank Limited through the issuance of senior notes to the capital market and subordinated
notes and a subordinated loan provided by Nedbank Limited. The notes issued by Precinct Funding 1 are listed on the JSE and rated by
Moody's. The class A and class B notes were placed with third-party investors and the junior notes and subordinated loan retained by
Nedbank Limited.
The Precinct Funding 1 structure takes the form of a static pool of small commercial property loans with limited substitution and redraws
or further advance capabilities.
Precinct Funding 1 makes use of an internal risk management policy and utilises the Nedbank Group Limited credit risk monitoring
process to govern lending activities to external parties. The primary measures used to identify, monitor and report on the level of exposure
to credit risk include individual loan and loan portfolio aging and performance analysis, analysis of impairment adequacy ratios, analysis
of loss ratio trends and analysis of loan portfolio profitability. The maximum credit exposure to credit risk in respect of the mortgage loans
is the balance of outstanding advances before taking into account the value of collateral held as security against such exposures and
impairments raised. The collateral held as security for the mortgage asset exposure is in the form of first indemnity bonds over fixed
commercial property.
Nedbank Limited provided Precinct Funding 1 with an interest-bearing subordinated loan at the commencement of the programme
to provide part of the initial funding. Interest is payable on a quarterly basis as part of the priority of payments. The full capital amount
outstanding plus any accrued interest will be payable in full on the final maturity date, provided that all outstanding notes have been
redeemed in full and all secured creditors have been settled.
Nedbank holds the class C and class D notes of Precinct Funding 1 amounting to £5 million (R87 million). These notes are subordinated
to the higher-ranking notes in terms of the priority of payments.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
I: Interests in subsidiaries, associates, and joint arrangements continued
I3: Structured entities continued
I: Interests in subsidiaries, associates, and joint arrangements continued
Precinct Funding 2 (RF) Limited (Precinct Funding 2)
I3: Structured entities continued
Precinct Funding 2 is a commercial-mortgage-backed securitisation programme (CMBS). The originator, seller and servicer of the
commercial property mortgage loan portfolio is Nedbank CIB Property Finance, the market leader in commercial property finance in SA.
Precinct Funding 2 (RF) Limited (Precinct Funding 2)
Precinct Funding 2 is a commercial-mortgage-backed securitisation programme (CMBS). The originator, seller and servicer of the
The Precinct Funding 2 CMBS Programme was implemented during 2017. Precinct Funding 2 securitised £60 million (R1 billion) worth
commercial property mortgage loan portfolio is Nedbank CIB Property Finance, the market leader in commercial property finance in SA.
of commercial property mortgage loans originated by Nedbank Limited through the issuance of senior notes to the capital market and
subordinated notes and a subordinated loan provided by Nedbank Limited. The notes issued by Precinct Funding 2 are listed on the JSE
The Precinct Funding 2 CMBS Programme was implemented during 2017. Precinct Funding 2 securitised £60 million (R1 billion) worth
and rated by Moody's. The class A and class B notes were placed with third-party investors and the junior notes and subordinated loan
of commercial property mortgage loans originated by Nedbank Limited through the issuance of senior notes to the capital market and
retained by Nedbank Limited.
subordinated notes and a subordinated loan provided by Nedbank Limited. The notes issued by Precinct Funding 2 are listed on the JSE
and rated by Moody's. The class A and class B notes were placed with third-party investors and the junior notes and subordinated loan
In comparison to Precinct Funding 1, the Precinct Funding 2 Structure allows for more flexibility to substitute loans. However, loan
retained by Nedbank Limited.
substitutions are subject to certain portfolio covenants and eligibility criteria.
In comparison to Precinct Funding 1, the Precinct Funding 2 Structure allows for more flexibility to substitute loans. However, loan
Precinct Funding 2 makes use of an internal risk management policy and utilises the Nedbank Group Limited credit risk monitoring
substitutions are subject to certain portfolio covenants and eligibility criteria.
process to govern lending activities to external parties. The primary measures used to identify, monitor and report on the level of exposure
to credit risk include individual loan and loan portfolio aging and performance analysis, analysis of impairment adequacy ratios, analysis
Precinct Funding 2 makes use of an internal risk management policy and utilises the Nedbank Group Limited credit risk monitoring
of loss ratio trends and analysis of loan portfolio profitability. The maximum credit exposure to credit risk in respect of the mortgage loans
process to govern lending activities to external parties. The primary measures used to identify, monitor and report on the level of exposure
is the balance of outstanding advances before taking into account the value of collateral held as security against such exposures and
to credit risk include individual loan and loan portfolio aging and performance analysis, analysis of impairment adequacy ratios, analysis
impairments raised. The collateral held as security for the mortgage asset exposure is in the form of first indemnity bonds over fixed
of loss ratio trends and analysis of loan portfolio profitability. The maximum credit exposure to credit risk in respect of the mortgage loans
commercial property.
is the balance of outstanding advances before taking into account the value of collateral held as security against such exposures and
impairments raised. The collateral held as security for the mortgage asset exposure is in the form of first indemnity bonds over fixed
Nedbank Limited provided Precinct Funding 2 with an interest-bearing subordinated loan at the commencement of the programme
commercial property.
to provide part of the initial funding. Interest is payable on a quarterly basis as part of the priority of payments. The full capital amount
outstanding plus any accrued interest will be payable in full on the final maturity date, provided that all outstanding notes have been
Nedbank Limited provided Precinct Funding 2 with an interest-bearing subordinated loan at the commencement of the programme
redeemed in full and all secured creditors have been settled.
to provide part of the initial funding. Interest is payable on a quarterly basis as part of the priority of payments. The full capital amount
outstanding plus any accrued interest will be payable in full on the final maturity date, provided that all outstanding notes have been
Nedbank holds the class C and class D notes of Precinct Funding 2 amounting to £5 million (R80 million). These notes are subordinated
redeemed in full and all secured creditors have been settled.
to the higher-ranking notes in terms of the priority of payments.
Nedbank holds the class C and class D notes of Precinct Funding 2 amounting to £5 million (R80 million). These notes are subordinated
(b) Securitisation vehicles consolidated in the Group's statement of financial position
to the higher-ranking notes in terms of the priority of payments.
The following table shows the carrying amount of securitised assets together with the associated liabilities, or each category of asset in the
statement of financial position1:
(b) Securitisation vehicles consolidated in the Group's statement of financial position
The following table shows the carrying amount of securitised assets together with the associated liabilities, or each category of asset in the
£m
statement of financial position1:
At 31 December 2016
At 31 December 2017
Loans and advances to customers
Residential mortgage loans
Commercial mortgage loans
Loans and advances to customers
Residential mortgage loans
Other financial assets
Commercial mortgage loans
Corporate and bank paper
Other securities
Other financial assets
Commercial paper
Corporate and bank paper
Total
Other securities
Commercial paper
1 The value of any derivative instruments taken out to hedge any financial asset or liability is adjusted against such instrument in this disclosure.
Total
The table above presents the gross balances within the securitisation schemes and does not reflect any elimination of intercompany and
1 The value of any derivative instruments taken out to hedge any financial asset or liability is adjusted against such instrument in this disclosure.
cash balances held by the various securitisation vehicles.
The table above presents the gross balances within the securitisation schemes and does not reflect any elimination of intercompany and
cash balances held by the various securitisation vehicles.
Associated
79
liabilities
81
79
81
–
–
–
160
–
166
160
Carrying
£m
Associated
amount of
At 31 December 2016
assets
liabilities
Carrying
amount of
166
assets
58
166
58
12
28
–
12
264
28
–
264
Associated
187
liabilities
76
187
76
–
–
40
–
303
–
40
303
Carrying
Associated
amount of
At 31 December 2017
assets
liabilities
Carrying
amount of
87
assets
79
87
79
–
–
–
166
–
286
280
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
(c) Interest in unconsolidated structured entities
The Group invests in unconsolidated structured entities as part of its normal investment and trading activities. The Group's total interest in
unconsolidated structured entities is classified as investments and securities held at fair value through profit or loss. The Group does not
sponsor any of the unconsolidated structured entities. The table below provides a summary of the carrying value of the Group's interest
in unconsolidated structured entities for both continuing operations and those classified as held for distribution:
Debt securities, preference shares and debentures
Equity securities – Unlisted
Pooled investments
Total
At
31 December
2017
101
118
50,936
51,155
At
31 December
2016
131
101
47,003
47,235
The Group's maximum exposure to loss with regard to the interests presented above is the carrying amount of the Group's investments.
Once the Group has disposed of its shares or units in a fund, it ceases to be exposed to any risk from that fund. The Group's holdings in
the above unconsolidated structured entities are largely less than 50% and as such the net asset value of these structured entities are
likely to be significantly higher than their carrying value.
(d) Other interests in unconsolidated structured entities
The Group receives management fees and other fees in respect of its asset management businesses that manage investments in which
the Group has no holding. These also represent interests in unconsolidated structured entities. As these investments are not held by the
Group, the investment risk is borne by the external investors and therefore the Group's maximum exposure to loss relates to future
management fees. The Group does not sponsor any of the funds or investment vehicles from which it receives fees.
The table below shows the assets under management of entities that the Group manages but does not have a holding in and the fees
earned from those entities. The information is presented for both continuing operations and those classified as held for distribution.
Pooled investments – Unit trusts
Total
At 31 December 2017
Assets
under
management
4,562
4,562
Fees earned
13
13
£m
At 31 December 2016
Assets
under
management
4,223
4,223
Fees earned
11
11
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
J: Other notes
J1: Post-employment benefits
J: Other notes
The Group operates a number of pension schemes around the world. These schemes have been designed and are administered in
accordance with local conditions and practices in the countries concerned and include both defined contribution and defined benefit
J1: Post-employment benefits
schemes. The assets of these schemes are held in separate trustee administered funds. Pension costs and contributions relating to
The Group operates a number of pension schemes around the world. These schemes have been designed and are administered in
defined benefit schemes are assessed in accordance with the advice of qualified actuaries. Actuarial advice confirms that the current
accordance with local conditions and practices in the countries concerned and include both defined contribution and defined benefit
level of contributions payable to each pension scheme, together with existing assets, are adequate to secure members' benefits over
schemes. The assets of these schemes are held in separate trustee administered funds. Pension costs and contributions relating to
the remaining service lives of participating employees. The schemes are reviewed at least on a triennial basis or in accordance with
defined benefit schemes are assessed in accordance with the advice of qualified actuaries. Actuarial advice confirms that the current
local practice and regulations. In the intervening years the actuary reviews the continuing appropriateness of the assumptions applied.
level of contributions payable to each pension scheme, together with existing assets, are adequate to secure members' benefits over
The actuarial assumptions used to calculate the projected benefit obligations of the Group's pension schemes vary according to the
the remaining service lives of participating employees. The schemes are reviewed at least on a triennial basis or in accordance with
economic conditions of the countries in which they operate.
local practice and regulations. In the intervening years the actuary reviews the continuing appropriateness of the assumptions applied.
The actuarial assumptions used to calculate the projected benefit obligations of the Group's pension schemes vary according to the
The movement analysis of post-employment benefits presented in note J1(a) includes the information for all of the Group's pension
economic conditions of the countries in which they operate.
schemes, including movements in plan assets and projected benefit obligations classified as held for sale or distribution for the year.
At the end of the movement analysis, a single line item will indicate the value of the net plan assets that have been transferred to assets
The movement analysis of post-employment benefits presented in note J1(a) includes the information for all of the Group's pension
and liabilities held for sale or distribution.
schemes, including movements in plan assets and projected benefit obligations classified as held for sale or distribution for the year.
At the end of the movement analysis, a single line item will indicate the value of the net plan assets that have been transferred to assets
(a) Liability for defined benefit obligations
and liabilities held for sale or distribution.
Other post-retirement
benefit schemes
2017
Other post-retirement
benefit schemes
£m
£m
2016
Year ended 31 December
(a) Liability for defined benefit obligations
Year ended 31 December
Pension plans
2017
2016
Pension plans
Changes in projected benefit obligation
Projected benefit obligation at beginning of the year
Current service cost
Changes in projected benefit obligation
Interest cost on benefit obligation
Projected benefit obligation at beginning of the year
Measurement losses/(gains) arising from experience adjustments
Current service cost
Benefits paid
Interest cost on benefit obligation
Assets divested as a result of scheme buy-outs
Measurement losses/(gains) arising from experience adjustments
Foreign exchange and other movements
Benefits paid
Projected benefit obligation at end of the year
Assets divested as a result of scheme buy-outs
Change in plan assets
Foreign exchange and other movements
Plan assets at fair value at beginning of the year
Projected benefit obligation at end of the year
Actual return on plan assets
Change in plan assets
Company contributions
Plan assets at fair value at beginning of the year
Employee contributions
Actual return on plan assets
Benefits paid
Company contributions
Liabilities divested as a result of scheme buy-outs
Employee contributions
Foreign exchange and other movements
Benefits paid
Plan assets at fair value at end of the year
Liabilities divested as a result of scheme buy-outs
Net assets/(liabilities) of plan
Foreign exchange and other movements
Unrecognised assets
Plan assets at fair value at end of the year
Other amounts recognised in statement of financial position
Net assets/(liabilities) of plan
Transfer to assets/liabilities held for sale and distribution1
Unrecognised assets
Net amount recognised in consolidated statement
Other amounts recognised in statement of financial position
Transfer to assets/liabilities held for sale and distribution1
Net amount recognised in consolidated statement
Disclosed as follows:
– Within trade, other receivables and other assets
– Within trade, other payables and other liabilities
Disclosed as follows:
– Within trade, other receivables and other assets
– Within trade, other payables and other liabilities
1 At 31 December 2017, the total net recognised positions of the post-employment schemes attributable to Nedbank and Old Mutual Wealth have been transferred to assets and
618
2017
2
32
618
(12)
2
(35)
32
(234)
(12)
9
(35)
380
(234)
9
772
380
5
33
772
1
5
(35)
33
(228)
1
11
(35)
559
(228)
179
11
(19)
559
(3)
179
(179)
(19)
(3)
(22)
(179)
240
2017
7
20
240
(11)
7
(8)
20
–
(11)
6
(8)
254
–
6
222
254
18
4
222
–
18
(8)
4
–
–
6
(8)
242
–
(12)
6
–
242
–
(12)
36
–
–
24
36
491
2016
3
31
491
46
3
(30)
31
–
46
77
(30)
618
–
77
616
618
54
10
616
1
54
(30)
10
–
1
121
(30)
772
–
154
121
(11)
772
(3)
154
–
(11)
(3)
140
–
of financial position
of financial position
154
2016
5
16
154
4
5
(6)
16
–
4
67
(6)
240
–
67
158
240
13
3
158
–
13
(6)
3
–
–
54
(6)
222
–
(18)
54
–
222
–
(18)
–
–
–
(18)
–
liabilities held for sale and distribution in the consolidated statement of financial position. Refer to note A4 for more information.
140
169
(29)
140
169
(29)
140
(18)
36
(54)
(18)
36
(54)
(18)
(22)
–
(22)
(22)
–
(22)
(22)
24
40
(16)
24
40
(16)
24
1 At 31 December 2017, the total net recognised positions of the post-employment schemes attributable to Nedbank and Old Mutual Wealth have been transferred to assets and
liabilities held for sale and distribution in the consolidated statement of financial position. Refer to note A4 for more information.
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Old Mutual plc
Annual Report and Accounts 2017
Details of the Group's post-employment schemes are as follows:
Old Mutual plc
During the year, bulk annuity arrangements for two legacy defined benefit schemes, the Old Mutual Staff Pension Fund and the G&N
Retirement Benefits Scheme, were agreed with Legal & General Assurance Society Limited. The agreements resulted in the buy-in of the
benefits of the two schemes with effect from 13 June 2017. This was converted to a full buy-out into individual annuity policies in October
2017 and wind-up of both schemes completed on 30 November 2017.
In order to effect the transaction, Old Mutual plc made a one off contribution of £27 million into the two schemes, which together with
derecognising of the combined existing surplus for the schemes, resulted in a £57 million charge in the consolidated statement of
comprehensive income.
Old Mutual plc no longer has any liability in respect of these two schemes, including administration and funding. Old Mutual plc had
previously been contributing £7 million of cash funding annually to the two schemes.
Nedbank
Nedbank has a number of defined-benefit and defined-contribution plans in terms of which it provides pension, postretirement medical
aid and long-term disability benefits to employees and their dependants on retirement, death or disability. All eligible employees and
former employees are members of trustee-administered or underwritten schemes within the Group, financed by company and employee
contributions. The benefits provided by the defined-benefit schemes are based on years of membership and/or salary levels. These
benefits are provided from contributions by employees, Nedbank, and income from the assets of these schemes. The benefits provided
by the defined-contribution schemes are determined by the accumulated contributions and investment earnings. At 31 December 2017,
Nedbank's pension schemes had a total recognised net surplus of £179 million and its other post-retirement schemes had a total net
deficit of £36 million. These amounts were transferred to assets held for sale and distribution and liabilities held for sale and distribution
respectively. At 31 December 2017, the total assets and total liabilities of all of Nedbank's post-retirement schemes were £606 million
and £458 million respectively.
Old Mutual Wealth
Old Mutual Wealth operates two defined benefit (final salary) pension schemes within Quilter Cheviot, the Quilter Cheviot Limited
Retirement Benefits Scheme (the "UK Final Salary Scheme") and the Quilter Cheviot Channel Islands Retirement Benefits Scheme
(the "CI Final Salary Scheme"). The UK Final Salary Scheme was closed to new entrants from 31 December 1997 and the CI Final Salary
Scheme was closed to new entrants from 29 April 2005. In addition, the schemes are closed to future accruals, all members are now
deferred members or pensioners (not accruing any further service benefits) and pension increases are linked to salary at the time of
closure (1 January 2015) and now receive statutory increases, predominantly based on the Consumer Price Index. At 31 December 2017,
the two schemes had a total surplus of £13 million, none of which was recognised in the consolidated statement of financial position.
At 31 December 2017, the total assets and total liabilities of the two schemes were £61 million and £48 million respectively.
Restriction on the ability to access individual pension fund surpluses
The Group has pension fund surpluses whose ability to access the surpluses is regulated by local laws and regulations. In all
situations the Group does not have the unilateral right to access these surpluses as the use of the surplus must be approved
by the relevant governing bodies of the pension funds.
(b) Expense/(income) recognised in the consolidated income statement
Year ended 31 December (Re-presented)¹
Continuing businesses
Current service costs
Net interest (income)/cost
Other post retirement plan costs
Total (included in staff costs)
Pension plans
2017
–
1
–
1
2016
–
2
–
2
£m
Other post-retirement
benefit schemes
2017
1
(3)
–
(2)
2016
1
(4)
2
(1)
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
Actuarial assumptions used in calculating the projected benefit obligation are based on mortality estimates relevant to the countries in
which they operate, with a specific allowance made for future improvements in mortality which is broadly in line with that adopted for the
92 series of mortality tables prepared by the Continuous Mortality Investigation Bureau of the Institute of Actuaries.
The effect to the Group's obligation of a 1% increase and 1% decrease in the assumed health cost trend rates would be an increase of
£28 million and decrease of £30 million (2016: increase of £31 million and decrease of £25 million) respectively.
Total contributions expected to be paid to the Group pension plans for the year ending 31 December 2018 are £1 million (subject to any
reassessments to be completed in the year).
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
J: Other notes continued
J1: Post-employment benefits continued
J: Other notes continued
(c) Plan asset allocation
J1: Post-employment benefits continued
Plan asset allocation relates to all of the Group’s pension schemes.
(c) Plan asset allocation
At 31 December
Plan asset allocation relates to all of the Group’s pension schemes.
At 31 December
%
%
2016
39.2
16.7
2016
4.6
39.2
24.9
16.7
14.6
4.6
100.0
24.9
14.6
100.0
Other post-retirement
benefit schemes
Other post-retirement
benefit schemes
2017
39.3
16.8
2017
4.6
39.3
24.7
16.8
14.6
4.6
100.0
24.7
14.6
100.0
Pension plans
2017
28.6
25.2
2017
4.2
28.6
19.2
25.2
22.8
4.2
100.0
19.2
22.8
100.0
2016
29.8
46.4
2016
3.4
29.8
3.4
46.4
17.0
3.4
100.0
3.4
17.0
100.0
Options over shares in Old Mutual plc (London Stock Exchange)
Pension plans
Equity securities
Debt securities
Property
Equity securities
Cash
Debt securities
Annuities and other
Property
Cash
Annuities and other
J2: Share-based payments
(a) Reconciliation of movements in options
J2: Share-based payments
During the year ended 31 December 2017, the Group had a number of share-based payment arrangements. The movement in the
options outstanding under these arrangements during the year is detailed below:
(a) Reconciliation of movements in options
During the year ended 31 December 2017, the Group had a number of share-based payment arrangements. The movement in the
Options over shares in Old Mutual plc (London Stock Exchange)
options outstanding under these arrangements during the year is detailed below:
Year ended 31 December 2017
Weighted
average
Year ended 31 December 2017
exercise price
Weighted
£1.59
average
–
exercise price
£1.60
£1.59
£1.60
–
–
£1.60
£1.59
£1.60
£1.60
–
£1.59
£1.60
Number of
options
13,360,129
Number of
–
options
(1,047,292)
13,360,129
(2,580,849)
–
–
(1,047,292)
9,731,988
(2,580,849)
340,060
–
9,731,988
340,060
Year ended 31 December 2016
Weighted
average
Year ended 31 December 2016
exercise price
Weighted
£1.73
average
£1.51
exercise price
£1.79
£1.73
£1.55
£1.51
£1.74
£1.79
£1.59
£1.55
£1.63
£1.74
£1.59
£1.63
Number of
options
11,950,545
Number of
7,925,248
options
(5,142,900)
11,950,545
(1,362,406)
7,925,248
(10,358)
(5,142,900)
13,360,129
(1,362,406)
74,527
(10,358)
13,360,129
74,527
Outstanding at beginning of the year
Granted during the year
Forfeited during the year
Outstanding at beginning of the year
Exercised during the year
Granted during the year
Expired during the year
Forfeited during the year
Outstanding at end of the year
Exercised during the year
Exercisable at 31 December
Expired during the year
Outstanding at end of the year
The options outstanding at 31 December 2017 have an exercise price in the range of £1.28 to £1.87 (2016: £1.28 to £1.87) and a
Exercisable at 31 December
weighted average remaining contractual life of 1.2 years (2016: 1.8 years). The weighted average share price at date of exercise for
options exercised during the year was £1.94 (2016: £1.93).
The options outstanding at 31 December 2017 have an exercise price in the range of £1.28 to £1.87 (2016: £1.28 to £1.87) and a
weighted average remaining contractual life of 1.2 years (2016: 1.8 years). The weighted average share price at date of exercise for
Options over shares in Old Mutual plc (Johannesburg Stock Exchange)
options exercised during the year was £1.94 (2016: £1.93).
Year ended 31 December 2016
Weighted
average
Year ended 31 December 2016
exercise price
Weighted
Outstanding at beginning of the year
R 15.05
average
Exercised during the year
R 14.76
exercise price
R 15.80
Outstanding at end of the year
Outstanding at beginning of the year
R 15.05
R 15.80
Exercisable at 31 December
R 14.76
Exercised during the year
R 15.80
Outstanding at end of the year
All outstanding options over Old Mutual plc shares (Johannesburg Stock Exchange) have been exercised during the year. These options
R 15.80
Exercisable at 31 December
were no longer granted after 2011. The weighted average share price of options exercised during the year was R34.53.
All outstanding options over Old Mutual plc shares (Johannesburg Stock Exchange) have been exercised during the year. These options
were no longer granted after 2011. The weighted average share price of options exercised during the year was R34.53.
Year ended 31 December 2017
Weighted
average
Year ended 31 December 2017
exercise price
Weighted
R15.80
average
R15.80
exercise price
–
R15.80
–
R15.80
–
–
Number of
options
2,068,440
Number of
(1,487,985)
options
580,455
2,068,440
580,455
(1,487,985)
580,455
580,455
Number of
options
580,455
Number of
(580,455)
options
–
580,455
–
(580,455)
–
–
Options over shares in Old Mutual plc (Johannesburg Stock Exchange)
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Old Mutual plc
Annual Report and Accounts 2017
(b) Measurements and assumptions
The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted.
The estimate of the fair value of share options granted is measured using a Black-Scholes option pricing model.
Share options are granted under a service and non-market based performance condition. Such conditions are not taken into account
in the grant date fair value measurement of the share options granted. There are no market conditions associated with the share
option grants.
The grant date for the UK and South African plan awards is deemed to be 1 January in the year prior to the date of issue. As such the
Group is required to estimate, at the reporting date, the number and fair value of the options that will be granted in the following year. The
fair value of awards expected to be granted in 2017 which will have an IFRS 2 grant date of 1 January 2017, is shown separately below.
The grant date for all other awards is the award issue date.
(c) Forfeitable/Restricted share grants
The following summarises the fair value of restricted shares granted by the Group during the year:
Instruments granted and purchased during the year
Shares in Old Mutual plc (London Stock Exchange)
Shares in Old Mutual plc (Johannesburg Stock Exchange)
Number
granted
1,195,323
25,126,598
17,812,646
20,284,617
2017
2016
2017
2016
Weighted
average
fair value
£2.18
£1.67
R34.86
R39.71
The share price at measurement date was used to determine the fair value of the restricted shares. Expected dividends were
not incorporated into the measurement of fair value where the holder of the restricted share is entitled to dividends throughout
the vesting period.
(d) Annual bonus awards
The UK and South Africa Plan Awards give rise to annual bonus awards. The level of annual bonus awards is contingent upon the
satisfactory completion of individual and company performance targets, measured over the financial year prior to the date the employees
receive the award. The accounting grant date for the South African and UK annual bonus plans (other than the new joiner and newly
qualified grants) has therefore been determined as 1 January in the year prior to the date of issue of the grants.
The Group anticipates awards under the South African scheme of 8,181,885 restricted shares (2016: 6,222,592). The restricted shares
have been valued using a share price of R38.00 (2016: R34.44).
The Group estimate of the total fair value of the annual bonus expected to be paid in the form of options and forfeitable shares is outlined
below. The fair value is determined by making an estimate of the level of bonus to be paid out following the attainment of personal and
company performance conditions.
UK Plans
(e) Financial impact
Expense arising from equity settled share and share option plans
Expense arising from cash settled share and share option plans
Year ended 31 December 2017
Vesting
period
4.2 years
Total fair value
£m
3
Year ended 31 December 2016
Vesting
Total fair value
period
£m
4.2 years
11
£m
Year ended
31 December
2016
(Re-presented)¹
13
–
13
Year ended
31 December
2017
17
4
21
1 The year ended 31 December 2016 has been re-presented to reflect Nedbank and Old Mutual Wealth as discontinued operations. Refer to note A4 for more information.
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
J: Other notes continued
J3: Related parties
J: Other notes continued
(a) Transactions with key management personnel, remuneration and other compensation
J3: Related parties
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group. Details of the compensation paid
(a) Transactions with key management personnel, remuneration and other compensation
to the Board of directors as well as their shareholdings in the Company are disclosed in the Remuneration Report on page 97 to 128.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group. Details of the compensation paid
(b) Key management personnel remuneration and other compensation
to the Board of directors as well as their shareholdings in the Company are disclosed in the Remuneration Report on page 97 to 128.
Year ended 31 December 2017
Year ended 31 December 2016
(b) Key management personnel remuneration and other compensation
Year ended 31 December 2017
Year ended 31 December 2016
Directors' fees
Remuneration
Cash remuneration
Directors' fees
Remuneration
Cash remuneration
Short-term employee benefits
Long-term employee benefits
Share-based payments
Short-term employee benefits
Long-term employee benefits
Share-based payments
Share options
Share options
Outstanding at beginning of the year
Granted during the year
Exercised during the year
Outstanding at beginning of the year
Outstanding at end of the year
Granted during the year
Exercised during the year
Restricted shares
Outstanding at end of the year
Restricted shares
Outstanding at beginning of the year
Leavers
New appointments
Outstanding at beginning of the year
Granted during the year
Leavers
Exercised during the year
New appointments
Vested during the year
Granted during the year
Outstanding at end of the year
Exercised during the year
Vested during the year
Outstanding at end of the year
Year ended 31 December 2017
Year ended 31 December 2016
Year ended 31 December 2017
Year ended 31 December 2016
Number of
personnel
11
Number of
personnel
9
11
10
9
9
9
10
9
9
Number of
personnel
4
Number of
personnel
4
3
Number of
personnel
10
Number of
(2)
personnel
1
10
(2)
1
£'000
2,081
21,758
£'000
4,830
2,081
5,444
21,758
123
4,830
11,361
5,444
123
23,839
11,361
23,839
Number of
options/shares
'000s
Number of
58
options/shares
'000s
(23)
58
35
(23)
35
Number of
options/shares
'000s
Number of
23,494
options/shares
(1,346)
'000s
1,087
23,494
948
(1,346)
(673)
1,087
(952)
948
22,558
(673)
(952)
22,558
Number of
personnel
11
Number of
personnel
14
11
14
14
14
11
14
14
11
Number of
personnel
4
Number of
personnel
4
4
Number of
personnel
10
Number of
(2)
personnel
2
10
(2)
2
10
10
£'000
1,584
25,133
£'000
6,228
1,584
9,828
25,133
280
6,228
8,797
9,828
280
26,717
8,797
26,717
Number of
options/shares
'000s
Number of
52
options/shares
6
'000s
–
52
58
6
–
58
Number of
options/shares
'000s
Number of
11,346
options/shares
(2,974)
'000s
5,215
11,346
11,659
(2,974)
(236)
5,215
(1,516)
11,659
23,494
(236)
(1,516)
23,494
Year ended 31 December 2017
3
Year ended 31 December 2016
4
Year ended 31 December 2017
Year ended 31 December 2016
9
9
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(c) Key management personnel transactions
Key management personnel and members of their close family have undertaken transactions with Old Mutual plc and its subsidiaries, joint
ventures and associated undertakings in the normal course of business, details of which are given below. For current accounts positive
values indicate assets of the individual whilst for credit cards and mortgages positive values indicate liabilities of the individual.
Current accounts
Balance at beginning of the year
Net movement during the year
Balance at end of the year
Credit cards
Balance at beginning of the year
Net movement during the year
Balance at end of the year
Mortgages
Balance at beginning of the year
Net movement during the year
Balance at end of the year
Property & casualty contracts
Total premium paid during the year
Claim paid during the year
Life insurance products
Total sum assured/value of investment at end of the year
Pensions, termination benefits paid
Value of pension plans as at end of the year
Year ended 31 December 2017
Year ended 31 December 2016
Number of
personnel
4
5
4
5
1
3
2
1
9
9
£000s
2,951
870
3,821
30
2
32
121
85
206
6
9
24,375
8,461
Number of
personnel
5
4
5
4
3
1
1
–
9
9
£000s
2,208
743
2,951
20
10
30
110
11
121
6
–
23,325
3,339
Various members of key management personnel hold or have at various times during the year held, investments managed by asset
management businesses of the Group. These include unit trusts, mutual funds and hedge funds. None of the amounts concerned are
material in the context of the funds managed by the Group business concerned, and all of the investments have been made by the
individuals concerned either on terms which are the same as those available to external clients generally or, where that is not the case,
on the same preferential terms as were available to employees of the business generally.
(d) Other transactions with related parties
Peter Moyo, the Chief Executive Officer of Old Mutual Life Assurance Company (South Africa) Limited, (OMLAC(SA)), a wholly owned
subsidiary of the Group, and one of the Company’s key management personnel, is also a founder and Executive Director of NMT Capital,
and holds an equity interest in NMT Capital and NMT Group Proprietary Limited (NMT Group).
(OMLAC(SA)) has provided equity and preference share funding to the NMT Group and has also provided preference share funding to
a family trust of Peter Moyo, which trust has an equity interest in NMT Capital. Included in dividend income from associated undertakings
for the year eneded 31 December 2017, is £0.1 million (R2 milllion) of preference share dividends received from NMT Capital (Pty) Ltd.
OMLAC(SA) has invested in preference shares to the value of £4 million (R62 million) in NMT Capital and has also invested in ordinary
and preference share capital of NMT Group (Pty Ltd) £8 million (R142 million), and the preference share capital of Amabubesi Capital
Travelling (Pty) Ltd of £1 million (R18 million), RZT Zeply 4971 (Pty) Ltd of £0.7 million (R13 million), RZT Zeply 4973 (Pty) Ltd of
£0.7 million (R13 million) and STS Capital (Pty) Ltd of £0.7 million (R13 million), all of which are considered to be related parties of
NMT Capital (Pty) Ltd. Preference share dividends totalling £0.5 million (R8 million) was received by OMLAC(SA) during the year.
The Group also holds £1 million (R14 million) of the ordinary share capital in NMT capital.
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
J: Other notes continued
J4: Contingent liabilities
J: Other notes continued
Contingent liabilities at 31 December 2017 presented in the table below are in respect of the Group's continuing operations. Consistent
with the requirements of accounting standards, the comparative period has not been re-presented for contingent liabilities in respect of
J4: Contingent liabilities
businesses classified as held for distribution. The comparative information presented at 31 December 2017, therefore includes the
Contingent liabilities at 31 December 2017 presented in the table below are in respect of the Group's continuing operations. Consistent
contingent liabilities for the composition of the Group as at 31 December 2016.
with the requirements of accounting standards, the comparative period has not been re-presented for contingent liabilities in respect of
businesses classified as held for distribution. The comparative information presented at 31 December 2017, therefore includes the
contingent liabilities for the composition of the Group as at 31 December 2016.
At
31 December
2017
At
11
31 December
–
2017
–
11
16
–
–
16
£m
At
31 December
£m
2016
At
965
31 December
806
2016
210
965
10
806
210
10
Guarantees and assets pledged as collateral security
Secured lending
Irrevocable letters of credit
Guarantees and assets pledged as collateral security
Other contingent liabilities
Secured lending
Irrevocable letters of credit
The table below presents the contingent liabilities, in respect of the businesses classified as held for sale and distribution as at
Other contingent liabilities
31 December 2017:
The table below presents the contingent liabilities, in respect of the businesses classified as held for sale and distribution as at
£m
31 December 2017:
Guarantees and assets pledged as collateral security
1,695
Secured lending
375
£m
Irrevocable letters of credit
192
Guarantees and assets pledged as collateral security
1,695
Secured lending
375
The Group has provided certain guarantees for specific client obligations, in return for which the Group has received a fee. The Group has
Irrevocable letters of credit
192
evaluated the extent of the possibility of the guarantees being called on and has provided appropriately.
The Group has provided certain guarantees for specific client obligations, in return for which the Group has received a fee. The Group has
Contingent liabilities – tax
evaluated the extent of the possibility of the guarantees being called on and has provided appropriately.
The Revenue authorities in the principal jurisdictions in which the Group operates (South Africa and the United Kingdom) routinely review
historic transactions undertaken and tax law interpretations made by the Group. The Group is committed to conducting its tax affairs in
Contingent liabilities – tax
accordance with the tax legislation of the jurisdictions in which they operate. All interpretations made by management are made with
The Revenue authorities in the principal jurisdictions in which the Group operates (South Africa and the United Kingdom) routinely review
reference to the specific facts and circumstances of the transaction and the relevant legislation.
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
There are occasions where the Group's interpretation of tax law may be challenged by the Revenue authorities. The financial statements
reference to the specific facts and circumstances of the transaction and the relevant legislation.
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
There are occasions where the Group's interpretation of tax law may be challenged by the Revenue authorities. The financial statements
resources required to fund such potential settlements are sufficient.
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
Due to the level of estimation required in determining tax provisions amounts eventually payable may differ from the provision recognised.
resources required to fund such potential settlements are sufficient.
Nedbank litigation
Due to the level of estimation required in determining tax provisions amounts eventually payable may differ from the provision recognised.
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.
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
The largest potential claim relates to Pinnacle Point Group Limited, where ABSA Bank Limited (ABSA) has initiated an action in the High
present be foreseen.
Court against Nedbank Limited (Nedbank) for the sum of £46 million (R773 million), where ABSA alleges that Nedbank had a legal duty
of care to it in relation to certain single stock futures transactions.
The largest potential claim relates to Pinnacle Point Group Limited, where ABSA Bank Limited (ABSA) has initiated an action in the High
Court against Nedbank Limited (Nedbank) for the sum of £46 million (R773 million), where ABSA alleges that Nedbank had a legal duty
In a matter relating to the same events, New Port Finance Company (Pty) Ltd and Winifred Trust have sued ABSA for £24 million
of care to it in relation to certain single stock futures transactions.
(R405 million) and £4 million (R65 million) respectively, alleging that ABSA had a duty of care towards them. During November 2016
ABSA joined Nedbank as a third party to that action claiming that, should ABSA be held liable, then ABSA would be entitled to claim
In a matter relating to the same events, New Port Finance Company (Pty) Ltd and Winifred Trust have sued ABSA for £24 million
a contribution from Nedbank.
(R405 million) and £4 million (R65 million) respectively, alleging that ABSA had a duty of care towards them. During November 2016
ABSA joined Nedbank as a third party to that action claiming that, should ABSA be held liable, then ABSA would be entitled to claim
Nedbank's counsel is of the view that Nedbank has a strong case to successfully resist both matters.
a contribution from Nedbank.
Nedbank's counsel is of the view that Nedbank has a strong case to successfully resist both matters.
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Old Mutual plc
Annual Report and Accounts 2017
Consumer protection
The Group is committed to treating customers fairly and supporting its customers in meeting their lifetime goals 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.
As detailed in note H5, the Group has recognised a provision of £69 million in 2017 for the cost of voluntarily redress for affected
customers following the publication by the UK Financial Conduct Authority (FCA) of a report detailing its findings of their industry-wide
thematic review on the fair treatment of long-standing customers invested in closed-book products sold by the life insurance sector
(TR 16/2) (Thematic Review) and the subsequent announcement that it was initiating an investigation into a number of firms, including
Old Mutual Wealth Life Assurance Limited (OMWLA), a subsidiary of the Group, in relation to potential breaches of the FCA's standards
relevant to the matters covered by the Thematic Review.
The potential for future enforced redress and associated penalties by the FCA cannot be estimated with any reliability and therefore no
provision has been recognised in the financial statements.
Implications of the Managed Separation strategy
The Group routinely monitors and reassesses contingent liabilities arising from pre-existing plc Head Office legacy items such as
litigation, and warranties and indemnities relating to past acquisitions and disposals. The adoption 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.
Outcome of Zimbabwean Commission Enquiry
On 31 December 2016, the Zimbabwean Government concluded its inquiry into the loss in value for certain policyholders and beneficiaries
upon the conversion of pension and insurance benefits after the dollarization of the economy in 2009. On 9 March 2018, the results of the
Zimbabwean Government’s inquiry were made public.
Emerging Markets is committed to treating its customers fairly and is currently reviewing the report and preparing a preliminary evaluation
of the potential impact on Emerging Markets’ operations. We are not currently able to establish what impact the commission's findings will
have on Old Mutual Zimbabwe.
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
J: Other notes continued
J5: Commitments
J: Other notes continued
Capital commitments
J5: Commitments
Capital commitments at 31 December 2017 presented in the table below are in respect of the Group's continuing operations. Consistent
with the requirements of accounting standards, the comparative period has not been re-presented for capital commitments in respect of
Capital commitments
businesses classified as held for distribution. The comparative information presented at 31 December 2017, therefore includes the capital
Capital commitments at 31 December 2017 presented in the table below are in respect of the Group's continuing operations. Consistent
commitments for the composition of the Group as at 31 December 2016.
with the requirements of accounting standards, the comparative period has not been re-presented for capital commitments in respect of
businesses classified as held for distribution. The comparative information presented at 31 December 2017, therefore includes the capital
The Group's management is confident that future net revenues and existing funding arrangements will be sufficient to cover these
commitments for the composition of the Group as at 31 December 2016.
commitments.
The Group's management is confident that future net revenues and existing funding arrangements will be sufficient to cover these
commitments.
At
31 December
2017
At
74
31 December
2
2017
28
74
2
28
£m
At
31 December
£m
2016
At
64
31 December
106
2016
48
64
106
48
£m
–
173
£m
46
–
173
46
Investment property
Property, plant and equipment
Intangible assets
Investment property
Property, plant and equipment
The table below presents the capital commitments, in respect of the businesses classified as held for sale and distribution as at
Intangible assets
31 December 2017:
The table below presents the capital commitments, in respect of the businesses classified as held for sale and distribution as at
31 December 2017:
Investment property
Property, plant and equipment
Intangible assets
Investment property
Property, plant and equipment
Intangible assets
J5: Commitments continued
Commitments to extend credit to customers
J5: Commitments continued
The following table presents the contractual amounts of the Group's financial instruments not included in the consolidated statement of
financial position that commit it to extend credit to customers in respect of the continuing operations. Consistent with the requirements
Commitments to extend credit to customers
of accounting standards, the comparative period has not been re-presented for commitments to extend credit to customers in respect of
The following table presents the contractual amounts of the Group's financial instruments not included in the consolidated statement of
businesses classified as held for distribution. The comparative information presented at 31 December 2017, therefore includes the capital
financial position that commit it to extend credit to customers in respect of the continuing operations. Consistent with the requirements
commitments for the composition of the Group as at 31 December 2016.
of accounting standards, the comparative period has not been re-presented for commitments to extend credit to customers in respect of
businesses classified as held for distribution. The comparative information presented at 31 December 2017, therefore includes the capital
£m
commitments for the composition of the Group as at 31 December 2016.
At
31 December
£m
2016
At
140
31 December
805
2016
4,375
140
805
4,375
Original term to maturity of one year or less
Original term to maturity of more than one year
Other commitments, note issuance facilities and revolving underwriting facilities
Original term to maturity of one year or less
Original term to maturity of more than one year
The table below presents the commitments to extend credit to customers in respect of the businesses classified as held for sale and
Other commitments, note issuance facilities and revolving underwriting facilities
distribution as at 31 December 2017:
The table below presents the commitments to extend credit to customers in respect of the businesses classified as held for sale and
£m
distribution as at 31 December 2017:
Original term to maturity of one year or less
865
Original term to maturity of more than one year
1,348
£m
Other commitments, note issuance facilities and revolving underwriting facilities
3,967
Original term to maturity of one year or less
865
Original term to maturity of more than one year
1,348
Assets are pledged as collateral under repurchase agreements with other financial institutions and for security deposits relating to local
Other commitments, note issuance facilities and revolving underwriting facilities
3,967
futures, options and stock exchange memberships. Mandatory reserve deposits are also held with local Central Banks in accordance with
local statutory requirements. These deposits are not available to finance the Group's day-to-day operations.
Assets are pledged as collateral under repurchase agreements with other financial institutions and for security deposits relating to local
futures, options and stock exchange memberships. Mandatory reserve deposits are also held with local Central Banks in accordance with
Commitments under the Group's operating lease arrangements are described in note J6.
local statutory requirements. These deposits are not available to finance the Group's day-to-day operations.
At
31 December
2017
At
–
31 December
67
2017
–
–
67
–
Commitments under the Group's operating lease arrangements are described in note J6.
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Annual Report and Accounts 2017
Future potential commitments
The Group and the Business Doctor Consortium Limited and its associates (Business Doctor) established Old Mutual Finance as a 50/50
start-up strategic alliance in 2008. The Group increased its shareholding in Old Mutual Finance (Pty) Ltd (Old Mutual Finance) from 50%
to 75% in 2014 by acquiring a 25% shareholding in Old Mutual Finance from Business Doctor for £66 million (R1.1 billion). The Group
has a call option to acquire the remaining 25% shareholding in Old Mutual Finance held by Business Doctor at market value under certain
circumstances, inter alia in the event of a change of control within Business Doctor and on the eighth and tenth anniversary of the effective
date of the Old Mutual Finance shareholders' agreement (i.e. in 2022 and 2024 respectively), whilst Business Doctor has a put option to
sell its remaining 25% shareholding in Old Mutual Finance to the Group at market value under certain circumstances, inter alia in the event
of a change of control within the Old Mutual plc Group (which will occur when Old Mutual Limited becomes the holding company of Old
Mutual plc) and on the eighth and tenth anniversary of the effective date of the Old Mutual Finance shareholders' agreement (i.e. in 2022
and 2024 respectively).
Commitments under derivative instruments
The Group enters into option contracts, financial features contracts, forward rate and interest rate swap agreements and other financial
agreements in the normal course of business. Note G4 provides further information on the Group's derivative financial instruments.
The Group has got options to acquire further stakes in businesses dependant on various circumstances which are regarded by the Group
as collectively and individually immaterial.
Other Commitments
Old Mutual Life Assurance Company (South Africa) Limited has entered into agreements where it has committed to provide capital to
funds and partnerships that it has invested in. The total undrawn commitment is £465 million at 31 December 2017(2016: £33 million).
J6: Operating lease arrangements
The following tables present the operating lease arrangements in respect of the Group's continuing opeation. Consistent with the
requirements of accounting standards, the comparative period has not been re-presented for operating lease arrangements in respect of
businesses classified as held for distribution. The comparative information presented at 31 December 2017, therefore includes the capital
commitments for the composition of the Group as at 31 December 2016.
At 31 December 2017
At 31 December 2016
Banking
1
5
1
7
Non-
banking
9
15
1
25
Total
10
20
2
32
Banking
116
89
115
320
Non-
banking
14
40
34
88
£m
Total
130
129
149
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(a) The Group as lessee
Outstanding commitments under non-cancellable
operating leases, fall due as follows:
Within one year
In the second to fifth years inclusive
After five years
(b) The Group as lessor
Assets subject to operating leases
Land
Buildings
Investment property
Future undiscounted minimum lease payments of contracts with tenants
Within one year
In the second to fifth years inclusive
After five years
At
31 December
2017
13
39
1,904
1,956
At
31 December
2017
106
244
96
446
£m
At
31 December
2016
3
16
1,697
1,716
£m
At
31 December
2016
99
257
118
474
J7: Fiduciary activities
The Group provides custody, trustee, corporate administration and investment management and advisory services to third parties that
involve the Group making allocation and purchase and sale decisions in relation to a wide range of financial instruments. Those assets
that are held in a fiduciary capacity are not included in these financial statements. Some of these arrangements involve the Group
accepting targets for benchmark levels of returns for the assets under the Group's care. These services give rise to the risk that the
Group will be accused of misadministration or under-performance. The fiduciary activities are carried out by both the businesses
classified as held for distribution and the continuing operations.
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
J: Other notes continued
J8: Events after the reporting date
J: Other notes continued
US legacy items
J8: Events after the reporting date
On 13 March 2018, Old Mutual plc announced that The Travelers Companies, Inc. and St. Paul Fire and Marine Insurance Company
had lodged a claim in the United States District Court for the Southern District of New York in relation to pre-existing plc Head Office
US legacy items
legacy items relating to previously disposed of US assets. Old Mutual plc considers this action to be without merit and it will be
On 13 March 2018, Old Mutual plc announced that The Travelers Companies, Inc. and St. Paul Fire and Marine Insurance Company
resisted accordingly.
had lodged a claim in the United States District Court for the Southern District of New York in relation to pre-existing plc Head Office
legacy items relating to previously disposed of US assets. Old Mutual plc considers this action to be without merit and it will be
Emerging Markets post-employment benefits
resisted accordingly.
Old Mutual Life Assurance Company (South Africa) Limited is obligated to provide post-employment benefits in the form of medical aid
contributions to existing employees and pensioners. During a previous financial period the company entered into an insurance policy
Emerging Markets post-employment benefits
issued by the MMI Holdings Ltd group of companies (MMI) to fund the obligation. In turn MMI reinsured some of the insurance risks
Old Mutual Life Assurance Company (South Africa) Limited is obligated to provide post-employment benefits in the form of medical aid
with the company. Due to the nature of the insurance policy issued by MMI, the insurance policy is treated as a qualifying insurance
contributions to existing employees and pensioners. During a previous financial period the company entered into an insurance policy
policy and included in the plan assets of the company. At 31 December 2017 the surplus asset held in the post-retirement medical
issued by the MMI Holdings Ltd group of companies (MMI) to fund the obligation. In turn MMI reinsured some of the insurance risks
aid fund was approximately R664 million (£40 million) (consisting of plan assets of £120 million (R2,010 million) and an obligation
with the company. Due to the nature of the insurance policy issued by MMI, the insurance policy is treated as a qualifying insurance
of £80 million (R1,346 million).
policy and included in the plan assets of the company. At 31 December 2017 the surplus asset held in the post-retirement medical
aid fund was approximately R664 million (£40 million) (consisting of plan assets of £120 million (R2,010 million) and an obligation
The company has been negotiating with MMI the transfer of the qualifying insurance policy and related policyholder assets to Old Mutual
of £80 million (R1,346 million).
Alternative Risk Transfer Ltd (OMART), a 100% subsidiary of the company. An agreement was reached and the effective date of the
transfer was on the 31st of January 2018. The accounting treatment and disclosure in the company and consolidated financial statements
The company has been negotiating with MMI the transfer of the qualifying insurance policy and related policyholder assets to Old Mutual
for the financial year ended 31 December 2017 were left unchanged from previous financial periods.
Alternative Risk Transfer Ltd (OMART), a 100% subsidiary of the company. An agreement was reached and the effective date of the
transfer was on the 31st of January 2018. The accounting treatment and disclosure in the company and consolidated financial statements
In the financial statements for the financial year ending 31 December 2018 the insurance policy will not qualify as a qualifying insurance
for the financial year ended 31 December 2017 were left unchanged from previous financial periods.
policy. The change in the classification of the insurance policy will result in the insurance policy and post-retirement medical aid obligation
being disclosed as separate items on the balance sheet of the company. In the consolidated financial statements for the financial period
In the financial statements for the financial year ending 31 December 2018 the insurance policy will not qualify as a qualifying insurance
ending 31 December 2018 the insurance and reinsurance policies between the company and OMART will be eliminated resulting in the
policy. The change in the classification of the insurance policy will result in the insurance policy and post-retirement medical aid obligation
consolidated balance sheet and income statement reflecting the obligation to employees and pensioners as well as the assets held by
being disclosed as separate items on the balance sheet of the company. In the consolidated financial statements for the financial period
OMART to back the policyholder liability to the company.
ending 31 December 2018 the insurance and reinsurance policies between the company and OMART will be eliminated resulting in the
consolidated balance sheet and income statement reflecting the obligation to employees and pensioners as well as the assets held by
Old Mutual Wealth acquisition of Skandia UK Limited from Old Mutual plc
OMART to back the policyholder liability to the company.
On 31 January 2018, Old Mutual Wealth acquired the Skandia UK Limited group of entities from Old Mutual plc. This group of entities
comprises five plc Head Office entities with a combined net asset value of £591 million. The transfer was financed by the issue of a share
Old Mutual Wealth acquisition of Skandia UK Limited from Old Mutual plc
and with the balance represented by a merger reserve. No debt was taken on as a result of this transaction. The most significant asset
On 31 January 2018, Old Mutual Wealth acquired the Skandia UK Limited group of entities from Old Mutual plc. This group of entities
within these entities is a £566 million receivable which corresponds to an equivalent payable within the Group's statement of financial
comprises five plc Head Office entities with a combined net asset value of £591 million. The transfer was financed by the issue of a share
position. The net effect of this transaction for the Group is to replace a payable due to Old Mutual plc with equity.
and with the balance represented by a merger reserve. No debt was taken on as a result of this transaction. The most significant asset
within these entities is a £566 million receivable which corresponds to an equivalent payable within the Group's statement of financial
position. The net effect of this transaction for the Group is to replace a payable due to Old Mutual plc with equity.
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Old Mutual Wealth financing arrangements
On 28 February 2018, the Group entered into, and fully drew down, the New Term Loan, a £300 million senior unsecured term loan with
a number of relationship banks with an annual coupon of 45 basis points above LIBOR, to be updated every three months. The New Term
Loan will be repaid in full using proceeds from the sale of the Single Strategy Business following the completion of the OMGI Transaction.
Also on 28 February 2018, the Group issued a £200 million subordinated debt security in the form of a 10-year Tier 2 bond with a one-time
issuer call option after 5 years to J.P. Morgan Securities plc, paying a semi-annual coupon of 4.478% (Tier 2 Bond). Including the impact
of amortisation of bond set-up costs, the issuance of the Tier 2 Bond security will increase operating expenses in the Head Office segment
by approximately £11 million on an annual basis. The debt security is currently undocumented and unlisted and has a Fitch instrument
rating of BBB-. The Group intends to finalise a prospectus and obtain a listing for the Tier 2 Bond on the regulated market of the London
Stock Exchange, with a view to a potential remarketing and secondary placement of the Tier 2 Bond in due course. In addition, the Group
entered into the New Revolving Facility, a £125 million revolving credit facility which is currently undrawn and is expected to remain
undrawn during 2018.
Subsequent to the year end, and as part of a series of internal transactions, £566 million of intercompany indebtedness to other
companies within the Old Mutual plc group has been equitised, with the effect of the intercompany indebtedness being cancelled and
replaced with equity in the form of share capital and a merger reserve. The overall indebtedness also reduced by £16 million from ordinary
course transactions. The remaining £200 million intercompany indebtedness was repaid in full from the new facilities referred to above
and from existing cash resources on 28 February 2018. On the same date, the £70 million revolving credit facility with Old Mutual plc
was cancelled.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
K: Accounting policies on financial assets and liabilities
The Group is exposed to financial risk through its financial assets (investments and loans), financial liabilities (investment contracts,
customer deposits and borrowings), reinsurance assets and insurance liabilities. The key focus of financial risk management for the
K: Accounting policies on financial assets and liabilities
Group is ensuring that the proceeds from its financial assets are sufficient to fund the obligations arising from its insurance and banking
The Group is exposed to financial risk through its financial assets (investments and loans), financial liabilities (investment contracts,
operations. The most important components of financial risk are credit risk, market risk (arising from changes in equity, bond prices,
customer deposits and borrowings), reinsurance assets and insurance liabilities. The key focus of financial risk management for the
interest and foreign exchange rates) and liquidity risk.
Group is ensuring that the proceeds from its financial assets are sufficient to fund the obligations arising from its insurance and banking
operations. The most important components of financial risk are credit risk, market risk (arising from changes in equity, bond prices,
(a) Recognition and derecognition
interest and foreign exchange rates) and liquidity risk.
A financial asset or liability is recognised when, and only when, the Group becomes a party to the contractual provisions of the
financial instrument.
(a) Recognition and derecognition
A financial asset or liability is recognised when, and only when, the Group becomes a party to the contractual provisions of the
The Group derecognises a financial asset when, and only when:
financial instrument.
not retain control.
not retain control.
The contractual rights to the cash flows arising from the financial assets have expired or been forfeited by the Group; or
The Group derecognises a financial asset when, and only when:
It transfers the financial asset including substantially all the risks and rewards of ownership of the asset; or
It transfers the financial asset and neither transfers nor retains substantially all the risks and rewards of ownership and does
The contractual rights to the cash flows arising from the financial assets have expired or been forfeited by the Group; or
It transfers the financial asset including substantially all the risks and rewards of ownership of the asset; or
It transfers the financial asset and neither transfers nor retains substantially all the risks and rewards of ownership and does
A financial liability is derecognised when, and only when the liability is extinguished. That is when the obligation specified in the contract
is discharged, assigned, cancelled or has expired.
A financial liability is derecognised when, and only when the liability is extinguished. That is when the obligation specified in the contract
The difference between the carrying amount of a financial liability (or part thereof) extinguished or transferred to another party and
is discharged, assigned, cancelled or has expired.
consideration received, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
The difference between the carrying amount of a financial liability (or part thereof) extinguished or transferred to another party and
All purchases and sales of financial assets that require delivery within the timeframe established by regulation or market convention
consideration received, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
('regular way' purchases and sales) are recognised at trade date, which is the date that the Group commits to purchase or sell the asset.
Loans and receivables are recognised (at fair value plus attributable transaction costs) when cash is advanced to borrowers.
All purchases and sales of financial assets that require delivery within the timeframe established by regulation or market convention
('regular way' purchases and sales) are recognised at trade date, which is the date that the Group commits to purchase or sell the asset.
(b) Initial measurement
Loans and receivables are recognised (at fair value plus attributable transaction costs) when cash is advanced to borrowers.
Financial instruments are initially recognised at fair value plus, in the case of a financial asset or for a financial liability not at fair value
through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.
(b) Initial measurement
Financial instruments are initially recognised at fair value plus, in the case of a financial asset or for a financial liability not at fair value
(c) Derivative financial instruments
through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.
Derivative financial instruments are recognised in the consolidated statement of financial position at fair value. Fair values are obtained
from quoted market prices, discounted cash flow models and option pricing models as appropriate. All derivatives are carried as assets
(c) Derivative financial instruments
when their fair value is positive and as liabilities when their fair value is negative.
Derivative financial instruments are recognised in the consolidated statement of financial position at fair value. Fair values are obtained
from quoted market prices, discounted cash flow models and option pricing models as appropriate. All derivatives are carried as assets
Changes in the fair value of derivatives not designated as hedges for hedge accounting purposes are recognised in profit or loss and are
when their fair value is positive and as liabilities when their fair value is negative.
included in investment return or finance costs as appropriate.
Changes in the fair value of derivatives not designated as hedges for hedge accounting purposes are recognised in profit or loss and are
(d) Hedge accounting
included in investment return or finance costs as appropriate.
Qualifying hedging instruments must either be derivative financial instruments or non-derivative financial instruments used to hedge the
risk of changes in foreign currency exchange rates, changes in fair value or changes in cash flows. Changes in the value of the financial
(d) Hedge accounting
instrument should be expected to offset changes in the fair value or cash flows of the underlying hedged item.
Qualifying hedging instruments must either be derivative financial instruments or non-derivative financial instruments used to hedge the
risk of changes in foreign currency exchange rates, changes in fair value or changes in cash flows. Changes in the value of the financial
The Group designates certain qualifying hedging instruments as either (1) a hedge of the exposure to changes in fair value of a
instrument should be expected to offset changes in the fair value or cash flows of the underlying hedged item.
recognised asset or liability or an unrecognised firm commitment (fair value hedge) or (2) a hedge of a future cash flow attributable
to a recognised asset or liability, or a forecasted transaction, and could affect profit or loss (cash flow hedge) or (3) a hedge of a net
The Group designates certain qualifying hedging instruments as either (1) a hedge of the exposure to changes in fair value of a
investment in a foreign operation. Hedge accounting is used for qualifying hedging instruments designated in this way provided certain
recognised asset or liability or an unrecognised firm commitment (fair value hedge) or (2) a hedge of a future cash flow attributable
criteria are met.
to a recognised asset or liability, or a forecasted transaction, and could affect profit or loss (cash flow hedge) or (3) a hedge of a net
investment in a foreign operation. Hedge accounting is used for qualifying hedging instruments designated in this way provided certain
The Group's criteria in accordance with reporting standards for a qualifying hedging instrument to be accounted for as a hedge include:
criteria are met.
Upfront formal documentation of the hedging instrument, hedged item or transaction, risk management objective and strategy,
The Group's criteria in accordance with reporting standards for a qualifying hedging instrument to be accounted for as a hedge include:
the nature of the risk being hedged and the effectiveness measurement methodology that will be applied is prepared before hedge
accounting is adopted
Upfront formal documentation of the hedging instrument, hedged item or transaction, risk management objective and strategy,
The hedge is documented showing that it is expected to be highly effective in offsetting the changes in the fair value or cash flows
the nature of the risk being hedged and the effectiveness measurement methodology that will be applied is prepared before hedge
attributable to the hedged risk, consistent with the risk management and strategy detailed in the upfront hedge documentation
accounting is adopted
The effectiveness of the hedge can be reliably measured
The hedge is documented showing that it is expected to be highly effective in offsetting the changes in the fair value or cash flows
The hedge is assessed and determined to have been highly effective on an ongoing basis
attributable to the hedged risk, consistent with the risk management and strategy detailed in the upfront hedge documentation
The effectiveness of the hedge can be reliably measured
The hedge is assessed and determined to have been highly effective on an ongoing basis
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For cash flow hedges of a forecast transaction, an assessment that it is highly probable that the hedged transaction will occur and will
carry profit or loss risk.
(d) Hedge accounting continued
Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that prove to be highly effective in relation
to hedged risk, are recorded in profit or loss, along with the corresponding change in fair value of the hedged asset or liability that is
attributable to that specific hedged risk.
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges or hedges of a net investment in a foreign
operation, and that prove to be highly effective in relation to the hedged risk, are recognised in other comprehensive income. Any
ineffective portion of changes in the fair value of the derivative is recognised in profit or loss.
If the hedge no longer meets the criteria for hedge accounting, hedge accounting is discontinued prospectively. For fair value hedge
accounting, any previous adjustment to the carrying amount of a hedged interest-bearing financial instrument carried at amortised cost
(as a result of previous hedge accounting), is amortised in profit or loss from the date hedge accounting ceases, to the maturity date of
the financial instrument, based on the effective interest method.
For hedges of a net investment in a foreign operation, any cumulative gains or losses in equity are recognised in profit or loss on disposal
of the foreign operation. The Group does not apply significant cash flow or fair value hedging.
(e) Embedded derivatives
Certain derivatives embedded in financial and non-financial instruments, such as the conversion option in a convertible bond, are treated
as separate derivatives and recognised as such on a standalone basis, when a separate instrument with the same terms as the
embedded derivative would meet the definition of a derivative, their risks and characteristics are not closely related to those of the host
contract and the host contract is not carried at fair value with unrealised gains and losses reported in profit or loss. If it is not possible to
determine the fair value of the embedded derivative, the entire hybrid instrument is categorised as fair value through profit or loss and
measured at fair value.
(f) Offsetting financial instruments and related income
Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position only when there
is currently a legally enforceable right to set off and there is intention to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Income and expense items are offset only to the extent that their related instruments have been offset in the consolidated statement
of financial position, with the exception of those relating to hedges, which are disclosed in accordance with profit or loss effect of the
hedged item.
(g) Interest income and expense
Interest income and expense in relation to financial instruments carried at amortised cost or held as available-for-sale are recognised in
profit or loss using the effective interest method, taking into account the expected timing and amount of cash flows. Interest income and
expense include the amortisation of any discount or premium or other differences between the initial carrying amount of an interest-
bearing instrument and its amount at maturity calculated on an effective interest basis.
Interest income and expense on financial instruments carried at fair value through profit or loss are presented as part of interest income
or expense.
(h) Non-interest revenue
Non-interest revenue in respect of financial instruments principally comprises fees and commission and other operating income.
These are accounted for as set out below.
Fees and commission income
Loan origination fees, for loans that are probable of being drawn down, are deferred (together with related direct costs) and recognised
as an adjustment to the effective yield on the loan. Fees and commission arising from negotiating, or participating in the negotiation
of a transaction for a third-party, such as the acquisition of loans, shares or other securities or the purchase or sale of businesses,
are recognised on completion of the underlying transaction.
Other income
Revenue other than interest, fees and commission (including fees and insurance premiums), which includes exchange and securities
trading income, dividends from investments and net gains on the sale of banking assets, is recognised in profit or loss when the amount of
revenue from the transaction or service can be measured reliably and it is probable that the economic benefits of the transaction or service
will flow to the Group.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
K: Accounting policies on financial assets and liabilities continued
(i) Financial assets
K: Accounting policies on financial assets and liabilities continued
Non-derivative financial assets are recorded as held-for-trading, designated as fair value through profit or loss, loans and receivables,
held-to-maturity or available-for-sale. An analysis of the Group's consolidated statement of financial position, showing the categorisation
(i) Financial assets
of financial assets, together with financial liabilities is set out in note E1.
Non-derivative financial assets are recorded as held-for-trading, designated as fair value through profit or loss, loans and receivables,
held-to-maturity or available-for-sale. An analysis of the Group's consolidated statement of financial position, showing the categorisation
(j) Classification of financial instruments
of financial assets, together with financial liabilities is set out in note E1.
Held-for-trading financial assets
(j) Classification of financial instruments
Held-for-trading financial assets are those that were either acquired for generating a profit from short-term fluctuations in price or dealer's
margin, or are securities included in a portfolio in which a pattern of short-term profit taking exists, or are derivatives that are not
Held-for-trading financial assets
designated as effective hedging instruments.
Held-for-trading financial assets are those that were either acquired for generating a profit from short-term fluctuations in price or dealer's
margin, or are securities included in a portfolio in which a pattern of short-term profit taking exists, or are derivatives that are not
Financial assets designated as fair value through profit or loss
designated as effective hedging instruments.
Financial assets that the Group has elected to designate as fair value through profit or loss are those where the treatment either eliminates
or significantly reduces a measurement or recognition inconsistency that would otherwise arise when using a different measurement basis
Financial assets designated as fair value through profit or loss
(for instance with respect to financial assets supporting insurance contract liabilities) or are managed, evaluated and reported using a fair
Financial assets that the Group has elected to designate as fair value through profit or loss are those where the treatment either eliminates
value basis (for instance financial assets supporting shareholders' funds).
or significantly reduces a measurement or recognition inconsistency that would otherwise arise when using a different measurement basis
(for instance with respect to financial assets supporting insurance contract liabilities) or are managed, evaluated and reported using a fair
All financial assets carried at fair value through profit or loss, whether held-for-trading or designated, are initially recognised at fair value
value basis (for instance financial assets supporting shareholders' funds).
and subsequently remeasured at fair value based on bid prices quoted in active markets. If such price information is not available for these
instruments, the Group uses other valuation techniques, including internal models, to measure these instruments. These techniques use
All financial assets carried at fair value through profit or loss, whether held-for-trading or designated, are initially recognised at fair value
market observable inputs where available, derived from similar assets and liabilities in similar and active markets, from recent transaction
and subsequently remeasured at fair value based on bid prices quoted in active markets. If such price information is not available for these
prices for comparable items or from other observable market data. For positions where observable reference data are not available for
instruments, the Group uses other valuation techniques, including internal models, to measure these instruments. These techniques use
some or all parameters, the Group estimates the non-market observable inputs used in its valuation models. Where discounted cash flow
market observable inputs where available, derived from similar assets and liabilities in similar and active markets, from recent transaction
techniques are used, estimated future cash flows are based on management's best estimates and the discount rate used is a market-
prices for comparable items or from other observable market data. For positions where observable reference data are not available for
related rate at the reporting date for an instrument with similar terms and conditions.
some or all parameters, the Group estimates the non-market observable inputs used in its valuation models. Where discounted cash flow
techniques are used, estimated future cash flows are based on management's best estimates and the discount rate used is a market-
Fair values of certain financial instruments, such as over-the-counter (OTC) derivative instruments, are determined using pricing models
related rate at the reporting date for an instrument with similar terms and conditions.
that consider, among other factors, contractual and market prices, correlations, yield curves, credit spreads, and volatility factors.
Fair values of certain financial instruments, such as over-the-counter (OTC) derivative instruments, are determined using pricing models
Realised and unrealised fair value gains and losses on all financial assets carried at fair value through profit or loss are included in
that consider, among other factors, contractual and market prices, correlations, yield curves, credit spreads, and volatility factors.
investment return (non-banking) or in banking trading, investment and similar income as appropriate.
Realised and unrealised fair value gains and losses on all financial assets carried at fair value through profit or loss are included in
Interest earned whilst holding financial assets at fair value through profit or loss is reported within investment return (non-banking) or
investment return (non-banking) or in banking trading, investment and similar income as appropriate.
banking interest and similar income, as appropriate. Dividends receivable are included separately in dividend income, within investment
return (non-banking) or banking trading, investment and similar income, when a dividend is declared.
Interest earned whilst holding financial assets at fair value through profit or loss is reported within investment return (non-banking) or
banking interest and similar income, as appropriate. Dividends receivable are included separately in dividend income, within investment
Loans and receivables
return (non-banking) or banking trading, investment and similar income, when a dividend is declared.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market,
other than those classified by the Group as fair value through profit or loss or available-for-sale. Loans and receivables are carried at
Loans and receivables
amortised cost less any impairment write-downs. Third-party expenses such as legal fees incurred in securing a loan are treated as part
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market,
of the cost of the transaction.
other than those classified by the Group as fair value through profit or loss or available-for-sale. Loans and receivables are carried at
amortised cost less any impairment write-downs. Third-party expenses such as legal fees incurred in securing a loan are treated as part
Held-to-maturity financial assets
of the cost of the transaction.
Financial assets with fixed maturity dates which are quoted in an active market and where management has both the intent and the ability
to hold the asset to maturity are classified as held-to-maturity. These assets are carried at amortised cost less any impairment write-
Held-to-maturity financial assets
downs. Interest earned on held-to-maturity financial assets is reported within investment return (non-banking) or banking interest and
Financial assets with fixed maturity dates which are quoted in an active market and where management has both the intent and the ability
similar income, as appropriate.
to hold the asset to maturity are classified as held-to-maturity. These assets are carried at amortised cost less any impairment write-
downs. Interest earned on held-to-maturity financial assets is reported within investment return (non-banking) or banking interest and
Available-for-sale financial assets
similar income, as appropriate.
Financial assets intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in
interest rates, exchange rates or equity prices other than those designated fair value through profit or loss or as loans and receivables,
Available-for-sale financial assets
are classified as available-for-sale. Management determines the appropriate classification of its investments at the time of the purchase.
Financial assets intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in
interest rates, exchange rates or equity prices other than those designated fair value through profit or loss or as loans and receivables,
Available-for-sale financial assets are measured at fair value based on bid prices quoted in active markets. If such prices are unavailable
are classified as available-for-sale. Management determines the appropriate classification of its investments at the time of the purchase.
or determined to be unreliable, the fair value of the financial asset is estimated using pricing models or discounted cash flow techniques.
Where discounted cash flow techniques are used, estimated future cash flows are based on management's best estimates and the
Available-for-sale financial assets are measured at fair value based on bid prices quoted in active markets. If such prices are unavailable
discount rate used is a market-related rate at the reporting date for an instrument with similar terms and conditions. Where pricing models
or determined to be unreliable, the fair value of the financial asset is estimated using pricing models or discounted cash flow techniques.
are used, inputs are based on observable market data where available at the reporting date.
Where discounted cash flow techniques are used, estimated future cash flows are based on management's best estimates and the
discount rate used is a market-related rate at the reporting date for an instrument with similar terms and conditions. Where pricing models
are used, inputs are based on observable market data where available at the reporting date.
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Unrealised gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised in other
comprehensive income. When available-for-sale financial assets are disposed, the related accumulated fair value adjustments are
included in profit or loss as gains and losses from available-for-sale financial assets. When available-for-sale assets are impaired the
resulting loss is shown separately in profit or loss as an impairment charge.
Interest earned on available-for-sale financial assets is reported within investment return (non-banking) or banking interest and similar
income, as appropriate. Dividends receivable are included separately in dividend income, within investment return (non-banking) or
banking trading, investment and similar income, as appropriate when a dividend is declared.
Financial liabilities (other than investment contracts and derivatives)
Non-derivative financial liabilities, including borrowed funds, amounts owed to depositors and liabilities under acceptances are recorded
as held-for-trading, designated as fair value through profit or loss or as financial liabilities at amortised cost.
Liabilities that the Group has elected to designate as fair value through profit or loss are those where the treatment either eliminates or
significantly reduces a measurement or recognition inconsistency that would otherwise arise when using a different measurement basis
or are managed, evaluated and reported using a fair value basis.
For financial liabilities recorded at fair value and which contain a demand feature, the fair value of the liability is not less than the amount
payable on demand, discounted from the first date that the amount could be required to be paid.
Financial liabilities categorised at amortised cost are recognised initially at fair value, which is normally represented by the transaction
price, less directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are stated at amortised cost
with any difference between cost and redemption value being recognised in profit or loss over the period of the borrowings on an effective
interest basis.
Equity classified conversion options included within financial liabilities are recorded separately in shareholders' equity. The Group does not
recognise any change in the value of this option in subsequent periods. The remaining obligation to make future payments of principal and
interest to bondholders is calculated using a market interest rate for an equivalent non-convertible bond and is presented on the amortised
cost basis in other borrowed funds until extinguished on conversion or maturity of the bonds.
If the Group purchases its own debt, it is removed from the consolidated statement of financial position and the difference between the
carrying amount of a liability and the consideration paid is recognised in profit or loss and are included in finance costs.
(k) Reclassifications of financial assets
A non-derivative financial asset that would have met the definition of loans and receivables at initial recognition that was required to
be categorised as held-for-trading (on the basis that it was held for the purpose of selling or repurchasing in the near term) may under
exceptional circumstances be reclassified out of the fair value through profit or loss category if the Group intends and is able to hold
the financial asset for the foreseeable future or until maturity. If a financial asset is so reclassified, it is reclassified at its fair value on the
date of reclassification. Any gain or loss already recognised in profit or loss is not reversed. The fair value at the date of reclassification
becomes its new cost or amortised cost, as applicable.
Other non-derivative financial assets that were required to be categorised as held-for-trading at initial recognition may be reclassified out
of the fair value through profit or loss category in rare circumstances. If a financial asset is so reclassified, it is reclassified at its fair value
on the date of reclassification. Any gain or loss already recognised in profit or loss is not reversed. Measurement of the asset after
reclassification depends on the subsequent categorisation.
A non-derivative financial asset that would have met the definition of loans and receivables at initial recognition that was designated as
available-for-sale may under exceptional circumstances be reclassified out of the available-for-sale category to the loans and receivables
category if it meets the loans and receivables definition at the date of reclassification and if the Group intends and is able to hold the
financial asset for the foreseeable future or until maturity. If a financial asset is so reclassified, it is reclassified at its fair value on the date
of reclassification. The fair value at the date of reclassification becomes its new cost or amortised cost, as applicable. In the case of a
financial asset with a fixed maturity, the gain or loss already recognised in the available-for-sale reserve in equity is amortised to profit
or loss over the remaining life using the effective interest method together with any difference between the new amortised cost and the
maturity amount. In the case of a financial asset that does not have a fixed maturity, the gain or loss already recognised in the available-
for-sale reserve in equity is recognised in profit or loss when the financial asset is sold or otherwise disposed.
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Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
K: Accounting policies on financial assets and liabilities continued
(i) Financial assets
K: Accounting policies on financial assets and liabilities continued
Non-derivative financial assets are recorded as held-for-trading, designated as fair value through profit or loss, loans and receivables,
held-to-maturity or available-for-sale. An analysis of the Group's consolidated statement of financial position, showing the categorisation
(l) Sale and repurchase agreements and lending of securities
of financial assets, together with financial liabilities is set out in note E1.
Securities sold subject to linked repurchase agreements are retained in the financial statements as appropriate when considering the
de-recognition criteria contained within IAS 39. The securities retained in the financial statements are reflected as trading or investment
(j) Classification of financial instruments
securities and the counterparty liability is included in amounts owed to other depositors, deposits from other banks, or other money market
deposits, as appropriate. Cash paid for securities purchased under agreements to resell at a pre-determined price are recorded as loans
Held-for-trading financial assets
and advances to other banks or customers as appropriate. The difference between the sale and repurchase price is treated as interest
Held-for-trading financial assets are those that were either acquired for generating a profit from short-term fluctuations in price or dealer's
and accrued over the life of the agreement using the effective interest method.
margin, or are securities included in a portfolio in which a pattern of short-term profit taking exists, or are derivatives that are not
designated as effective hedging instruments.
Securities lent to counterparties are retained in the financial statements and any interest earned recognised in profit or loss using the
effective interest method.
Financial assets designated as fair value through profit or loss
Financial assets that the Group has elected to designate as fair value through profit or loss are those where the treatment either eliminates
Securities borrowed are not recognised in the financial statements, unless these are sold to third parties, in which case the purchase
or significantly reduces a measurement or recognition inconsistency that would otherwise arise when using a different measurement basis
and sale are recorded with the gain or loss included in trading income. The obligation to return them is recorded at fair value as a
(for instance with respect to financial assets supporting insurance contract liabilities) or are managed, evaluated and reported using a fair
trading liability.
value basis (for instance financial assets supporting shareholders' funds).
(m) Parent Company investments in subsidiary undertakings and associates
All financial assets carried at fair value through profit or loss, whether held-for-trading or designated, are initially recognised at fair value
and subsequently remeasured at fair value based on bid prices quoted in active markets. If such price information is not available for these
Parent Company investments in subsidiary undertakings and associates are recorded at cost. Impairments of Parent Company
instruments, the Group uses other valuation techniques, including internal models, to measure these instruments. These techniques use
investments in subsidiary undertakings and associates are accounted for in the same way as impairments of other non-financial assets.
market observable inputs where available, derived from similar assets and liabilities in similar and active markets, from recent transaction
prices for comparable items or from other observable market data. For positions where observable reference data are not available for
(n) Impairments of financial assets
some or all parameters, the Group estimates the non-market observable inputs used in its valuation models. Where discounted cash flow
Indicators of impairment
techniques are used, estimated future cash flows are based on management's best estimates and the discount rate used is a market-
A provision for impairment is established if there is objective evidence that the Group will not be able to recover all amounts relating
related rate at the reporting date for an instrument with similar terms and conditions.
to the financial asset. Observable data that could come to the attention of the Group that could lead to a provision for impairment to
be made include:
Fair values of certain financial instruments, such as over-the-counter (OTC) derivative instruments, are determined using pricing models
that consider, among other factors, contractual and market prices, correlations, yield curves, credit spreads, and volatility factors.
Significant financial difficulty of the counterparty
A breach of contract, such as a default or delinquency in interest or principal payments
Realised and unrealised fair value gains and losses on all financial assets carried at fair value through profit or loss are included in
The Group, for economic or legal reasons relating to the counterparty's financial difficulty, grants to the counterparty a concession that
investment return (non-banking) or in banking trading, investment and similar income as appropriate.
the Group would not otherwise consider
It becoming probable that the counterparty will enter bankruptcy or other financial reorganisation
Interest earned whilst holding financial assets at fair value through profit or loss is reported within investment return (non-banking) or
Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of assets since the initial
banking interest and similar income, as appropriate. Dividends receivable are included separately in dividend income, within investment
recognition of those assets, although the decrease cannot yet be identified with the individual financial assets, including:
return (non-banking) or banking trading, investment and similar income, when a dividend is declared.
adverse changes in the payment status of counterparties in the group of financial assets; or
national or local economic conditions that correlate with defaults on the assets in the group of financial assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market,
In addition, for an available-for-sale financial asset, a significant or prolonged decline in the fair value below its cost is also objective
other than those classified by the Group as fair value through profit or loss or available-for-sale. Loans and receivables are carried at
evidence of impairment.
amortised cost less any impairment write-downs. Third-party expenses such as legal fees incurred in securing a loan are treated as part
of the cost of the transaction.
Held-to-maturity financial assets
Financial assets with fixed maturity dates which are quoted in an active market and where management has both the intent and the ability
to hold the asset to maturity are classified as held-to-maturity. These assets are carried at amortised cost less any impairment write-
downs. Interest earned on held-to-maturity financial assets is reported within investment return (non-banking) or banking interest and
similar income, as appropriate.
Available-for-sale financial assets
Financial assets intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in
interest rates, exchange rates or equity prices other than those designated fair value through profit or loss or as loans and receivables,
are classified as available-for-sale. Management determines the appropriate classification of its investments at the time of the purchase.
Available-for-sale financial assets are measured at fair value based on bid prices quoted in active markets. If such prices are unavailable
or determined to be unreliable, the fair value of the financial asset is estimated using pricing models or discounted cash flow techniques.
Where discounted cash flow techniques are used, estimated future cash flows are based on management's best estimates and the
discount rate used is a market-related rate at the reporting date for an instrument with similar terms and conditions. Where pricing models
are used, inputs are based on observable market data where available at the reporting date.
304
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Old Mutual plc
Annual Report and Accounts 2017
Financial assets at amortised cost
The amount of the impairment of a financial asset held at amortised cost is the difference between the carrying amount and the
recoverable amount, being the value of expected cash flows, including amounts recoverable from guarantees and collateral, discounted
based on the effective interest rate at initial recognition. In estimating future expected cash flows the Group looks at the contractual cash
flows of the assets and adjusts these contractual cash flows for historical loss experience of assets with similar credit risks, with this
adjusted to reflect any additional conditions that are expected to arise or to account for those which no longer exist. This is done to predict
inherent losses which exist in the asset as at the reporting date but have not been reported.
The impairment provision also covers losses where there is objective evidence that losses are present in components of the loan portfolio
at the reporting date, but these components have not yet been specifically identified. When a loan is uncollectable, it is written-off against
the related impairment provision.
If the amount of impairment subsequently decreases due to an event occurring after the write-down, the release of the impairment
provision is credited to profit or loss. Impairment reversals are limited to what the carrying amount would have been, had no impairment
losses been recognised.
Interest income on impaired loans and receivables is recognised on the impaired amount using the original effective interest rate before
the impairment.
Available-for-sale financial assets
The amount of the impairment loss of an available-for-sale financial asset is the cumulative loss that has been recognised in other
comprehensive income, being the difference between the acquisition cost and the asset's current fair value, less any impairment loss
on that asset previously recognised in profit or loss. For available-for-sale debt securities, fair value is determined as the present value
of expected future cash flows discounted at the current market rate of interest.
All such impairments are recognised in profit or loss. The reversal of an impairment allowance in respect of a debt instrument categorised
as available-for-sale is credited to profit or loss, the release in respect of an equity instrument categorised as available-for-sale is credited
to the available-for-sale reserve within equity.
305
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Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
100
100
100
100
100
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Shareholding
Ordinary
Shareholding
Ordinary
Ordinary
Percentage
holding
Percentage
100
holding
100
100
Country of
incorporation
Country of
Republic of South Africa
incorporation
Republic of South Africa
Republic of South Africa
L: Related undertakings of the Group
The following provides a list of the Group’s related undertakings. These disclosures are required by Section 409 of the Companies
L: Related undertakings of the Group
Act 2006. It should be noted that this is a statutory disclosure and does not represent the way that the Group accounts for these
The following provides a list of the Group’s related undertakings. These disclosures are required by Section 409 of the Companies
entities.
Act 2006. It should be noted that this is a statutory disclosure and does not represent the way that the Group accounts for these
entities.
(a) Group subsidiaries
The table below sets out the Group's subsidiary undertakings (including investment funds and collective investment schemes controlled by
(a) Group subsidiaries
the Company). All shares are held indirectly by the Company (unless indicated) and their results are included in the Company’s
The table below sets out the Group's subsidiary undertakings (including investment funds and collective investment schemes controlled by
consolidated financial statements.
the Company). All shares are held indirectly by the Company (unless indicated) and their results are included in the Company’s
consolidated financial statements.
Name
310 Halfway House Ext 13
Investments (Pty) Ltd
Name
312 Halfway House Ext 13
310 Halfway House Ext 13
Investments (Pty) Ltd
Investments (Pty) Ltd
314 Halfway House Ext 13
312 Halfway House Ext 13
Investments (Pty) Ltd
Investments (Pty) Ltd
315 Halfway House Ext 13
314 Halfway House Ext 13
Investments (Pty) Ltd
Investments (Pty) Ltd
316 Halfway House Ext 13
315 Halfway House Ext 13
Investments (Pty) Ltd
Investments (Pty) Ltd
317 Halfway House Ext 13
316 Halfway House Ext 13
Investments (Pty) Ltd
Investments (Pty) Ltd
318 Halfway House Ext 13
317 Halfway House Ext 13
Investments (Pty) Ltd
Investments (Pty) Ltd
319 Halfway House Ext 13
318 Halfway House Ext 13
Investments (Pty) Ltd
Investments (Pty) Ltd
32 Randjesfontein Investments (Pty)
319 Halfway House Ext 13
Ltd
Investments (Pty) Ltd
320 Halfway House Ext 13
32 Randjesfontein Investments (Pty)
Investments (Pty) Ltd
Ltd
321 Halfway House Ext 13
320 Halfway House Ext 13
Investments (Pty) Ltd
Investments (Pty) Ltd
AAM Advisory PTE Limited
321 Halfway House Ext 13
Investments (Pty) Ltd
Acsis (Pty) Ltd
AAM Advisory PTE Limited
Acsis Licence Group (Pty) Ltd
Acsis (Pty) Ltd
Adviceworx (Pty) Ltd
Acsis Licence Group (Pty) Ltd
Adviceworx Old Mutual Inflation Plus
Adviceworx (Pty) Ltd
4-5% Fund of Funds
Affordable Rental and Investment
Adviceworx Old Mutual Inflation Plus
Fund South Africa Trust
4-5% Fund of Funds
African Fund Managers (Mauritius)
Affordable Rental and Investment
Fund South Africa Trust
African Infrastructure Investment
African Fund Managers (Mauritius)
Fund
African Infrastructure Investment
African Infrastructure Investment
Fund 2 Partnership
Fund
African Infrastructure Investment
Fund 2 Partnership
Registered Office Address
Grand Central Airport, New road and Pretoria main
road, Midrand, Gauteng, 1685
Registered Office Address
Grand Central Airport, New road and Pretoria main
Grand Central Airport, New road and Pretoria main
road, Midrand, Gauteng, 1685
road, Midrand, Gauteng, 1685
Grand Central Airport, New road and Pretoria main
Grand Central Airport, New road and Pretoria main
road, Midrand, Gauteng, 1685
road, Midrand, Gauteng, 1685
Grand Central Airport, New road and Pretoria main
Grand Central Airport, New road and Pretoria main
road, Midrand, Gauteng, 1685
road, Midrand, Gauteng, 1685
Grand Central Airport, New road and Pretoria main
Grand Central Airport, New road and Pretoria main
road, Midrand, Gauteng, 1685
road, Midrand, Gauteng, 1685
Grand Central Airport, New road and Pretoria main
Grand Central Airport, New road and Pretoria main
road, Midrand, Gauteng, 1685
road, Midrand, Gauteng, 1685
Grand Central Airport, New road and Pretoria main
Grand Central Airport, New road and Pretoria main
road, Midrand, Gauteng, 1685
road, Midrand, Gauteng, 1685
Grand Central Airport, New road and Pretoria main
Grand Central Airport, New road and Pretoria main
road, Midrand, Gauteng, 1685
road, Midrand, Gauteng, 1685
Grand Central Airport, New road and Pretoria main
Grand Central Airport, New road and Pretoria main
road, Midrand, Gauteng, 1685
road, Midrand, Gauteng, 1685
Grand Central Airport, New road and Pretoria main
Grand Central Airport, New road and Pretoria main
road, Midrand, Gauteng, 1685
road, Midrand, Gauteng, 1685
Grand Central Airport, New road and Pretoria main
Grand Central Airport, New road and Pretoria main
road, Midrand, Gauteng, 1685
road, Midrand, Gauteng, 1685
CapitaGreen #06-01, 138 Market Street, Singapore
Grand Central Airport, New road and Pretoria main
048946
road, Midrand, Gauteng, 1685
Mutualpark, Jan Smuts Drive, Pinelands, 7405
CapitaGreen #06-01, 138 Market Street, Singapore
048946
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
1st Floor Building 5, Commerce Square, 39 Rivonia
Road, Sandhurst, 2194
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands 7405
1st Floor Building 5, Commerce Square, 39 Rivonia
Road, Sandhurst, 2194
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands 7405
c/o Cim Fund Services Ltd, 33 Edith Cavell Street, Port
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Louis
Ground Floor, Colinton House, The Oval, 1 Oakdale
c/o Cim Fund Services Ltd, 33 Edith Cavell Street, Port
Street, Newlands, Cape Town, 7700
Louis
Ground Floor, Colinton House, The Oval, 1 Oakdale
Ground Floor, Colinton House, The Oval, 1 Oakdale
Street, Newlands, Cape Town 7700
Street, Newlands, Cape Town, 7700
Ground Floor, Colinton House, The Oval, 1 Oakdale
Street, Newlands, Cape Town 7700
Ordinary
Ordinary
Ordinary
Ordinary
Class A and Class B
shares
Ordinary
Class B1 shares
Class A and Class B
shares
Trust does not issue
Class B1 shares
shares
Ordinary
Trust does not issue
shares
one class of share
Ordinary
Republic of South Africa
Singapore
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Singapore
Republic of South Africa
Republic of South Africa
Mauritius
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Mauritius
Republic of South Africa
100
100
100
100
100
100
32
100
Republic of South Africa
one class of share
one class of share
one class of share
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
41
100
100
100
100
100
100
100
100
100
100
32
100
100
100
100
44
41
44
306
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Percentage
holding
100
Shareholding
Ordinary
Country of
incorporation
Republic of South Africa
Name
African Infrastructure Investment
Fund 3 GP (Pty)
African Infrastructure Investment
Holding Company 2 (Mauritius)
African Infrastructure Investment
Managers (Pty) Limited
AIIF2 Power Holdings
AIIF2 Towers SA (Pty) Limited
AIIM Hydropower Holdings (Pty)
Limited
AIIM Seed General Partner (Pty)
Limited
AIIM Seed GP Partnership
AIIM Staff GP (Pty) Limited
Aiva Florida Inc.
AIVA Health S.A.
AIVA Holding Group S.A.
AIVA Investments S.A.
AIVA S.A.
AIVA TPA Services S.A.
ALFI Rogge Partners S.A.
Amber Mountain Investment 3 (Pty)
Ltd
Apollo Advisors (Pty) Ltd
Apollo II GP Partnership General
Partner
Apollo Investment Partnership II En
Commandite Partnership
Azaadville Gardens (RF) (Pty) Ltd
Balanced Fund
50
100
69
100
99
100
96
100
100
100
100
100
100
100
100
100
93
93
51
65
72
Banco Unico
Barprop (Pty) Ltd
Beaumont Robinson Limited
50% + 1
100
100
Bedford Square Properties (Pty) Ltd 99
Bene Inventa (Pty) Ltd
Blaauwberg Insurance Company
Limited
Black Distributors SPV Limited
100
100
100
Bloemfontein Board of Executors and
Trust Company Ltd
100
Blue Downs 3 Property
Developments (Pty) Ltd
100
Blueprint Distribution Limited
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Class A, A3, B1, B2, C
and R shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary and cumulative
redeemable preference
shares
Ordinary and cumulative
redeemable preference
shares
Ordinary
Mauritius
Republic of South Africa
Republic of South Africa
Republic of South Africa
Mauritius
Republic of South Africa
Republic of South Africa
Republic of South Africa
Florida, USA
Uruguay
Panama
Uruguay
Uruguay
Uruguay
England and Wales
Republic of South Africa
Registered Office Address
Ground Floor, Colinton House, The Oval, 1 Oakdale
Street, Newlands, Cape Town, 7700
c/o Cim Fund Services Ltd, 33 Edith Cavell Street, Port
Louis
Colinton House, Ground Floor, The Oval, 1 Oakdale
Street, Newlands, Cape Town, 7700
c/o Cim Fund Services Ltd, 33 Edith Cavell Street, Port
Louis
Ground Floor, Colinton House, The Oval, 1
OakdaleStreet, Newlands, Cape Town, 7700
c/o Cim Fund Services Ltd, 33 Edith Cavell Street, Port
Louis, Mauritius
Ground Floor, Colinton House, The Oval, 1 Oakdale
Street, Newlands, Cape Town, 7700
Ground Floor, Colinton House, The Oval, 1 Oakdale
Street, Newlands, Cape Town, 7700
Ground Floor, Colinton House, The Oval, 1 Oakdale
Street, Newlands, Cape Town, 7700
201 South Biscayne, Boulevard. Suite 1500 BB Miami
Florida
Zonamerica - Ruta 8 km 17500 Edif. Beta 3, Of 011
Costa del Este, Av Roberto Motta Edificio Capital Plaza
Piso 8 - Panama- Republica de Panama
Zonamerica - Ruta 8km 17500 Edif. Beta 3, Of.011
Luis Alberto de Herrera 1245 WTC Torre I - Of.1406
Zonamerica - Ruta 8 Km 17 500 Edif. Beta 3, Of.011
5th Floor Millennium Bridge House 2, Lambeth Hill,
London, EC4V 4GG
127 Cape Road, Mount Croix, Port Elizabeth 6001
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Republic of South Africa
Ground Floor, Colinton House,The Oval, 1 Oakdale
Street, Newlands, Cape Town 7701
Republic of South Africa Walkers SPV Limited, Walker House, 87 Mary Street,
Republic of South Africa
Republic of South Africa
Republic of South Africa
Mozambique
Republic of South Africa
England & Wales
Republic of South Africa
Republic of South Africa
Isle of Man
England & Wales
Republic of South Africa
George Town, Grand Cayman KY1-9002, Cayman
Islands
Ground Floor, Colinton House, The Oval, 1 Oakdale
Street, Newlands, Cape Town, 7700
11th floor, Nedbank Corner, 96 Jorissen Street,
Braamfontein, Johannesburg, Gauteng 2017
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Julius Nyerere Avenue, n'500 Maputo, Mozambique
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Illovo Edge - 3rd Floor Building 3, Cnr Harries and
Fricker Roads, Illovo
135 Rivonia Road, Sandown, Sandton, 2196
Third Floor, St George's Court, Upper Church Street,
Douglas, Isle of Man. IM1 1EE
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Old Mutual West Campus Entrance 2, Mutual Park, 2
Jan Smuts Drive, Pinelands, 7405
England & Wales
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
Blueprint Financial Services Limited
100
Ordinary
England & Wales
307
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Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Name
Blueprint Organisation Limited
Name
BNS Nominees (Pty) Ltd
Blueprint Organisation Limited
BoE 187 Investments (Pty) Ltd
BoE Developments (Pty) Ltd
BNS Nominees (Pty) Ltd
BoE Holdings (Pty) Ltd
BoE 187 Investments (Pty) Ltd
BoE Link Nominees (Proprietary)
BoE Developments (Pty) Ltd
Limited (RF)
BoE Holdings (Pty) Ltd
BoE Private Client & Trust Company
BoE Link Nominees (Proprietary)
(Pty) Ltd
Limited (RF)
BoE Private Equity Investments (Pty)
BoE Private Client & Trust Company
Ltd
(Pty) Ltd
Boness Development Phase 3 (Pty)
BoE Private Equity Investments (Pty)
Ltd
Ltd
BPCC Security Company (Pty) Ltd
Boness Development Phase 3 (Pty)
Ltd
BPCC Security Company (Pty) Ltd
C.I.P.M. Nominees Limited
Cabs Custodial Services (Private)
Limited (formerly known as Three
C.I.P.M. Nominees Limited
Anchor Investments (Pvt) Ltd)
Cabs Custodial Services (Private)
Caerus Bureau Services Limited
Limited (formerly known as Three
Anchor Investments (Pvt) Ltd)
Caerus Capital Group Limited
Caerus Bureau Services Limited
Caerus Financial Limited
Caerus Capital Group Limited
Caerus Holdings Limited
Caerus Financial Limited
Percentage
holding
100
Percentage
holding
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Caerus Portfolio Management Limited 100
100
Caerus Holdings Limited
Caerus Wealth Limited
100
Caerus Portfolio Management Limited 100
Caerus Wealth Solutions Limited
Caerus Wealth Limited
Capegate Crescent Development
Caerus Wealth Solutions Limited
(Pty) Ltd
Capital Development Limited
Capegate Crescent Development
(Pty) Ltd
Capital Growth Investments Trust
Capital Development Limited
Capital Investments Limited
Capital Growth Investments Trust
CBN Nominees (Pty) Ltd
Capital Investments Limited
CCF Old Mutual Multi-Style Global
CBN Nominees (Pty) Ltd
Equity
CCF Old Mutual Opp Global Equity
CCF Old Mutual Multi-Style Global
Celestis Broker Services (Pty) Ltd
Equity
Central Africa Building Society
CCF Old Mutual Opp Global Equity
Cheviot Capital (Nominees) Limited
Celestis Broker Services (Pty) Ltd
Cheviot Exodus LP
Central Africa Building Society
City Centre Properties (Pvt) Ltd
Cheviot Capital (Nominees) Limited
Cheviot Exodus LP
City Centre Properties (Pvt) Ltd
100
100
100
100
100
100
100
100
51
100
100
51
100
100
80
100
100
100
80
100
100
100
100
93
100
100
93
Shareholding
Ordinary
Shareholding
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary and cumulative
Ordinary
redeemable preference
shares
Ordinary and cumulative
Ordinary
redeemable preference
Ordinary
shares
Ordinary
Ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
Ordinary
ordinary
Ordinary
Ordinary
Trust does not issue
Ordinary
shares
Ordinary
Trust does not issue
shares
Ordinary
Ordinary
Class A and C shares
Ordinary
Class A and C shares
Class A and C shares
Ordinary
Ordinary
Class A and C shares
Ordinary
Ordinary
partnership contribution
Ordinary
Ordinary
Ordinary
partnership contribution
Ordinary
Country of
incorporation
England & Wales
Country of
incorporation
Republic of South Africa
England & Wales
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Registered Office Address
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
Registered Office Address
135 Rivonia Road, Sandown, Sandton, 2196
Wiltshire Court, Farnsby Street, Swindon, England,
135 Rivonia Road, Sandown, Sandton, 2196
SN1 5AH
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Mutualpark, Jan Smuts Drive, Pinelands, 7405
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Jersey
Zimbabwe
Jersey
Zimbabwe
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Republic of South Africa
England & Wales
Malawi
Republic of South Africa
Zimbabwe
Malawi
Malawi
Zimbabwe
Namibia
Malawi
Ireland
Namibia
Ireland
Ireland
Republic of South Africa
Zimbabwe
Ireland
England & Wales
Republic of South Africa
England & Wales
Zimbabwe
Zimbabwe
England & Wales
England & Wales
Zimbabwe
135 Rivonia Road, Sandown, Sandton, 2196
4th Floor 28/30 The Parade St Helier Jersey JE2 3QQ
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
4th Floor 28/30 The Parade St Helier Jersey JE2 3QQ
Mutual Gardens, 100 The Chase West Emerald Hill,
Wiltshire Court, Farnsby Street, Swindon, England,
Harare
SN1 5AH
Wiltshire Court, Farnsby Street, Swindon, England,
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
SN1 5AH
Wiltshire Court, Farnsby Street, Swindon, England,
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
SN1 5AH
Wiltshire Court, Farnsby Street, Swindon, England,
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
SN1 5AH
Wiltshire Court, Farnsby Street, Swindon, England,
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
SN1 5AH
Wiltshire Court, Farnsby Street, Swindon, England,
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
SN1 5AH
Wiltshire Court, Farnsby Street, Swindon, England,
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
SN1 5AH
Ground Floor Vineyards Square South, The Vineyards
Wiltshire Court, Farnsby Street, Swindon, England,
Office Estate, 99 Jip De Jager Road, Tygervalley
SN1 5AH
Old Mutal Building, Robert Mugabe Crescent, PO Box
Ground Floor Vineyards Square South, The Vineyards
30459, Lilongwe 3
Office Estate, 99 Jip De Jager Road, Tygervalley
Mutual Gardens, 100 The Chase West Emerald Hill,
Old Mutal Building, Robert Mugabe Crescent, PO Box
Harare
30459, Lilongwe 3
Old Mutal Building, Robert Mugabe Crescent, PO Box
Mutual Gardens, 100 The Chase West Emerald Hill,
30459, Lilongwe 3
Harare
8th Floor, Namdeb Sentre, 10 Dr Frans Indongo Str,
Old Mutal Building, Robert Mugabe Crescent, PO Box
Windhoek
30459, Lilongwe 3
78 Sir John Rogerson’s Quay, Dublin 2, Ireland
8th Floor, Namdeb Sentre, 10 Dr Frans Indongo Str,
Windhoek
78 Sir John Rogerson’s Quay, Dublin 2, Ireland
78 Sir John Rogerson’s Quay, Dublin 2, Ireland
Mutualpark, Jan smuts Drive, Pinelands, 7405
Northend Close Northridge Park, Highlands, Harare
78 Sir John Rogerson’s Quay, Dublin 2, Ireland
One Kingsway, London WC2B 6AN
Mutualpark, Jan smuts Drive, Pinelands, 7405
90 Long Acre, London, WC2E 9RA
Northend Close Northridge Park, Highlands, Harare
Mutual Gardens, 100 The Chase West Emerald Hill,
One Kingsway, London WC2B 6AN
HARARE
90 Long Acre, London, WC2E 9RA
Mutual Gardens, 100 The Chase West Emerald Hill,
HARARE
308
300
300
Old Mutual plc Annual Report and Accounts 2017
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Old Mutual plc
Annual Report and Accounts 2017
Name
Commsale 2000 Limited
Percentage
holding
100
Shareholding
ordinary
Country of
incorporation
England & Wales
Community Property Company (Pty)
Limited
Community Property Holdings Limited 100
100
Consumer Credit (Swaziland) (Pty)
Ltd
Corporate Aone Trade & Invest 9 Pty
Ltd
Cougar Investment Holding Company
Limited
Credit Guarantee Insurance
Corporation of Africa Ltd
Crystal Park Developments (RF) (Pty)
Ltd
100
100
100
86
100
Crystal Park Housing Portfolio (RF)
(Pty) Ltd
Crystal Park Trust
CU Property Holdings (Pvt) Ltd
Depfin Investments (Pty) Ltd
Dodd Murray Limited
100
100
100
100
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Republic of South Africa
Republic of South Africa
Swaziland
Republic of South Africa
Republic of South Africa
Republic of South Africa
Ordinary
Republic of South Africa
Trust does not issue
shares
Ordinary
Republic of South Africa
Zimbabwe
Ordinary
ordinary
Republic of South Africa
England & Wales
DQS Financial Management Limited 100
Ordinary
England & Wales
Education SPV Limited
100
Ordinary
England & Wales
Eighty One Main Street Nominees Ltd 100
100
Equibond (Pty) Ltd
100
Erf 7 Sandown (Pty) Ltd
Esimio Trading 101 (Pty) Ltd
Fairbairn Investment Company
Limited
Fairbairn Investments (UK) Limited
(OM Seed Investment (UK) Limited)
Fairbairn Nominees (Pty) Ltd
Fairbairn UK Limited (OMFS
Company 1 Limited)
Faulu Microfinance Bank Limited
100
100
100
100
100
67
Featherwood Apartments (Pty) Ltd
74
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary and cumulative
redeemable preference
shares
Ordinary
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
England & Wales
England & Wales
Republic of South Africa
England & Wales
Kenya
Republic of South Africa
Featherwood Rental (Pty) Ltd
74
Ordinary
Republic of South Africa
Fidelity Multi Asset Adventurous Fund 65
Accumulation
England & Wales
100
Fidelity Nominees (RF) (Pty) Ltd
Finlac Trust (Pty) Ltd
100
First Trade and Invest 9 (RF) (Pty) Ltd 100
Ordinary
Ordinary
Ordinary
Republic of South Africa
Republic of South Africa
Republic of South Africa
Frittlewell Investments (Pvt) Limited
100
Ordinary
Zimbabwe
Front Line Investment Limited
Futuregrowth Agri Fund
Futuregrowth Agri Fund 2
Futuregrowth Agri-fund (South
Africa)-1GP (Pty) Ltd
Futuregrowth Asset Management
(Pty) Ltd
G.E.O.C. Nominees Ltd
Galilean Properties (Pty) Ltd
Global Bond Feeder Fund
70
43
99
100
100
100
100
39
Registered Office Address
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
3rd Floor Great Westerford, 240 Main Road,
Rondebosch, 7700
3rd Floor Great Westerford, 240 Main Road,
Rondebosch, 7700
Deloitte & Touche, 1st floor, Embassy House, Cnr
Allister Milller and Morris Strs, Mbabane, Swaziland
c/o Old Mutual Alterantive Investments, Mutual Park,
Jan Smuts Drive, Pinelands.
Mutualpark, Jan Smuts Drive, Pinelands, 7405
i
F
n
a
n
c
a
s
l
i
Are Of Old Mutual Investment Group, 3rd Floor Omig
Building, West Campus,Mutual Park,Jan Smuts D,
Western Cape Province, 7405
384 Johan Road, cnr Johan and Taylor Road,
Honeydew, Johannesburg, Gauteng 2140
c/o Old Mutual Alterantive Investments, Mutual Park,
Jan Smuts Drive, Pinelands
Royal Mutual House, 45 Nelson Mandela, Harare,
Zimbabwe
135 Rivonia Road, Sandown, Sandton, 2196
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Building 7, 1st Floor, Pinewood Office Park, 33 Riley
Road,Woodmead
24 Archter Road, Paulshof, 2191
Millennium Bridge House 2, Lambeth Hill, London,
EC4V 4GG
Millennium Bridge House 2, Lambeth Hill, London,
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House 2, Lambeth Hill, London,
EC4V 4GG
Business Support Centre, Ngong Lane, Off Ngong
Road P. O. Box 60240-00200, Nairobi
c/o Old Mutual Alterantive Investments, Mutual Park,
Jan Smuts Drive, Pinelands.
c/o Old Mutual Alterantive Investments, Mutual Park,
Jan Smuts Drive, Pinelands.
Oakhill House 150 Tonbridge Road Hildenborough
Tonbridge Kent TN11 9DZ
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Old Mutual West Campus Entrance 2, Mutual Park, 2
Jan Smuts Drive, Pinelands, 7405
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Old Mutal Building, Robert Mugabe Crescent, PO Box
30459, Lilongwe 3
Mutual Park Jan Smuts Drive, Pinelands, 7405
Mutual Park Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Ordinary
Malawi
one class of share
one class of share
Ordinary
Republic of South Africa
Republic of South Africa
Republic of South Africa
Ordinary
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Ordinary
Ordinary
Class A and B2 shares
Republic of South Africa
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
135 Daisy Street, Sandton, Sandown, 2196
Mutualpark, Jan Smuts Drive, Pinelands, 7405
309
301
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Name
Global Currency Feeder Fund
Name
Global Edge Technologies (Pty)
Global Currency Feeder Fund
Limited
Golddunn Property Developments
Global Edge Technologies (Pty)
(Pty) Ltd
Limited
Grand Central Airport (Pty) Ltd
Golddunn Property Developments
(Pty) Ltd
Grand Central Investments Share
Grand Central Airport (Pty) Ltd
Block (Pty) Ltd
Green Horizon Environment
Grand Central Investments Share
Rehabilitation Company (NPC)
Block (Pty) Ltd
Greenfield Developments Company
Green Horizon Environment
(Pty) Ltd
Rehabilitation Company (NPC)
HIFSA Housing Impact Fund South
Greenfield Developments Company
Africa
(Pty) Ltd
High Yield Opportunity Fund
HIFSA Housing Impact Fund South
Africa
Housing Impact Fund South Africa
Trust
High Yield Opportunity Fund
Housing Investment Partners (Pty)
Housing Impact Fund South Africa
Ltd
Trust
IBL Asset Finance and Services (Pty)
Housing Investment Partners (Pty)
Ltd
Ltd
Ideas Nedbank AIIF Investors Trust
IBL Asset Finance and Services (Pty)
Ltd
IFA Holding Company Limited
Ideas Nedbank AIIF Investors Trust
IFA Services Holdings Company
IFA Holding Company Limited
Limited
IMFUNDO SPV Holdings (Pty) Ltd
IFA Services Holdings Company
Limited
Imvelo Facilities Management (Pty)
Ltd
IMFUNDO SPV Holdings (Pty) Ltd
Incentive Investment Consultants
Imvelo Facilities Management (Pty)
(Pty) Ltd
Ltd
Infiniti Financial Planning &
Incentive Investment Consultants
Investment Management Limited
(Pty) Ltd
Institutional Money Market Fund
Infiniti Financial Planning &
Investment Management Limited
Intrinsic Cirilium Investment Company
Limited
Institutional Money Market Fund
Intrinsic Financial Planning Limited
Intrinsic Cirilium Investment Company
Limited
Intrinsic Financial Services Limited
Intrinsic Financial Planning Limited
Percentage
holding
Percentage
33
holding
100
33
100
100
100
100
100
100
100
100
100
100
43
100
38
43
54
38
68
54
100
68
60
100
100
60
100
100
100
100
60
100
100
60
100
100
100
100
100
100
100
100
100
100
Intrinsic Financial Solutions Limited
Intrinsic Financial Services Limited
100
100
Intrinsic Mortgage Planning Limited
Intrinsic Financial Solutions Limited
100
100
Intrinsic Valuation Services Limited
Intrinsic Mortgage Planning Limited
100
100
100
100
100
100
Intrinsic Wealth Financial Solutions
Intrinsic Valuation Services Limited
Limited
Intrinsic Wealth Limited
Intrinsic Wealth Financial Solutions
Limited
100
Investage 91 (Pty) Ltd
100
Intrinsic Wealth Limited
K2012150042 (South Africa) (Pty) Ltd 100
100
Investage 91 (Pty) Ltd
K2013236459 (South Africa) (Pty) Ltd 100
K2012150042 (South Africa) (Pty) Ltd 100
Kagiso Infrastructure Empowerment
100
Fund
K2013236459 (South Africa) (Pty) Ltd 100
100
KDGC (Pty) Ltd
100
Kagiso Infrastructure Empowerment
Fund
Kingsmead Properties (Pty) Ltd
KDGC (Pty) Ltd
Kirkney Securitisation (Pty) Ltd
Kingsmead Properties (Pty) Ltd
L & S Properties Limited
Kirkney Securitisation (Pty) Ltd
100
100
100
100
100
100
LIBERO International SICAV PLC
L & S Properties Limited
Lighthouse Development (Pty) Ltd
LIBERO International SICAV PLC
Linton Projects (Pty) Ltd
Lighthouse Development (Pty) Ltd
M.C.Z. (Pvt) Ltd
Linton Projects (Pty) Ltd
M.C.Z. (Pvt) Ltd
100
100
100
100
100
100
70
100
70
Shareholding
Class A, B1, B2 and C
shares
Shareholding
ordinary
Class A, B1, B2 and C
shares
Ordinary
ordinary
Country of
incorporation
Country of
Republic of South Africa
incorporation
South Africa
Republic of South Africa
Registered Office Address
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Registered Office Address
Mutual Gardens, Mowbray, Cape Town
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
South Africa
665 Duncan Street, Hillcrest, Pretoria, 0001
Mutual Gardens, Mowbray, Cape Town
Ordinary
Ordinary
Republic of South Africa
Republic of South Africa
Class A and Class B
Ordinary
shares
Ordinary
Class A and Class B
shares
Ordinary
Ordinary
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Ordinary
Ordinary
Republic of South Africa
Republic of South Africa
Class A, B and C shares Republic of South Africa
Republic of South Africa
Ordinary
Republic of South Africa
Ordinary
Class A, B and C shares Republic of South Africa
Republic of South Africa
Ordinary
Republic of South Africa
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
ordinary
Ordinary
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
England & Wales
Republic of South Africa
England & Wales
England & Wales
Republic of South Africa
England & Wales
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
England & Wales
Republic of South Africa
Class B1 and B2 shares Republic of South Africa
ordinary
Ordinary
Class B1 and B2 shares Republic of South Africa
Ordinary
Ordinary
England & Wales
England & Wales
England & Wales
England & Wales
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
one class of share
Ordinary
Ordinary
one class of share
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Republic of South Africa
England & Wales
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Guernsey
Republic of South Africa
Malta
Guernsey
Republic of South Africa
Malta
Republic of South Africa
Republic of South Africa
Zimbabwe
Republic of South Africa
Zimbabwe
310
302
302
Grand Central Airport, New Road And Pretoria Main
665 Duncan Street, Hillcrest, Pretoria, 0001
Road, Midrand, Gauteng, 1685
Grand Central Airport, New Road And Pretoria Main
Grand Central Airport, New Road And Pretoria Main
Road, Midrand, Gauteng, 1685
Road, Midrand, Gauteng, 1685
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Grand Central Airport, New Road And Pretoria Main
Road, Midrand, Gauteng, 1685
3rd floor, OMIG Building Entrance 2, West Campus,
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutual Park, Jan Smuts Drive, Pinelands 7405
2nd Floor Summit Place, Cnr Rivonia & School Road,
3rd floor, OMIG Building Entrance 2, West Campus,
Morningside, 2196
Mutual Park, Jan Smuts Drive, Pinelands 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
2nd Floor Summit Place, Cnr Rivonia & School Road,
Morningside, 2196
2nd Floor Summit Place, Cnr Rivonia & School Road,
Morningside, 2196
Mutualpark, Jan Smuts Drive, Pinelands, 7405
2nd Floor, Summit Square, 15 School Road, Cnr
2nd Floor Summit Place, Cnr Rivonia & School Road,
Rivonia Road, Morningside, Sandton, 2196
Morningside, 2196
135 Rivonia Road, Sandown, Sandton, 2196
2nd Floor, Summit Square, 15 School Road, Cnr
Rivonia Road, Morningside, Sandton, 2196
PO Box 72112, Parkview, 2122
135 Rivonia Road, Sandown, Sandton, 2196
Old Mutual House, Portland Terrace, Southampton
SO14 7EJ
PO Box 72112, Parkview, 2122
Old Mutual House, Portland Terrace, Southampton
Old Mutual House, Portland Terrace, Southampton
SO14 7EJ
SO14 7EJ
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Old Mutual House, Portland Terrace, Southampton
SO14 7EJ
71 Cottswold Drive, Westville, Durban, Kwa Zulu Natal,
3629
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Room 2, The White House, 27 Courtenay Street,
71 Cottswold Drive, Westville, Durban, Kwa Zulu Natal,
George, 6530
3629
Millennium Bridge House, 2 Lambeth Hill, London
Room 2, The White House, 27 Courtenay Street,
EC4V 4GG
George, 6530
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Wiltshire Court, Farnsby Street, Swindon, England,
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
SN1 5AH
Wiltshire Court, Farnsby Street, Swindon, England,
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
SN1 5AH
Wiltshire Court, Farnsby Street, Swindon, England,
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
SN1 5AH
Wiltshire Court, Farnsby Street, Swindon, England,
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
SN1 5AH
Wiltshire Court, Farnsby Street, Swindon, England,
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
SN1 5AH
Wiltshire Court, Farnsby Street, Swindon, England,
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
SN1 5AH
Wiltshire Court, Farnsby Street, Swindon, England,
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
SN1 5AH
135 Rivonia Road, Sandown, Sandton, 2196
Wiltshire Court, Farnsby Street, Swindon, England,
SN1 5AH
Mutualpark, Jan Smuts Drive, Pinelands, 7405
135 Rivonia Road, Sandown, Sandton, 2196
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Ground Floor, Colinton House, The Oval, 1 Oakdale
Road, Newlands, 7700
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Die Klubhuis, Cnr 18th Street and Pinnaster Avenue,
Ground Floor, Colinton House, The Oval, 1 Oakdale
Hazelwood, Gauteng, 0081
Road, Newlands, 7700
135 Rivonia Road, Sandown, Sandton, 2196
Die Klubhuis, Cnr 18th Street and Pinnaster Avenue,
Hazelwood, Gauteng, 0081
11th Floor Nedbank Corner, 96 Jorissen Street,
Braamfontein, Gauteng, 2001
135 Rivonia Road, Sandown, Sandton, 2196
Albert House, South Esplanade, St Peter Port,
11th Floor Nedbank Corner, 96 Jorissen Street,
Guernsey GY1 1AW
Braamfontein, Gauteng, 2001
One Kingsway, London, WC2B 6AN
Albert House, South Esplanade, St Peter Port,
Guernsey GY1 1AW
135 Rivonia Road, Sandown, Sandton, 2196
One Kingsway, London, WC2B 6AN
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
135 Rivonia Road, Sandown, Sandton, 2196
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Name
Maestro Financial Services Limited
Percentage
holding
100
Shareholding
ordinary
MBCA Nominees (Private) Ltd
100
Ordinary
Zimbabwe
Malawian Dividend Access Trust
100
Marriott Asset Management (Pty) Ltd 100
Marriott Corporate Services (Pty) Ltd 100
100
Marriott Isle of Man Limited
Marriott Property Services (Pty) Ltd
Marriott Retirement Fund
Administrators (Pty) Ltd
Marriott Unit Trust Management
Company (RF) (Pty) Ltd
Masisizane Fund NPC
Masisizane Trust
100
100
100
100
100
75
Masthead (Pty) Limited
Masthead Financial Advisors (Pty) Ltd 100
100
Masthead Financial Planning (Pty)
Ltd
Masthead Holdings (Pty) Ltd
Max Payment Solutions (Pty) Ltd
MBCA Bank Ltd
100
100
100
Mercury Securities (Pty) Ltd
100
Metropolis Health Services (Pty) Ltd 100
100
MHF Properties (Pty) Ltd
100
Michael Waite Independent Financial
Advice Limited
Millpencil Ltd
100
Morened (Pty) Ltd
Mortgage Investment Corporation
(Pty) Ltd
MPICO Limited
MPICO Malls Limited
100
100
72
84
MTHA Financial Services Trust
100
100
100
Mutual & Federal Company of
Zimbabwe (Pvt) Ltd
Mutual & Federal Investments (Pty)
Ltd
Mutual & Federal Management
Incentive Trust
Mutual & Federal Risk Financing Ltd 100
100
Mutual & Federal Senior Black
Management Incentive Trust
Mutual Place (NPC)
N.B.S.A. Ltd
100
100
100
N.H.S. Properties (Pty) Ltd
Nasionale
Dorpsontwikkelingskorperasie Ltd
National Board (P.E.) Ltd
National Board of Executors Ltd
Ned Investment Trust
Ned Settle Services (Pty) Ltd
Nedamericas Investments Ltd
Nedbank (Lesotho) Ltd
Nedbank (Malawi) Ltd
Nedbank (Swaziland) Ltd
Nedbank Group Insurance Company
Ltd
Nedbank Group Insurance Holdings
Ltd
Nedbank Group Ltd
Nedbank Ltd
Nedbank Namibia Ltd
Nedbank Nominees (RF) (Pty) Ltd
Nedbank Private Wealth Ltd
100
100
100
100
100
100
75
100
100
65
100
100
N/A
100
100
100
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Country of
incorporation
England & Wales
Malawi
Registered Office Address
Millennium Bridge House, 2 Lambeth Hill, London,,
EC4V 4GG
Old Mutual Building, 30 Glyn Jones Road, Blantyre
Republic of South Africa
Republic of South Africa
Isle of Man
Republic of South Africa
Republic of South Africa
2 Delamore Road, Hillcrest, 3610
2 Delamore Road, Hillcrest, 3610
IOMA House, Hope Street, Douglas IM1 !AP Isle of
Man
Mutualpark, Jan Smuts Drive, Pinelands, 7405
2 Delamore Road, Hillcrest, 3610
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Trust does not issue
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Trust does not issue
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Republic of South Africa
Republic of South Africa
Zimbabwe
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Republic of South Africa
Republic of South Africa
Republic of South Africa
England & Wales
England & Wales
Republic of South Africa
Republic of South Africa
Malawi
Malawi
Trust does not issue
shares
Ordinary
Republic of South Africa
Zimbabwe
Ordinary
Republic of South Africa
Trust does not issue
shares
Ordinary
Trust does not issue
shares
Ordinary
Ordinary
Namibia
Republic of South Africa
Namibia
Republic of South Africa
England & Wales
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Mauritius
Lesotho
Malawi
Swaziland
Isle of Man
Republic of South Africa
i
F
n
a
n
c
a
s
l
i
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
14th floor Old Mutual centre, 3rd Street/ John Mayo
Avenue, Port Louis, Mauritius
14th floor Old Mutual centre, 3rd Street/ John Mayo
Avenue, Harare, Zimbabwe
135 Rivonia Road, Sandown, Sandton, 2196
Mutualpark, Jan Smuts Drive, Pinelands, 7405
135 Rivonia Road, Sandown, Sandton, 2196
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House 2, Lambeth Hill, London,
EC4V 4GG
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Old Mutual House, City Centre, P.O. Box 30459,
Lilongwe 3. Malawi
Old Mutal Building, Robert Mugabe Crescent, PO Box
30459, Lilongwe 3
3 Rockridge Road, Pilgrin House, Parktown, 2193
M&F Centre, 227 Independence Avenue, Windhoek,
Namibia
Mutualpark, Jan Smuts Drive, Pinelands, 7405
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Mutualpark, Jan Smuts Drive, Pinelands, 7405
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Mutual Park Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
1st floor, Fairfax House, 21 Mgr Gonin street, Port
Louis Mauritius
Kingsway Road, Maseru
Plantation House, Victoria Avenue, Blantyre
Third Floor, Nedcentre Building, Cnr Dr Sishayi &
Sozisa Roads, Swaziland
IOM Assurance Co. Ltd, Prospect Hill, Douglas, IOM
IM ET British Isles
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Republic of South Africa
Namibia
Republic of South Africa
Isle of Man
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
12-20 Dr Frans Indongo Street, Windhoek
135 Rivonia Road, Sandown, Sandton, 2196
St Mary's Court, 20 Hill Street, Douglas, Isle of Man
311
303
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Percentage
holding
100
Percentage
holding
100
100
Shareholding
Ordinary
Shareholding
Ordinary
Ordinary
Name
Nedcap International Ltd
Name
Nedcapital Investment Holdings (Pty)
Nedcap International Ltd
Ltd
NedCapital Namibia (Pty) Ltd
Nedcapital Investment Holdings (Pty)
Ltd
Nedcor Bank Nominees (RF) (Pty)
NedCapital Namibia (Pty) Ltd
Ltd
Nedcor Investments Ltd
Nedcor Bank Nominees (RF) (Pty)
Nedcor Trade Services (Asia) Ltd
Ltd
Nedcor Investments Ltd
Nedcor Trade Services Ltd
Nedcor Trade Services (Asia) Ltd
Nedeurope Ltd
Nedcor Trade Services Ltd
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Nedgroup Administrators (Pty) Ltd
Nedeurope Ltd
Nedgroup Beneficiary Solutions (Pty)
Ltd
Nedgroup Administrators (Pty) Ltd
Nedgroup Beta Solutions (Pty) Ltd
Nedgroup Beneficiary Solutions (Pty)
Nedgroup Collective Investments
Ltd
(RF) (Pty) Ltd
100
Nedgroup Beta Solutions (Pty) Ltd
Nedgroup Financial Services 104 Ltd 100
100
Nedgroup Collective Investments
Nedgroup Insurance Administrators
100
(RF) (Pty) Ltd
Ltd
Nedgroup Financial Services 104 Ltd 100
100
Nedgroup Insurance Company Ltd
100
Nedgroup Insurance Administrators
Nedgroup International Holdings Ltd 100
Ltd
100
Nedgroup Insurance Company Ltd
Nedgroup Investment 102 Ltd
100
Nedgroup International Holdings Ltd 100
100
Nedgroup Investment Advisors (UK)
Ltd
Nedgroup Investment 102 Ltd
Nedgroup Investment Advisors Ltd
Nedgroup Investment Advisors (UK)
Nedgroup Investments (IOM) Ltd
Ltd
Nedgroup Investment Advisors Ltd
Nedgroup Investments (Pty) Ltd
Nedgroup Investments (IOM) Ltd
NedGroup Investments Africa
100
100
100
100
100
100
100
100
Nedgroup Investments (Pty) Ltd
Nedgroup Life Assurance Company
NedGroup Investments Africa
Ltd
Nedgroup Private Wealth (Pty) Ltd
Nedgroup Life Assurance Company
Nedgroup Private Wealth Corporate
Ltd
Services Ltd
Nedgroup Private Wealth (Pty) Ltd
Nedgroup Private Wealth Directors
Nedgroup Private Wealth Corporate
Ltd
Services Ltd
Nedgroup Private Wealth Fiduciary
Nedgroup Private Wealth Directors
Services Ltd
Ltd
Nedgroup Private Wealth Nominees
Nedgroup Private Wealth Fiduciary
(IOM) Ltd
Services Ltd
Nedgroup Private Wealth Nominees
Nedgroup Private Wealth Nominees
(Jersey) Ltd
(IOM) Ltd
Nedgroup Private Wealth Nominees
Nedgroup Private Wealth Nominees
(RF) (Pty) Ltd
(Jersey) Ltd
Nedgroup Private Wealth Nominees
Nedgroup Private Wealth Nominees
(UK) Ltd
(RF) (Pty) Ltd
Nedgroup Private Wealth Secretarial
Nedgroup Private Wealth Nominees
Ltd
(UK) Ltd
Nedgroup Private Wealth
Nedgroup Private Wealth Secretarial
Stockbrokers (Pty) Ltd
Ltd
Nedgroup Secretariat Services (Pty)
Nedgroup Private Wealth
Ltd
Stockbrokers (Pty) Ltd
Nedgroup Securities (Pty) Ltd
Nedgroup Secretariat Services (Pty)
Nedgroup Structured Life Ltd
Ltd
Nedgroup Trust (Jersey) Ltd
Nedgroup Securities (Pty) Ltd
Nedgroup Structured Life Ltd
Nedgroup Trust (KZN) (Pty) Ltd
Nedgroup Trust (Jersey) Ltd
Nedgroup Trust (Pty) Ltd
Nedgroup Trust Ltd
Nedgroup Trust (KZN) (Pty) Ltd
Nedgroup Wealth Management (Pty)
Nedgroup Trust (Pty) Ltd
Ltd
Nedgroup Trust Ltd
Nedgroup Wealth Management (Pty)
Ltd
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary Class A and
Class B shares
Ordinary
Ordinary
Ordinary Class A and
Ordinary
Class B shares
Ordinary
Ordinary
Ordinary
Ordinary Class A and
Class B shares
Ordinary
Ordinary
Ordinary Class A and
Ordinary
Class B shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Country of
incorporation
Isle of Man
Country of
incorporation
Namibia
Isle of Man
Namibia
Namibia
Republic of South Africa
Namibia
Republic of South Africa
Republic of South Africa
Hong Kong
Republic of South Africa
Mauritius
Hong Kong
Isle of Man
Mauritius
Republic of South Africa
Isle of Man
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Registered Office Address
Falcon Cliff, Palace Road, Douglas, Isle of Man, IM2
4LB
Registered Office Address
55 Rehobother Road, Ausspannplatz,
Falcon Cliff, Palace Road, Douglas, Isle of Man, IM2
Windhoek,Namibia
4LB
55 Rehobother Road, Ausspannplatz,
55 Rehobother Road, Ausspannplatz,
Windhoek,Namibia
Windhoek,Namibia
135 Rivonia Road, Sandown, Sandton, 2196
55 Rehobother Road, Ausspannplatz,
Windhoek,Namibia
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
1808-1811 Great Eagle Centre, 23 harbour, Road,
Hong Kong
135 Rivonia Road, Sandown, Sandton, 2196
10th Floor, Standard Chartered Tower, 19 Cybercity,
1808-1811 Great Eagle Centre, 23 harbour, Road,
Ebene, Mauritius
Hong Kong
Falcon Cliff, Palace Road, Douglas, Isle of Man, IM2
10th Floor, Standard Chartered Tower, 19 Cybercity,
4LB
Ebene, Mauritius
135 Rivonia Road, Sandown, Sandton, 2196
Falcon Cliff, Palace Road, Douglas, Isle of Man, IM2
135 Rivonia Road, Sandown, Sandton, 2196
4LB
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Republic of South Africa
Republic of South Africa
Isle of Man
Republic of South Africa
Republic of South Africa
Isle of Man
England & Wales
Republic of South Africa
Republic of South Africa
England & Wales
Isle of Man
Republic of South Africa
Republic of South Africa
Isle of Man
Mauritius
Republic of South Africa
Republic of South Africa
Mauritius
Republic of South Africa
Republic of South Africa
Jersey
Republic of South Africa
Guernsey
Jersey
Jersey
Guernsey
Isle of Man
Jersey
Jersey
Isle of Man
Republic of South Africa
Jersey
Isle of Man
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
1st Floor, Samual Harris House, St George's Street,
Douglas, Isle of Man
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
1st Floor, Samual Harris House, St George's Street,
5th Floor, 44-48 Dover Street, London, W1S 4NX
Douglas, Isle of Man
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
5th Floor, 44-48 Dover Street, London, W1S 4NX
Samuel Harris House, St Georges Street, Douglas,
IOM
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Samuel Harris House, St Georges Street, Douglas,
10th Floor, Standard Chartered Tower, 19 Cybercity,
IOM
Ebene, Mauritius
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
10th Floor, Standard Chartered Tower, 19 Cybercity,
Ebene, Mauritius
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Fairbairn House, 31 Esplanade, St Hielier, Jersey,
Channel Islands
135 Rivonia Road, Sandown, Sandton, 2196
Fairbairn House, Rohais, St Peter Port
Fairbairn House, 31 Esplanade, St Hielier, Jersey,
Channel Islands
Fairbairn House, 31 Esplanade, St Hielier, Jersey,
Fairbairn House, Rohais, St Peter Port
Channel Islands
St Mary's Court, 20 Hill Street, Douglas, Isle of Man
Fairbairn House, 31 Esplanade, St Hielier, Jersey,
Channel Islands
Fairbairn House, 31 Esplanade, St Hielier, Jersey,
St Mary's Court, 20 Hill Street, Douglas, Isle of Man
Channel Islands
135 Rivonia Road, Sandown, Sandton, 2196
Fairbairn House, 31 Esplanade, St Hielier, Jersey,
Channel Islands
St Mary's Court, 20 Hill Street, Douglas, Isle of Man
135 Rivonia Road, Sandown, Sandton, 2196
Guernsey
Isle of Man
Fairbairn House, Rohais, St Peter Port
St Mary's Court, 20 Hill Street, Douglas, Isle of Man
Republic of South Africa
Guernsey
135 Rivonia Road, Sandown, Sandton, 2196
Fairbairn House, Rohais, St Peter Port
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Republic of South Africa
Republic of South Africa
Jersey
Republic of South Africa
Republic of South Africa
Republic of South Africa
Jersey
Republic of South Africa
Guernsey
Republic of South Africa
Republic of South Africa
Republic of South Africa
Guernsey
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Fairbairn House, 31 Esplanade, St Hielier, Jersey,
135 Rivonia Road, Sandown, Sandton, 2196
Channel Islands
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Fairbairn House, 31 Esplanade, St Hielier, Jersey,
135 Rivonia Road, Sandown, Sandton, 2196
Channel Islands
Fairburn House, Rohais, St Peter Port
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Fairburn House, Rohais, St Peter Port
135 Rivonia Road, Sandown, Sandton, 2196
312
304
304
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Percentage
holding
100
100
100
100
Shareholding
Ordinary
Ordinary
Ordinary
Ordinary
Country of
incorporation
Republic of South Africa
Namibia
Namibia
Namibia
Registered Office Address
135 Rivonia Road, Sandown, Sandton, 2196
12-20 Dr Frans Indongo Street, Windhoek
12-20 Dr Frans Indongo Street, Windhoek
12-20 Dr Frans Indongo Street, Windhoek
Old Mutual (Blantyre) Nominees Ltd 100
Ordinary
Name
Nedinvest (Pty) Ltd
NedLoans (Pty) Ltd
NedNamibia Holdings Ltd
NedNamibia Life Assurance
Company Ltd
NedPlan Insurance Brokers Namibia
(Pty) Ltd
Nedport Developments (Pty) Ltd
NedProperties (Pty) Ltd
NES Investments (Pty) Ltd
New Capital Properties Limited
100
100
100
100
100
Newtown Leasing (Pty) Ltd
Newtown Motor Dealership (Pty) Ltd 50
100
NIB 61 Share Block (Pty) Ltd
NIB Blue Capital Investments (Pty)
Ltd
NPL FINANCIAL LIMITED
Oakleaf Investment Holding 83 (Pty)
Ltd
Old Mint (Pty) Ltd
Old Mutual (Africa) Holdings (Pty)
Limited
Old Mutual (Bermuda) Holdings
Limited
Old Mutual (Bermuda) Re Limited
100
100
100
100
100
100
100
100
Old Mutual (Malawi) Ltd
Old Mutual (Namibia) Management
Incentive Trust
Old Mutual (Namibia) Nominees (Pty)
Ltd
Old Mutual (Netherlands) B.V.
100
100
100
100
Old Mutual (South Africa) Holdings
(Pty) Ltd
Old Mutual (South Africa) Nominees
(Pty) (RF) Ltd
Old Mutual (South Africa) Share Trust 100
100
100
100
100
100
48
Old Mutual (Swaziland) Investments
(Pty) Ltd
Old Mutual (Zimbabwe) Unclaimed
Share Trust
Old Mutual 130/30 (Pty) Limited
Old Mutual Absolute Return
Government Bond Fund
Old Mutual Actuaries & Consultants
(Pty) Ltd
Old Mutual Administradora De
Fondos De Pensiones Y Cesantias
S.A.
Old Mutual Africa Private Equity Fund
of Funds
Old Mutual Africa Property Asset
Management Company
Old Mutual African Frontier Fd
92
Old Mutual Albaraka Balanced Fund 36
100
100
100
100
Old Mutual Alternative Investment
Holdings (Pty) Ltd
Old Mutual Alternative Investments
(Namibia) (Pty) Ltd
Old Mutual Alternative Investments
(Pty) Ltd
Old Mutual Alternative Investments
GP (Pty) Ltd
Old Mutual Alternative Risk Transfer
Ltd
100
100
100
100
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
ordinary
Class A and Class B
shares, Class A preference
shares and class B
redeemable cumulative
preference shares
one class of share
Ordinary
Ordinary
Ordinary
Ordinary
Trust does not issue
shares
Ordinary
Ordinary
Ordinary
Ordinary
Trust does not issue
shares
Ordinary
Trust does not issue
shares
Ordinary
Accumulation
Ordinary
Ordinary
Namibia
12-20 Dr Frans Indongo Street, Windhoek
Republic of South Africa
Namibia
Republic of South Africa
Malawi
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
9 Feld Street, Windhoek, Namibia
138 Rivonia Road, Sandown, Sandton, 2196
Old Mutal Building, Robert Mugabe Crescent, PO Box
30459, Lilongwe 3
135 Rivonia Road, Sandown, Sandton, 2196
Die Klubhuis, Cnr 18th Street and Pinnaster Avenue,
Hazelwood, Gauteng, 0081
Mutualpark, Jan Smuts Drive, Pinelands, 7405
135 Rivonia Road, Sandown, Sandton, 2196
England & Wales
Republic of South Africa
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7406
Bermuda
Bermuda
Malawi
Malawi
Namibia
Namibia
Netherlands
Republic of South Africa
Crawford House, 50 Cedar Avenue, Hamilton HM11,
Bermuda
Crawford House, 50 Cedar Avenue, Hamilton HM11,
Bermuda
30 Glyn Jones Road, Old Mutual Building, P.O. Box
393, Blantyre, Malawi
31 Glyn Jones Road, Old Mutual Building, P.O. Box
393, Blantyre, Malawi
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Luna ArenA, Herikerbergweg 182, 1101 CM
Amsterdam, The Netherlands
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Swaziland
Zimbabwe
Republic of South Africa
England & Wales
Republic of South Africa
Old Mutual Swaziland, 4th Floor, Public Services
Pension Fund Building. Mhlambanyatsi Rd. Mbabane
Old Mutual Zimbabwe Limited, Mutual Gardens, No.
100 The Chase (West),Emerald Hill, Harare, Zimbabwe
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Colombia
Av. 19 109 A30, Bogotá, Colombia
i
F
n
a
n
c
a
s
l
i
Class A shares
Ireland
Ashley House, Morehampton Road, Dublin 4, Ireland
Ordinary
Republic of South Africa
Ireland
Republic of South Africa
C/O Abax Corporate Services Ltd, 6th Floor, Tower A,
1 Cyber City, Ebene, Mauritius
78 Sir John Rogerson’s Quay, Dublin 2, Ireland
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Class B shares
Class A, B1, B0 and B2
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary, Class N1, N3,
N4, N5, N6,
N8, N9 Variable Rate
Redeemable Preference
Shares
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands 7405
Namibia
Republic of South Africa
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
313
305
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Percentage
Name
holding
Percentage
100
Old Mutual Alternative Solutions
holding
Name
Limited
100
Old Mutual Alternative Solutions
95
Old Mutual Aristeia QI Hedge Fund
Limited
Old Mutual Asian Equity Income Fund 95
95
Old Mutual Aristeia QI Hedge Fund
Old Mutual Asian Equity Income Fund 95
Old Mutual Asistencia Professional
S.A. de C.V.
Old Mutual Asistencia Professional
Old Mutual Asset Managers (East
S.A. de C.V.
Africa) Limited
100
Old Mutual Asset Managers (East
Old Mutual Asset Managers (Pvt) Ltd 100
Africa) Limited
Old Mutual Asset Managers (Pvt) Ltd 100
Old Mutual Asset Solutions Limited
100
100
100
100
37
37
71
100
100
100
72
100
100
72
100
100
100
Old Mutual Asset Solutions Limited
Old Mutual Bermuda Business
Services Inc.
Old Mutual Bermuda Business
Old Mutual Bond
Services Inc.
Old Mutual Bond
Old Mutual Broad Based (Namibia
Employee Share Trust)
Old Mutual Broad Based (Namibia
Old Mutual Broad Based
Employee Share Trust)
Empowerment (Namibia) (Pty) Ltd
Old Mutual Broad Based
Old Mutual Business Services
Empowerment (Namibia) (Pty) Ltd
(Mauritius) Limited
100
Old Mutual Business Services
Old Mutual Business Services Limited 100
(Mauritius) Limited
Old Mutual Business Services Limited 100
Old Mutual Capital Holding (Pty) Ltd 100
Old Mutual Capital Partners (Pty) Ltd 100
Old Mutual Capital Holding (Pty) Ltd 100
Old Mutual Capped SWIX Index
Old Mutual Capital Partners (Pty) Ltd 100
Old Mutual Chronos QI Hedge Fund 100
Old Mutual Capped SWIX Index
Old Mutual Cirilium Adventurous
Old Mutual Chronos QI Hedge Fund 100
Passive Portfolio
Old Mutual Cirilium Adventurous
Old Mutual Cirilium Adventurous
Passive Portfolio
Portfolio
Old Mutual Cirilium Adventurous
Old Mutual Cirilium Balanced Fund
Portfolio
Old Mutual Cirilium Balanced Fund
Old Mutual Cirilium Balanced Passive
Fund
Old Mutual Cirilium Balanced Passive
Old Mutual Cirilium Conservative
Fund
Fund
Old Mutual Cirilium Conservative
Old Mutual Cirilium Conservative
Fund
Passive Fund
Old Mutual Cirilium Conservative
Old Mutual Cirilium Dynamic Passive
Passive Fund
Fund
Old Mutual Cirilium Dynamic Passive
Old Mutual Cirilium Moderate Passive
Fund
Fund
Old Mutual Cirilium Moderate Passive
Old Mutual Cirilium Moderate
Fund
Portfolio
Old Mutual Cirilium Moderate
Old Mutual Compania De Seguros
Portfolio
De Vida S.A.
Old Mutual Compania De Seguros
Old Mutual Compass Portfolio 2
De Vida S.A.
Old Mutual Compass Portfolio 2
Old Mutual Compass Portfolio 3
55
39
52
55
94
73
73
84
65
50
64
47
71
64
47
65
39
94
50
58
58
52
Old Mutual Compass Portfolio 3
Old Mutual Compass Portfolio 4
Old Mutual Compass Portfolio 4
Old Mutual Compass Portfolio 5
84
81
81
97
97
Old Mutual Compass Portfolio 5
Old Mutual Core Conservative Fund 98
70
Old Mutual Core Diversified Fund
Old Mutual Core Conservative Fund 98
70
Old Mutual Core Diversified Fund
100
Old Mutual Corporate Real Estate
Asset Management (Pty) Ltd
Old Mutual Corporate Real Estate
Old Mutual Creation Adventurous
Asset Management (Pty) Ltd
Portfolio
Old Mutual Creation Adventurous
Old Mutual Creation Balanced
Portfolio
Portolio (was OM Spectrum 4 Fund)
Old Mutual Creation Balanced
Old Mutual Creation Conservative
Portolio (was OM Spectrum 4 Fund)
Portolio (was OM Spectrum 3 Fund)
Old Mutual Creation Conservative
Old Mutual Creation Dynamic
Portolio (was OM Spectrum 3 Fund)
Portfolio (was OM Spectrum 7 Fund)
Old Mutual Creation Dynamic
Portfolio (was OM Spectrum 7 Fund)
100
92
100
100
92
92
92
89
89
Country of
incorporation
Shareholding
Country of
Republic of South Africa
Ordinary
incorporation
Shareholding
Republic of South Africa
Ordinary
Class D1 and D3 shares Republic of South Africa
Ordinary
Class D1 and D3 shares Republic of South Africa
Ordinary
Ordinary
England & Wales
Mexico
England & Wales
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Mexico
Kenya
Kenya
Zimbabwe
Zimbabwe
England & Wales
England & Wales
Delaware, USA
Ordinary
Class B1, B2, C and R
shares
Class B1, B2, C and R
Trust does not issue
shares
shares
Trust does not issue
Ordinary
shares
Ordinary
Ordinary
Delaware, USA
Republic of South Africa
Republic of South Africa
Namibia
Namibia
Namibia
Namibia
Mauritius
Ordinary
Ordinary
Mauritius
England & Wales
England & Wales
Ordinary
Republic of South Africa
Ordinary
Republic of South Africa
Ordinary
Republic of South Africa
Ordinary
Republic of South Africa
Class A and B1 shares
Republic of South Africa
Ordinary
Class D1 and D3 shares Republic of South Africa
Republic of South Africa
Class A and B1 shares
ordinary
England & Wales
Class D1 and D3 shares Republic of South Africa
ordinary
ordinary
England & Wales
England & Wales
ordinary
Accumulation
England & Wales
England & Wales
Accumulation
Accumulation
England & Wales
England & Wales
Accumulation
Accumulation
England & Wales
England & Wales
Accumulation
Accumulation
England & Wales
England & Wales
Accumulation
Accumulation
England & Wales
England & Wales
Accumulation
Accumulation
England & Wales
England & Wales
Accumulation
ordinary
England & Wales
England & Wales
ordinary
Ordinary
Ordinary
Hedged
Hedged
Hedged
Hedged
Hedged
Hedged
Hedged
England & Wales
Colombia
Colombia
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Hedged
Class B1, and B2 shares Republic of South Africa
Republic of South Africa
Class A, A2, B1 and B2
Class B1, and B2 shares Republic of South Africa
shares
Republic of South Africa
Class A, A2, B1 and B2
Republic of South Africa
Ordinary
shares
Ordinary
ordinary
Republic of South Africa
England & Wales
ordinary
Accumulation
England & Wales
England & Wales
Accumulation
Accumulation
England & Wales
England & Wales
Accumulation
Accumulation
England & Wales
England & Wales
Accumulation
England & Wales
314
306
306
Registered Office Address
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Registered Office Address
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London
Mutualpark, Jan Smuts Drive, Pinelands, 7405
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Bosques de Ciruelos 162, Bosques de las Lomas, C.P.
EC4V 4GG
11700, Ciudad de Mexico
Bosques de Ciruelos 162, Bosques de las Lomas, C.P.
LR Number 209/12331, Mutual building, Mara/Ragati
11700, Ciudad de Mexico
road, PO BOX 30059 - 00100
LR Number 209/12331, Mutual building, Mara/Ragati
Mutual Gardens, 100 The Chase West Emerald Hill,
road, PO BOX 30059 - 00100
Harare
Mutual Gardens, 100 The Chase West Emerald Hill,
Old Mutual House, Portland Terrace, Southampton
Harare
SO14 7AY
Old Mutual House, Portland Terrace, Southampton
c/o United Corporate Services, Inc., 874 Walker Road,
SO14 7AY
Suite C, Dover, Delaware 19904
c/o United Corporate Services, Inc., 874 Walker Road,
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Suite C, Dover, Delaware 19904
Mutualpark, Jan Smuts Drive, Pinelands, 7405
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
11th Floor Mutual Tower 223 Independence Avenue
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Windhoek
11th Floor Mutual Tower 223 Independence Avenue
10th floor, Standard Chartered Tower, 19 Cybercity,
Windhoek
Ebene, Mauritius
10th floor, Standard Chartered Tower, 19 Cybercity,
Millennium Bridge House 2, Lambeth Hill, London,
Ebene, Mauritius
EC4V 4GG
Millennium Bridge House 2, Lambeth Hill, London,
Mutualpark, Jan Smuts Drive, Pinelands, 7405
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London,
Mutualpark, Jan Smuts Drive, Pinelands, 7405
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London,
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London,
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London,
Av. 19 109 A30, Bogotá, Colombia
EC4V 4GG
Av. 19 109 A30, Bogotá, Colombia
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Mutualpark, Jan Smuts Drive, Pinelands, 7405
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London,
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Old Mutual plc Annual Report and Accounts 2017
Percentage
holding
92
100
100
Name
Old Mutual Creation Moderate
Portfolio (was OM Spectrum 6 Fund)
Old Mutual Credit Investments
Holdings (Pty) Limited
Old Mutual Customised Solutions
(Pty) Ltd
Old Mutual Deuda Corto Plazo, S.A.
de C.V. Fondo de Inversión en
Instrumentos de Deuda
Old Mutual Deuda Estratégica, S.A.
de C.V. Fondo de Inversión en
Instrumentos de Deuda
Old Mutual Direct Holdings (Pty) Ltd 100
100
Old Mutual Dividend Access
Company (Pty) Ltd
Old Mutual Dividend Access Trust
100
100
100
Old Mutual Dynamic Floor
Old Mutual Emerging Market Debt
Fund
Old Mutual Emerging Markets Ltd
Old Mutual Europe Ex UK Smaller
companies Fund
Old Mutual Europe GmbH
Old Mutual Finance (Namibia) (Pty)
Ltd
Old Mutual Finance (Private) Ltd
34
43
100
47
100
75
100
Old Mutual Finance (RF) (Pty) Ltd
75
Old Mutual Finance House 1 (Pty)
Limited
Old Mutual Financial Services (UK)
Limited
Old Mutual Financial Services
Botswana (Pty) Ltd
Old Mutual Financials Contingent
Capital Fund
Old Mutual Flexible
100
100
100
75
68
Old Mutual Foundation (Charitable
Trust)
Old Mutual Foundation Management
(Pty) Limited
Old Mutual Foundation Trust
100
100
100
100
100
100
Old Mutual Fund Administration
Services (Pty) Ltd
Old Mutual Funding Company (RF)
Ltd
Old Mutual FundsNet Nominees (Pty)
Ltd
Old Mutual Global AGG Bond
OLD MUTUAL GLOBAL
CURRENCY FUND
Old Mutual GLOBAL DEFENSIVE
FUND
Old Mutual Global Emerging Markets 85
89
78
100
Old Mutual Global Investors (Asia
Pacific) Limited
Old Mutual Global Investors
(Singapore) PTE Limited
Old Mutual Global Investors
(Switzerland) LLC
Old Mutual Global Investors (UK)
Limited
Old Mutual Global Investors Holdings
Limited
OLD MUTUAL GLOBAL MANAGED
ALPHA FUND
Old Mutual Global Managed Volatility
Fund
OLD MUTUAL GLOBAL PAN
AFRICAN U3 HYB
100
100
100
100
100
100
100
94
Old Mutual plc
Annual Report and Accounts 2017
Shareholding
Accumulation
Ordinary
Ordinary
Country of
incorporation
England & Wales
Republic of South Africa
Registered Office Address
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Investment Fund
Mexico
Investment Fund
Mexico
Bosque de Circuelos 162 first floor, Col. Bosque de las
Lomas, ZIP code 11700, Mexico City
Bosque de Circuelos 162 first floor, Col. Bosque de las
Lomas, ZIP code 11700, Mexico City
Ordinary
Ordinary
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Trust does not issue
shares
Class A1, B1, B2 and C
shares
ordinary
Ordinary
Hedged
Ordinary
Ordinary
Ordinary
Classes of shares include
class A, B, C, D, E and F
redeemable cumulative
preference shares and
ordinary shares.
Ordinary
Ordinary
Ordinary
ordinary
Class A1, B1, B2, C and R
shares
Trust does not issue
shares
Ordinary
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
England & Wales
Republic of South Africa
England & Wales
Germany
Namibia
Zimbabwe
Republic of South Africa
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Kaiserin-Augusta-Allee 108, 10553 Berlin, Germany
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
England & Wales
Botswana
England & Wales
Republic of South Africa
Millennium Bridge House 2, Lambeth Hill, London,
EC4V 4GG
Plot 163/4 Unit 5, Gaborone International Commerce
Park, Gaborone, Botswana
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Namibia
Republic of South Africa
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Trust does not issue
shares
Ordinary
Zimbabwe
Republic of South Africa
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Ordinary
Ordinary
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
i
F
n
a
n
c
a
s
l
i
Class A shares
Class A, B and C shares
Ireland
Ireland
Class A shares
Ireland
Ordinary and Class A, B, B
Income, C, I, S, U2, R
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
England & Wales
Hong Kong
Singapore
England & Wales
England & Wales
Class A shares
Class A shares
Class U3 shares
Ireland
Ireland
Ireland
315
307
78 Sir John Rogerson’s Quay, Dublin 2, Ireland
78 Sir John Rogerson’s Quay, Dublin 2, Ireland
Russell Investments Ireland Limited, 78 Sir John
Rogerson’s Quay, Dublin 2, Ireland
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
24th Floor, Henley Building, 5 Queen's Road, Central
Hong Kong
8 Marina Boulevard #05-02 Marina Bay Financial
Centre Singapore (018981)
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Russell Investments Ireland Limited, 78 Sir John
Rogerson’s Quay, Dublin 2, Ireland
78 Sir John Rogerson’s Quay, Dublin 2, Ireland
Russell Investments Ireland Limited, 78 Sir John
Rogerson’s Quay, Dublin 2, Ireland
Switzerland
Schützengasse 4, 8001, Zürich, Switzerland
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Percentage
holding
Percentage
100
holding
100
100
100
100
100
100
100
100
100
63
100
100
100
63
100
100
100
100
100
100
95
100
99
95
99
100
100
100
100
100
100
100
Name
Old Mutual Global Portfolios –
Balanced Fund
Name
Old Mutual Global Portfolios –
Old Mutual Global Portfolios –
Cautious Fund
Balanced Fund
Old Mutual Global Portfolios –
Old Mutual Global Portfolios –
Dynamic Fund
Cautious Fund
Old Mutual Global REIT Fund
Old Mutual Global Portfolios –
Dynamic Fund
Old Mutual Global Strategic Absolute
Return Bond Fund (was Old Mutual
Old Mutual Global REIT Fund
Global Strategic Bond Fund)
Old Mutual Global Strategic Absolute
Old Mutual Group Holdings (SA) (Pty)
Return Bond Fund (was Old Mutual
Ltd
Global Strategic Bond Fund)
Old Mutual Health Insurance Ltd
Old Mutual Group Holdings (SA) (Pty)
Ltd
Old Mutual Holding Company
(Ghana) Limited
Old Mutual Health Insurance Ltd
Old Mutual Holding De Colombia S.A. 94
Old Mutual Holding Company
(Ghana) Limited
Old Mutual Holdings (Guernsey)
Limited
Old Mutual Holding De Colombia S.A. 94
Old Mutual Holdings (Mauritius)
Old Mutual Holdings (Guernsey)
Limited
Limited
Old Mutual Holdings (Namibia) (Pty)
Old Mutual Holdings (Mauritius)
Ltd
Limited
Old Mutual Holdings (Pty) Ltd
Old Mutual Holdings (Namibia) (Pty)
Ltd
Old Mutual Holdings Limited
Old Mutual Holdings (Pty) Ltd
Old Mutual Insurance Company (Pvt)
Old Mutual Holdings Limited
Ltd
Old Mutual Insure Limited (previously
Old Mutual Insurance Company (Pvt)
known as Mutual & Federal
Ltd
Insurance Company Limited)
Old Mutual Insure Limited (previously
Old Mutual Interest Plus Fund
known as Mutual & Federal
Insurance Company Limited)
Old Mutual International (Guernsey)
Old Mutual Interest Plus Fund
Ltd
Old Mutual International (Middle East)
Old Mutual International (Guernsey)
Limited
Ltd
Old Mutual International Business
Old Mutual International (Middle East)
Services Limited
Limited
Old Mutual International Holdings
Old Mutual International Business
Limited
Services Limited
Old Mutual International Ireland dac
Old Mutual International Holdings
Limited
Old Mutual International Isle of Man
Old Mutual International Ireland dac
Limited
Old Mutual International Trust
Old Mutual International Isle of Man
Company Limited
Limited
Old Mutual Investment Administrators
Old Mutual International Trust
(Pty) Limited
Company Limited
Old Mutual Investment Grade
Old Mutual Investment Administrators
Corporate Bond
(Pty) Limited
Old Mutual Investment Group
Old Mutual Investment Grade
(Namibia) (Pty) Ltd
Corporate Bond
Old Mutual Investment Group (Pty)
Old Mutual Investment Group
Ltd
(Namibia) (Pty) Ltd
Old Mutual Investment Group (Pty)
Old Mutual Investment Group
Ltd
Holdings (Pty) Ltd
Old Mutual Investment Group Limited 100
100
Old Mutual Investment Group
Holdings (Pty) Ltd
100
Old Mutual Investment Group Limited
(Kenya)
Old Mutual Investment Group Limited 100
100
Old Mutual Investment Group
100
Old Mutual Investment Group Limited
Swaziland (Pty) Ltd
(Kenya)
Old Mutual Investment Group
Old Mutual Investment Group
Zimbabwe (Pvt) Limited
Swaziland (Pty) Ltd
Old Mutual Investment Management
Old Mutual Investment Group
Limited
Zimbabwe (Pvt) Limited
Old Mutual Investment Services
Old Mutual Investment Management
(Kenya) Limited
Limited
Old Mutual Investment Services
Old Mutual Investment Services
(Namibia) (Pty) Ltd
(Kenya) Limited
Old Mutual Investment Services
(Namibia) (Pty) Ltd
100
100
100
100
100
100
48
100
100
48
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Shareholding
Ordinary
Shareholding
Ordinary
Ordinary
Country of
incorporation
Country of
Luxembourg
incorporation
Luxembourg
Luxembourg
Ordinary
Ordinary
Luxembourg
Luxembourg
Class A and C shares
Ordinary
Hedged
Class A and C shares
Hedged
Ordinary
Ireland
Luxembourg
England & Wales
Ireland
England & Wales
Republic of South Africa
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Class A, B1, B3, B5 and C
shares
Ordinary
Class A, B1, B3, B5 and C
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Hedged
Ordinary
Ordinary
Hedged
Republic of South Africa
Republic of South Africa
Ghana
Republic of South Africa
Colombia
Ghana
Guernsey
Colombia
Mauritius
Guernsey
Namibia
Mauritius
Republic of South Africa
Namibia
Kenya
Republic of South Africa
Zimbabwe
Kenya
Republic of South Africa
Zimbabwe
Republic of South Africa
Republic of South Africa
Guernsey
Republic of South Africa
Dubai
Guernsey
Isle of Man
Dubai
Isle of Man
Isle of Man
Ireland
Isle of Man
Isle of Man
Ireland
Isle of Man
Isle of Man
Republic of South Africa
Isle of Man
England & Wales
Republic of South Africa
Namibia
England & Wales
Ordinary shares and Class
Ordinary
A, B, C, D, E, F, H and I
ordinary par value shares
Ordinary shares and Class
Ordinary
A, B, C, D, E, F, H and I
ordinary par value shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Republic of South Africa
Namibia
Republic of South Africa
Republic of South Africa
Malawi
Republic of South Africa
Kenya
Malawi
Swaziland
Kenya
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Zimbabwe
Swaziland
England & Wales
Zimbabwe
Kenya
England & Wales
Namibia
Kenya
Namibia
316
308
308
Registered Office Address
4, Rue Jean Monnet L-2180 Luxembourg Grand Duchy
of Luxembourg
Registered Office Address
4, Rue Jean Monnet L-2180 Luxembourg Grand Duchy
4, Rue Jean Monnet L-2180 Luxembourg Grand Duchy
of Luxembourg
of Luxembourg
4, Rue Jean Monnet L-2180 Luxembourg Grand Duchy
4, Rue Jean Monnet L-2180 Luxembourg Grand Duchy
of Luxembourg
of Luxembourg
78 Sir John Rogerson’s Quay, Dublin 2, Ireland
4, Rue Jean Monnet L-2180 Luxembourg Grand Duchy
of Luxembourg
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
78 Sir John Rogerson’s Quay, Dublin 2, Ireland
Millennium Bridge House, 2 Lambeth Hill, London
Mutualpark, Jan Smuts Drive, Pinelands, 7405
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Provident Towers, Ring Road Central, P.O. Box 5754
Accra, Ghana
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Av. 19 109 A30, Bogotá, Colombia
Provident Towers, Ring Road Central, P.O. Box 5754
Accra, Ghana
Albert House, South Esplanade, St Peter Port,
Guernsey GY1 1AW
Av. 19 109 A30, Bogotá, Colombia
10th Floor, Raffles Tower, 19 Cybercity, Ebene,
Albert House, South Esplanade, St Peter Port,
Mauritius
Guernsey GY1 1AW
11th Floor Mutual Tower 223 Independence Avenue
10th Floor, Raffles Tower, 19 Cybercity, Ebene,
Windhoek
Mauritius
Mutualpark, Jan Smuts Drive, Pinelands, 7405
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
LR Number 209/12331, Mutual building, Mara/Ragati
road, PO BOX 30059 - 00100
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutual Gardens, 100 The Chase West Emerald Hill,
LR Number 209/12331, Mutual building, Mara/Ragati
Harare
road, PO BOX 30059 - 00100
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Albert House, South Esplanade, St Peter Port,
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Guernsey GY1 1AW
7 & 8,Level 2, Gate Village 7, Dubai International
Albert House, South Esplanade, St Peter Port,
Financial Centre, Dubai, 482062, United Arab Emirates
Guernsey GY1 1AW
King Edward Bay House, King Edward Road, Onchan,
7 & 8,Level 2, Gate Village 7, Dubai International
IM99 1NU, Isle of Man
Financial Centre, Dubai, 482062, United Arab Emirates
King Edward Bay House, King Edward Road, Onchan,
King Edward Bay House, King Edward Road, Onchan,
IM99 1NU, Isle of Man
IM99 1NU, Isle of Man
Arthur Cox Building, Earlsfort Terrace, Dublin 2, D02
King Edward Bay House, King Edward Road, Onchan,
CK83
IM99 1NU, Isle of Man
King Edward Bay House, King Edward Road, Onchan,
Arthur Cox Building, Earlsfort Terrace, Dublin 2, D02
IM99 1NU, Isle of Man
CK83
King Edward Bay House, King Edward Road, Onchan,
King Edward Bay House, King Edward Road, Onchan,
IM99 1NU, Isle of Man
IM99 1NU, Isle of Man
Mutualpark, Jan Smuts Drive, Pinelands, 7405
King Edward Bay House, King Edward Road, Onchan,
IM99 1NU, Isle of Man
Millennium Bridge House, 2 Lambeth Hill, London
Mutualpark, Jan Smuts Drive, Pinelands, 7405
EC4V 4GG
11th Floor Mutual Tower 223 Independence Avenue
Millennium Bridge House, 2 Lambeth Hill, London
Windhoek
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Old Mutual Building, 30 Glyn Jones Road, Blantyre
Mutualpark, Jan Smuts Drive, Pinelands, 7405
LR Number 209/12331, Mutual building, Mara/Ragati
road, PO BOX 30059 - 00100
Old Mutual Building, 30 Glyn Jones Road, Blantyre
Old Mutual Swaziland, 4th Floor, Public Services
LR Number 209/12331, Mutual building, Mara/Ragati
Pension Fund Building. Mhlambanyatsi Rd. Mbabane
road, PO BOX 30059 - 00100
Mutual Gardens, 100 The Chase West Emerald Hill,
Old Mutual Swaziland, 4th Floor, Public Services
Harare
Pension Fund Building. Mhlambanyatsi Rd. Mbabane
Millennium Bridge House, 2 Lambeth Hill, London
Mutual Gardens, 100 The Chase West Emerald Hill,
EC4V 4GG
Harare
LR Number 209/12331, Mutual building, Mara/Ragati
Millennium Bridge House, 2 Lambeth Hill, London
road, PO BOX 30059 - 00100
EC4V 4GG
11th Floor Mutual Tower 223 Independence Avenue
LR Number 209/12331, Mutual building, Mara/Ragati
Windhoek
road, PO BOX 30059 - 00100
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Old Mutual plc Annual Report and Accounts 2017
Name
Old Mutual Investment Services (Pty)
Ltd
Old Mutual Investment Services
Nominees (Namibia) (Pty) Ltd
Old Mutual Investment Services
Nominees (Pty) Ltd
Old Mutual Japanese Equity
Old Mutual JPM US Growth
Advantage Fund (was OM
Threadneedle American Select Fund)
Old Mutual Life Assurance Co
(Swaziland) Ltd
Old Mutual Life Assurance Company
(Ghana) Limited
Old Mutual Life Assurance Company
(Malawi) Ltd
Old Mutual Life Assurance Company
(Namibia) Ltd
Old Mutual Life Assurance Company
(South Africa) Ltd
Old Mutual Life Assurance Company
Ltd
Old Mutual Life Assurance Company
Zimbabwe Ltd
Old Mutual Life Insurance Company
(Botswana) Limited
Old Mutual Life S.A. de C.V.
Old Mutual Local Currency Emerging
Market Debt Fund
Old Mutual Managed Alpha QI Hedge
Fund
Old Mutual Managed Fund
Old Mutual Maximum Return FoF
100
100
55
100
85
100
100
100
100
63
100
100
100
61
100
24
53
100
100
Old Mutual Medium Term Incentive
Trust
Old Mutual Metis Alternative Fund
(Pty) Ltd
Old Mutual Metis Alternative Fund
Trust
Old Mutual Mexico Holdings,
S.A.de.C.V
Old Mutual Moderate Balanced Fund 68
44
Old Mutual Money Market Fund
100
100
35
44
98
Old Mutual Monthly income High yield
Bond Fund
Old Mutual MSCI Emerging ESG
Index Fund
Old Mutual MSCI World ESG Index
Fund
Old Mutual Multi-Managers
Defensive Fund of Funds
Old Mutual Multi-Managers Equity
Fund of Funds
Old Mutual Multi-Managers Agg Bal
FoF
Old Mutual Multi-Managers Balanced
Fund of Funds
Old Mutual Multi-Managers Caut FoF 55
62
72
49
55
Old Mutual Multi-Managers
Enhanced Income Fund of Funds
Old Mutual Multi-Managers Inflation
Plus Fund No.3
Old Mutual Multi-Managers Inflation
Plus Fund No.4
Old Mutual Multi-Managers Inflation
Plus Fund No.5
Old Mutual Multi-Managers Inflation
Plus Fund No.7
Old Mutual Multi-Managers Max Ret
FoF
Old Mutual Multi-Managers Money
Market Fund
63
100
100
100
100
52
38
Old Mutual plc
Annual Report and Accounts 2017
Percentage
holding
100
Shareholding
Ordinary
Country of
incorporation
Republic of South Africa
Registered Office Address
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Ordinary shares and Class
A, B, C, D, E, F, H and I
ordinary par value shares
Ordinary
Namibia
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Hedged
England & Wales
Accumulation
England & Wales
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Swaziland
Ghana
Malawi
Namibia
Republic of South Africa
Kenya
Zimbabwe
Botswana
Mexico
England & Wales
Republic of South Africa
England & Wales
Republic of South Africa
Old Mutual Swaziland, 4th Floor, Public Services
Pension Fund Building. Mhlambanyatsi Rd. Mbabane
42 Ring Road Central, Accra
30 Glyn Jones Road, Old Mutual Building, P.O. Box
393, Blantyre, Malawi
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Mutualpark, Jan Smuts Drive, Pinelands, 7405
LR Number 209/12331, Mutual building, Mara/Ragati
road, PO BOX 30059 - 00100
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Plot 64511 Fairgrounds Gaborone
Bosque de Ciruelos No. 162, Bosques de las Lomas,
11700, México, D.F., Mexico
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
i
F
n
a
n
c
a
s
l
i
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Hedged
Class D1, D2 and D4
shares
Accumulation
Class A, B1, B2 and C
shares
Trust does not issue
shares
Ordinary
Trust does not issue
shares
Ordinary
Republic of South Africa
Mexico
Class A and B1 shares
Class A, A2, B1, B2, B3,
B5 and C shares
Hedged
Republic of South Africa
Republic of South Africa
England & Wales
Class C and D shares
Ireland
Class B, C, and D shares
Ireland
Class A and B4 shares
Republic of South Africa
Maitland House 1, River Park, River Lane, Mowbray,
7700, South Africa
Bosque de Ciruelos No. 162, Bosques de las Lomas,
11700, México, D.F., Mexico
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Russell Investments Ireland Limited, 78 Sir John
Rogerson’s Quay, Dublin 2, Ireland
Russell Investments Ireland Limited, 78 Sir John
Rogerson’s Quay, Dublin 2, Ireland
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Class A, B2, B4, C and C2
shares
Class A and B4 shares
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Class A, B2, B4, C and C2
shares
Class B4, C2, A and C
shares
Class A, B2, B4, C and C2
shares
Class B1 and B2 shares Republic of South Africa
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Class B1, B2 and B3
shares
Class B1 and B2 shares Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Class B1 and B2 shares Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Class A and B4 shares
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Class A, B4 and C shares Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
317
309
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Country of
incorporation
Country of
Republic of South Africa
incorporation
Republic of South Africa
Republic of South Africa
Registered Office Address
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Registered Office Address
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Percentage
holding
Percentage
74
holding
100
74
100
100
Name
Old Mutual Multi-Managers Satellite
Equity Fund No.1
Name
Old Mutual Multi-Managers Satellite
Old Mutual Multi-Managers Satellite
Equity Fund No.2
Equity Fund No.1
Old Mutual Multi-Managers Satellite
Old Mutual Multi-Managers Satellite
Equity Fund No.4
Equity Fund No.2
Old Mutual Multi-Mgrs Satellite Equity
Old Mutual Multi-Managers Satellite
Fund No. 3
Equity Fund No.4
Old Mutual Multi-Strategy Trust
Old Mutual Multi-Mgrs Satellite Equity
Fund No. 3
Old Mutual Multi-Style Global Equity 99
100
Old Mutual Multi-Strategy Trust
68
Old Mutual Namibia Dynamic Floor
Fund
Old Mutual Multi-Style Global Equity 99
59
Old Mutual Namibia Enhanced
68
Old Mutual Namibia Dynamic Floor
Income Fund
Fund
Old Mutual Namibia Growth Fund
Old Mutual Namibia Enhanced
Income Fund
Old Mutual Namibia Income Fund
Old Mutual Namibia Growth Fund
100
35
35
100
42
52
52
59
Shareholding
Class B1, B2, B3 and B5
shares
Shareholding
Class B1, B2, B3 and B5
Class B1, B2, B3 and B5
shares
shares
Class B1, B2 and B3
Class B1, B2, B3 and B5
shares
shares
Class B2, B3 and B5
Class B1, B2 and B3
shares
shares
Trust does not issue
Class B2, B3 and B5
shares
shares
Class B1 and B2 shares
Trust does not issue
shares
one class of share
Class B1 and B2 shares
one class of share
one class of share
Old Mutual Namibia Managed Fund 59
42
Old Mutual Namibia Income Fund
one class of share
one class of share
Namibia
Namibia
100
95
100
70
100
70
100
100
100
100
100
45
100
100
100
100
70
70
Old Mutual Namibia Real Income
45
Old Mutual Namibia Managed Fund 59
Fund
Old Mutual Namibian Dividend
Old Mutual Namibia Real Income
Access Trust
Fund
Old Mutual Newton UK Income Fund
Old Mutual Namibian Dividend
(was OM Newton UK Income Fund)
Access Trust
Old Mutual Newton UK opportunities
Old Mutual Newton UK Income Fund
Fund (was OM BlackRock UK
(was OM Newton UK Income Fund)
Special Situations Fund)
Old Mutual Newton UK opportunities
Old Mutual Nigeria General Insurance
Fund (was OM BlackRock UK
Company Limited
Special Situations Fund)
Old Mutual Nigeria Life Assurance
Old Mutual Nigeria General Insurance
Company Limited
Company Limited
Old Mutual Nominees (Pty) Ltd
Old Mutual Nigeria Life Assurance
Company Limited
Old Mutual Nominees (Swaziland)
(Pty) Ltd
Old Mutual Nominees (Pty) Ltd
Old Mutual Operadora De Fondos,
Old Mutual Nominees (Swaziland)
S.A. de C.V. Sociedad Operadora de
(Pty) Ltd
Fondos de Inversión
Old Mutual Operadora De Fondos,
Old Mutual Pan African Fund
S.A. de C.V. Sociedad Operadora de
Fondos de Inversión
Old Mutual Pension Services
Old Mutual Pan African Fund
Company Limited
Old Mutual Pensions Trust Ghana
Old Mutual Pension Services
Limited
Company Limited
Old Mutual Planeación Financiera
Old Mutual Pensions Trust Ghana
S.A.
Limited
Old Mutual Properties (Namibia) (Pty)
Old Mutual Planeación Financiera
Ltd
S.A.
Old Mutual Property (Pty) Ltd
Old Mutual Properties (Namibia) (Pty)
Ltd
Old Mutual Property (Pty) Ltd
Old Mutual Property Investment
Corporation (Pvt) Ltd
Old Mutual Property Zimbabwe (Pvt)
Old Mutual Property Investment
Limited
Corporation (Pvt) Ltd
Old Mutual RAFI 40 Index
Old Mutual Property Zimbabwe (Pvt)
Limited
Old Mutual Real Estate Holding
Old Mutual RAFI 40 Index
Company (Pty) Ltd
Old Mutual Real Estate Zimbabwe
Old Mutual Real Estate Holding
(Pvt) Limited
Company (Pty) Ltd
Old Mutual Real Income
Old Mutual Real Estate Zimbabwe
(Pvt) Limited
Old Mutual Reinsurance (Mauritius)
Old Mutual Real Income
Limited
Old Mutual Renta Variable
Old Mutual Reinsurance (Mauritius)
Estratégica, S.A. de C.V. Fondo de
Limited
Inversión de Renta Variable
Old Mutual Renta Variable
Estratégica, S.A. de C.V. Fondo de
Inversión de Renta Variable
99
100
100
84
100
100
84
100
100
46
100
100
46
99
100
100
95
100
100
100
100
100
100
100
100
100
100
Nigeria
Nigeria
235 Ikorodu Rd, Illupeju, Lagos, Nigeria
20 Adetokunbo Ademola Street, Victoria Island, Lagos
78 Sir John Rogerson’s Quay, Dublin 2, Ireland
Mutualpark, Jan Smuts Drive, Pinelands, 7405
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
78 Sir John Rogerson’s Quay, Dublin 2, Ireland
11th Floor Mutual Tower 223 Independence Avenue
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Windhoek
11th Floor Mutual Tower 223 Independence Avenue
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Windhoek
11th Floor Mutual Tower 223 Independence Avenue
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Windhoek
11th Floor Mutual Tower 223 Independence Avenue
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Windhoek
11th Floor Mutual Tower 223 Independence Avenue
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Windhoek
11th Floor Mutual Tower 223 Independence Avenue
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Windhoek
Millennium Bridge House, 2 Lambeth Hill, London
11th Floor Mutual Tower 223 Independence Avenue
EC4V 4GG
Windhoek
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
20 Adetokunbo Ademola Street, Victoria Island, Lagos
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
235 Ikorodu Rd, Illupeju, Lagos, Nigeria
Old Mutual Swaziland, 4th Floor, Public Services
Pension Fund Building. Mhlambanyatsi Rd. Mbabane
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Bosque de Ciruelos No. 162, Bosques de las Lomas,
Old Mutual Swaziland, 4th Floor, Public Services
11700, México, D.F., Mexico
Pension Fund Building. Mhlambanyatsi Rd. Mbabane
Bosque de Ciruelos No. 162, Bosques de las Lomas,
Millennium Bridge House, 2 Lambeth Hill, London
11700, México, D.F., Mexico
EC4V 4GG
Old Mutual Building 30 Glyn Jones Road, Blantyre,
Millennium Bridge House, 2 Lambeth Hill, London
Malawi
EC4V 4GG
Provident Towers, Ring Road Central, Accra, Ghana
Old Mutual Building 30 Glyn Jones Road, Blantyre,
Malawi
Av. 19 109 A30, Bogotá, Colombia
Provident Towers, Ring Road Central, Accra, Ghana
11th Floor Mutual Tower 223 Independence Avenue
Av. 19 109 A30, Bogotá, Colombia
Windhoek
Mutualpark, Jan Smuts Drive, Pinelands, 7405
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Mutual Gardens, 100 The Chase West Emerald Hill,
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Harare
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutual Gardens, 100 The Chase West Emerald Hill,
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Harare
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
10th floor, Standard Chartered Tower, 19 Cybercity,
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Ebene, Mauritius
Bosque de Circuelos, 162 first floor, Col. Bosques de
10th floor, Standard Chartered Tower, 19 Cybercity,
las Lomas, ZIP code 11700, Mexico City
Ebene, Mauritius
Bosque de Circuelos, 162 first floor, Col. Bosques de
las Lomas, ZIP code 11700, Mexico City
Ireland
Republic of South Africa
Namibia
Ireland
Namibia
Namibia
one class of share
one class of share
Namibia
Namibia
one class of share
one class of share
Namibia
Namibia
one class of share
one class of share
Namibia
Namibia
Namibia
Namibia
Trust does not issue
one class of share
shares
Income and Accumulation England & Wales
Trust does not issue
shares
Accumulation
England & Wales
Income and Accumulation England & Wales
Namibia
Accumulation
Ordinary
England & Wales
Nigeria
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Republic of South Africa
Nigeria
Swaziland
Republic of South Africa
Mexico
Swaziland
Mexico
England & Wales
Malawi
England & Wales
Ghana
Malawi
Colombia
Ghana
Namibia
Colombia
Ordinary shares and Class
Ordinary
A ordinary par value
shares
Ordinary shares and Class
Ordinary
A ordinary par value
shares
Ordinary
Ordinary
Class A, B1, B2 and C
Ordinary
shares
Ordinary & Linked Units
Class A, B1, B2 and C
shares
Ordinary
Ordinary & Linked Units
Class A, B1, B2 and C
Ordinary
shares
Ordinary
Class A, B1, B2 and C
shares
Investment Fund
Ordinary
Republic of South Africa
Namibia
Republic of South Africa
Zimbabwe
Zimbabwe
Zimbabwe
Republic of South Africa
Zimbabwe
Republic of South Africa
Republic of South Africa
Zimbabwe
Republic of South Africa
Republic of South Africa
Zimbabwe
Mauritius
Republic of South Africa
Mexico
Mauritius
Investment Fund
Mexico
318
310
310
Old Mutual plc Annual Report and Accounts 2017
Name
Old Mutual Renta Variable México,
S.A. de C.V. Fondo de Inversión de
Renta Variable
Old Mutual Retirement
Accommodation Fund (Pty) Ltd
Old Mutual S.A. de C.V.
Old Mutual Schroder European Alpha
Income Fund
Old Mutual Securities (Pvt) Limited
Old Mutual Securities Limited
100
99
100
70
70
100
100
Old Mutual Securities Nominees (Pvt)
Limited
Old Mutual Servicios Mexico S.A. de
C.V.
Old Mutual Shared Services (Pvt)
Limited
Old Mutual Short Term Insurance
Company (Namibia) Limited
Old Mutual Short-Term Insurance
(Botswana) Ltd
Old Mutual Sociedad Fiduciaria S.A. 87
Old Mutual Specialised Finance (Pty)
Ltd
100
100
100
100
Old Mutual Specialty Insurance
Limited
Old Mutual Stable Growth
Old Mutual Style Premia Absolute
Return Fund
Old Mutual Swaziland (Pty) Ltd
100
56
96
100
Old Mutual Swaziland Agri-Fund GP
(Pty) Ltd
Old Mutual Swaziland Balanced Fund 87
100
Old Mutual Swaziland Money Market 36
Old Mutual Technology Holdings
(Pty) Ltd
OLD MUTUAL TITAN GLOBAL
EQUITY FUND
Old Mutual Transaction Services (Pty)
Ltd
Old Mutual Transactional Service
(Pty) Ltd
Old Mutual Trust (Pty) Ltd
Old Mutual Trust Company Limited
Old Mutual Unit Trust Company
(Malawi) Ltd
Old Mutual Unit Trust Management
Co. (Pvt) Ltd
Old Mutual Unit Trust Management
Company (Namibia) Ltd
Old Mutual Unit Trust Managers (RF)
(Pty) Ltd
Old Mutual Unit Trusts (Pty) Ltd
Old Mutual VAF (Pty) Ltd
Old Mutual VAF 2 (Pty) Ltd
Old Mutual VAF 2 TRUST
Old Mutual VAF 3 (Propietary)
Limited
Old Mutual VAF 3 Trust
Old Mutual VAF Trust
Old Mutual Valores S.A. Comisionista
de Bolsa
Old Mutual Volatility Arbitrage QI
Hedge Fund
Old Mutual Wealth (Namibia) (Pty)
Ltd
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
99
100
Old Mutual plc
Annual Report and Accounts 2017
Percentage
holding
100
Shareholding
Investment Fund
Country of
incorporation
Mexico
Registered Office Address
Bosque de Circuelos 162 first floor, Col. Bosque de las
Lomas, Zip code 11700, Mexico City
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Ordinary
Ordinary
ordinary
Ordinary
Ordinary
Ordinary
Class B
Ordinary
Ordinary
Ordinary
Mexico
England & Wales
Zimbabwe
Kenya
Zimbabwe
Mexico
Zimbabwe
Namibia
Botswana
Ordinary
Ordinary, Class B
Preference Share,
Redeemable Prefernce
Shares
Ordinary
Colombia
Republic of South Africa
Mauritius
Class A, B1, B2, B3 and C
shares
Hedged
Republic of South Africa
England & Wales
Ordinary
Ordinary
Class A, B, C and D
shares
Class A, B, C and D
shares
Ordinary
Swaziland
Swaziland
Swaziland
Swaziland
Republic of South Africa
Class A shares
Ireland
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Republic of South Africa
Namibia
Republic of South Africa
Ghana
Malawi
Zimbabwe
Namibia
Ordinary & Redeemable
Preference Share
Ordinary
Republic of South Africa
Swaziland
Ordinary
Ordinary
Trust does not issue
shares
Class C and L shares
Trust does not issue
shares
Trust does not issue
shares
Ordinary
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Colombia
i
F
n
a
n
c
a
s
l
i
Bosque de Ciruelos No. 162, Bosques de las Lomas,
11700, México, D.F., Mexico
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
IPS Building, 6th Floor Kimathi Street, P.O. Box 50338-
00200, Nairobi, Kenya
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Bosque de Ciruelos No. 162, Bosques de las Lomas,
11700, México, D.F., Mexico
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
M&F Centre, 227 Independence Avenue, Windhoek,
Namibia
Fairgrounds Office Park, Ground Floor Building B, Plot
50676, Gaborone, Botswana
Av. 19 109 A30, Bogotá, Colombia
Mutualpark, Jan Smuts Drive, Pinelands, 7405
10th floor, Standard Chartered Tower, 19 Cybercity,
Ebene, Mauritius
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Old Mutual Swaziland, 4th Floor, Public Services
Pension Fund Building. Mhlambanyatsi Rd. Mbabane
P.O. Box 95, Mbabane
4th Floor, PSPF Building, Mhlambanyatsi Road,
Mbabane, Swaziland
4th Floor, PSPF Building, Mhlambanyatsi Road,
Mbabane, Swaziland
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Russell Investments Ireland Limited, 78 Sir John
Rogerson’s Quay, Dublin 2, Ireland
Mutualpark, Jan Smuts Drive, Pinelands, 7405
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
135 Rivonia Road, Sandown, Sandton, 2196
42 Ring Road Central, Accra
30 Glyn Jones Road, Old Mutual Building, P.O. Box
393, Blantyre, Malawi
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Old Mutual Swaziland, 4th Floor, Public Services
Pension Fund Building. Mhlambanyatsi Rd. Mbabane
Mutualpark (West Campus), Jan Smuts Drive,
Pinelands, 7405
Mutualpark (West Campus), Jan Smuts Drive,
Pinelands, 7405
Mutual House 1, River Park, River Lane, Mobray, 7700,
South Africa
Old Mutual Investment Group, West Campus,
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutual House 1, River Park, River Lane, Mobray, 7700,
South Africa
Mutual House 1, River Park, River Lane, Mobray, 7700,
South Africa
Av. 19 109 A30, Bogotá, Colombia
Class D1 and D3 shares Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Ordinary
Namibia
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
319
311
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
100
100
100
100
100
100
Percentage
holding
Name
Percentage
100
Old Mutual Wealth Business Services
holding
Name
Limited
Old Mutual Wealth Holdings Limited 100
100
Old Mutual Wealth Business Services
Limited
Old Mutual Wealth Life & Pensions
100
Old Mutual Wealth Holdings Limited 100
Limited
Old Mutual Wealth Life Assurance
Old Mutual Wealth Life & Pensions
Limited
Limited
Old Mutual Wealth Limited
Old Mutual Wealth Life Assurance
Limited
Old Mutual Wealth Management
Old Mutual Wealth Limited
Limited
Old Mutual Wealth Nominees Limited 100
100
Old Mutual Wealth Management
Limited
Old Mutual Wealth Pensions Trustee
100
Old Mutual Wealth Nominees Limited 100
Limited
Old Mutual Wealth Private Client
Old Mutual Wealth Pensions Trustee
Advisers Limited
Limited
Old Mutual Wealth Proprietary
Old Mutual Wealth Private Client
Limited
Advisers Limited
Old Mutual Wealth Services
Old Mutual Wealth Proprietary
Company Proprietary Limited
Limited
Old Mutual Wealth Trust Company
Old Mutual Wealth Services
(Pty) Ltd
Company Proprietary Limited
Old Mutual Wealth UK Holding
Old Mutual Wealth Trust Company
Limited
(Pty) Ltd
Old Mutual West Africa Company
Old Mutual Wealth UK Holding
Limited
Limited
Old Mutual Woodford Equity Income 100
100
Old Mutual West Africa Company
Limited
Old Mutual World Equity
Old Mutual Woodford Equity Income 100
100
100
100
100
100
100
100
100
100
100
100
100
37
Old Mutual Zimbabwe Dividend
Old Mutual World Equity
Access Trust
Old Mutual Zimbabwe Ltd
Old Mutual Zimbabwe Dividend
Access Trust
Old Mutual Zimbabwe Nominees
Old Mutual Zimbabwe Ltd
(Pvt) Ltd
OM Aberdeen Asia Pacific Fund
Old Mutual Zimbabwe Nominees
(Pvt) Ltd
OM Artemis Income Fund
OM Aberdeen Asia Pacific Fund
100
37
79
100
100
79
100
100
100
100
OM Artemis UK Special Situations
OM Artemis Income Fund
Fund
OM Asia Pacific Fund
OM Artemis UK Special Situations
Fund
OM Blackrock Gold & General Fund 100
OM Asia Pacific Fund
44
100
100
100
44
Shareholding
Ordinary
Shareholding
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Country of
incorporation
Country of
England & Wales
incorporation
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Held by OM plc
Ordinary
England & Wales
England & Wales
Ordinary
Held by OM plc
England & Wales
England & Wales
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
England & Wales
England & Wales
England & Wales
England & Wales
Republic of South Africa
England & Wales
Republic of South Africa
Republic of South Africa
England & Wales
Republic of South Africa
Nigeria
England & Wales
Accumulation
Ordinary
England & Wales
Nigeria
Hedged
Accumulation
England & Wales
England & Wales
Trust does not issue
Hedged
shares
Ordinary
Trust does not issue
shares
Ordinary
Ordinary
Zimbabwe
England & Wales
Zimbabwe
Zimbabwe
Zimbabwe
Zimbabwe
Accumulation
Ordinary
England & Wales
Zimbabwe
Accumulation
Accumulation
England & Wales
England & Wales
Accumulation
Accumulation
England & Wales
England & Wales
Accumulation
Accumulation
England & Wales
England & Wales
Accumulation
Accumulation
England & Wales
England & Wales
OM Bond 1 Fund
100
OM Blackrock Gold & General Fund 100
Income
Accumulation
England & Wales
England & Wales
OM Bond 2 Fund
OM Bond 1 Fund
OM Bond 3 Fund
OM Bond 2 Fund
OM Botswana Holdco Limited
OM Bond 3 Fund
OM Corporate Bond Fund
OM Botswana Holdco Limited
OM Equity 1 Fund
OM Corporate Bond Fund
OM Equity 2 Fund
OM Equity 1 Fund
OM Ethical Fund
OM Equity 2 Fund
100
100
100
100
100
100
50
100
100
50
100
100
62
100
Income and Accumulation England & Wales
England & Wales
Income
Income and Accumulation England & Wales
Income and Accumulation England & Wales
Ordinary
England & Wales
Income and Accumulation England & Wales
Income and Accumulation England & Wales
England & Wales
Ordinary
Accumulation
England & Wales
Income and Accumulation England & Wales
Accumulation
Accumulation
England & Wales
England & Wales
Accumulation
Accumulation
England & Wales
England & Wales
OM European Equity (ex UK) Fund
OM Ethical Fund
77
62
Accumulation
Accumulation
England & Wales
England & Wales
OM Fidelity Global Focus Fund
OM European Equity (ex UK) Fund
100
77
Accumulation
Accumulation
England & Wales
England & Wales
OM Fidelity Moneybuilder Income
OM Fidelity Global Focus Fund
Fund
OM Fidelity Strategic Bond Fund
OM Fidelity Moneybuilder Income
Fund
OM Fidelity Strategic Bond Fund
100
100
100
100
100
Income and Accumulation England & Wales
England & Wales
Accumulation
Income and Accumulation England & Wales
Income and Accumulation England & Wales
Income and Accumulation England & Wales
320
312
312
Registered Office Address
Old Mutual House, Portland Terrace, Southampton
Registered Office Address
SO14 7EJ
Old Mutual House, Portland Terrace, Southampton
Old Mutual House, Portland Terrace, Southampton
SO14 7EJ
SO14 7EJ
Old Mutual House, Portland Terrace, Southampton
Old Mutual House, Portland Terrace, Southampton
SO14 7EJ
SO14 7EJ
Old Mutual House, Portland Terrace, Southampton
Old Mutual House, Portland Terrace, Southampton
SO14 7EJ
SO14 7EJ
Old Mutual House, Portland Terrace, Southampton
Old Mutual House, Portland Terrace, Southampton
SO14 7EJ
SO14 7EJ
Old Mutual House, Portland Terrace, Southampton
Old Mutual House, Portland Terrace, Southampton
SO14 7EJ
SO14 7EJ
Old Mutual House, Portland Terrace, Southampton
Old Mutual House, Portland Terrace, Southampton
SO14 7EJ
SO14 7EJ
Old Mutual House, Portland Terrace, Southampton
Old Mutual House, Portland Terrace, Southampton
SO14 7EJ
SO14 7EJ
Millennium Bridge House, 2 Lambeth Hill, London
Old Mutual House, Portland Terrace, Southampton
EC4V 4GG
SO14 7EJ
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Old Mutual House, Portland Terrace, Southampton
Mutualpark, Jan Smuts Drive, Pinelands, 7405
SO14 7EJ
235 Ikorodu Rd, Illupeju, Lagos, Nigeria
Old Mutual House, Portland Terrace, Southampton
SO14 7EJ
Millennium Bridge House, 2 Lambeth Hill, London
235 Ikorodu Rd, Illupeju, Lagos, Nigeria
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Mutual Gardens, 100 The Chase West Emerald Hill,
Millennium Bridge House, 2 Lambeth Hill, London
Harare
EC4V 4GG
Mutual Gardens, 100 The Chase West Emerald Hill,
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Harare
Mutual Gardens, 100 The Chase West Emerald Hill,
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Harare
Millennium Bridge House, 2 Lambeth Hill, London
Mutual Gardens, 100 The Chase West Emerald Hill,
EC4V 4GG
Harare
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London,
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Name
OM Foundation 3 Fund
OM Foundation 4 Fund
OM Foundation 5 Fund
OM Generation Target 3 Fund
OM Generation Target 4 Fund
OM Generation Target 5 Fund
OM Gilt Fund
OM GLOBAL BALANCED FUND HY
A
OM Global Best Ideas Fund
Percentage
holding
Shareholding
Country of
incorporation
97
100
100
76
85
73
100
100
58
Income and Accumulation England & Wales
Income and Accumulation England & Wales
Income and Accumulation England & Wales
Income and Accumulation England & Wales
Income and Accumulation England & Wales
Income and Accumulation England & Wales
Income and Accumulation England & Wales
Class A shares
Republic of South Africa
Accumulation
England & Wales
OM GLOBAL EMERGING OP FUND 48
Class A shares
Ireland
OM Global Equity Income Fund
88
Income and Accumulation England & Wales
OM Global Property Securities Fund 73
Income and Accumulation England & Wales
OM Group (UK) Limited
OM Henderson China Opportunities
Fund
OM Henderson European Growth
Fund (was OM Henderson European
Fund)
OM Invesco Perpetual Asian Fund
OM Invesco Perpetual Corporate
Bond Fund
OM JPM Emerging Markets Fund
100
100
100
100
100
100
Ordinary
England & Wales
Accumulation
England & Wales
Accumulation
England & Wales
Accumulation
England & Wales
Income and Accumulation England & Wales
Accumulation
England & Wales
OM JPM Natural Resources Fund
99
Accumulation
England & Wales
OM Latin America Holdco UK Limited 100
Ordinary
England & Wales
OM Monthly Income Bond Fund
79
Income and Accumulation England & Wales
OM Newton Global Income Fund
100
Income and Accumulation England & Wales
OM North American Equity Fund
28
Accumulation
England & Wales
OM Portfolio Holdings (South Africa)
(Pty) Ltd
OM Portfolio Holdings Zimbabwe Ltd 100
100
Ordinary
Ordinary
Republic of South Africa
Zimbabwe
OM Schroder Tokyo Fund
100
Accumulation
England & Wales
OM Schroder US Mid Cap Fund
100
Income and Accumulation England & Wales
OM Threadneedle European Select
Fund
OM Threadneedle High Yield Bond
Fund
OM UK Equity Income Fund
OM UK Index Fund
OM Voyager Diversified Fund
OM Voyager Global Dynamic Equity
Fund
OM Voyager Strategic Bond Fund
OM World Index Fund
OM Zimbabwe Holdco Limited
100
100
67
100
99
96
94
100
100
OMAM Axiom Investments (Pty) Ltd 100
100
OMF (IOM) Limited
Accumulation
England & Wales
Income and Accumulation England & Wales
Income and Accumulation England & Wales
Accumulation
England & Wales
Accumulation
England & Wales
Accumulation
England & Wales
Income and Accumulation England & Wales
Accumulation
England & Wales
Ordinary
Ordinary
Ordinary
England & Wales
Republic of South Africa
Isle of Man
OMFS (GGP) Limited
100
Ordinary
England & Wales
Registered Office Address
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Russell Investments Ireland Limited, 78 Sir John
Rogerson’s Quay, Dublin 2, Ireland
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House 2, Lambeth Hill, London,
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
King Edward Bay House, King Edward Road Onchan
Isle of Man IM99 INU
Millennium Bridge House 2, Lambeth Hill, London,
EC4V 4GG
321
313
i
F
n
a
n
c
a
s
l
i
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Name
OMIFM LIMITED
Name
OMIFM LIMITED
OMIGSA Alternative Assets Trust
OMIGSA Alternative Assets Trust
OMIGSA Alternative Strategies plc
OMIGSA Alternative Strategies plc
OMIGSA Black Management Trust
OMIGSA Black Management Trust
OMIGSA Green Hands Trust
OMIGSA Green Hands Trust
OMIGSA Imfundo Trust
OMIGSA Imfundo Trust
OMIGSA INTERNATIONAL
PRIVATE EQUITY FUND OF
OMIGSA INTERNATIONAL
FUNDS I
PRIVATE EQUITY FUND OF
OMIGSA INTERNATIONAL
FUNDS I
PRIVATE EQUITY FUND OF
OMIGSA INTERNATIONAL
FUNDS II
PRIVATE EQUITY FUND OF
OMIGSA Management Company
FUNDS II
Limited
OMIGSA Management Company
OMIGSA Management Trust
Limited
OMIGSA Management Trust
OMIGSA New Retail Fund II Trust
OMIGSA New Retail Fund II Trust
OMLA Holdings Limited
OMLA Holdings Limited
OMP Africa Holdco Pty Ltd
Percentage
holding
Percentage
100
holding
100
100
100
100
100
100
100
100
100
100
100
99
99
100
100
100
100
100
100
100
100
100
100
100
100
OMP Africa Holdco Pty Ltd
100
OMP Africa Investment (Pty) Ltd
OMP Management Services (Pty) Ltd 100
100
OMP Africa Investment (Pty) Ltd
OMP SS1
100
OMP Management Services (Pty) Ltd 100
100
OMP SS1
100
OMP SS2
OMP SS2
OMP SS3
OMP SS3
OMP SS4
OMP SS4
OMP SS5
OMP SS5
OMPAI-NPIC Investments Ltd
100
100
100
100
100
100
100
100
100
OMPAI-NPIC Investments Ltd
OMPE Fund IV Co-Investment Trust 100
OMPE Fund IV Co-Investment Trust 100
OMPE Fund IV Executive Trust
100
100
OMPE Fund IV Executive Trust
OMQI Managed Alpha GP (Pty) Ltd 100
100
OMSA Broad-Based Employee
OMQI Managed Alpha GP (Pty) Ltd 100
Share Trust
100
OMSA Broad-Based Employee
OMSA Management Incentive Trust 100
Share Trust
OMSA Management Incentive Trust 100
OMW COSEC SERVICES LIMITED 100
OMW COSEC SERVICES LIMITED 100
Onrus Manor (Pty) Ltd
100
Pamela J Cum & Associates (Pty) Ltd 100
100
Onrus Manor (Pty) Ltd
Pembroke Quilter (Ireland) Nominees
100
Pamela J Cum & Associates (Pty) Ltd 100
Limited
100
Pembroke Quilter (Ireland) Nominees
100
Peoples Mortgage Ltd
Limited
100
Positive Solutions (Financial
100
Peoples Mortgage Ltd
Services) Limited
100
Positive Solutions (Financial
100
Premier Planning Limited
Services) Limited
Premier Planning Limited
Premier Wealth Limited
100
100
Premier Wealth Limited
Prestige College OPCO (RF) NPC
Prestige Deal Property Company
Prestige College OPCO (RF) NPC
(RF) Proprietary Limited
Prestige Deal Property Company
Private Equity Fund IV
(RF) Proprietary Limited
Private Equity Multi-Managed Fund
Private Equity Fund IV
Proclare (Pty) Ltd
Private Equity Multi-Managed Fund
Proclare (Pty) Ltd
100
100
50
100
50
94
100
94
100
100
100
Shareholding
ordinary
Shareholding
ordinary
Trust does not issue
shares
Trust does not issue
Ordinary
shares
Ordinary
Trust does not issue
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
Class A and B shares
shares
Class A and B shares
Class C and F shares
Class C and F shares
Ordinary
Ordinary
Trust does not issue
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
Ordinary
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Trust does not issue
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
Ordinary
shares
Trust does not issue
Ordinary
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
ordinary
shares
ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
ordinary
ordinary
ordinary
ordinary
Class B1 shares
Ordinary
Class B1 shares
Ordinary
one class of share
one class of share
one class of share
Class A and C shares
one class of share
Class A and C shares
Country of
incorporation
Country of
England & Wales
incorporation
England & Wales
Republic of South Africa
Republic of South Africa
Ireland
Ireland
Republic of South Africa
Republic of South Africa
Republic of South Africa
Registered Office Address
Millennium Bridge House, 2 Lambeth Hill, London,
Registered Office Address
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London,
Mutualpark, Jan Smuts Drive, Pinelands, 7405
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
New Century House, Mayor Street, International
Financial Services Centre, Dublin 1 Ireland
New Century House, Mayor Street, International
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Financial Services Centre, Dublin 1 Ireland
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Ireland
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Ashley House, Morehampton Road, Dublin 4, Ireland
Ireland
Ireland
Ireland
Ireland
Ashley House, Morehampton Road, Dublin 4, Ireland
Ashley House, Morehampton Road, Dublin 4, Ireland
Ashley House, Morehampton Road, Dublin 4, Ireland
78 Sir John Rogerso's Quay Dublin 2 D02 RK57
Ireland
Republic of South Africa
78 Sir John Rogerso's Quay Dublin 2 D02 RK57
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
England & Wales
England & Wales
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Mauritius
Republic of South Africa
Mauritius
Mauritius
Mauritius
Mauritius
Mauritius
Mauritius
Mauritius
Mauritius
Mauritius
Mauritius
Mauritius
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
England & Wales
England & Wales
Republic of South Africa
Republic of South Africa
Republic of South Africa
Ireland
Republic of South Africa
Ireland
Republic of South Africa
England & Wales
Republic of South Africa
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House 2, Lambeth Hill, London,
EC4V 4GG
Millennium Bridge House 2, Lambeth Hill, London,
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
EC4V 4GG
Cybercity, Ebene
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Cybercity, Ebene
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Cybercity, Ebene
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
Cybercity, Ebene
Cybercity, Ebene
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
Cybercity, Ebene
Cybercity, Ebene
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
Cybercity, Ebene
Cybercity, Ebene
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
Cybercity, Ebene
Cybercity, Ebene
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
Cybercity, Ebene
Cybercity, Ebene
c/o Abax Corporate Services Ltd, 6th Floor Tower A 1
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Cybercity, Ebene
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London,
135 Rivonia Road, Sandown, Sandton, 2196
EC4V 4GG
PO Box 1245, Northriding 2162
135 Rivonia Road, Sandown, Sandton, 2196
Hambledon House, 2nd Floor, 19/26 Lower Pembroke
PO Box 1245, Northriding 2162
Street, Dublin 2, Ireland
Hambledon House, 2nd Floor, 19/26 Lower Pembroke
135 Rivonia Road, Sandown, Sandton, 2196
Street, Dublin 2, Ireland
Riverside House, The Waterfront, Newcastle upon
135 Rivonia Road, Sandown, Sandton, 2196
Tyne NE15 8NY
Riverside House, The Waterfront, Newcastle upon
Millennium Bridge House, 2 Lambeth Hill, London
Tyne NE15 8NY
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
Millennium Bridge House, 2 Lambeth Hill, London
EC4V 4GG
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London
164 Nicolson Street, Brooklyn, Pretoria
EC4V 4GG
164 Nicolson Street, Brooklyn, Pretoria
164 Nicolson Street, Brooklyn, Pretoria
164 Nicolson Street, Brooklyn, Pretoria
Mutual Park, Jan Smuts Drive, Pinelands, 7405
Mutual Park, Jan Smuts Drive, Pinelands, 7405
Mutual Park, Jan Smuts Drive, Pinelands, 7405
135 Rivonia Road, Sandown, Sandton, 2196
Mutual Park, Jan Smuts Drive, Pinelands, 7405
135 Rivonia Road, Sandown, Sandton, 2196
322
314
314
Old Mutual plc Annual Report and Accounts 2017
Name
Pyraned (Pty) Ltd
QGCI Nominees Limited
QUILPEP Nominees Limited
Quilter Cheviot Holdings Limited
QUILTER CHEVIOT INVESTMENT
MANAGEMENT LIMITED
Quilter Cheviot Limited
QUILTER FINANCIAL PLANNING
LIMITED
Quilter Group Limited (was Cheviot
GP Limited)
QUILTER INTERNATIONAL
LIMITED
QUILTER INVESTORS LIMITED
QUILTER LIFE ASSURANCE
LIMITED
QUILTER LIMITED
100
100
100
100
100
100
100
Quilter Nominees Limited
QUILTER PRIVATE CLIENT
ADVISERS LIMITED
QUILTER WEALTH SOLUTIONS
LIMITED
Rainbow Beach Trading 180 (Pty) Ltd 100
100
100
100
Real Living Spaces (Pty) Ltd (RF)
50
RGP share Co Ltd
100
RIC OLD MUTUAL QUALITY
GLOBAL EQUITY FUND A
Richmond Park Development
Company (Pty) Ltd
Richmond Park Investments (Pty) Ltd 45
31
38
RM Insurance Holdings Ltd
RMB Holdings Ltd
Rodina Investments (Pty) Ltd
Royal Deal Operations Company
(RF) NPC
Royals Deal Property (RF) (Pty) Ltd
SA Quoted Property Fund
School and Education Grant Impact
Fund of South Africa NPC
Seaward Development (Pty) Ltd
Selcourt Housing Portfolio (RF) (Pty)
Ltd
Selestia Investments Limited
SIS Equity FoF
SIS Flexible Income FoF
SIS Inflation Matching
SIS Inflation plus 1 - 3
SIS Inflation plus 3 - 5
SIS International Flexible FoF
SIS Nominees (Pty) Ltd
SIS Property Equity FoF
92
100
100
100
100
58
100
100
100
100
34
37
39
32
38
48
100
33
Skandia Global Investments S.A.
94
Skandia UK Limited
100
SMK Genomineerdes (Edms) Bpk
100
Spectrum Nominees Ltd
Squarestone Growth LLP
100
64
Old Mutual plc
Annual Report and Accounts 2017
Percentage
holding
100
100
100
100
100
Shareholding
Class A and C shares
Ordinary
Ordinary
Ordinary
ordinary
Country of
incorporation
Republic of South Africa
Jersey
England & Wales
England & Wales
England & Wales
Ordinary
ordinary
Ordinary
ordinary
ordinary
ordinary
ordinary
Ordinary
ordinary
ordinary
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Class A, B1, B0 and B2
shares
Class A shares
Republic of South Africa
Republic of South Africa
Class A, A3, B1, B2, C
and R shares
Class A shares
Switzerland
Ireland
Ordinary
Ordinary
Republic of South Africa
Republic of South Africa
Zimbabwe
Jersey
Class B1, B2, C and R
shares
Class A1, B1, B2 and B3
shares
Ordinary & Redeemable
Preference Share
Ordinary
Class A1, B1, B2 and C
shares
Class A, B1, B2, B4, C and
C3 shares
Class A and C shares
Republic of South Africa
Republic of South Africa
Republic of South Africa
Class A, B and C shares Republic of South Africa
Republic of South Africa
Ordinary
Ordinary
England & Wales
Class B6 shares
Republic of South Africa
Class B6 shares
Republic of South Africa
Class B shares
Class B shares
Class B shares
Class B6 and R share
class
Class A, B and C shares Republic of South Africa
Republic of South Africa
Class B6 shares
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Class A2, B2 and R
shares
Class B1 and B2 shares
Colombia
England & Wales
Republic of South Africa
Class A, B1, B3, B5 and C
shares
Class A, B1, B2, C and R
shares
Members Interest in the
limited liability partnership
323
315
Registered Office Address
135 Rivonia Road, Sandown, Sandton, 2196
4th Floor 28/30 The Parade St Helier Jersey JE2 3QQ
One Kingsway, London WC2B 6AN
One Kingsway, London WC2B 6AN
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
One Kingsway, London WC2B 6AN
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
One Kingsway, London WC2B 6AN
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
One Kingsway, London WC2B 6AN
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
Mutualpark, Jan Smuts Drive, Pinelands, 7405
C/O Old Mutual Alternative I, Mutual Park Jan Smuts
Drive, Pinelands, Western Cape, 7405
Cours de Rive 14, 1204 Genève
Russell Investments Ireland Limited, 78 Sir John
Rogerson’s Quay, Dublin 2, Ireland
Die Klubhuis, Cnr 18th Street and Pinnaster Avenue,
Hazelwood, Gauteng, 0082
Die Klubhuis, Cnr 18th Street and Pinnaster Avenue,
Hazelwood, Gauteng, 0081
Mutual Gardens, 100 The Chase West Emerald Hill,
Harare
Po Box 51, 57 Bath Street, St Helier, JE4 0XP
i
F
n
a
n
c
a
s
l
i
310 W F Nkomo Street, Pretoria, Gauteng Province,
Gauteng, 0002
Mutualpark, Jan Smuts Drive, Pinelands, 7405
OMIGSA Building, West Campus 2, Jan Smuts Drive,
Pinelands 7406
135 Rivonia Road, Sandown, Sandton, 2196
Unit 205, 2nd Floor, De Jonker Centre, Morkel Street,
Mostertsdrift, Stellenbosch, 7600
Old Mutual House, Portland Terrace, Southampton
SO14 7EJ
6th Floor, The Terraces, 25 Protea Road, Claremont,
7735
6th Floor, The Terraces, 25 Protea Road, Claremont,
7735
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
6th Floor, The Terraces, 25 Protea Road, Claremont,
7735
Mutualpark, Jan Smuts Drive, Pinelands, 7405
6th Floor, The Terraces, 25 Protea Road, Claremont,
7735
Av. 19 109 A30, Bogotá, Colombia
Millennium Bridge House 2, Lambeth Hill, London,
EC4V 4GG
135 Rivonia Road, Sandown, Sandton, 2196
Guernsey
Fairbairn House, Rohais, St Peter Port
England & Wales
5th Floor, Standbrook House, 2-5 Old Bond Street,
London, United Kingdom 1S4PD
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Percentage
holding
Percentage
100
holding
100
100
100
-
100
-
100
100
100
100
100
50
50
100
100
100
100
100
Name
Strategic Implementation Services
Name
Administration (Pty) Ltd
Strategic Implementation Services
Strategic Investment Services Life
Administration (Pty) Ltd
Company Limited
Strategic Investment Services Life
Strategic Investment Services
Company Limited
Management Company Limited
Strategic Investment Services
Sustainable Housing Investment (RF)
Management Company Limited
(Pty) Ltd
Sustainable Housing Investment (RF)
Syfrets Ltd
(Pty) Ltd
Syfrets Mortgage Nominees (RF)
Syfrets Ltd
(Pty) Ltd
Syfrets Mortgage Nominees (RF)
Syfrets Nominees Ltd
(Pty) Ltd
Syfrets Nominees Ltd
Syfrets Participation Bond Managers
(Pty) Ltd
100
Syfrets Participation Bond Managers
100
Syfrets Property Brokers (Pty) Ltd
(Pty) Ltd
100
Syfrets Securities Ltd
100
Syfrets Property Brokers (Pty) Ltd
100
Syfrets Securities Ltd
Syfrets Securities Nominees (Pty) Ltd 100
Syfrets Trust & Executor (Eastern
100
Syfrets Securities Nominees (Pty) Ltd 100
Cape) Ltd
100
Syfrets Trust & Executor (Eastern
100
Syfrets Trust & Executor
Cape) Ltd
(Grahamstown) Co. Ltd
Syfrets Trust & Executor
Synthesis Funding Ltd
(Grahamstown) Co. Ltd
Synthesis Funding Ltd
Telle Investments (Pty) Ltd
100
100
Telle Investments (Pty) Ltd
The Board of Executors
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
The Board of Executors
The Board of Executors Mortgages
(Pty) Ltd
The Board of Executors Mortgages
The C.O.C. Trust Company Ltd
(Pty) Ltd
The C.O.C. Trust Company Ltd
The Colonial Orphan Chamber &
Trust Company
The Colonial Orphan Chamber &
The Correlation Fund (Pty) Ltd
Trust Company
The Correlation Fund Trust
The Correlation Fund (Pty) Ltd
The Correlation Fund Trust
The General Estate & Orphan
Chamber
The General Estate & Orphan
The Kirkney Securitisation Owner
Chamber
Trust
The Kirkney Securitisation Owner
The Masisizane Fund
Trust
The Motor Finance Corporation (Pty)
The Masisizane Fund
Ltd
The Motor Finance Corporation (Pty)
The Mutual & Federal Black Broker
Ltd
Trust
The Mutual & Federal Black Broker
The Mutual & Federal Community
Trust
Trust
The Mutual & Federal Community
The Mutual & Federal Management
Trust
Incentive Trust
The Mutual & Federal Management
The Mutual & Federal Namibia
Incentive Trust
Discretionary Trust
The Mutual & Federal Namibia
The Mutual & Federal Namibia
Discretionary Trust
Management Incentive Trust
The Mutual & Federal Namibia
The Mutual & Federal Namibia Senior
Management Incentive Trust
Black Management Trust
The Mutual & Federal Namibia Senior
The Mutual & Federal Senior Black
Black Management Trust
Management Incentive Trust
The Mutual & Federal Senior Black
The Old Mutual (South Africa)
Management Incentive Trust
Foundation
The Old Mutual (South Africa)
The Old Mutual Black Distributors
Foundation
Trust
The Old Mutual Black Distributors
The Old Mutual Education Trust
Trust
100
The Old Mutual Education Trust
100
The South African Association
100
Thembokwesi SPV (Pty) Ltd
100
The South African Association
100
Think Synergy Limited
100
Thembokwesi SPV (Pty) Ltd
100
Think Synergy Limited
Toontjiesrivier Landgoed (Edms) Bpk 100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Shareholding
Ordinary
Shareholding
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Country of
incorporation
Country of
Republic of South Africa
incorporation
Republic of South Africa
Republic of South Africa
Registered Office Address
Mutual Park Jan Smuts Drive, Pinelands, 7405
Registered Office Address
Mutual Park Jan Smuts Drive, Pinelands, 7405
Mutual Park Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Mutual Park Jan Smuts Drive, Pinelands, 7405
Mutual Park Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Mutual Park Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Republic of South Africa
Ordinary
Class B1 and B3 shares Republic of South Africa
Class B1, B2 and B3
Republic of South Africa
Class B1 and B3 shares Republic of South Africa
shares
Republic of South Africa
Class B1, B2 and B3
Republic of South Africa
Class B1, B2 and B3
shares
shares
Class B1, B2 and B3
Class B1, B2 and B3
shares
shares
Republic of South Africa
Class B1, B2 and B3
Class B1 and B2 shares Republic of South Africa
shares
Class B1, B2 and B3
Republic of South Africa
Class B1 and B2 shares Republic of South Africa
shares
Republic of South Africa
Class B1, B2 and B3
Class B1 and B2 shares Republic of South Africa
shares
Class B1, B2 and B3
Republic of South Africa
Class B1 and B2 shares Republic of South Africa
shares
Republic of South Africa
Class B1, B2 and B3
Class B1 and B2 shares Republic of South Africa
shares
Class B1 and B2 shares Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
138 Rivonia Road, Sandown, Sandton, 2196
Class A, B1, B2 and C
shares
Class A, B1, B2 and C
Class A, B1, B2, B4, C and
shares
C3 shares
Class A, B1, B2, B4, C and
Class A, B1, B2, B3 and C
C3 shares
shares
Class A, B1, B2, B3 and C
Class A, A12 and B1
shares
shares
Class A, A12 and B1
Class C and L shares
shares
Class C and L shares
Class A shares
Trust does not issue
Class A shares
shares
Trust does not issue
Class C and F shares
shares
Class C and F shares
Trust does not issue
shares
Trust does not issue
one class of share
shares
Ordinary
one class of share
Ordinary
Trust does not issue
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
Trust does not issue
shares
shares
Trust does not issue
Ordinary
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Republic of South Africa
Republic of South Africa
138 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Namibia
Namibia
Namibia
Namibia
Namibia
Namibia
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
Maitland House 1, River Park, Gloucester Road,
Mowbray, Cape Town 7700
Maitland House 1, River Park, Gloucester Road,
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mowbray, Cape Town 7700
135 Rivonia Road, Sandown, Sandton, 2196
Mutualpark, Jan Smuts Drive, Pinelands, 7405
135 Rivonia Road, Sandown, Sandton, 2196
Mutual & Federal Centre, 75 President Street,
Johannesburg
Mutual & Federal Centre, 75 President Street,
Mutual & Federal Centre, 75 President Street,
Johannesburg
Johannesburg
Mutual & Federal Centre, 75 President Street,
Mutual & Federal Centre, 75 President Street, JHB
Johannesburg
Mutual & Federal Centre, 75 President Street, JHB
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
11th Floor Mutual Tower 223 Independence Avenue
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Windhoek
11th Floor Mutual Tower 223 Independence Avenue
11th Floor Mutual Tower 223 Independence Avenue
Windhoek
Windhoek
11th Floor Mutual Tower 223 Independence Avenue
Mutual & Federal Centre, 75 Helen Joseph Street,
Windhoek
Johannesburg
Mutual & Federal Centre, 75 Helen Joseph Street,
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Johannesburg
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
England & Wales
Republic of South Africa
England & Wales
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands, 7405
135 Rivonia Road, Sandown, Sandton, 2196
Mutualpark, Jan Smuts Drive, Pinelands, 7405
135 Rivonia Road, Sandown, Sandton, 2196
Riverside House, The Waterfront, Newcastle upon
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Tyne NE15 8NY
Riverside House, The Waterfront, Newcastle upon
135 Rivonia Road, Sandown, Sandton, 2196
Tyne NE15 8NY
135 Rivonia Road, Sandown, Sandton, 2196
Toontjiesrivier Landgoed (Edms) Bpk 100
Ordinary
Republic of South Africa
324
316
316
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Country of
incorporation
Republic of South Africa
Registered Office Address
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Name
Top Companies Fund
Percentage
holding
41
Triangle Real Estate India Fund
99
Shareholding
Class A, B1, B2, C and R
shares
Ordinary
UAM UK Holdings Limited
UAP Africa Limited
100
100
Ordinary
Ordinary
UAP Credit Services Limited (Kenya) 100
Ordinary
UAP Financial Services Limited
94
UAP Global Services Ltd
UAP Holdings Limited
100
61
Ordinary
Ordinary
Ordinary
UAP Insurance Company Limited
100
Ordinary
Mauritius
Scotland
Mauritius
Kenya
Uganda
Mauritius
Kenya
Kenya
UAP Insurance Rwanda Limited
100
Ordinary
Rwanda
UAP Insurance South Sudan Limited 100
Ordinary
South Sudan
UAP Insurance Tanzania Limited
100
Ordinary
Tanzania
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
ordinary
Ordinary
Kenya
Kenya
Uganda
Uganda
Kenya
Mauritius
South Sudan
Uganda
Kenya
Republic of South Africa
Republic of South Africa
Republic of South Africa
England & Wales
Republic of South Africa
Trust : No shares issued Republic of South Africa
Ordinary
Nigeria
UAP Investments Limited
UAP Life Assurance Limited
100
100
UAP Life Assurance Uganda Limited 53
UAP Old Mutual Insurance Uganda
Ltd
UAP Properties Kenya Limited
UAP Properties Limited
UAP Properties Limited (South
Sudan)
UAP Properties Limited (Uganda)
UAP Trust Corporation
Urban Impact Properties Limited
Uvest Housing Portfolio 2 (RF)
Proprietary Limited
Villager Investments No. 1 (Pty) Ltd
VIOLET NO.2 LIMITED
Visigro Investments (Pty) Ltd
Weekend Trust
WEST AFRICAN
INFRASTRUCTURE INVESTMENT
MANAGERS LIMITED
Win Twice Properties (Pty) Ltd
Winter Breeze Investment Holding
Company (Pty) Ltd
ZLE Developments (Pty) Ltd
53
100
100
70
100
100
100
100
100
100
100
100
83
97
100
50
1 Held directly by the Company
c/o Abax Corporate Services Ltd, Level 6, One
Cathedral Square Building, Jules Koenig Street, Port
Louis, Mauritius
Quartermile Two, 2 Lister Square, Edinburgh,
Midlothian, EH3 9GL
2nd Floor, The AXIS, 26 Bank Street, Cybercity, Ebene
72201
Bishops Garden Towers 7th Floor Bishops Road P.O.
Box 43013 – 00100
Nakawa Business Park, 6th Floor, Plot 3 – 5, New
Portbell Road; P.O. Box 1610, Kampala
2nd Floor, The AXIS, 26 Bank Street, Cybercity, Ebene
72201, Mauritius
Bishops Garden Towers 8th Floor Bishops Road; P.O.
Box 43013 – 00100
Bishops Garden Towers, 7th Floor, Bishops Road; P.O.
Box 43013 – 00100
Grand Pension Plaza, 7th Floor BP 6644 Kigali
Rwanda
UAP Plaza, Hai Cinema Opposite Al-Sabah Children
Hospital P.O. Box 201 Juba
Barclays House, 4th Floor, Ohio Street; P.O. Box
71009, Dar es Salaam
3rd Floor I&M Building, 2nd Ngong Avenue, Nairobi,
Kenya
Bishops Garden Towers Mezzanine Floor Bishops
Road P.O. Box 23842 – 00100
Nakawa Business Park
6th Floor Plot 3 – 5, New Portbell Road P.O. Box 1610,
Kampala
Plot 1, Kimathi Avenue P.O. Box 7185 Kampala
Uganda Tel. +256 414 332 700
Bishops Garden Towers 7th Floor Bishops Road P.O.
Box 30165 – 00100
C/o Axis Fiduciary Ltd, 2nd Floor, The AXIS, 26
Cybercity, Ebene 72201, Mauritius
UAP Plaza, Hai Cinema Opposite Al-Sabah Children
Hospital P.O. Box 201 Juba
Plot 1, Kimathi Avenue P.O. Box 7185 Kampala
Uganda
Bishops Garden Towers 7th Floor Bishops Road P.O.
Box 43013 – 00100
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Madison Square, 5th Floor, 4 Howick Close, Corner Bill
Bezuidenhout Avenue & Carl Cronje Avenue
135 Rivonia Road, Sandown, Sandton, 2196
Millennium Bridge House, 2 Lambeth Hill, London,
EC4V 4GG
Haumann Rodger, Shiraz House, The Vineyards Office
Estate, 99 Jip De Jager Road, Bellville, 7536
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Heritage Place (7th Floor), 21 Lugard Road, Ikoyi,
Lagos
i
F
n
a
n
c
a
s
i
l
Ordinary
Ordinary
Republic of South Africa
Republic of South Africa
Illovo Edge - 3rd Floor Building 3, Cnr Harries And
Fricker Roads, Illovo,
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Ordinary & preference
Republic of South Africa
Tygervalley Chambers Four, 2nd Floor, 27 Willie van
Schoor drive, Bellville, Western cape 7530
325
317
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
(b) Investments in associated undertakings
The table below sets out the Group's investments in associated undertakings and entities where the Company directly or indirectly owns at
least 20% of the voting rights. All shares are held indirectly by the Company (unless indicated).
(b) Investments in associated undertakings
The table below sets out the Group's investments in associated undertakings and entities where the Company directly or indirectly owns at
least 20% of the voting rights. All shares are held indirectly by the Company (unless indicated).
Name
169 On Main (Pty) Ltd
Shareholding
Ordinary
Percentage
holding
50
Percentage
holding
49
50
13
49
Name
2 Oceans School Property Company
169 On Main (Pty) Ltd
(Pty) Ltd
360 dot net Limited
2 Oceans School Property Company
(Pty) Ltd
ACED Great Karoo Wind Farm (Pty)
360 dot net Limited
Ltd
Aquarella Investments 509 (Pty) Ltd 28
40
ACED Great Karoo Wind Farm (Pty)
Ltd
Aquarella Investments 509 (Pty) Ltd 28
Bea Ned (Pty) Ltd
50
29
Bond Choice (Pty) Ltd
40
13
Bea Ned (Pty) Ltd
Campuskey (Pty) Ltd
Bond Choice (Pty) Ltd
Cape Commodities Traders and
Investors 9 (Pty) Ltd
Campuskey (Pty) Ltd
Capricorn Business and Technology
Cape Commodities Traders and
Park (Pty) Ltd
Investors 9 (Pty) Ltd
Circlevest Securitisation (RF) (Pty)
Capricorn Business and Technology
Ltd
Park (Pty) Ltd
Commercial Property Investments
Circlevest Securitisation (RF) (Pty)
(Pty) Ltd
Ltd
Comsol Networks (Pty) Ltd
Commercial Property Investments
(Pty) Ltd
Consep Developments (Pty) Ltd
Comsol Networks (Pty) Ltd
50
20
29
35
20
33
35
22
33
50
22
25
50
31
25
40
31
43
40
40
CRD Management Company (Pty)
Consep Developments (Pty) Ltd
Ltd
Crossroads Distribution (Pty) Ltd
CRD Management Company (Pty)
Datacraft Americas Trading Ltd
Ltd
(Bermuda)
Crossroads Distribution (Pty) Ltd
Datacraft Mexico SA de CV
Datacraft Americas Trading Ltd
(Bermuda)
DM10 Corretora de Seguros e
Datacraft Mexico SA de CV
Assessoria LTDA. EPP
Ecobank Transnational Incorporated 21
20
DM10 Corretora de Seguros e
40
Edinvest Schools Propco (RF) (Pty)
Assessoria LTDA. EPP
Ltd
Ecobank Transnational Incorporated 21
21
Entersekt (Pty) Ltd
40
Edinvest Schools Propco (RF) (Pty)
Ltd
Entersekt International Ltd
Entersekt (Pty) Ltd
43
30
40
20
30
21
21
Eveready (Pty) Ltd
Entersekt International Ltd
Farm Bothasfontein (Kyalami) (Pty)
Ltd
Eveready (Pty) Ltd
Friedshelf 1168 (Pty) Ltd
Farm Bothasfontein (Kyalami) (Pty)
Friedshelf 1514 (Pty) Ltd
Ltd
Gateway Central Park (Pty) Ltd
Friedshelf 1168 (Pty) Ltd
Gateway Park Avenue (Pty) Ltd
Friedshelf 1514 (Pty) Ltd
Golddurb Investments (Pty) Ltd
Gateway Central Park (Pty) Ltd
Gateway Park Avenue (Pty) Ltd
Golden Pond Trading 350 (Pty) Ltd
Golddurb Investments (Pty) Ltd
Hazeldean Retreat (Pty) Ltd
Golden Pond Trading 350 (Pty) Ltd
Ideal Infinity Services (Pty) Ltd
Hazeldean Retreat (Pty) Ltd
Iliza Elitsha JV Co (Pty) Ltd
Ideal Infinity Services (Pty) Ltd
Iliza Elitsha JV Co (Pty) Ltd
20
21
30
20
36
30
40
30
36
45
40
25
30
45
20
25
20
20
20
20
33
20
33
Shareholding
Preference
Ordinary
Ordinary
Preference
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Quotas
Ordinary
Ordinary
Quotas
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Registered Office Address
1st Floor Suite 101, Mill Square Offices, 12 Plein Street,
Stellenbosch 7599
Registered Office Address
19 Queen Bess Road, Lansdowne, Cape Town
1st Floor Suite 101, Mill Square Offices, 12 Plein Street,
Stellenbosch 7599
12-14 Upper Marlborough Road, St Albans,
19 Queen Bess Road, Lansdowne, Cape Town
Hertfordshire AL1 3UR
2nd Floor, Fernwood House The Oval, 1 Oakdale
12-14 Upper Marlborough Road, St Albans,
Road, Newlands, Cape Town, 7700
Hertfordshire AL1 3UR
Suite 415 1st Floor Block 4, Island Office Park, 35-37
2nd Floor, Fernwood House The Oval, 1 Oakdale
Island Circle, Riverhorse Valley East, Kwa-Zulu Natal,
Road, Newlands, Cape Town, 7700
4017
Suite 415 1st Floor Block 4, Island Office Park, 35-37
4th Floor, 151 Musgrave Road, Durban, 4001
Island Circle, Riverhorse Valley East, Kwa-Zulu Natal,
3rd Floor Bond Choice Building, 2 Silverton Road,
4017
Musgrave, Durban, 4001
4th Floor, 151 Musgrave Road, Durban, 4001
2 Groeneweide Street, Stellenbosch 7600
3rd Floor Bond Choice Building, 2 Silverton Road,
Legacy House, 5 Autumn Street, Rivonia 2128
Musgrave, Durban, 4001
2 Groeneweide Street, Stellenbosch 7600
87 Capricorn Boulevard, Capricorn Park, Muizenberg,
Legacy House, 5 Autumn Street, Rivonia 2128
Western Cape 7945
Emwil house West, 15 Pony Street, Tijgervallei Office,
87 Capricorn Boulevard, Capricorn Park, Muizenberg,
Silver Lakes, 0081
Western Cape 7945
Stratway Office Park, 5th Block 1st Floor Valley Road,
Emwil house West, 15 Pony Street, Tijgervallei Office,
Broadacres Gauteng 2012
Silver Lakes, 0081
152 Roan Crescent Corporate Park North Midrand
Stratway Office Park, 5th Block 1st Floor Valley Road,
1862
Broadacres Gauteng 2012
Unilong House, Cnr Georginia & Paul Kruger St,
152 Roan Crescent Corporate Park North Midrand
Horizon, Roodepoort, 1724
1862
6 Goodenough Avenue Epping 2 Goodwood, 7460
Unilong House, Cnr Georginia & Paul Kruger St,
Horizon, Roodepoort, 1724
6 Goodenough Avenue Epping 2 Goodwood, 7460
6 Goodenough Avenue Epping 2 Goodwood, 7460
Milner House, 18 Parliament Street, Hamilton,
Bermuda
6 Goodenough Avenue Epping 2 Goodwood, 7460
Av Insurgentes, Sur 1106, 11 Piso, Nochebuena 03720
Milner House, 18 Parliament Street, Hamilton,
Mexico D.F.
Bermuda
Avenida José Silva de Azevedo Neto, Nº 200, Bolco
Av Insurgentes, Sur 1106, 11 Piso, Nochebuena 03720
04, sala 308, Barra da Tijuuca, Rio de Janeiro
Mexico D.F.
2365 Boulevard du Mono, Lome, Republic of Togo
Avenida José Silva de Azevedo Neto, Nº 200, Bolco
7 - 8 Bronzite Building, Abrey Eco Park, 5 Abrey Road,
04, sala 308, Barra da Tijuuca, Rio de Janeiro
Kloof, KZN, 3610
2365 Boulevard du Mono, Lome, Republic of Togo
Entersekt House 6 Electron Street Technopark
7 - 8 Bronzite Building, Abrey Eco Park, 5 Abrey Road,
Stellenbosch 7600
Kloof, KZN, 3610
Intercontinental Trust Level 3, Alexaner House 35
Entersekt House 6 Electron Street Technopark
Cybercity Ebene Mauritius 72201
Stellenbosch 7600
30 Bird street, Central, Port Elizabeth, 6001
Intercontinental Trust Level 3, Alexaner House 35
Gatehouse, Kyalami Grand Prix Circuit, Allandate and
Cybercity Ebene Mauritius 72201
Kyalami Main Road, Midrand, 1683
30 Bird street, Central, Port Elizabeth, 6001
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Gatehouse, Kyalami Grand Prix Circuit, Allandate and
6 Goodenough Avenue Epping 2 Goodwood, 7460
Kyalami Main Road, Midrand, 1683
6 Beverley Drive, Westville, 3629
Mutualpark, Jan Smuts Drive, Pinelands, 7405
6 Beverley Drive, Westville, 3629
6 Goodenough Avenue Epping 2 Goodwood, 7460
94 Regency Drive, Cnr Soverein & Regency Drive,
6 Beverley Drive, Westville, 3629
Route 21 Corporate Park, Irene 0062
6 Beverley Drive, Westville, 3629
1st Floor Northern Entrance, 24 Richefond Circle,
94 Regency Drive, Cnr Soverein & Regency Drive,
Ridgeside Office Park, Umhlance Rocks 4319
Route 21 Corporate Park, Irene 0062
1st Floor, Gleneagles Building, Fairway Office Park, 52
1st Floor Northern Entrance, 24 Richefond Circle,
Grosvenor Road, Bryanston, 2021
Ridgeside Office Park, Umhlance Rocks 4319
33 Ashford Road, Parkwood, Johannesburg 2193
1st Floor, Gleneagles Building, Fairway Office Park, 52
Abcon House, Fairway Office Park 52 Grosvenor Road
Grosvenor Road, Bryanston, 2021
Bryanston, Bryanston, 2021.
33 Ashford Road, Parkwood, Johannesburg 2193
Abcon House, Fairway Office Park 52 Grosvenor Road
Bryanston, Bryanston, 2021.
Country of
incorporation
Republic of South Africa
Country of
incorporation
Republic of South Africa
Republic of South Africa
England & Wales
Republic of South Africa
Republic of South Africa
England & Wales
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Bermuda
Republic of South Africa
Mexico
Bermuda
Brazil
Mexico
Togo
Brazil
Republic of South Africa
Togo
Republic of South Africa
Republic of South Africa
Mauritius
Republic of South Africa
Republic of South Africa
Mauritius
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
326
318
318
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Percentage
holding
24
Shareholding
Ordinary
Name
Imbumba Aganang Private Party
(Pty) Limited
Isegen South Africa (Pty) Ltd
45
27
33
49
23
20
35
Izwe Loans Securitisation (Pty) Ltd
Klein Steenberg (Pty) Ltd
Lulama Property Management (Pty)
Ltd (in deregistration)
Main Street 1457 (Pty) Ltd
Manappu Investments (Pty) Ltd
Masingita Property Investment
Holdings (Pty) Ltd
Mercury Administrator and
Underwriter Agency (Pty) Ltd
Merx Underwriting Managers (Pty)
Ltd
NamClear (Pty) Ltd
25
Nedbank Mogale ESD (Pty) Ltd SPV 49
35
Nedglen Property Developments
(Pty) Ltd
Northants Property Enterprises (Pty)
Ltd
Nxuba Wind Farm (RF) (Pty) Ltd
50
40
49
25
Odyssey Developments (Pty) Ltd
Off The Shelf Investments Forty One
(Pty) Ltd
Old Mutual Trust (Namibia) LTD
Old Mutual US Dollar Money Market
Fund
Olievenhout Plaza (Pty) Ltd
Onyx Developments (Pty) Ltd
Oukraal Developments (Pty) Ltd
49
33
50
50
25
50
30
Pacific Eagle Properties 13 (Pty) Ltd 25
Payments Association of Lesotho Ltd 20
Pearldale Property Developers (Pty)
Ltd
Platin Underwriting Managers (Pty)
Ltd
Positivo (Pty) Ltd
35
40
30
Povimix (Pty) Ltd
30
Pro-Active Health Solutions (Pty) Ltd 38
QCP1 Investments (Pty) Ltd
Quintado 126 (Pty) Ltd
Raiden Investments (Pty) Ltd
30
25
40
Real People Home Improvement
Finance (Pty) Ltd
Rejem Linton One (Pty) Ltd
40
Robow Investments No 47 (Pty) Ltd 50
25
RSPCE Devco (Pty) Ltd
RZT Zelby 4558 (Pty) Ltd
S.B.V. Services (Pty) Ltd
Schools and Education Investment
Impact Fund of South Africa
30
35
25
20
Sethekgo Private Party (RF) (Pty)
Limited
Setsing Financial Services (Pty) Ltd
35
49
Seventy Five on Maude (Pty) Ltd
Silver Meadow Trading 255 (Pty) Ltd 40
35
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Trust does not issue
shares
i
F
n
a
n
c
a
s
l
i
Country of
incorporation
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Registered Office Address
79 Hyde Lane, First Floor, South Block, Hyde Park,
2196
284 Refinery Road, Sapref Park, isipingo,Kwazulu
Natal, 4110
9 Wellington Road, Parktown, 2193
30 Bird Street, Central, Port Elizabeth
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Republic of South Africa
Republic of South Africa
Republic of South Africa
20 Anvil Road Isando Johannesburg 1609
33 Ashford Road, Parkwood, Johannesburg 2193
4 Wabord Road, Parktown, Johannesburg 2193
Republic of South Africa
19&21 Totius Str, Potchefstroom2531
Republic of South Africa
31 E Riley Road, Bedfordview
Namibia
Republic of South Africa
Republic of South Africa
Republic of South Africa
c/o Deloitte and Touche, PO Box 47, Windhoek
135 Rivonia Road, Sandown, Sandton, 2196
Mazars House, Rialto Road, Grand Moorings Precinct,
Century City, 7441
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
Republic of South Africa
Republic of South Africa
Namibia
Mauritius
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Lesotho
Republic of South Africa
2nd Floor, Fernwood House, The Oval, 1 Oakdale
Road, Newlands, 7700
La Rocca Office Park, Block B 1st Floor, C/O main and
Petunia Road, Byranston 2191
The President Office Suites, 4 Alexander Road Bantry
Bay, Cape Town, WC 8001
12-20 Dr Frans Indongo Str, Windhoek, Namibia
NTS Office, Level 5, Barkly Wharf, Caudan Waterfront,
Port Louis, Mauritius / C/o NTS Office, 5th Floor Barkly
Wharf, Caudan Waterfront, Port Louis, Mauritius
Sokatumi Estate, Leyden Avenue, Clubview Centurion,
Gauteng, 0157
Mazars House, Rialto Road, Grand Moorings Precinct,
Century City 7441
Abcon House, Fairway Office Park 52 Grosvenor Road
Bryanston, Bryanston, 2021.
Ridgeside Campus, 2 Ncondo Place, Umhlanga, 4320
Central Bank of Lesotho, P.O.Box 1184, Corner Airport
and Moshoeshoe Roads, Maseru 100, Lesotho
46 Main Road, Bergvleit, 7945
Republic of South Africa
152 Bryanston Drive, Sandton, 2191
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Suite 9C Waterkloof Rand Shopping C, C/R Rigel
Avenue and Buffeldrift ST, Erasmusrand, Gauteng,
0181 37 Third street, Delmas,2210
323 Lynnwood Road, Menlo Park 0081
1st Floor, Block A, Upper Grayston Office Park,
150 Linden Road, 2031
Ground Floor Douglas Murray House, 18 Protea Road,
Claremont, Western Cape, 7708.
1st Floor Suite 101, Mill Square Offices, 12 Plein Street,
Stellenbosch 7599
Unit B, 3rd Floor, 20 The Piazza, Melrose Arch, Atholl
Oaklands Road, Melrose North, Johannesburg, 2196
Real People Views, 12 Esplanade Road, Quigney,
East London 5201
7 Danie Theron Street, Alberante Ext, Alberton, 1449
1st Floor, North Wing, Nedbank Clock Tower, V&A
Waterfront, 8001
26 Charles De Gaulle Street, The Greens Office Park,
Highveld, Gauteng, 0157
5th Floor, The Spinnaker, Albert Terrace, Durban
Sbv House,Corner Of 11th Avenue & 8th Street,
Houghton,2198, Jhb
Old Mutual Investment Group (South Africa)
(Proprietary) Limited, Mutual Park, Jan Smuts Drive,
Pinelands, 7405 Cape Town
10 Fricker Road, Illovo Boulevard, Illovo, 2196
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Legacy House, 5 Autumn Street, Rivonia
Inframax House, Sunrise Park, Prestige Drive, Sunrise
Circle, Ndabeni, 7405
327
319
Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Group financial statements
Group financial statements
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Percentage
holding
Name
40
Skynet South Africa (Pty) Ltd
Percentage
23
South African Bankers Services
holding
Name
Company Ltd
40
Skynet South Africa (Pty) Ltd
South African Roll Company (Pty) Ltd 50
23
South African Bankers Services
Stay at South Point Properties (Pty)
15
Company Ltd
Ltd
South African Roll Company (Pty) Ltd 50
33
Stella SGS Investments (Pty) Ltd
15
Stay at South Point Properties (Pty)
Swaziland Royal Insurance Corp
16
Ltd
Ten Kaiser Wilhelm Strasse (Pty) Ltd 50
33
Stella SGS Investments (Pty) Ltd
The Heron Banks Development Trust 50
16
Swaziland Royal Insurance Corp
Ten Kaiser Wilhelm Strasse (Pty) Ltd 50
The Waterbuck Trust
40
The Heron Banks Development Trust 50
20
The Woodlands Property Trust
27
UFFM Management (Pty) Ltd
40
The Waterbuck Trust
Walvis Bay Land Syndicate (Pty) Ltd 50
20
The Woodlands Property Trust
98
Whirlprops 33 (Pty) Ltd
27
UFFM Management (Pty) Ltd
Winelands Business Park (Pty) Ltd
40
Walvis Bay Land Syndicate (Pty) Ltd 50
98
Whirlprops 33 (Pty) Ltd
33
Women Investment Portfolio
40
Winelands Business Park (Pty) Ltd
Holdings Ltd
1 Held directly by the Company
Women Investment Portfolio
Holdings Ltd
33
Shareholding
Ordinary
Ordinary
Shareholding
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Country of
incorporation
Republic of South Africa
Country of
Republic of South Africa
incorporation
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Swaziland
Namibia
Republic of South Africa
Republic of South Africa
Swaziland
Namibia
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Namibia
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Namibia
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Registered Office Address
6 Goodenough Avenue Epping 2 Goodwood, 7460
243 Booysen Road, Selby, Jhb, 2001
Registered Office Address
6 Goodenough Avenue Epping 2 Goodwood, 7460
8 McColm Boulevard, Vanderbijlpark, 1911
243 Booysen Road, Selby, Jhb, 2001
1st Floor, Mvelelo House, 19 Melle Street,
Braamfontein, 2017
8 McColm Boulevard, Vanderbijlpark, 1911
60 Craddock Avenue, Dunkeld 2196
1st Floor, Mvelelo House, 19 Melle Street,
2nd Floor, Lilunga House, Gilfillan Street, Mbabane
Braamfontein, 2017
10 Sam Nujoma Street, Swakopmund
60 Craddock Avenue, Dunkeld 2196
Abcon House, Fairway Office Park 52 Grosvenor Road
2nd Floor, Lilunga House, Gilfillan Street, Mbabane
Bryanston, Bryanston, 2021.
10 Sam Nujoma Street, Swakopmund
17 Kosi Place, Umgeni Business Park, Durban, 4091
Abcon House, Fairway Office Park 52 Grosvenor Road
6th Floor, 4 Sandown Valley Crescent, Sandton, 2196
Bryanston, Bryanston, 2021.
Moores Rowland 1 Thibault Square Cape Town 8001
17 Kosi Place, Umgeni Business Park, Durban, 4091
38, 11th Road, Walvis Bay
6th Floor, 4 Sandown Valley Crescent, Sandton, 2196
Mutualpark, Jan Smuts Drive, Pinelands, 7405
Moores Rowland 1 Thibault Square Cape Town 8001
Ground Floor, Douglas MurrayHouse, 18 Protea Road,
38, 11th Road, Walvis Bay
Claremont ,7708
Mutualpark, Jan Smuts Drive, Pinelands, 7405
29 Central Street, Houghton, 2198
Ground Floor, Douglas MurrayHouse, 18 Protea Road,
Claremont ,7708
29 Central Street, Houghton, 2198
(c) Investments in joint ventures
1 Held directly by the Company
The table below includes the Group’s investments in joint ventures. All shares are indirectly held by the Company and the financial
year end of all companies is 31 December, unless otherwise stated. All of the joint ventures are strategic in the Group’s underlying
(c) Investments in joint ventures
operating model. The joint ventures are evaluated according to the Groups’ contractual rights to jointly control the entity.
The table below includes the Group’s investments in joint ventures. All shares are indirectly held by the Company and the financial
year end of all companies is 31 December, unless otherwise stated. All of the joint ventures are strategic in the Group’s underlying
operating model. The joint ventures are evaluated according to the Groups’ contractual rights to jointly control the entity.
Name
ACED De Aar Solar PV Park 2 (Pty) Ltd 50
Country of incorporation
Republic of South Africa
Percentage
holding
Percentage
holding
Name
ACED De Aar Solar PV Park 2 (Pty) Ltd 50
ACED Renewables Hidden Valley (Pty)
50
Ltd
ACED Renewables Hidden Valley (Pty)
ACED Soetwater Wind Farm (Pty) Ltd
Ltd
ACED Soetwater Wind Farm (Pty) Ltd
African Clean Energy Developments
(Pty) Ltd
African Infrastructure Investment Fund 2
African Clean Energy Developments
GP (Pty) Ltd
(Pty) Ltd
African Infrastructure Investment Fund 2
AIIM Hydroneo (Pty) Ltd
GP (Pty) Ltd
Curo Fund Services (Pty) Ltd
AIIM Hydroneo (Pty) Ltd
Imbumba Aganang Facility Management
Curo Fund Services (Pty) Ltd
Company (Pty) Limited
Infrastructure Empowerment Fund
Imbumba Aganang Facility Management
Managers (Pty) Ltd
Company (Pty) Limited
Old Mutual Guodian Life Insurance
Infrastructure Empowerment Fund
Company Ltd
Managers (Pty) Ltd
Old Mutual Guodian Life Insurance
Company Ltd
50
50
50
50
100
50
100
50
50
50
50
50
50
50
50
50
50
Registered Office Address
2nd Floor, Fernwood House The Oval, 1
Oakdale Road, Newlands, Cape Town,
Registered Office Address
7700
2nd Floor, Fernwood House The Oval, 1
2nd Floor, Fernwood House The Oval, 1
Oakdale Road, Newlands, Cape Town,
Oakdale Road, Newlands, Cape Town,
7700
7700
2nd Floor, Fernwood House The Oval, 1
2nd Floor, Fernwood House The Oval, 1
Oakdale Road, Newlands, Cape Town,
Oakdale Road, Newlands, Cape Town,
7700
7700
2nd Floor, Fernwood House The Oval, 1
Ground Floor, Colinton House, The Oval,
Oakdale Road, Newlands, Cape Town,
Oakdale Road, Claremont
7700
Colinton House, The Oval, 1 Oakdale
Ground Floor, Colinton House, The Oval,
Street, Newlands, Cape Town, 7700,
Oakdale Road, Claremont
South Africa.
Colinton House, The Oval, 1 Oakdale
c/o Cim Fund Services Ltd, 33 Edith
Street, Newlands, Cape Town, 7700,
Cavell Street, Port Louis, Mauritius
South Africa.
Building 2, Mispel Street, Parc du Cap,
c/o Cim Fund Services Ltd, 33 Edith
7530 Belville
Cavell Street, Port Louis, Mauritius
79 Hyde Lane, First Floor, South Block,
Building 2, Mispel Street, Parc du Cap,
Hyde Park, 2196
7530 Belville
Ground Floor, Colinton House, The Oval,
79 Hyde Lane, First Floor, South Block,
1 Oakdale Road, Newlands, 7700
Hyde Park, 2196
10th Floor, Building 1 of China Center,
Ground Floor, Colinton House, The Oval,
No. 81 Jianguo Road, Beijing, PRC
1 Oakdale Road, Newlands, 7700
10th Floor, Building 1 of China Center,
No. 81 Jianguo Road, Beijing, PRC
Country of incorporation
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Mauritius
Republic of South Africa
Mauritius
Mauritius
Republic of South Africa
Mauritius
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Peoples Republic of China
Republic of South Africa
Peoples Republic of China
328
320
320
Old Mutual plc
Annual Report and Accounts 2017
Name
Fund
Ltd
Old Mutual US Dollar Money Market
50
Mauritius
Percentage
holding
Country of incorporation
Registered Office Address
OMIGPI Kerr Property Developers (Pty)
50
Republic of South Africa
71 Cotswold Drive,Westville,, 3629
Limited
OMPE GP IV (Pty) Ltd
50
50
Orchards Developments (Pty) Ltd
Republic of South Africa
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands,
Pixley Ka Seme PV Park (Pty) Ltd
50
Republic of South Africa
Savanna City Developments (RF) (Pty)
50
Republic of South Africa
Mutualpark, Jan Smuts Drive, Pinelands,
Space Securitisation (Pty) Ltd
50
Republic of South Africa
Tirasano Facilities Management (Pty)
50
Limited
Triangle Real Estate India Fund
50
Managers Private Ltd
Two Rivers Lifestyle Centre Limited
50
Mauritius
Mauritius
Republic of South Africa
Tsebo House, 7 Arnold Road, Rosebank,
NTS Office, Level 5, Barkly Wharf,
Caudan Waterfront, Port Louis, Mauritius
/ C/o NTS Office, 5th Floor Barkly Wharf,
Caudan Waterfront, Port Louis, Mauritius
7405
7700
7405
2196
11th floor, Nedbank Corner, 96 Jorissen
Street, Braamfontein, Johannesburg,
Gauteng 2017
2nd Floor, Fernwood House The Oval, 1
Oakdale Road, Newlands, Cape Town,
Old Mutual Alternative Investments,
OMIG Building Entrance 2 West
Campus, Mutual Park Jan Smuts Drive
Pinelands, Western Cape 7405
c/o Abax Corporate Services Ltd, Level
6, One Cathedral Square Building, Jules
Koenig Street, Port Louis, Mauritius
C/O Abax Corporate Serices Mauritius
(d) Other qualifying undertakings
The Company is indirectly a member of the following Limited Partnerships which are consolidated into the Company’s group
financial statements
Name
Dr Holsboer Benefit Fund
Glenmore Seaside Resort (Pty) Ltd
Greenhouse Funding (RF) Ltd
Greenhouse Funding 4 (RF) Ltd
Greenhouse Funding 5 (RF) Ltd
Greenhouse Funding 6 (RF) Ltd
Greenhouse Funding III (RF) Ltd
Ndala Investments No 1 (RF) Ltd
Ndala Investments No 2 (RF) Ltd
Octane ABS1 (Pty) Ltd
Octane ABS2 (Pty) Ltd
Precinct Funding 1 (RF) Ltd
Precinct Funding 2 (RF) Ltd
Country of incorporation
Registered Office Address
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Swaziland Automated Electronic Clearing House
Republic of South Africa
- (SAECH)
West Road South No 3 (RF) Ltd
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
F
i
n
a
n
c
i
a
l
s
321
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Name
Old Mutual US Dollar Money Market
Fund
Percentage
holding
50
OMIGPI Kerr Property Developers (Pty)
Limited
OMPE GP IV (Pty) Ltd
Orchards Developments (Pty) Ltd
50
50
50
Country of incorporation
Mauritius
Republic of South Africa
Republic of South Africa
Republic of South Africa
Pixley Ka Seme PV Park (Pty) Ltd
50
Republic of South Africa
Savanna City Developments (RF) (Pty)
Ltd
Space Securitisation (Pty) Ltd
50
50
Tirasano Facilities Management (Pty)
Limited
Triangle Real Estate India Fund
Managers Private Ltd
50
50
Two Rivers Lifestyle Centre Limited
50
Republic of South Africa
Republic of South Africa
Republic of South Africa
Mauritius
Mauritius
Registered Office Address
NTS Office, Level 5, Barkly Wharf,
Caudan Waterfront, Port Louis, Mauritius
/ C/o NTS Office, 5th Floor Barkly Wharf,
Caudan Waterfront, Port Louis, Mauritius
71 Cotswold Drive,Westville,, 3629
Mutualpark, Jan Smuts Drive, Pinelands,
7405
11th floor, Nedbank Corner, 96 Jorissen
Street, Braamfontein, Johannesburg,
Gauteng 2017
2nd Floor, Fernwood House The Oval, 1
Oakdale Road, Newlands, Cape Town,
7700
Mutualpark, Jan Smuts Drive, Pinelands,
7405
Old Mutual Alternative Investments,
OMIG Building Entrance 2 West
Campus, Mutual Park Jan Smuts Drive
Pinelands, Western Cape 7405
Tsebo House, 7 Arnold Road, Rosebank,
2196
c/o Abax Corporate Services Ltd, Level
6, One Cathedral Square Building, Jules
Koenig Street, Port Louis, Mauritius
C/O Abax Corporate Serices Mauritius
(d) Other qualifying undertakings
The Company is indirectly a member of the following Limited Partnerships which are consolidated into the Company’s group
financial statements
Name
Dr Holsboer Benefit Fund
Glenmore Seaside Resort (Pty) Ltd
Greenhouse Funding (RF) Ltd
Greenhouse Funding 4 (RF) Ltd
Greenhouse Funding 5 (RF) Ltd
Greenhouse Funding 6 (RF) Ltd
Greenhouse Funding III (RF) Ltd
Ndala Investments No 1 (RF) Ltd
Ndala Investments No 2 (RF) Ltd
Octane ABS1 (Pty) Ltd
Octane ABS2 (Pty) Ltd
Precinct Funding 1 (RF) Ltd
Precinct Funding 2 (RF) Ltd
Swaziland Automated Electronic Clearing House
- (SAECH)
West Road South No 3 (RF) Ltd
Country of incorporation
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa
Registered Office Address
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
135 Rivonia Road, Sandown, Sandton, 2196
Republic of South Africa
135 Rivonia Road, Sandown, Sandton, 2196
329
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Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Financial statements of the Company
Financial statements of the Company
Company statement of financial position
Company statement of financial position
For the year ended 31 December 2017
For the year ended 31 December 2017
Notes
Assets
Investments in Group subsidiaries
Investments and securities
Assets
Investments in associated undertakings and joint ventures
Investments in Group subsidiaries
Trade, other receivables and other assets
Investments and securities
Derivative financial instruments – assets
Investments in associated undertakings and joint ventures
Cash and cash equivalents
Trade, other receivables and other assets
Assets held for sale and distribution
Derivative financial instruments – assets
Total assets
Cash and cash equivalents
Liabilities
Assets held for sale and distribution
Borrowed funds
Total assets
Provisions
Liabilities
Trade, other payables and other liabilities
Borrowed funds
Derivative financial instruments – liabilities
Provisions
Total liabilities
Trade, other payables and other liabilities
Net assets
Derivative financial instruments – liabilities
Equity
Total liabilities
Equity attributable to equity holders of the parent
Net assets
Total equity
Equity
Equity attributable to equity holders of the parent
The Company’s financial statements on pages 330 to 339 were approved by the Board of Directors on 14 March 2018.
Total equity
2
Notes
3
4
2
5
3
6
4
5
13
6
13
7
8
9
7
6
8
9
6
At
31 December
2017
At
31 December
4,150
2017
–
–
4,150
366
–
34
–
539
366
2,135
34
7,224
539
2,135
461
7,224
–
254
461
–
–
715
254
6,509
–
715
6,509
6,509
6,509
6,509
6,509
£m
At
31 December
£m
2016
At
31 December
5,457
2016
163
26
5,457
4,119
163
77
26
570
4,119
–
77
10,412
570
–
1,023
10,412
7
3,944
1,023
69
7
5,043
3,944
5,369
69
5,043
5,369
5,369
5,369
5,369
5,369
The Company’s financial statements on pages 330 to 339 were approved by the Board of Directors on 14 March 2018.
Jonathan Bruce Hemphill
Group Chief Executive
Jonathan Bruce Hemphill
Group Chief Executive
Company registered number: 03591559
Company registered number: 03591559
Ingrid Johnson
Group Finance Director
Ingrid Johnson
Group Finance Director
330
332
332
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Financial statements of the Company
Financial statements of the Company
Company statement of cash flows
Company statement of cash flows
For the year ended 31 December 2017
For the year ended 31 December 2017
Profit/(Loss) after tax
Recognition of impairment losses
Profit arising on disposal of subsidiaries, associates, joint ventures and strategic investments
Profit/(Loss) after tax
Fair value movement on derivatives and borrowed funds
Recognition of impairment losses
Foreign exchange movement on assets and liabilities
Profit arising on disposal of subsidiaries, associates, joint ventures and strategic investments
Non cash movements in profit after tax
Fair value movement on derivatives and borrowed funds
Other operating assets and liabilities
Foreign exchange movement on assets and liabilities
Changes in working capital
Non cash movements in profit after tax
Net cash inflow from operating activities
Other operating assets and liabilities
Net acquisition/(disposal) of financial investments
Changes in working capital
Net movement of interests in subsidiaries, associates, joint ventures and strategic investments
Net cash inflow from operating activities
Disposal of interests in subsidiaries, associates, joint ventures and strategic investments
Net acquisition/(disposal) of financial investments
Other investing cash flows
Net movement of interests in subsidiaries, associates, joint ventures and strategic investments
Net cash inflow from investing activities
Disposal of interests in subsidiaries, associates, joint ventures and strategic investments
External interest received
Other investing cash flows
External interest paid
Net cash inflow from investing activities
Intercompany interest paid
External interest received
Dividends received from Subsidiaries
External interest paid
Dividends paid to:
Intercompany interest paid
Ordinary shareholders of the Company
Dividends received from Subsidiaries
Preferred security interests
Dividends paid to:
Net proceeds from issue of ordinary shares
Ordinary shareholders of the Company
Subordinated and other debt repaid
Preferred security interests
Loan financing received from Group companies
Net proceeds from issue of ordinary shares
Net cash outflow from financing activities
Subordinated and other debt repaid
Loan financing received from Group companies
Net (decrease)/increase in cash and cash equivalents
Net cash outflow from financing activities
Cash and cash equivalents at beginning of the period
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at end of the year
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the year
Year ended
31 December
2017
Year ended
1,564
31 December
110
2017
(102)
1,564
27
110
7
(102)
42
27
(1,057)
7
(1,057)
42
549
(1,057)
161
(1,057)
(213)
549
137
161
(24)
(213)
61
137
39
(24)
(63)
61
(90)
39
262
(63)
(90)
(129)
262
(13)
4
(129)
(956)
(13)
305
4
(641)
(956)
305
(31)
(641)
£m
Year ended
31 December
£m
2016
Year ended
(169)
31 December
89
2016
(10)
(169)
83
89
(12)
(10)
150
83
150
(12)
150
150
131
150
(7)
150
–
131
44
(7)
71
–
108
44
38
71
(63)
108
(151)
38
–
(63)
(151)
(160)
–
(15)
2
(160)
(116)
(15)
353
2
(112)
(116)
353
127
(112)
570
(31)
539
570
539
443
127
570
443
570
331
333
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Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Financial statements of the Company
Financial statements of the Company
Company statement of changes in equity
Company statement of changes in equity
For the year ended 31 December 2017
For the year ended 31 December 2017
Shareholders equity of the Company at
beginning of the year
Profit for the year
Shareholders equity of the Company at
Items that will not be reclassified
beginning of the year
subsequently to profit and loss
Profit for the year
Actuarial loss on defined benefit plan
Items that will not be reclassified
Total comprehensive income for the year
subsequently to profit and loss
Dividends for the year
Actuarial loss on defined benefit plan
Merger reserve realised
Total comprehensive income for the year
Preferred securities purchased
Dividends for the year
Other movements in share capital and
Merger reserve realised
share-based payment reserve
Preferred securities purchased
Fair value of equity settled share options
Other movements in share capital and
Shareholders' equity of the Company
share-based payment reserve
at end of the year
Fair value of equity settled share options
Shareholders' equity of the Company
at end of the year
Year ended 31 December 2016
Year ended 31 December 2016
Shareholders equity of the Company at
beginning of the year
Loss for the year
Shareholders equity of the Company at
Items that will not be reclassified
beginning of the year
subsequently to profit and loss
Loss for the year
Actuarial loss on defined benefit plan
Items that will not be reclassified
Total comprehensive income for the year
subsequently to profit and loss
Dividends for the year
Actuarial loss on defined benefit plan
Tax relief on dividends paid
Total comprehensive income for the year
Other movements in share capital and
Dividends for the year
share-based payment reserve
Tax relief on dividends paid
Fair value of equity settled share options
Other movements in share capital and
Shareholders' equity of the Company
share-based payment reserve
at end of the year
Fair value of equity settled share options
Shareholders' equity of the Company
at end of the year
Millions
Number of
shares
Millions
issued and
Number of
fully paid
shares
issued and
4,930
fully paid
–
4,930
–
–
–
–
–
–
–
–
–
–
3
–
–
3
4,933
–
4,933
Millions
Number of
shares
Millions
issued and
Number of
fully paid
shares
issued and
4,928
fully paid
–
4,928
–
–
–
–
–
–
–
–
2
–
–
2
4,930
–
Share
capital
Share
premium
Other
reserves
Retained
earnings
Share
563
capital
–
Share
1,042
premium
–
Other
1,428
reserves
–
Retained
2,063
earnings
1,549
563
–
–
–
–
–
–
–
–
–
–
1
–
–
1
564
–
1,042
–
–
–
–
–
–
–
–
–
–
17
–
–
17
1,059
–
1,428
–
–
–
–
–
(104)
–
–
–
(104)
–
–
(109)
–
1,215
(109)
2,063
1,549
(22)
1,527
(128)
(22)
104
1,527
(15)
(128)
104
(3)
(15)
123
(3)
3,671
123
564
1,059
1,215
3,671
Share
capital
Share
premium
Other
reserves
Retained
earnings
Share
563
capital
–
Share
1,040
premium
–
Other
1,400
reserves
–
Retained
2,458
earnings
(183)
563
–
–
–
–
–
–
–
–
–
–
–
–
563
–
1,040
–
–
–
–
–
–
–
–
2
–
–
2
1,042
–
1,400
–
–
–
–
–
–
–
–
–
–
28
–
1,428
28
2,458
(183)
(10)
(193)
(159)
(10)
(3)
(193)
(159)
(40)
(3)
–
(40)
2,063
–
Perpetual
preferred
callable
Perpetual
securities
preferred
callable
273
securities
15
273
15
–
15
(15)
–
–
15
(273)
(15)
–
–
(273)
–
–
–
–
–
Perpetual
preferred
callable
Perpetual
securities
preferred
callable
273
securities
14
273
14
–
14
(17)
–
3
14
(17)
–
3
–
–
273
–
£m
£m
Total
5,369
Total
1,564
5,369
1,564
(22)
1,542
(143)
(22)
–
1,542
(288)
(143)
–
15
(288)
14
15
6,509
14
6,509
£m
£m
Total
5,734
Total
(169)
5,734
(169)
(10)
(179)
(176)
(10)
–
(179)
(176)
(38)
–
28
(38)
5,369
28
4,930
563
1,042
1,428
2,063
273
5,369
£m
At
31 December
£m
2016
At
1,252
31 December
152
2016
24
1,252
1,428
152
24
1,428
Other reserves
Merger reserve
Share-based payment reserve
Other reserves
Cancellation of treasury shares
Merger reserve
Attributable to equity holders of Company at end of the year
Share-based payment reserve
Cancellation of treasury shares
Attributable to equity holders of Company at end of the year
At
31 December
2017
At
1,148
31 December
43
2017
24
1,148
1,215
43
24
1,215
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Financial statements of the Company
Financial statements of the Company
Notes to the Company financial statements
Notes to the Company financial statements
For the year ended 31 December 2017
1 Financial assets and liabilities
For the year ended 31 December 2017
Company statement of financial position
1 Financial assets and liabilities
The Company is principally involved in the management of its investments in subsidiaries, with its risks considered to be consistent with
those in the operations themselves. Full details of the financial risks are provided in the Group financial statements, note F3. The most
Company statement of financial position
important components of financial risk for the Company itself are interest rate risk, currency risk, liquidity risk and credit risk. These risks
The Company is principally involved in the management of its investments in subsidiaries, with its risks considered to be consistent with
arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market
those in the operations themselves. Full details of the financial risks are provided in the Group financial statements, note F3. The most
movements.
important components of financial risk for the Company itself are interest rate risk, currency risk, liquidity risk and credit risk. These risks
arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market
The Company financial statements have been prepared on the going concern basis which the Directors believe to be appropriate having
movements.
taken into consideration the points as set out in the Governance section headed Going concern viability statements.
The Company financial statements have been prepared on the going concern basis which the Directors believe to be appropriate having
(a) Categories of financial instruments
taken into consideration the points as set out in the Governance section headed Going concern viability statements.
The financial instruments of the Company consist of derivative assets and liabilities, both of which are treated as held-for-trading, other
assets and cash and cash equivalents which are treated as loan and receivables, borrowed funds of which £570 million is designated as
(a) Categories of financial instruments
fair value through the income statement and £453 million at amortised cost (2016: £535million and £567 million respectively) and other
The financial instruments of the Company consist of derivative assets and liabilities, both of which are treated as held-for-trading, other
liabilities which are also measured at amortised cost. For borrowed funds, as the financial instruments measured at fair value through the
assets and cash and cash equivalents which are treated as loan and receivables, borrowed funds of which £570 million is designated as
income statement, the hierarchy classification (as detailed in the Group financial statements, note G4) is level 1.
fair value through the income statement and £453 million at amortised cost (2016: £535million and £567 million respectively) and other
liabilities which are also measured at amortised cost. For borrowed funds, as the financial instruments measured at fair value through the
(b) Capital risk management
income statement, the hierarchy classification (as detailed in the Group financial statements, note G4) is level 1.
Old Mutual plc is the holding company of the Group and is responsible for the raising and allocation of capital in line with the Group’s
capital management policies set out in note F1 to the consolidated financial statements and for ensuring the operational funding and
(b) Capital risk management
regulatory capital needs of the holding company and its subsidiaries are met at all times.
Old Mutual plc is the holding company of the Group and is responsible for the raising and allocation of capital in line with the Group’s
capital management policies set out in note F1 to the consolidated financial statements and for ensuring the operational funding and
(c) Currency risk
regulatory capital needs of the holding company and its subsidiaries are met at all times.
The Company is exposed to effects of fluctuations in the prevailing foreign currency exchange rates on its statement of financial position
and cash flows. The principal foreign currency risk arises from the fact that the Group’s functional currencies is Pounds Sterling, whereas
(c) Currency risk
the functional currency of its principal operations are South African rand and US dollar. The exposure of the Group to currency risk is
The Company is exposed to effects of fluctuations in the prevailing foreign currency exchange rates on its statement of financial position
disclosed in the Group consolidated financial statements, note F4. The Company hedges some of this currency translation risk through
and cash flows. The principal foreign currency risk arises from the fact that the Group’s functional currencies is Pounds Sterling, whereas
currency swaps, currency borrowings and forward foreign exchange rate contracts. Exchange rate exposures are managed within
the functional currency of its principal operations are South African rand and US dollar. The exposure of the Group to currency risk is
approved policy parameters utilising forward exchange contracts and currency swap agreements. A 10% deterioration in the values of the
disclosed in the Group consolidated financial statements, note F4. The Company hedges some of this currency translation risk through
major currencies the Company is exposed to in relation to GBP would result in a decrease in the Company’s equity holders’ funds of £11
currency swaps, currency borrowings and forward foreign exchange rate contracts. Exchange rate exposures are managed within
million (2016: decrease of £49 million).
approved policy parameters utilising forward exchange contracts and currency swap agreements. A 10% deterioration in the values of the
major currencies the Company is exposed to in relation to GBP would result in a decrease in the Company’s equity holders’ funds of £11
(d) Credit risk
million (2016: decrease of £49 million).
The Company is principally exposed to credit risk through its derivative asset positions, investment and securities, holdings of cash and
cash equivalents which it holds to back shareholder liabilities and the ability of its subsidiaries to repay amounts due to the Company. The
(d) Credit risk
exposure of the Group to credit risk is disclosed in the consolidated financial statements, note F3(a). Credit risk is managed by placing
The Company is principally exposed to credit risk through its derivative asset positions, investment and securities, holdings of cash and
limits on exposures to any single counterparty, or groups of counterparties and to geographical and industry segments. Credit risk is
cash equivalents which it holds to back shareholder liabilities and the ability of its subsidiaries to repay amounts due to the Company. The
monitored with reference to established credit rating agencies, with limits placed on exposure to below investment grade holdings, or the
exposure of the Group to credit risk is disclosed in the consolidated financial statements, note F3(a). Credit risk is managed by placing
financial position of companies within the Group. Of the Company’s financial assets bearing credit risk, derivative assets, investment and
limits on exposures to any single counterparty, or groups of counterparties and to geographical and industry segments. Credit risk is
securities, bonds and cash and cash equivalents are rated as investment grade (being AAA to BBB for Standard & Poor’s or an
monitored with reference to established credit rating agencies, with limits placed on exposure to below investment grade holdings, or the
equivalent). The other financial assets bearing credit risk are not rated.
financial position of companies within the Group. Of the Company’s financial assets bearing credit risk, derivative assets, investment and
securities, bonds and cash and cash equivalents are rated as investment grade (being AAA to BBB for Standard & Poor’s or an
(e) Interest rate risk
equivalent). The other financial assets bearing credit risk are not rated.
Interest rate risk is the risk that fluctuating interest rates will unfavourably affect the Company’s earnings and the value of its assets,
liabilities and capital.
(e) Interest rate risk
Interest rate risk is the risk that fluctuating interest rates will unfavourably affect the Company’s earnings and the value of its assets,
The Company employs currency and interest rate swap transactions to mitigate against the impact of changes in the fair values of its
liabilities and capital.
borrowed funds. Details of the arrangements in place are shown in the Group financial statements note G5 Hedge accounting.
The Company employs currency and interest rate swap transactions to mitigate against the impact of changes in the fair values of its
(f) Liquidity risk
borrowed funds. Details of the arrangements in place are shown in the Group financial statements note G5 Hedge accounting.
Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. Ultimate responsibility for liquidity
risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the
(f) Liquidity risk
management of the Company’s short, medium and long-term funding and liquidity management requirements. The Company has net
Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. Ultimate responsibility for liquidity
current assets of £681 million (2016: net current liabilities £534 million), all of which represent assets, including inter group short dated
risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the
loans, to other Group companies. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and
management of the Company’s short, medium and long-term funding and liquidity management requirements. The Company has net
continuously monitoring forecast and actual cash flows of both the Company and its subsidiaries.
current assets of £681 million (2016: net current liabilities £534 million), all of which represent assets, including inter group short dated
loans, to other Group companies. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and
continuously monitoring forecast and actual cash flows of both the Company and its subsidiaries.
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Old Mutual plc Annual Report and Accounts 2017Financials
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Financial statements of the Company
Financial statements of the Company
Notes to the Company financial statements continued
Notes to the Company financial statements continued
For the year ended 31 December 2017
1 Financial assets and liabilities (continued)
For the year ended 31 December 2017
The key information reviewed by the Company’s executive directors and Executive Committee, together with the Capital Management
Committee, is a detailed management report on the Company’s current and planned capital and liquidity position. Forecasts are updated
1 Financial assets and liabilities (continued)
regularly based on when new information is received, and as part of the annual business planning cycle. The Company’s liquidity and
The key information reviewed by the Company’s executive directors and Executive Committee, together with the Capital Management
capital position and forecast are presented to the Company’s Board of Directors on a regular basis.
Committee, is a detailed management report on the Company’s current and planned capital and liquidity position. Forecasts are updated
regularly based on when new information is received, and as part of the annual business planning cycle. The Company’s liquidity and
Further information on liquidity and the Company’s cash flows is contained in other sections of this Annual Report, for example the
capital position and forecast are presented to the Company’s Board of Directors on a regular basis.
business review and Group Finance Director’s statement.
Further information on liquidity and the Company’s cash flows is contained in other sections of this Annual Report, for example the
(g) Future standards, amendments to standards and interpretations not early-adopted in the 2017 annual
business review and Group Finance Director’s statement.
financial statements.
(g) Future standards, amendments to standards and interpretations not early-adopted in the 2017 annual
IFRS 9 Financial Instruments
financial statements.
The impact on the Company’s financial position is discussed in the Group Consolidated Financial Statement, note A7.
IFRS 9 Financial Instruments
2 Principal subsidiaries
The impact on the Company’s financial position is discussed in the Group Consolidated Financial Statement, note A7.
2 Principal subsidiaries
At
31 December
2017
At
5,457
31 December
665
2017
293
5,457
(20)
665
(110)
293
(2,135)
(20)
4,150
(110)
(2,135)
4,150
£m
At
31 December
£m
2016
At
5,562
31 December
–
2016
28
5,562
(44)
–
(89)
28
–
(44)
5,457
(89)
–
5,457
Balance at beginning of the year
Acquisitions
Additions
Balance at beginning of the year
Disposals
Acquisitions
Impairments
Additions
Transfer to assets held for sale and distribution
Disposals
Balance at end of the year
Impairments
Transfer to assets held for sale and distribution
On 3 February 2017, the Company injected £4,000,000 in cash to its subsidiary Constantia Insurance Company (Guernsey) Limited.
Balance at end of the year
On 4 May 2017, the Company injected £200,000,000 in cash to its subsidiary Old Mutual Wealth Management Limited.
On 3 February 2017, the Company injected £4,000,000 in cash to its subsidiary Constantia Insurance Company (Guernsey) Limited.
On 15 September 2017, the Company acquired the entire issued share capital of Fairbairn Investment (UK) Limited for £5,016,000 from
On 4 May 2017, the Company injected £200,000,000 in cash to its subsidiary Old Mutual Wealth Management Limited.
OM Group (UK) Limited.
On 15 September 2017, the Company acquired the entire issued share capital of Fairbairn Investment (UK) Limited for £5,016,000 from
On 15 September 2017, the Company sold its investment in Skandia UK Limited for £1 to OM Group (UK) Limited.
OM Group (UK) Limited.
On 15 September 2017, the Company acquired the entire issued share capital of Old Mutual Business Services Limited for £58,067,000
On 15 September 2017, the Company sold its investment in Skandia UK Limited for £1 to OM Group (UK) Limited.
from OMFS (GGP) Limited.
On 15 September 2017, the Company acquired the entire issued share capital of Old Mutual Business Services Limited for £58,067,000
On 22 September 2017, the Company acquired the entire issued share capital of OM Holdings (Guernsey) Limited for £7,437,000 from
from OMFS (GGP) Limited.
OM Group (UK) Limited.
On 22 September 2017, the Company acquired the entire issued share capital of OM Holdings (Guernsey) Limited for £7,437,000 from
On 29 September 2017, the Company sold its investment Old Mutual Europe GmbH for £14,880,000 to OM Group (UK) Limited. As a
OM Group (UK) Limited.
result of the sale, the Company made a profit of £14,608,000.
On 29 September 2017, the Company sold its investment Old Mutual Europe GmbH for £14,880,000 to OM Group (UK) Limited. As a
On 29 September 2017, the Company sold its investment in Commsale 2000 Limited for £287,000 to Old Mutual Wealth Management
result of the sale, the Company made a profit of £14,608,000.
Limited. As a result of the sale, the Company made a loss of £157,000.
On 29 September 2017, the Company sold its investment in Commsale 2000 Limited for £287,000 to Old Mutual Wealth Management
On 9 October 2017, the Company acquired the entire issued share capital of UAM UK Holdings Limited for £1,058,000 from OM Group
Limited. As a result of the sale, the Company made a loss of £157,000.
(UK) Limited.
On 9 October 2017, the Company acquired the entire issued share capital of UAM UK Holdings Limited for £1,058,000 from OM Group
On 17 October 2017, OM Holdings (Guernsey) Limited returned capital to the Company by transferring the entire issued share capital of
(UK) Limited.
Old Mutual International (Guernsey) Ltd and L & S Properties Ltd for £3,627,000 and £3,301,000 respectively.
On 17 October 2017, OM Holdings (Guernsey) Limited returned capital to the Company by transferring the entire issued share capital of
Old Mutual International (Guernsey) Ltd and L & S Properties Ltd for £3,627,000 and £3,301,000 respectively.
334
336
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
2 Principal subsidiaries (continued)
On 24 November 2017, the Company acquired the entire issued share capital of Skandia UK Limited by way of a distribution in specie of
£594,128,000 from OM Group (UK) Limited.
On 1 December 2017, the Company injected £8,822,000 in cash to its subsidiary Constantia Insurance Company (Guernsey) Limited.
On 21 December 2017, Old Mutual Wealth Management Limited issued the Company with one ordinary £1 share with a premium of
£58,143,000 in consideration for extinguishing receivables due to the Company.
On 29 December 2017, the Company sold its investment in Constantia Insurance Company (Guernsey) Limited for £1,466,000 to Randall
& Quilter II Holdings Limited. As a result of the sale, the Company made a loss of £11,494,000.
During 2017, the Company impaired its investments in Constantia Insurance Company (Guernsey) Limited, Old Mutual Business Services
Limited, Commsale 20000 Limited, UAM UK Holdings Limited, OM Holdings (Guernsey) Limited and Old Mutual Asset Solutions Limited
by £25 million, £3 million, £0.5 million, £0.6 million, £0.5 million and £2 million respectively.
The Company routinely makes share awards to employees of subsidiaries companies, for which no consideration is paid by these entities.
The applicable accounting standard requires that this is reflected as a share-based payment expense in the subsidiary company and to be
reflected as an increase in the value of the investment in the subsidiary, with a corresponding increase in the share-based payment
reserve in the Company. The impact of these transactions in the financial statements was an addition of £15 million (2016: £28 million)
and an impairment of £78m (2016: nil).
The principal subsidiary undertakings of the Company are as follows:
At 31 December 2017
OM Group (UK) Limited
Old Mutual Wealth Management Limited
Country of incorporation
England & Wales
England & Wales
Class of shares
Ordinary
Ordinary
% interest held
100
100
A complete list of subsidiaries is in note L2 of the Group consolidated financial statements.
3 Investments and securities
Other debt securities, preference shares and debentures
Total investment and securities
In the prior year, other debt securities, preference shares and debentures were all rated AAA-BBB.
4 Investments in associated undertakings and joint ventures
The Company held the following interest in associated undertakings:
At
31 December
2017
–
–
£m
At
31 December
2016
163
163
Kotak Mahindra Old Mutual Life Insurance Limited
Country of
operation
India
%
interest held
26
At
31 December
2017
–
£m
At
31 December
2016
26
On 13 October 2017, the Company sold its 26% stake in Kotak Mahindra Old Mutual Life Insurance Limited for £149,393,000 to its joint
venture partner Kotak Mahindra Bank Limited. As a result of the sale, the Company has recognised a profit on disposal of £121,733,000,
net of sale costs.
5 Trade, other receivables and other assets
Other receivables
Corporation tax receivable
Accrued interest and rent
Other prepayments and accrued income
Amounts owed by Group undertakings
Amounts falling due within one year
Amounts falling due after one year
Total other assets
335
337
At
31 December
2017
1
45
2
1
£m
At
31 December
2016
28
–
3
2
234
83
366
12
4,074
4,119
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Financial statements of the Company
Financial statements of the Company
Notes to the Company financial statements continued
Notes to the Company financial statements continued
For the year ended 31 December 2017
6 Derivative financial instruments
For the year ended 31 December 2017
The following tables provide a detailed breakdown of the fair values of the Company’s derivative financial instruments outstanding at the
6 Derivative financial instruments
year end. These instruments allow the Company to transfer, modify or reduce foreign exchange and interest rate risks.
The following tables provide a detailed breakdown of the fair values of the Company’s derivative financial instruments outstanding at the
The Company undertakes transactions involving derivative financial instruments with other financial institutions. Management has
year end. These instruments allow the Company to transfer, modify or reduce foreign exchange and interest rate risks.
established limits commensurate with the credit quality of the institutions with whom it deals, and manages the resulting exposures such
The Company undertakes transactions involving derivative financial instruments with other financial institutions. Management has
that a default by any individual counterparty is unlikely to have a materially adverse impact on the Company.
established limits commensurate with the credit quality of the institutions with whom it deals, and manages the resulting exposures such
that a default by any individual counterparty is unlikely to have a materially adverse impact on the Company.
£m
Exchange rate contracts
Swaps
Exchange rate contracts
Options
Swaps
Forwards
Options
Forwards
Interest rate contracts
Swaps
Interest rate contracts
Total
Swaps
The contractual maturities of the derivative liabilities held are as follows:
Total
The contractual maturities of the derivative liabilities held are as follows:
Balance
Sheet
Balance
amount
Sheet
amount
–
–
69
69
Less than
3 months
Less than
3 months
–
–
29
29
More than
3 months
More than
less than
3 months
1 year
less than
1 year
–
–
–
–
At 31 December 2017
Derivative financial liabilities
At 31 December 2017
At 31 December 2016
Derivative financial liabilities
Derivative financial liabilities
At 31 December 2016
Derivative financial liabilities
7 Borrowed funds
7 Borrowed funds
Subordinated debt securities
Total borrowed funds
Subordinated debt securities
Total borrowed funds
At December 2017
Fair values
At December 2017
Fair values
Assets
Liabilities
At December 2016
Fair values
At December 2016
Fair values
Assets
£m
Liabilities
Assets
–
–
–
1
–
1
1
1
33
34
33
34
Between
1 and 5
Between
years
1 and 5
years
–
–
40
40
Liabilities
–
–
–
–
–
–
–
–
–
–
–
–
Assets
–
–
–
13
–
13
13
13
64
77
64
77
No
contractual
No
maturity
contractual
date
maturity
date
–
–
–
–
More than
5 years
More than
5 years
–
–
–
–
Liabilities
33
7
33
29
7
69
29
69
–
69
–
69
£m
£m
Total
Total
–
–
69
69
At
31 December
At
2017
31 December
461
2017
461
461
461
£m
At
£m
31 December
At
2016
31 December
1,023
2016
1,023
1,023
1,023
£m
At
£m
31 December
At
2016
31 December
Fair valued through income statement
570
2016
453
Amortised cost
570
Fair valued through income statement
1,023
Total borrowed funds
453
Amortised cost
1,023
The following table is a maturity analysis of liability cash flows based on contractual maturity dates for borrowed funds. Maturity analysis is
Total borrowed funds
undiscounted and based on year end exchange rates. In addition to the contractual cash flows detailed below, the Company is obligated
The following table is a maturity analysis of liability cash flows based on contractual maturity dates for borrowed funds. Maturity analysis is
to make interest payments on borrowed funds, details of which are in the Group consolidated financial statements in note G7.
undiscounted and based on year end exchange rates. In addition to the contractual cash flows detailed below, the Company is obligated
to make interest payments on borrowed funds, details of which are in the Group consolidated financial statements in note G7.
£m
At
£m
31 December
At
2016
31 December
500
2016
450
500
950
450
950
Greater than 1 year and less than 5 years
Greater than 5 years
Greater than 1 year and less than 5 years
Borrowed funds
Greater than 5 years
Additional details of these borrowings and undrawn facilities are included in Group consolidated financial statements in note G7.
Borrowed funds
At
31 December
At
2017
31 December
400
2017
61
400
461
61
461
At
31 December
At
2017
31 December
341
2017
61
341
402
61
402
Additional details of these borrowings and undrawn facilities are included in Group consolidated financial statements in note G7.
336
338
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Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
8 Provisions
Post-employment benefits
Total provisions
9 Trade, other payables and other liabilities
Accruals and deferred income
Corporation tax
Amounts owed to Group undertakings:
Amount falling due within one year
Amount falling due after one year
Total other liabilities
At
31 December
2017
–
–
£m
At
31 December
2016
7
7
Note
10
At
31 December
2017
6
11
£m
At
31 December
2016
15
21
125
112
254
1,263
2,645
3,944
10 Post-employment benefits
During the period, a bulk annuity arrangement for the Company’s legacy defined benefit scheme, the Old Mutual Staff Pension Fund, was
agreed with Legal & General Assurance Society Limited. The agreement resulted in the buy-in of the benefits of the scheme with effect
from 13 June 2017. This was converted to a full buy-out into individual annuity policies in October 2017 and wind-up of the scheme was
completed on 30 November 2017.
In order to effect the transaction, the Company has made a one off contribution of £22.6 million into the scheme, which together with
writing off the existing IAS 19 deficit for the scheme, resulted in a £17.3 million reduction in IFRS NAV recognised in the statement of
changes in equity. The Company no longer has any liability in respect of this scheme, including administration and funding. The Company
had previously been contributing annually £3.6 million of cash funding to the scheme.
During the year two employees (2017: two) were directly employed by the Company. The costs for these Directors are disclosed within the
Remuneration Report on pages 97 to 128.
£m
Pension plans
Year to
31 December
2017
Year to
31 December
2016
102
(6)
2
(2)
(96)
–
–
95
2
(2)
25
(96)
(24)
–
–
–
79
–
3
(3)
–
23
102
79
–
(3)
4
–
15
95
(7)
–
Liability for defined benefit obligation
Change in projected benefit obligation
Projected benefit obligation at beginning of the year
Past service cost
Interest cost on benefit obligation
Benefits paid
Settlement payments
Actuarial (gains)/losses
Projected benefit obligation at end of the year
Change in plan assets
Plan assets at fair value at beginning of the year
Actual return on plan assets
Benefits paid
Company contributions
Settlement payments
Actuarial (gains)/losses
Plan assets at fair value at end of the year
Net liability recognised in balance sheet
Expense recognised in the income statement
337
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Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Financial statements of the Company
Financial statements of the Company
Notes to the Company financial statements continued
Notes to the Company financial statements continued
For the year ended 31 December 2017
10 Post-employment benefits (continued)
For the year ended 31 December 2017
Actuarial assumptions used in calculating the projected benefit obligation are based on relevant mortality estimates, with a specific
allowance made for future improvements in mortality which is broadly in line with that adopted for the 92 series of mortality tables prepared
10 Post-employment benefits (continued)
by the Continuous Mortality Investigation Bureau of the Institute of Actuaries. The expected returns on plan assets have been determined
Actuarial assumptions used in calculating the projected benefit obligation are based on relevant mortality estimates, with a specific
on the basis of long-term expectations, the carrying value of the assets and the market conditions at the balance sheet date specific to the
allowance made for future improvements in mortality which is broadly in line with that adopted for the 92 series of mortality tables prepared
relevant locations. The detailed actuarial assumptions can viewed on the Group’s website at www.oldmutualplc.com.
by the Continuous Mortality Investigation Bureau of the Institute of Actuaries. The expected returns on plan assets have been determined
on the basis of long-term expectations, the carrying value of the assets and the market conditions at the balance sheet date specific to the
%
relevant locations. The detailed actuarial assumptions can viewed on the Group’s website at www.oldmutualplc.com.
Pension plans
Pension plans
At
31 December
2017
At
–
31 December
–
2017
–
–
–
–
–
–
At
%
31 December
Plan asset allocation
2016
At
26
Equity securities
31 December
65
Debt securities
Plan asset allocation
2016
8
Cash
26
Equity securities
1
Other investments
65
Debt securities
8
Cash
1
Other investments
11 Contingent liabilities
In February 2008, the Company issued a guarantee to a third party over OMNIA obligations, a non-group company under the reinsurance
contracts relating to the offshore investment products sold by a third party. The maximum payment under this guarantee is $250 million.
11 Contingent liabilities
This guarantee is accounted for as an insurance contract and payments will only arise should OMNIA be unable to meet its obligations
In February 2008, the Company issued a guarantee to a third party over OMNIA obligations, a non-group company under the reinsurance
under the relevant reinsurance contracts as they fall due.
contracts relating to the offshore investment products sold by a third party. The maximum payment under this guarantee is $250 million.
This guarantee is accounted for as an insurance contract and payments will only arise should OMNIA be unable to meet its obligations
OMNIA was formerly known as Old Mutual Bermuda and currently complies with all capital requirements of the Bermuda Monetary
under the relevant reinsurance contracts as they fall due.
Authority.
OMNIA was formerly known as Old Mutual Bermuda and currently complies with all capital requirements of the Bermuda Monetary
The Company routinely monitors and reassesses contingent liabilities arising from matters such as litigation, and warranties and
Authority.
indemnities relating to past acquisitions and disposals. The adoption of the Group’s Managed Separation strategy on 11 March 2016
does not affect the nature of such items, however it is possible that the Company may seek to resolve certain matters as part of the
The Company routinely monitors and reassesses contingent liabilities arising from matters such as litigation, and warranties and
implementation of the Group’s Managed Separation strategy.
indemnities relating to past acquisitions and disposals. The adoption of the Group’s Managed Separation strategy on 11 March 2016
does not affect the nature of such items, however it is possible that the Company may seek to resolve certain matters as part of the
This guarantee has terminated in February 2018, with no further amounts currently being requested under this guarantee.
implementation of the Group’s Managed Separation strategy.
12 Related parties
This guarantee has terminated in February 2018, with no further amounts currently being requested under this guarantee.
Old Mutual plc enters into transactions with its subsidiaries in the normal course of business. These are principally related to funding
of the Group’s businesses and head office functions. Details of loans, including balances due from/to the Company, are set out below.
12 Related parties
Disclosures in respect of the key management personnel of the Company are included in the Group’s related parties disclosures in
Old Mutual plc enters into transactions with its subsidiaries in the normal course of business. These are principally related to funding
note J3.
of the Group’s businesses and head office functions. Details of loans, including balances due from/to the Company, are set out below.
Disclosures in respect of the key management personnel of the Company are included in the Group’s related parties disclosures in
There are no transactions entered into by the Company with associated undertakings.
note J3.
There are no transactions entered into by the Company with associated undertakings.
Balances due from subsidiaries
Balances due to subsidiaries
Balances due from other related parties – Nedgroup Trust Limited
Balances due from subsidiaries
Balances due to subsidiaries
Balances due from other related parties – Nedgroup Trust Limited
Income statement information
At 31 December
Income statement information
At 31 December
Subsidiaries
Subsidiaries
Year ended 31 December 2017
Interest
Year ended 31 December 2017
received
44
Interest
received
44
Ordinary
dividends
received
Ordinary
1,739
dividends
received
1,739
Other
amounts
paid
Other
(117)
amounts
paid
(117)
338
340
340
At
31 December
2017
At
301
31 December
(236)
2017
16
301
(236)
16
£m
At
31 December
£m
2016
At
4,070
31 December
(3,908)
2016
16
4,070
(3,908)
16
£m
Year ended 31 December 2016
Interest
Year ended 31 December 2016
received
74
Interest
received
74
Ordinary
dividends
received
Ordinary
95
dividends
received
95
Other
£m
Amounts
paid
Other
(108)
Amounts
paid
(108)
Old Mutual plc Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
13 Assets held for sale and distribution
Old Mutual plc announced at its preliminary results announcement in 2016, and in various subsequent updates, that the long-term
interests of its shareholders and other stakeholders would be best served by a managed separation of the Group into its four constituent
businesses:
Emerging Markets, the South African incorporated emerging markets financial services business with a focus on Africa;
Nedbank Limited (Nedbank), the South African incorporated retail and corporate bank with a significant presence in Africa;
Old Mutual Wealth, the UK incorporated wealth and asset management business; and
OM Asset Management plc (OMAM), the US incorporated asset management business.
The OMAM shareholding has now been reduced to 1,000 shares.
The process of managed separation of the businesses is planned to be achieved through the execution of the following remaining steps:
the distribution of the Old Mutual Wealth shares to existing Old Mutual shareholders and the listing of Old Mutual Wealth, which it
is intended will incorporate a secondary offering. Old Mutual Wealth will have a primary listing on the LSE and a secondary listing
on the JSE.
the creation of a new South African holding company, Old Mutual Limited (OML), which will acquire Old Mutual plc (consisting primarily
of Emerging Markets and Nedbank pursuant to a scheme of arrangement under UK law).
the distribution of the OML shares to existing Old Mutual plc shareholders and the listing of OML. OML will be primary listed on the JSE
with a standard listing on the LSE and secondary listings on the ZSE, NSX and MSE.
after the listing of OML and a period thereafter to allow for the share register to settle, OML anticipates unbundling (in terms of SA law)
to its shareholders a significant portion of its shareholding in Nedbank, whilst retaining a strategic minority interest. Nedbank is primary
listed on the JSE and secondary listed on the NSX.
In anticipation of the execution of the Group’s managed separation strategy, through the distribution of Old Mutual Wealth shares, the
company’s investment in Old Mutual Wealth has been classified as held for sale and distribution in the statement of financial position at
31 December 2017.
This judgement was done based on the facts and circumstances which existed at 31 December 2017 when the Directors made a
formal assessment of whether the businesses should be classified as held for distribution. Although there may be a few minor internal
reorganisations that may occur before distributions, as at 31 December 2017, the businesses in their current state could have been
distributed. The Directors considered that it was highly probable that the Old Mutual Wealth business would be distributed within a period
of twelve months based on interactions with South African and UK regulators, positive interactions with the relevant tax authorities and
interactions with the South African government. The Directors have also taken into account the likelihood of the Court approval of the
scheme and have come to the conclusion that the business should be classified as held for distribution.
Nedbank is not a directly held subsidiary of Old Mutual plc and therefore cannot be considered as held for sale or held for distribution in
the Company Financial Statements.
14 Events after the reporting date
On 31 January 2018, the Company sold its entire investment in Skandia UK Limited to Old Mutual Wealth Management Limited for a
consideration of £591,361,000. As a result of the sale, the Company made a loss of £2,767,000.
339
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Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Old Mutual plc
Annual Report and Accounts 2017
Shareholder information
Shareholder information
Shareholder information
Shareholder information
Listings and shares in issue (unaudited)
Listings and shares in issue (unaudited)
The Company’s shares are listed on the London, Malawi, Namibian and Zimbabwe Stock Exchanges and on the JSE Limited (JSE).
The Company’s shares are listed on the London, Malawi, Namibian and Zimbabwe Stock Exchanges and on the JSE Limited (JSE).
Listings and shares in issue (unaudited)
Listings and shares in issue (unaudited)
The primary listing, which is known as a premium listing, is on the London Stock Exchange and the other listings are all secondary listings.
The primary listing, which is known as a premium listing, is on the London Stock Exchange and the other listings are all secondary listings.
The Company’s shares are listed on the London, Malawi, Namibian and Zimbabwe Stock Exchanges and on the JSE Limited (JSE).
The Company’s shares are listed on the London, Malawi, Namibian and Zimbabwe Stock Exchanges and on the JSE Limited (JSE).
The Company’s shares are also traded on the external list of the Nasdaq Nordic Exchange.
The Company’s shares are also traded on the external list of the Nasdaq Nordic Exchange.
The primary listing, which is known as a premium listing, is on the London Stock Exchange and the other listings are all secondary listings.
The primary listing, which is known as a premium listing, is on the London Stock Exchange and the other listings are all secondary listings.
The Company’s shares are also traded on the external list of the Nasdaq Nordic Exchange.
The ISIN number of the Company’s ordinary shares of 113⁄7p each is GB00B77J0862 and the SEDOL is B77J086.
The Company’s shares are also traded on the external list of the Nasdaq Nordic Exchange.
The ISIN number of the Company’s ordinary shares of 113⁄7p each is GB00B77J0862 and the SEDOL is B77J086.
The ISIN number of the Company’s ordinary shares of 113⁄7p each is GB00B77J0862 and the SEDOL is B77J086.
The ISIN number of the Company’s ordinary shares of 113⁄7p each is GB00B77J0862 and the SEDOL is B77J086.
The 113⁄7p nominal value of the Company’s shares reflects the seven-for-eight share consolidation that took place in April 2012. If your
The 113⁄7p nominal value of the Company’s shares reflects the seven-for-eight share consolidation that took place in April 2012. If your
shareholding is certificated and you have not yet surrendered your old certificate for shares of 10p each for replacement by a certificate
shareholding is certificated and you have not yet surrendered your old certificate for shares of 10p each for replacement by a certificate
The 113⁄7p nominal value of the Company’s shares reflects the seven-for-eight share consolidation that took place in April 2012. If your
The 113⁄7p nominal value of the Company’s shares reflects the seven-for-eight share consolidation that took place in April 2012. If your
representing your consolidated shareholding, please contact our share registrars, whose details are set out later in this section.
representing your consolidated shareholding, please contact our share registrars, whose details are set out later in this section.
shareholding is certificated and you have not yet surrendered your old certificate for shares of 10p each for replacement by a certificate
shareholding is certificated and you have not yet surrendered your old certificate for shares of 10p each for replacement by a certificate
representing your consolidated shareholding, please contact our share registrars, whose details are set out later in this section.
representing your consolidated shareholding, please contact our share registrars, whose details are set out later in this section.
The high and low closing prices of the Company’s shares during 2017 and 2016 on the two main markets on which they are listed were
The high and low closing prices of the Company’s shares during 2017 and 2016 on the two main markets on which they are listed were
as follows:
as follows:
The high and low closing prices of the Company’s shares during 2017 and 2016 on the two main markets on which they are listed were
The high and low closing prices of the Company’s shares during 2017 and 2016 on the two main markets on which they are listed were
as follows:
as follows:
2016
Low
London Stock Exchange
2016
148.1p
London Stock Exchange
Low
JSE
R31.20
JSE
London Stock Exchange
148.1p
London Stock Exchange
At 31 December 2017, the Company had approximately 478,634 underlying shareholders. Many of our retail shareholders hold their
At 31 December 2017, the Company had approximately 478,634 underlying shareholders. Many of our retail shareholders hold their
JSE
R31.20
JSE
shares through Company-sponsored nominee arrangements, as described in the footnote to the second table below.
shares through Company-sponsored nominee arrangements, as described in the footnote to the second table below.
At 31 December 2017, the Company had approximately 478,634 underlying shareholders. Many of our retail shareholders hold their
At 31 December 2017, the Company had approximately 478,634 underlying shareholders. Many of our retail shareholders hold their
shares through Company-sponsored nominee arrangements, as described in the footnote to the second table below.
shares through Company-sponsored nominee arrangements, as described in the footnote to the second table below.
In more detail, the geographical analysis and shareholder profile of our share register at 31 December 2017 were as follows:
In more detail, the geographical analysis and shareholder profile of our share register at 31 December 2017 were as follows:
2017
Low
2017
188.0p
Low
R31.69
188.0p
R31.69
2017
Low
2017
188.0p
Low
R31.69
188.0p
R31.69
High
231.7p
High
R38.34
231.7p
R38.34
High
225.5p
High
R44.60
225.5p
R44.60
High
231.7p
High
R38.34
231.7p
R38.34
High
225.5p
High
R44.60
225.5p
R44.60
2016
Low
2016
148.1p
Low
R31.20
148.1p
R31.20
In more detail, the geographical analysis and shareholder profile of our share register at 31 December 2017 were as follows:
In more detail, the geographical analysis and shareholder profile of our share register at 31 December 2017 were as follows:
Register
Register
UK
UK
Register
Register
South Africa
South Africa
UK
UK
Zimbabwe
Zimbabwe
South Africa
South Africa
Namibia
Namibia
Zimbabwe
Zimbabwe
Malawi
Malawi
Namibia
Namibia
Total
Total
Malawi
Malawi
Source: Equiniti/Link Market Services
Source: Equiniti/Link Market Services
Total
Total
Total shares
Total shares
1,875,209,959
1,875,209,959
Total shares
Total shares
2,985,250,445
2,985,250,445
1,875,209,959
1,875,209,959
60,162,319
60,162,319
2,985,250,445
2,985,250,445
7,092,686
7,092,686
60,162,319
60,162,319
4,999,860
4,999,860
7,092,686
7,092,686
4,932,715,269
4,932,715,269
4,999,860
4,999,860
4,932,715,269
4,932,715,269
% of whole
38.02%
% of whole
60.52%
38.02%
1.22%
60.52%
0.14%
1.22%
0.10%
0.14%
100%
0.10%
100%
% of whole
38.02%
% of whole
60.52%
38.02%
1.22%
60.52%
0.14%
1.22%
0.10%
0.14%
100%
0.10%
100%
Number
9,194
Number
25,973
9,194
26,246
25,973
484
26,246
4,422
484
66,319
4,422
66,319
Number
9,194
Number
25,973
9,194
26,246
25,973
484
26,246
4,422
484
66,319
4,422
66,319
Source: Equiniti/Link Market Services
Source: Equiniti/Link Market Services
Register
Register
1-1,000
1-1,000
Register
Register
1,001-10,000
1,001-10,000
1-1,000
1-1,000
10,001-100,000
10,001-100,000
1,001-10,000
1,001-10,000
100,001-250,000
100,001-250,000
10,001-100,000
10,001-100,000
250,001+
250,001+
100,001-250,000
100,001-250,000
Total
Total
250,001+
250,001+
Source: Equiniti/Link Market Services
Source: Equiniti/Link Market Services
Total
Total
Total shares
Total shares
17,963,781
17,963,781
Total shares
Total shares
18,000,450
18,000,450
17,963,781
17,963,781
24,032,589
24,032,589
18,000,450
18,000,450
40,485,797
40,485,797
24,032,589
24,032,589
4,832,232,652
4,832,232,652
40,485,797
40,485,797
4,932,715,269
4,932,715,269
4,832,232,652
4,832,232,652
4,932,715,269
4,932,715,269
% of whole
% of whole
0.36
0.36
% of whole
% of whole
0.36
0.36
0.36
0.36
0.49
0.49
0.36
0.36
0.82
0.82
0.49
0.49
97.96
97.96
0.82
0.82
100
100
97.96
97.96
100
100
Number
58,068
Number
6,931
58,068
796
6,931
180
796
344
180
66,319
344
66,319
Number
58,068
Number
6,931
58,068
796
6,931
180
796
344
180
66,319
344
66,319
Source: Equiniti/Link Market Services
Note
The registered shareholdings on the South African branch register included PLC Nominees (Pty) Limited, which held a total of
Note
2,963,768,350 shares, including 402,396 beneficial owners. The registered shareholdings on the Zimbabwean branch register included
The registered shareholdings on the South African branch register included PLC Nominees (Pty) Limited, which held a total of
Old Mutual Zimbabwe Nominees (Pvt) Limited, which held a total of 669,463 shares as nominee for 3,432 underlying beneficial owners.
2,963,768,350 shares, including 402,396 beneficial owners. The registered shareholdings on the Zimbabwean branch register included
The registered shareholdings on the Namibian section of the principal register included Old Mutual (Namibia) Nominees (Pty) Limited,
Old Mutual Zimbabwe Nominees (Pvt) Limited, which held a total of 669,463 shares as nominee for 3,432 underlying beneficial owners.
which held a total of 6,626,320 shares as nominee for 6,355 underlying beneficial owners. The registered shareholdings on the Malawian
The registered shareholdings on the Namibian section of the principal register included Old Mutual (Namibia) Nominees (Pty) Limited,
branch register included Old Mutual (Blantyre) Nominees Limited, which held a total 35,327 shares as nominee 132 underlying beneficial
which held a total of 6,626,320 shares as nominee for 6,355 underlying beneficial owners. The registered shareholdings on the Malawian
owners.
branch register included Old Mutual (Blantyre) Nominees Limited, which held a total 35,327 shares as nominee 132 underlying beneficial
owners.
Source: Equiniti/Link Market Services
Note
The registered shareholdings on the South African branch register included PLC Nominees (Pty) Limited, which held a total of
Note
2,963,768,350 shares, including 402,396 beneficial owners. The registered shareholdings on the Zimbabwean branch register included
The registered shareholdings on the South African branch register included PLC Nominees (Pty) Limited, which held a total of
Old Mutual Zimbabwe Nominees (Pvt) Limited, which held a total of 669,463 shares as nominee for 3,432 underlying beneficial owners.
2,963,768,350 shares, including 402,396 beneficial owners. The registered shareholdings on the Zimbabwean branch register included
The registered shareholdings on the Namibian section of the principal register included Old Mutual (Namibia) Nominees (Pty) Limited,
Old Mutual Zimbabwe Nominees (Pvt) Limited, which held a total of 669,463 shares as nominee for 3,432 underlying beneficial owners.
which held a total of 6,626,320 shares as nominee for 6,355 underlying beneficial owners. The registered shareholdings on the Malawian
The registered shareholdings on the Namibian section of the principal register included Old Mutual (Namibia) Nominees (Pty) Limited,
branch register included Old Mutual (Blantyre) Nominees Limited, which held a total 35,327 shares as nominee 132 underlying beneficial
which held a total of 6,626,320 shares as nominee for 6,355 underlying beneficial owners. The registered shareholdings on the Malawian
owners.
branch register included Old Mutual (Blantyre) Nominees Limited, which held a total 35,327 shares as nominee 132 underlying beneficial
owners.
342
340
342
342
342
343
Old Mutual plc
Annual Report and Accounts 2017
Dealings in the Company’s shares
on the JSE
All transactions in the Company’s shares on the JSE are
required to be settled electronically through Strate, and share
certificates are no longer good for delivery in respect of
such transactions. Shareholders who have any enquiries
about the effect of Strate on their holdings in the Company
should contact Link Market Services in Johannesburg
on +27 (0)86 140 0110 or +27 (0)11 029 0253
Dealings in the Company’s shares
on the Zimbabwe Stock Exchange
With effect from March 2015, all transactions in the Company’s
shares on the Zimbabwe Stock Exchange have been required to
be settled in dematerialised form, and share certificates are no
longer good for delivery in respect of such transactions. The
Company sent a circular to its registered shareholders on the
Zimbabwe branch register during the first quarter of 2015 to explain
the consequences of this and inviting them to dematerialise their
certificated shareholdings through an Issuer-Sponsored Nominee
Programme. Shareholders on the Zimbabwe branch register
who have any enquiries about dematerialising their holdings in
the Company should refer to this circular (which is also available
on the Company’s website) or, in case of doubt, contact Corpserve
Registrars on +263 (0)4 751559/61.
Electronic communications and
electronic proxy appointment
The Company wrote to shareholders on its South African branch
register and on the principal and Namibian sections of its UK
register in November 2012 to inform them that it was moving to e-
comms as the default form of communication, in line with provisions
in the UK Companies Act 2006 and the Company’s Articles of
Association. Shareholders who wished to continue to receive
physical copies of shareholder communications, rather than
accessing these from the Company’s website, were required to
notify the Company’s registrars of their election to do so by
4 January 2013. A similar process was followed, with different
applicable dates, for new shareholders who bought shares
between November 2012 and 15 August 2014.
Further exercises to extend these arrangements to shareholders
on the Malawian and Zimbabwean branch registers took place
during 2014 and 2015 respectively.
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
Registrars
The Company’s share register is administered by the Global Share
Alliance (comprising Equiniti Limited in the UK and Link Market
Services South Africa (Pty) Ltd in South Africa) in conjunction with
local representatives in the other territories where the Company’s
shares are listed. The following are the relevant contact details:
UK
Equiniti Limited
Aspect House, Spencer Road, Lancing
West Sussex BN99 6DA
Tel no: 0371 384 2878 (if calling from the UK)
Tel no: +44 121 415 0833 (from overseas)
Website for shareholder information and queries:
www.shareview.co.uk
South Africa
Link Market Services South Africa (Pty) Ltd
13th Floor Rennie House, 19 Ameshoff Street
Braamfontein, Johannesburg 2001
PO Box 10462, Johannesburg, 2000
Tel no: +27 (0)86 140 0110/ +27(0)11 029 0253/
+27 (0)086 154 6566/ +27 (0)11 715 3000
Email: oldmutualenquiries@linkmarketservices.co.za
www.investorcentre.linkmarketservices.co.za
Malawi
National Bank of Malawi
Legal Department
NBM Towers, 7 Henderson Street Blantyre
(PO Box 1438, Blantyre, Malawi)
Email: nbminvestment@natbankmw.com
Tel no: +265 182 0622/0054
Fax no: +265 182 1591
Namibia
Transfer Secretaries (Pty) Limited
4 Robert Mugabe Avenue, Windhoek
(PO Box 2401, Windhoek)
Tel no: +264 (0)61 227647
Fax: +264 (0)61 248531
Email: ts@nsx.com.na
Zimbabwe
Corpserve Registrars (Pvt) Ltd
2nd Floor, ZB Centre
Cnr 1st Street and K. Nkrumah Avenue
Harare
(PO Box 2208, Harare, Zimbabwe)
Tel no: +263 (0)4 751559/61
Fax: +263 (0)4 752629
Email: corpserve@escrowgroup.org
www.corpserveregistars.com
Old Mutual plc Annual Report and Accounts 2017
S
i
t
r
a
t
e
g
c
r
e
p
o
r
t
Old Mutual plc
Annual Report and Accounts 2017
Dealings in the Company’s shares
on the JSE
All transactions in the Company’s shares on the JSE are
required to be settled electronically through Strate, and share
certificates are no longer good for delivery in respect of
such transactions. Shareholders who have any enquiries
about the effect of Strate on their holdings in the Company
should contact Link Market Services in Johannesburg
on +27 (0)86 140 0110 or +27 (0)11 029 0253
Dealings in the Company’s shares
on the Zimbabwe Stock Exchange
With effect from March 2015, all transactions in the Company’s
shares on the Zimbabwe Stock Exchange have been required to
be settled in dematerialised form, and share certificates are no
longer good for delivery in respect of such transactions. The
Company sent a circular to its registered shareholders on the
Zimbabwe branch register during the first quarter of 2015 to explain
the consequences of this and inviting them to dematerialise their
certificated shareholdings through an Issuer-Sponsored Nominee
Programme. Shareholders on the Zimbabwe branch register
who have any enquiries about dematerialising their holdings in
the Company should refer to this circular (which is also available
on the Company’s website) or, in case of doubt, contact Corpserve
Registrars on +263 (0)4 751559/61.
Electronic communications and
electronic proxy appointment
The Company wrote to shareholders on its South African branch
register and on the principal and Namibian sections of its UK
register in November 2012 to inform them that it was moving to e-
comms as the default form of communication, in line with provisions
in the UK Companies Act 2006 and the Company’s Articles of
Association. Shareholders who wished to continue to receive
physical copies of shareholder communications, rather than
accessing these from the Company’s website, were required to
notify the Company’s registrars of their election to do so by
4 January 2013. A similar process was followed, with different
applicable dates, for new shareholders who bought shares
between November 2012 and 15 August 2014.
Further exercises to extend these arrangements to shareholders
on the Malawian and Zimbabwean branch registers took place
during 2014 and 2015 respectively.
Registrars
The Company’s share register is administered by the Global Share
Alliance (comprising Equiniti Limited in the UK and Link Market
Services South Africa (Pty) Ltd in South Africa) in conjunction with
local representatives in the other territories where the Company’s
shares are listed. The following are the relevant contact details:
UK
Equiniti Limited
Aspect House, Spencer Road, Lancing
West Sussex BN99 6DA
Tel no: 0371 384 2878 (if calling from the UK)
Tel no: +44 121 415 0833 (from overseas)
Website for shareholder information and queries:
www.shareview.co.uk
South Africa
Link Market Services South Africa (Pty) Ltd
13th Floor Rennie House, 19 Ameshoff Street
Braamfontein, Johannesburg 2001
PO Box 10462, Johannesburg, 2000
Tel no: +27 (0)86 140 0110/ +27(0)11 029 0253/
+27 (0)086 154 6566/ +27 (0)11 715 3000
Email: oldmutualenquiries@linkmarketservices.co.za
www.investorcentre.linkmarketservices.co.za
Malawi
National Bank of Malawi
Legal Department
NBM Towers, 7 Henderson Street Blantyre
(PO Box 1438, Blantyre, Malawi)
Email: nbminvestment@natbankmw.com
Tel no: +265 182 0622/0054
Fax no: +265 182 1591
Namibia
Transfer Secretaries (Pty) Limited
4 Robert Mugabe Avenue, Windhoek
(PO Box 2401, Windhoek)
Tel no: +264 (0)61 227647
Fax: +264 (0)61 248531
Email: ts@nsx.com.na
Zimbabwe
Corpserve Registrars (Pvt) Ltd
2nd Floor, ZB Centre
Cnr 1st Street and K. Nkrumah Avenue
Harare
(PO Box 2208, Harare, Zimbabwe)
Tel no: +263 (0)4 751559/61
Fax: +263 (0)4 752629
Email: corpserve@escrowgroup.org
www.corpserveregistars.com
341
343
Old Mutual plc Annual Report and Accounts 2017Financials
Shareholder information
continued
Shareholder information
continued
If you are currently still receiving documents by post, but would
like to receive notification of future communications from the
Company by email:
If you are currently still receiving documents by post, but would
like to receive notification of future communications from the
If your shares are on the principal UK register, please log on to
Company by email:
If your shares are on the South African branch register,
If your shares are on the Zimbabwean or Malawian branch
our website, www.oldmutual.com, select ‘Investor Relations’, then
‘Shareholder Centre’, then click on ‘Shareholder investor centre’
If your shares are on the principal UK register, please log on to
and follow the instructions to log into the Shareholder Investor
our website, www.oldmutual.com, select ‘Investor Relations’, then
Centre. In order to register, you will need your Shareholder
‘Shareholder Centre’, then click on ‘Shareholder investor centre’
Reference Number, which can be found on the payment advice
and follow the instructions to log into the Shareholder Investor
notice or tax voucher accompanying your last dividend payment
Centre. In order to register, you will need your Shareholder
or notification. Before you register, you will be asked to agree
Reference Number, which can be found on the payment advice
to the Terms and Conditions for Electronic Communications
notice or tax voucher accompanying your last dividend payment
with Shareholders. It is important that you read these Terms
or notification. Before you register, you will be asked to agree
and Conditions carefully, as they set out the basis on which
to the Terms and Conditions for Electronic Communications
electronic communications will be sent to you
with Shareholders. It is important that you read these Terms
and Conditions carefully, as they set out the basis on which
please call the contact centre of Link Market Services on
electronic communications will be sent to you
+27 (0)86 140 0110 or email them at
If your shares are on the South African branch register,
oldmutualenquiries@linkmarketservices.co.za
please call the contact centre of Link Market Services on
If your shares are on the Zimbabwean or Malawian branch
+27 (0)86 140 0110 or email them at
registers or the Namibian section of the principal register, please
oldmutualenquiries@linkmarketservices.co.za
contact the applicable local share register representatives, whose
details are set out above.
registers or the Namibian section of the principal register, please
contact the applicable local share register representatives, whose
details are set out above.
Any election to receive documents electronically will generally
remain in force until you contact the Company’s registrars to
terminate or change such election.
Any election to receive documents electronically will generally
remain in force until you contact the Company’s registrars to
Electronic proxy appointment is available for this year’s Annual
terminate or change such election.
General Meeting. This enables proxy votes to be submitted
electronically, as an alternative to filling out and posting a form
Electronic proxy appointment is available for this year’s Annual
of proxy. Further details are set out on the form of proxy, which can
General Meeting. This enables proxy votes to be submitted
be accessed in the AGM section of the Shareholder Information
electronically, as an alternative to filling out and posting a form
part of our website.
of proxy. Further details are set out on the form of proxy, which can
be accessed in the AGM section of the Shareholder Information
Second interim dividend for the year ended
part of our website.
31 December 2017 and timetable for payment
The Board has declared a second interim dividend (the ‘Second
Second interim dividend for the year ended
Interim Dividend’) for the year ended 31 December 2017 of
31 December 2017 and timetable for payment
3.57 pence per share, which will be paid on 30 April 2018.
The Board has declared a second interim dividend (the ‘Second
Shareholders on the South African, Zimbabwean and Malawian
Interim Dividend’) for the year ended 31 December 2017 of
branch registers and the Namibian section of the principal register
3.57 pence per share, which will be paid on 30 April 2018.
will be paid local currency cash equivalents of the Second Interim
Shareholders on the South African, Zimbabwean and Malawian
Dividend under dividend access trust or similar arrangements
branch registers and the Namibian section of the principal register
established in each country. Shareholders who hold their shares
will be paid local currency cash equivalents of the Second Interim
through Euroclear Sweden AB, the Swedish nominee, will be
Dividend under dividend access trust or similar arrangements
paid the cash equivalent of the Second Interim Dividend in
established in each country. Shareholders who hold their shares
Swedish kronor.
through Euroclear Sweden AB, the Swedish nominee, will be
paid the cash equivalent of the Second Interim Dividend in
Swedish kronor.
The currency equivalents of the Second Interim Dividend are as
follows:
The currency equivalents of the Second Interim Dividend are as
South Africa
South African cents per share
follows:
Malawian kwacha per share
Malawi
Namibian cents per share
Namibia
South African cents per share
South Africa
US cents per share
Zimbabwe
Malawian kwacha per share
Malawi
Swedish kronor per share
Sweden
Namibian cents per share
Namibia
These currency equivalents have been calculated using the
US cents per share
Zimbabwe
following exchange rates:
Swedish kronor per share
Sweden
66.50482
34.14
66.50482
66.50482
4.71
34.14
0.39
66.50482
4.71
0.39
Rand/£
Malawian kwacha/£
Namibian dollars/£
Rand/£
US dollars/£
Malawian kwacha/£
Swedish kronor/£
Namibian dollars/£
US dollars/£
Swedish kronor/£
These currency equivalents have been calculated using the
South Africa
18.6288
following exchange rates:
Malawi
956.38
18.6288
Namibia
18.6288
South Africa
1.3182
Zimbabwe
956.38
Malawi
10.8460
Sweden
18.6288
Namibia
Dividend Tax will be withheld at the rate of 20% from the
1.3182
Zimbabwe
amount of the gross dividend of 66.50482 South African cents per
10.8460
Sweden
share paid to South African shareholders unless a shareholder
Dividend Tax will be withheld at the rate of 20% from the
qualifies for exemption. After Dividend Tax has been withheld,
amount of the gross dividend of 66.50482 South African cents per
the net dividend will be 53.20386 South African cents per share.
share paid to South African shareholders unless a shareholder
The Company had a total of 4,932,779,577 shares in issue at
qualifies for exemption. After Dividend Tax has been withheld,
the date on which the dividend was announced, 15 March 2018.
the net dividend will be 53.20386 South African cents per share.
In South Africa, the dividend will be distributed by Old Mutual
The Company had a total of 4,932,779,577 shares in issue at
Dividend Access Company (Pty) Limited, a South African
the date on which the dividend was announced, 15 March 2018.
company with tax registration number 9460/144/14/1,
In South Africa, the dividend will be distributed by Old Mutual
in terms of the Company’s dividend access share arrangements.
Dividend Access Company (Pty) Limited, a South African
company with tax registration number 9460/144/14/1,
The record date for this dividend payment is the close of business
in terms of the Company’s dividend access share arrangements.
on 6 April 2018 for all the exchanges where the Company’s
shares are listed. The last day to trade cum-dividend will be
The record date for this dividend payment is the close of business
28 March 2018 on the Malawi Stock Exchange, 3 April 2018 on the
on 6 April 2018 for all the exchanges where the Company’s
JSE and on the Namibian and Zimbabwean Stock Exchanges and
shares are listed. The last day to trade cum-dividend will be
4 April 2018 on the London Stock Exchange. The shares will trade
28 March 2018 on the Malawi Stock Exchange, 3 April 2018 on the
ex-dividend from the opening of business on 29 March 2018 on
JSE and on the Namibian and Zimbabwean Stock Exchanges and
the Malawi Stock Exchange, from the opening of business on
4 April 2018 on the London Stock Exchange. The shares will trade
4 April 2018 on the JSE and on the Namibian and Zimbabwean
ex-dividend from the opening of business on 29 March 2018 on
Stock Exchanges and from the opening of business on 5 April 2018
the Malawi Stock Exchange, from the opening of business on
on the London Stock Exchange.
4 April 2018 on the JSE and on the Namibian and Zimbabwean
Stock Exchanges and from the opening of business on 5 April 2018
No dematerialisation or rematerialisation within Strate and
on the London Stock Exchange.
no transfers between registers may take place in the period from
3 April 2018 to 6 April 2018, both dates inclusive.
No dematerialisation or rematerialisation within Strate and
Financial calendar for the rest of 2018
no transfers between registers may take place in the period from
3 April 2018 to 6 April 2018, both dates inclusive.
The Company’s financial calendar for the rest of 2018 is as follows:
Financial calendar for the rest of 2018
Annual General Meeting
The Company’s financial calendar for the rest of 2018 is as follows:
Final results for 2018
30 April 2018
March 2019
Annual General Meeting
Final results for 2018
30 April 2018
March 2019
342
Old Mutual plc Annual Report and Accounts 2017
Notes
If you are currently still receiving documents by post, but would
The currency equivalents of the Second Interim Dividend are as
like to receive notification of future communications from the
follows:
Shareholder information
continued
Shareholder information
continued
Company by email:
If you are currently still receiving documents by post, but would
like to receive notification of future communications from the
If your shares are on the principal UK register, please log on to
Company by email:
our website, www.oldmutual.com, select ‘Investor Relations’, then
‘Shareholder Centre’, then click on ‘Shareholder investor centre’
If your shares are on the principal UK register, please log on to
and follow the instructions to log into the Shareholder Investor
our website, www.oldmutual.com, select ‘Investor Relations’, then
Centre. In order to register, you will need your Shareholder
‘Shareholder Centre’, then click on ‘Shareholder investor centre’
Reference Number, which can be found on the payment advice
and follow the instructions to log into the Shareholder Investor
notice or tax voucher accompanying your last dividend payment
Centre. In order to register, you will need your Shareholder
or notification. Before you register, you will be asked to agree
Reference Number, which can be found on the payment advice
to the Terms and Conditions for Electronic Communications
notice or tax voucher accompanying your last dividend payment
with Shareholders. It is important that you read these Terms
or notification. Before you register, you will be asked to agree
and Conditions carefully, as they set out the basis on which
to the Terms and Conditions for Electronic Communications
electronic communications will be sent to you
with Shareholders. It is important that you read these Terms
If your shares are on the South African branch register,
and Conditions carefully, as they set out the basis on which
please call the contact centre of Link Market Services on
electronic communications will be sent to you
+27 (0)86 140 0110 or email them at
If your shares are on the South African branch register,
oldmutualenquiries@linkmarketservices.co.za
please call the contact centre of Link Market Services on
If your shares are on the Zimbabwean or Malawian branch
+27 (0)86 140 0110 or email them at
registers or the Namibian section of the principal register, please
oldmutualenquiries@linkmarketservices.co.za
contact the applicable local share register representatives, whose
If your shares are on the Zimbabwean or Malawian branch
details are set out above.
registers or the Namibian section of the principal register, please
Any election to receive documents electronically will generally
contact the applicable local share register representatives, whose
remain in force until you contact the Company’s registrars to
details are set out above.
terminate or change such election.
Any election to receive documents electronically will generally
remain in force until you contact the Company’s registrars to
Electronic proxy appointment is available for this year’s Annual
terminate or change such election.
General Meeting. This enables proxy votes to be submitted
electronically, as an alternative to filling out and posting a form
Electronic proxy appointment is available for this year’s Annual
of proxy. Further details are set out on the form of proxy, which can
General Meeting. This enables proxy votes to be submitted
be accessed in the AGM section of the Shareholder Information
electronically, as an alternative to filling out and posting a form
part of our website.
of proxy. Further details are set out on the form of proxy, which can
part of our website.
be accessed in the AGM section of the Shareholder Information
Second interim dividend for the year ended
31 December 2017 and timetable for payment
The Board has declared a second interim dividend (the ‘Second
Second interim dividend for the year ended
Interim Dividend’) for the year ended 31 December 2017 of
31 December 2017 and timetable for payment
3.57 pence per share, which will be paid on 30 April 2018.
The Board has declared a second interim dividend (the ‘Second
Shareholders on the South African, Zimbabwean and Malawian
Interim Dividend’) for the year ended 31 December 2017 of
branch registers and the Namibian section of the principal register
3.57 pence per share, which will be paid on 30 April 2018.
will be paid local currency cash equivalents of the Second Interim
Shareholders on the South African, Zimbabwean and Malawian
Dividend under dividend access trust or similar arrangements
branch registers and the Namibian section of the principal register
established in each country. Shareholders who hold their shares
will be paid local currency cash equivalents of the Second Interim
through Euroclear Sweden AB, the Swedish nominee, will be
Dividend under dividend access trust or similar arrangements
paid the cash equivalent of the Second Interim Dividend in
established in each country. Shareholders who hold their shares
Swedish kronor.
through Euroclear Sweden AB, the Swedish nominee, will be
paid the cash equivalent of the Second Interim Dividend in
Swedish kronor.
The currency equivalents of the Second Interim Dividend are as
South African cents per share
South Africa
66.50482
follows:
Malawi
Namibia
South Africa
Zimbabwe
Malawi
Sweden
Namibia
34.14
66.50482
66.50482
4.71
34.14
0.39
66.50482
Malawian kwacha per share
Namibian cents per share
South African cents per share
US cents per share
Malawian kwacha per share
Swedish kronor per share
Namibian cents per share
These currency equivalents have been calculated using the
US cents per share
Zimbabwe
4.71
following exchange rates:
Sweden
0.39
Swedish kronor per share
These currency equivalents have been calculated using the
South Africa
18.6288
Rand/£
following exchange rates:
Malawi
956.38
Namibia
South Africa
Zimbabwe
Malawi
Sweden
Namibia
18.6288
18.6288
1.3182
956.38
10.8460
18.6288
Malawian kwacha/£
Namibian dollars/£
Rand/£
US dollars/£
Malawian kwacha/£
Swedish kronor/£
Namibian dollars/£
Dividend Tax will be withheld at the rate of 20% from the
US dollars/£
Zimbabwe
1.3182
amount of the gross dividend of 66.50482 South African cents per
Swedish kronor/£
Sweden
10.8460
share paid to South African shareholders unless a shareholder
Dividend Tax will be withheld at the rate of 20% from the
qualifies for exemption. After Dividend Tax has been withheld,
amount of the gross dividend of 66.50482 South African cents per
the net dividend will be 53.20386 South African cents per share.
share paid to South African shareholders unless a shareholder
The Company had a total of 4,932,779,577 shares in issue at
qualifies for exemption. After Dividend Tax has been withheld,
the date on which the dividend was announced, 15 March 2018.
the net dividend will be 53.20386 South African cents per share.
In South Africa, the dividend will be distributed by Old Mutual
The Company had a total of 4,932,779,577 shares in issue at
Dividend Access Company (Pty) Limited, a South African
the date on which the dividend was announced, 15 March 2018.
company with tax registration number 9460/144/14/1,
In South Africa, the dividend will be distributed by Old Mutual
in terms of the Company’s dividend access share arrangements.
Dividend Access Company (Pty) Limited, a South African
company with tax registration number 9460/144/14/1,
The record date for this dividend payment is the close of business
in terms of the Company’s dividend access share arrangements.
on 6 April 2018 for all the exchanges where the Company’s
shares are listed. The last day to trade cum-dividend will be
The record date for this dividend payment is the close of business
28 March 2018 on the Malawi Stock Exchange, 3 April 2018 on the
on 6 April 2018 for all the exchanges where the Company’s
JSE and on the Namibian and Zimbabwean Stock Exchanges and
shares are listed. The last day to trade cum-dividend will be
4 April 2018 on the London Stock Exchange. The shares will trade
28 March 2018 on the Malawi Stock Exchange, 3 April 2018 on the
ex-dividend from the opening of business on 29 March 2018 on
JSE and on the Namibian and Zimbabwean Stock Exchanges and
the Malawi Stock Exchange, from the opening of business on
4 April 2018 on the London Stock Exchange. The shares will trade
4 April 2018 on the JSE and on the Namibian and Zimbabwean
ex-dividend from the opening of business on 29 March 2018 on
Stock Exchanges and from the opening of business on 5 April 2018
the Malawi Stock Exchange, from the opening of business on
on the London Stock Exchange.
4 April 2018 on the JSE and on the Namibian and Zimbabwean
Stock Exchanges and from the opening of business on 5 April 2018
No dematerialisation or rematerialisation within Strate and
on the London Stock Exchange.
no transfers between registers may take place in the period from
3 April 2018 to 6 April 2018, both dates inclusive.
No dematerialisation or rematerialisation within Strate and
no transfers between registers may take place in the period from
Financial calendar for the rest of 2018
3 April 2018 to 6 April 2018, both dates inclusive.
The Company’s financial calendar for the rest of 2018 is as follows:
Financial calendar for the rest of 2018
Annual General Meeting
30 April 2018
The Company’s financial calendar for the rest of 2018 is as follows:
Final results for 2018
March 2019
Annual General Meeting
Final results for 2018
30 April 2018
March 2019
343
Old Mutual plc Annual Report and Accounts 2017
Notes
344
Old Mutual plc Annual Report and Accounts 2017 Disclaimer
These materials do not constitute or form a part of, and should not be construed as, any
offer or solicitation or advertisement to purchase and/or subscribe for Securities in South
Africa, including an offer to the public for the sale of, or subscription for, or the solicitation
or advertisement of an offer to buy and/or subscribe for, securities as defined in the
South African Companies Act, 71 of 2008 (as amended) or otherwise (the “Act”) and will
not be distributed to any person in South Africa in any manner that could be construed
as an offer to the public in terms of the Act. These materials do not constitute a prospectus
registered and/or issued in terms of the Act. Nothing in these materials should be viewed,
or construed, as “advice”, as that term is used in the South African Financial Markets Act,
19 of 2012, as amended, and/or Financial Advisory and Intermediary Services Act, 37
of 2002, as amended.
These materials are not an offer to sell, or a solicitation of an offer to purchase, securities
in the United States or in any other jurisdiction. The securities to which these materials relate
have not been registered under the US Securities Act of 1933, as amended (the “Securities
Act”), and may not be offered or sold in the United States except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the Securities Act.
There will be no public offering of the securities in the United States.
These materials may contain certain forward-looking statements with respect to certain
of Old Mutual plc’s, Quilter’s and OML’s plans and their current goals and expectations
relating to its future financial condition, performance and results and, the execution of
the Managed Separation. By their nature, all forward-looking statements involve risk
and uncertainty because they relate to future events and circumstances which are beyond
Old Mutual plc’s, Quilter’s and OML’s control including amongst other things, UK and
South Africa domestic and global economic and business conditions, market related
risks such as fluctuations in interest rates and exchange rates, the policies and actions of
regulatory authorities, the impact of competition, inflation, deflation, the timing and impact
of other uncertainties of future acquisitions or combinations within relevant industries, the
delivery of the Managed Separation in accordance with the expected timetable and cost
projections, as well as the impact of tax and other legislation and other regulations in the
jurisdictions in which Old Mutual plc, Quilter and OML and their affiliates operate. As a
result, Old Mutual plc’s, Quilter’s and OML’s actual future financial condition, performance
and results may differ materially from the plans, goals and expectations set forth in Old
Mutual plc’s, Quilter’s and OML’s forward looking statements. Old Mutual plc, Quilter
and OML undertake no obligation to update the forward-looking statements contained
in these materials or any other forward-looking statements it may make.
Acknowledgements
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www.oldmutualplc.com
Registered Office:
5th Floor
Millennium Bridge House
2 Lambeth Hill
London EC4V 4GG
Old Mutual plc
Registered in England and
Wales No. 3591559 and
as an external company
in each of South Africa
(No. 1999/004855/10),
Malawi (No. 5282),
Namibia (No. F/3591559)
and Zimbabwe (No. E1/99)
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