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You are here: Announcement

Friday 06 August, 2010


RNS Number : 6449Q
Old Mutual PLC
06 August 2010
 



Group Market Consistent Embedded Value statement of earnings

For the 6 months ended 30 June 2010

 

 

 

 

£m

 

Notes

6 months ended 30 June 2010

6 months ended 30 June 2009

Year ended

31 December

2009

Long Term Savings

 

 

 

 

Covered business

 

498

488

554

Asset management

 

64

(7)

26

Banking

 

8

8

16

 

 

570

489

596

Nedbank

 

 

 

 

Banking

 

266

211

470

Mutual and Federal

 

 

 

 

General insurance

 

33

20

70

US Asset Management

 

 

 

 

Asset management

 

40

30

83

Other operating segments

 

 

 

 

Finance costs*

 

(86)

(68)

(144)

Other shareholders' expenses

 

(5)

(33)

(69)

Adjusted operating Group MCEV earnings before tax from core operations

 

818

649

1,006

Bermuda non-core operations

 

 

 

 

Long-term business

 

30

106

8

Adjusted operating Group MCEV earnings before tax**

 

848

755

1,014

Adjusting items

C1

(391)

509

913

Total Group MCEV earnings before tax for the financial period

 

457

1,264

1,927

Income tax attributable to shareholders

 

(39)

(143)

(145)

Total Group MCEV earnings after tax for the financial period

 

418

1,121

1,782

Total Group MCEV earnings for the financial period attributable to:

 

 

 

 

Equity holders of the parent

 

302

1,026

1,562

Non-controlling interests

 

 

 

 

Ordinary shares

 

85

61

156

Preferred securities

 

31

34

64

Total Group MCEV earnings after tax for the financial period

 

418

1,121

1,782

Basic total Group MCEV earnings per ordinary share (pence)

 

6.0

20.5

31.3

Weighted average number of shares - millions

 

5,057

4,996

4,994

*       This includes interest payable from Old Mutual plc to non-core operations of £18 million for the six months ended 30 June 2010 (six months ended 30 June 2009: £21million; year ended 31 December 2010: £40 million). Part of the interest earned by Bermuda from the loan note with Old Mutual plc has been reclassified for the 6 months ended 30 June 2009 from non-operating to operating earnings to be consistent with the treatment applied for the year ended 31 December 2009 and the 6 months ended 30 June 2010.

**     For long-term business and general insurance businesses, adjusted operating Group MCEV earnings are based on short-term and long-term investment returns respectively, include investment returns on life fund investments in Group equity and debt instruments, and are stated net of income tax attributable to policyholder returns. For the US Asset Management business it includes compensation costs in respect of certain long-term incentive schemes defined as non-controlling interests in accordance with IFRS. For all businesses, adjusted operating MCEV earnings exclude goodwill impairment, the impact of acquisition accounting, put revaluations related to long-term incentive schemes, the impact of closure of unclaimed shares trusts, profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments, dividends declared to holders of perpetual preferred callable securities, and fair value (profits)/losses on certain Group debt movements.

 

 

Adjusted operating Group MCEV earnings per share

For the 6 months ended 30 June 2010

 

 

 

 

£m

 

Notes

6 months ended 30 June 2010

6 months ended 30 June

2009

Year ended

31 December

2009

 

Adjusted operating Group MCEV earnings before tax

 

848

755

1,014

 

Tax on adjusted operating Group MCEV earnings

B2

(155)

(183)

(209)

 

Adjusted operating Group MCEV earnings after tax

 

693

572

805

 

Non-controlling interests

 

 

 

 

 

Ordinary shares

 

(95)

(70)

(179)

 

Preferred securities

 

(31)

(34)

(64)

 

Adjusted operating Group MCEV earnings after tax attributable to ordinary equity holders

 

567

468

562

 

Adjusted operating Group MCEV earnings from core operations

 

537

390

581

 

Adjusted operating Group MCEV earnings from non-core operations

 

30

78

(19)

 

Adjusted operating Group MCEV earnings per share from core operations

 

10.0

7.5

11.1

 

Adjusted operating Group MCEV earnings per share from non-core operations

 

0.6

1.4

(0.4)

 

Adjusted operating Group MCEV earnings per share* (pence)

 

10.6

8.9

10.7

 

Adjusted weighted average number of shares - millions

 

5,343

5,232

5,229

 

*       Adjusted operating Group MCEV earnings per share is calculated on the same basis as adjusted operating Group MCEV earnings and is stated after tax and non-controlling interests. It excludes income attributable to Black Economic Empowerment trusts of listed subsidiaries. The calculation of the adjusted weighted average number of shares includes own shares held in policyholders' funds and Black Economic Empowerment trusts.

 

 

 

Components of Group MCEV and adjusted Group MCEV

For the 6 months ended 30 June 2010

 

Components of Group MCEV

 

 

 

£m

 

Notes

At

30 June

2010

At

30 June 2009

At

31 December

2009

Adjusted net worth attributable to ordinary equity holders of the parent

 

4,845

3,860

4,417

Equity

 

9,047

7,731

8,464

Adjustment to include long-term business on a statutory solvency basis:

 

 

 

 

Long Term Savings

C3

(2,766)

(2,167)

(2,626)

Bermuda

C3

(13)

(27)

(6)

Adjustment for market value of life funds' investments in Group equity and debt instruments held in life funds

 

244

235

268

Adjustment to remove perpetual preferred callable securities and accrued dividends

 

(688)

(688)

(688)

Adjustment to exclude acquisition goodwill from the covered business:

 

 

 

 

Long Term Savings

C3

(979)

(1,224)

(995)

Value of in-force business

 

3,208

2,741

3,212

Present value of future profits

 

4,269

3,481

4,255

Additional time value of financial options and guarantees

 

(456)

(127)

(416)

Frictional costs

 

(235)

(199)

(221)

Cost of residual non-hedgeable risks

 

(370)

(414)

(406)

 

 

 

 

 

Group MCEV

 

8,053

6,601

7,629

Group MCEV value per share (pence)

 

148.0

125.1

144.5

Return on Group MCEV (RoEV) per annum from core operations

 

14.2%

13.1%

11.1%

Return on Group MCEV (RoEV) per annum from non-core operations

 

0.5%

1.7%

(0.4)%

Return on Group MCEV (RoEV) per annum

 

14.7%

14.8%

10.7%

Number of shares in issue at the end of the financial period less treasury shares - millions

 

5,442

5,277

5,279

 

The adjustments to include long-term business on a statutory solvency basis reflect the difference between the net worth of each business on the statutory basis (as required by the local regulator) and their portion of the Group's consolidated equity shareholder funds. In South Africa, these values exclude items that are eliminated or shown separately on consolidation (such as Nedbank and inter-company loans). For some European countries the value reflected in the adjustment to include long-term business on a statutory solvency basis includes the value of the deferred acquisition cost asset, which is part of the equity.

The RoEV is calculated as the adjusted operating Group MCEV earnings after tax and non-controlling interests of £567 million (6 months ended 30 June 2009: £468 million; year ended 31 December 2009: £562 million) divided by the opening Group MCEV. The operating assumption changes of £0 million (6 months ended 30 June 2009: £26 million) and other operating variances of £12 million (6 months ended 30 June 2009: £128 million) are not annualised.

Components of Group MCEV and adjusted Group MCEV

For the 6 months ended 30 June 2010

 

Components of adjusted Group MCEV

£m

 

Notes

At

30June

2010

At

30 June

2009

At

31 December

2009

Group MCEV

 

8,053

6,601

7,629

Pro forma adjustments to bring Group investments to market value

 

 

 

 

Adjustment to bring listed subsidiaries to market value

 

495

133

805

Nedbank

 

495

78

623

Mutual & Federal

 

-

55

182

Adjustment for value of own shares in ESOP schemes*

 

73

57

71

Adjustment for present value of Black Economic Empowerment scheme deferred consideration

 

241

194

221

Adjustment to bring external debt to market value

 

206

604

302

Adjusted Group MCEV

B1

9,068

7,589

9,028

Adjusted Group MCEV per share (pence)

 

166.6

143.8

171.0

Number of shares in issue at the end of the financial period less treasury shares - millions

 

5,442

5,277

5,279

*       Includes adjustment for value of excess own shares in employee share scheme trusts. The movement in value between 31 December 2009 and 30 June 2010 is the net effect of the decrease in the Old Mutual plc share price, the reduction in excess own shares following employee share grants in March 2010 and the reduction in overall shares held due to exercises of rights to take delivery of, or net settle, share grants during the financial period.

 

Reconciliation of movements in Group MCEV (after tax)

£m

 


6 months ended 30 June 2010

6 months ended 30 June 2009

 

Notes

Covered business MCEV

Non-covered business IFRS

Total Group MCEV

Covered business MCEV

Non-covered business IFRS

Total Group MCEV

Opening Group MCEV

 

6,027

1,602

7,629

4,183

1,079

5,262

Adjusted operating MCEV earnings

 

452

115

567

487

(19)

468

Non-operating MCEV earnings

 

(164)

(101)

(265)

569

(11)

558

Total Group MCEV earnings

 

288

14

302

1,056

(30)

1,026

Other movements in IFRS net equity

C2

(141)

263

122

117

196

313

Closing Group MCEV

 

6,174

1,879

8,053

5,356

1,245

6,601

 

 


£m

 


Year ended 31 December 2009

 

Notes

Covered business MCEV

Non-covered business IFRS

Total Group MCEV

Opening Group MCEV

 

4,183

1,079

5,262

Adjusted operating MCEV earnings

 

492

70

562

Non-operating MCEV earnings

 

1,191

(191)

1,000

Total Group MCEV earnings

 

1,683

(121)

1,562

Other movements in IFRS net equity

C2

161

644

805

Closing Group MCEV

 

6,027

1,602

7,629

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010

A MCEV policies

A1 Basis of preparation

The Market Consistent Embedded Value methodology (referred to herein and in the supplementary statements on pages 81 to 122 as 'MCEV') adopts the Market Consistent Embedded Value Principles (Copyright © Stichting CFO Forum Foundation 2008) issued in June 2008 and updated in October 2009 by the CFO Forum ('the Principles') as the basis for the methodology used in preparing the supplementary information.

The CFO Forum announced changes to the MCEV Principles in October 2009 to reflect inter alia the inclusion of a liquidity premium. These changes affirm that the risk free reference rate to be applied under MCEV should include both the swap yield curve appropriate to the currency of the cash flows and a liquidity premium where appropriate. The CFO Forum is undertaking further work to develop more detailed application guidance.

The Principles have been fully complied with for all businesses as at 30 June 2010. Any changes in the methodology and assumptions made in presenting this supplementary information compared to those disclosed in the annual report and accounts 2009 are set out in notes A2 and A3.

Throughout the supplementary information the following terminology is used to distinguish between the terms 'MCEV', 'Group MCEV' and 'adjusted Group MCEV':

·      MCEV is a measure of the consolidated value of shareholders' interests in the covered business and consists of the sum of the shareholders' adjusted net worth in respect of the covered business and the value of the in-force covered business.

·      Group MCEV is a measure of the consolidated value of shareholders' interests in covered and non-covered business. Non-covered business is valued at the IFRS net asset value detailed in the primary financial statements adjusted to eliminate inter-company loans.

·      The adjusted Group MCEV, a measure used by management to assess the shareholders' interest in the value of the Group, includes the impact of marking all debt to market value, the market value of the Group's listed banking subsidiary, marking the value of deferred consideration due in respect of Black Economic Empowerment arrangements in South Africa ('the BEE schemes') to market, as well as including the market value of excess own shares held in ESOP schemes.

A2 Methodology

Required capital

Required capital is the market value of assets that is attributed to support the covered business, over and above that required to back statutory liabilities for covered business, whose distribution to shareholders is restricted. The following capital measures are considered in determining the required capital held for covered business so that it reflects the level of capital considered by the directors to be appropriate to manage the business:

·      Economic capital;

·      Regulatory capital (ie the level of solvency capital which the local regulators require);

·      Capital required by rating agencies in respect of the North American business in order to maintain the desired credit rating; and

·      Any other required capital definition to meet internal management objectives.

Economic capital for the covered business is based upon Old Mutual's own internal assessment of risks inherent in the underlying business. It measures capital requirements on an economic statement of financial position, with MCEV as the available capital, consistent with a 99.93% confidence level over a one-year time horizon.

The table below shows the level of required capital expressed as a percentage of the minimum local regulatory capital requirements.

 

£m

 

At 30 June 2010

At 30 June 2009

At 31 December 2009

 

Required capital (a)

Regulatory capital (b)

Ratio (a/b)

Required capital (a)

Regulatory capital (b)

Ratio (a/b)

Required capital (a)

Regulatory capital (b)

Ratio (a/b)

Emerging Markets

1,318

1,011

1.3

1,110

852

1.3

1,225

930

1.3

Nordic

109

95

1.1

120

71

1.7

104

92

1.1

Retail Europe*

38

52

0.7

57

43

1.3

32

52

0.6

Wealth Management**

215

142

1.5

213

131

1.6

213

143

1.5

US Life

491

204

2.4

523

210

2.5

462

193

2.4

Bermuda***

341

-

n/a

279

-

n/a

363

-

n/a

Total

2,512

1,504

1.7

2,302

1,307

1.8

2,399

1,410

1.7

*       Local regulators within many of the Retail Europe countries allow intangible assets to be included as admissible regulatory capital. In such cases the required capital reported for MCEV is net of these items, although each of the countries continues to be sufficiently capitalised on the local solvency basis. Skandia Leben in Germany is permitted under local regulations to include the unallocated policyholder profit sharing liability as admissible capital.

**     The regulatory capital requirement for Wealth Management has been restated at 30 June 2009 and 31 December 2009 to exclude the impact of a policyholder tax credit in Italy, which may be used to offset the capital requirement.

***    The Bermudan regulator allows intangible assets to be included as admissible regulatory capital.

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

 

Cost of residual non-hedgeable risks

The cost of residual non-hedgeable risks ('CNHR') is calculated using a cost of capital approach, ie it is determined as the present value of capital charges for all future non-hedgeable risk capital requirements until the liabilities have run off. The capital charge in each year is the product of the projected expected non-hedgeable risk capital held after allowance for some diversification benefits and the cost of capital charge.

The table below shows the amounts of diversified economic capital held in respect of residual non-hedgeable risks.

Capital held in respect of non-hedgeable risks

£m

 

At
30 June
2010

At
30 June
2009

At
31 December 2009

Emerging Markets

643

503

606

Nordic

315

295

333

Retail Europe

128

150

143

Wealth Management*

553

562

563

US Life

703

549

661

Bermuda**

285

510

619

Total

2,627

2,569

2,925

*       The capital held in respect of non-hedgeable risks for Weath Management at 31 December 2009 has been restated from £640 million to £563 million due to calculation refinements.

**     The capital held in respect of non-hedgeable risks for Bermuda has reduced from 31 December 2009 to 30 June 2010 as a result of the change in the allowance for hedging basis risk, that is now made in the determination of reserves for guaranteed benefits, as well as other calculation refinements.

 

A weighted average cost of capital charge of 2.0% has been applied to residual non-hedgeable capital at a business unit level over the life of the contracts. This translates into an equivalent cost of capital charge of approximately 2.7% being applied to the Group diversified capital required in respect of such non-hedgeable risks.

Taxation

There is currently uncertainty around both the basis and effective date for possible taxation of fee income earned from fund managers by Swedish insurance companies and the expenses that can be relieved against such income. At present we continue to treat fee income from our Swedish unit-linked business as being exempt from corporation tax within our MCEV.

The Emergency Budget of 22 June 2010 announced a reduction in the UK corporation tax rate by 1% per year for four years from April 2011, ultimately bringing the corporation tax rate down to 24%.  The MCEV results at 30 June 2010 have been calculated using an ongoing UK corporation tax rate of 28% and each reduction in the tax rate will be included in future results as and when they are enacted. The estimated positive impact on the value of in-force business ('VIF') in respect of Wealth Management at 30 June 2010, assuming that all the annual reductions in the tax rate will be enacted, is £17 million.

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010

A3 Assumptions

Non-economic assumptions

The management expenses attributable to life assurance business have been allocated to expenses relating to the acquisition of new business, maintenance of in-force business (including investment management expenses) and development projects.

Unallocated Group holding Company expenses have been included to the extent that they relate to the covered business. The table below shows the future expenses attributable to long-term business.  The allocation of these expenses aligns to the proportion that the management expenses incurred by the business bears to the total management expenses incurred in the Group.

Group holding Company expenses attributable to long-term business

%

 

At
30 June
2010

At
30 June
2009

At
31 December 2009

Emerging Markets

16

14

16

Nordic

4

4

4

Retail Europe

2

3

3

Wealth Management

8

8

8

US Life

-

4

2

Bermuda

-

-

-

Total

30

33

33

 

Economic assumptions

Risk free reference rates and inflation

A wide range of liquidity market data and literature was reviewed at 30 June 2010, such as the Barrie+Hibbert calibration of US corporate bond spreads using a structural Merton-style model applied to actual corporate bonds held in the portfolio and a comparison of the yields of similar durations on South African government bonds and bonds issued by state-owned enterprises. It is the directors' view that a significant proportion of corporate bond spreads at 30 June 2010 is attributable to liquidity premium allowances rather than credit and default allowances and that returns in excess of swap rates can be achieved, rather than entire corporate bond spreads being lost to worsening default experience. For the US Life business and OMLAC(SA)'s Retail Affluent Immediate Annuity business the currency, credit quality and duration of the actual corporate bond portfolios were considered and adjusted risk free reference rates were derived at 30 June 2010 by adding 75bps of liquidity premium for the US Life business (30 June 2009: 175bps; 31 December 2009: 100bps) and adding 50bps of liquidity premium for OMLAC(SA)'s Retail Affluent Immediate Annuity business (30 June 2009: 50bps; 31 December 2009: 50bps) to the swap rates used for setting investment return and discounting assumptions. These adjustments reflect the liquidity premium component in corporate bond spreads over swap rates that is expected to be earned on the portfolios. Old Mutual believes that the differences between market yields on US Life's and OMLAC(SA)'s Retail Affluent bond portfolios and the adjusted risk free reference rates still provide substantial implied margins for default.

The risk free reference spot yields (excluding any applicable liquidity adjustments) and expense inflation rates at various terms for each of the significant regions are provided in the table below. The risk free reference spot yield curve has been derived from mid swap rates at the reporting date.

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

 

Risk free reference spot yields (excluding any applicable liquidity adjustments)

 

 

%

At 30 June 2010

GBP

EUR

USD

ZAR

SEK

1 year

0.9

1.2

0.7

6.7

1.3

5 years

3.8

2.1

2.1

8.0

2.3

10 years

4.4

2.9

3.0

8.6

3.1

20 years

3.9

3.4

3.6

8.2

3.6

 

 

 

 

 

 

At 30 June 2009

 

 

 

 

 

1 year

2.0

1.4

0.9

7.7

1.0

5 years

3.7

2.9

2.9

9.0

2.9

10 years

4.0

3.7

3.7

9.2

3.9

20 years

2.9

4.3

4.1

7.9

4.2

 

 

 

 

 

 

At 31 December 2009

 

 

 

 

 

1 year

0.9

1.3

0.7

7.3

0.8

5 years

4.7

2.8

3.0

8.9

2.9

10 years

4.8

3.6

3.5

9.2

3.7

20 years

4.0

4.1

4.0

8.2

4.1

 

 

Expense inflation

 

 

 

 

%

At 30 June 2010

GBP

EUR

USD

ZAR

SEK

1 year

3.3

1.0-3.3

3.0

6.2

1.5

5 years

3.5

1.0-3.3

3.0

6.3

2.3

10 years

4.0

1.0-3.3

3.0

6.7

2.6

20 years

4.5

1.0-3.3

3.0

6.4

2.9

 

 

 

 

 

 

At 30 June 2009

 

 

 

 

 

1 year

0.1

2.3-3.0

3.0

5.9

1.3

5 years

1.9

2.3-3.0

3.0

7.2

2.5

10 years

2.9

2.3-3.0

3.0

7.4

3.0

20 years

4.2

2.3-3.0

3.0

6.2

2.7

 

 

 

 

 

 

At 31 December 2009

 

 

 

 

 

1 year

3.3

2.5-3.0

3.0

6.4

1.1

5 years

3.8

2.5-3.0

3.0

7.5

2.6

10 years

4.4

2.5-3.0

3.0

7.7

2.8

20 years

4.8

2.5-3.0

3.0

6.7

3.0

 

 

 

Volatilities

The at-the-money annualised asset volatility assumptions of the asset classes incorporated in the stochastic models are detailed below.

ZAR volatilities*

 

 

 

 

 

%

Option term

1 year swap

5 year swap

10 year swap

20 year swap

Equity
(total return index)

Property
(total return index)

At 30 June 2010

 

 

 

 

 

 

1 year

15.6

13.9

12.9

12.4

28.4

16.9

5 years

14.5

13.7

13.2

12.8

26.3

14.8

10 years

13.6

13.2

12.8

12.3

26.6

14.3

20 years

12.8

12.2

11.7

10.9

26.9

14.2

 

 

 

 

 

 

 

At 30 June 2009

 

 

 

 

 

 

1 year

18.6

17.3

16.6

16.8

27.4

17.3

5 years

18.5

17.6

17.3

17.3

26.3

15.7

10 years

18.0

17.3

16.7

16.1

26.5

14.1

20 years

16.4

15.7

15.1

14.0

27.4

14.5

 

 

 

 

 

 

 

At 31 December 2009

 

 

 

 

 

 

1 year

18.3

16.2

15.1

14.8

27.4

17.1

5 years

16.9

15.8

15.3

15.1

25.5

14.8

10 years

15.7

15.2

14.7

14.1

26.2

14.1

20 years

14.5

13.8

13.1

12.0

27.0

14.2

*       Due to limited liquidity in the ZAR swaption and equity option market, the market consistent asset model has been calibrated by extrapolating swaption and equity option implied volatility data beyond terms of 2 years and 3 years respectively.

 

USD volatilities

 

 

 

%

Option term

1 year swap

5 year swap

10 year swap

20 year swap

At 30 June 2010

 

 

 

 

1 year

71.0

39.6

32.3

27.2

5 years

29.1

26.5

24.1

22.0

10 years

23.3

21.4

20.5

18.7

20 years

19.4

17.9

17.2

16.0

 

 

 

 

 

At 30 June 2009

 

 

 

 

1 year

61.3

41.9

37.8

33.0

5 years

27.8

26.5

25.0

22.4

10 years

20.8

19.6

19.3

16.9

20 years

16.1

15.6

15.0

13.7

 

 

 

 

 

At 31 December 2009

 

 

 

 

1 year

62.3

36.8

30.1

25.9

5 years

26.9

24.7

22.6

20.6

10 years

18.6

18.3

17.9

16.3

20 years

15.6

14.6

14.3

12.8

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

 

International equity volatilities (applicable to Old Mutual Bermuda)*

%

Option term

SPX

RTY

TPX

HSCEI

TWY

KOSP12

NIFTY

SX5E

UKX

At 30 June 2010

 

 

 

 

 

 

 

 

 

1 year

29.0

37.2

29.1

31.0

24.3

23.1

21.9

29.7

27.3

5 years

28.0

39.0

29.3

31.8

27.3

23.7

23.5

27.9

26.9

10 years

28.0

39.0

29.3

31.8

27.3

23.7

23.5

27.9

26.9


 

 

 

 

 

 

 

 

 

At 30 June 2009

 

 

 

 

 

 

 

 

 

1 year

25.9

33.0

29.4

39.3

30.6

27.0

31.6

29.5

27.0

5 years

26.5

36.1

27.5

36.4

30.0

26.8

29.0

27.7

26.5

10 years

23.1

30.6

25.8

35.2

29.3

27.9

29.4

26.8

25.6


 

 

 

 

 

 

 

 

 

At 31 December 2009

 

 

 

 

 

 

 

 

 

1 year

22.1

28.6

28.3

33.5

22.9

23.3

26.5

24.7

23.1

5 years

24.4

32.9

29.4

34.2

26.4

24.2

26.4

25.4

24.1

10 years

25.0

32.6

29.0

37.4

27.5

30.0

31.2

27.4

25.9

 

International equity volatilities (applicable to Old Mutual Bermuda)*

%

Option term

EEM

USAgg

EUAgg

APAgg

At 30 June 2010

 

 

 

 

1 year

35.2

5.5

13.0

12.6

5 years

32.4

5.5

13.0

12.6

10 years

32.4

5.5

13.0

12.6

 

 

 

 

 

At 30 June 2009

 

 

 

 

1 year

35.5

4.5

11.5

10.8

5 years

32.8

4.5

11.5

10.8

10 years

35.9

4.5

11.5

10.8

 

 

 

 

 

At 31 December 2009

 

 

 

 

1 year

31.6

4.5

12.0

11.6

5 years

30.8

4.5

12.0

11.6

10 years

36.7

4.5

12.0

11.6

*       In prior reporting periods, the volatilities disclosed for Bermuda were on a 1-year forward basis for most indices. The assumptions at 30 June 2010, as well as the comparatives for prior reporting periods, are now shown as the annualised volatilities applicable over the entire option term specified, consistent with the disclosure of volatilities for other regions. These volatilities, as represented by their Bloomberg codes, refer to price indices. Due to ongoing enhancements in the fund mapping process, the indices referenced may vary from period to period.

 

 

 

 

Tax

The weighted average effective tax rates that apply to the cash flow projections at 30 June 2010 are set out below:

·      OMLAC(SA) - 34% (30 June 2009: 31%; 31 December 2009: 33%)

·      Namibia - 0% (30 June 2009: 0%; 31 December 2009: 0%)

·      Nordic - 0% (30 June 2009: 0%; 31 December 2009: 4%)

·      Retail Europe - 27% (30 June 2009: 29%; 31 December 2009: 28%)

·      Wealth Management - 13% (30 June 2009: 18%; 31 December 2009: 13%)

·      US Life* - 0% (30 June 2009: 0%; 31 December 2009: 0%)*

·      Bermuda* - 0% (30 June 2009: 0%; 31 December 2009: 0%)*

 

*       The weighted average effective tax rates for US Life and Bermuda at 31 December 2009 have been restated to 0% from 5% and 10% respectively due to a calculation correction.

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B Segment information

B1 Adjusted Group MCEV presented per business line

 

 

 

£m


At

30 June 2010

At

30 June 2009

At
31 December 2009

MCEV of the covered business

6,174

5,356

6,027

Adjusted net worth*

2,966

2,615

2,815

Value of in-force business

3,208

2,741

3,212

Adjusted net worth of the asset management businesses

1,968

1,712

1,716

Emerging Markets

250

290

216

Nordic**

32

(130)

(75)

Retail Europe

13

11

12

Wealth Management

157

226

152

US Asset Management

1,516

1,315

1,411

Value of the banking business

2,998

2,208

2,948

Nordic (adjusted net worth)

292

259

314

Nedbank (market value)

2,706

1,949

2,634

Value of the general insurance business

 

 

 

Mutual & Federal***

321

272

448

Net other business

(88)

(235)

123

Adjustment for present value of Black Economic Empowerment scheme deferred consideration

241

194

221

Adjustment for value of own shares in ESOP schemes****

73

57

71

Perpetual preferred securities (US$ denominated)

(435)

(292)

(385)

Perpetual preferred callable securities

(487)

(273)

(477)

GBP denominated

(236)

(125)

(224)

Euro denominated

(251)

(148)

(253)

Debt

(1,697)

(1,410)

(1,664)

Rand denominated

(309)

(213)

(290)

USD denominated

(323)

(248)

(338)

GBP denominated

(790)

(653)

(759)

SEK denominated

(273)

(190)

(256)

Euro denominated

(2)

(106)

(21)

 

 

 

 

Adjusted Group MCEV

9,068

7,589

9,028

*       Adjusted net worth is after the elimination of inter-company loans.

**     Includes the adjusted net worth of Nordic holding companies that are classified as non-covered business, net of the holding companies investment in Group subsidiaries.

***    Reflected at IFRS net asset value at 30 June 2010 and at market value for 30 June 2009 and 30 December 2009 as a result of the acquisition of the remaining non-controlling interest in Mutual & Federal.

****   Includes adjustment for value of excess own shares in employee share scheme trusts. The movement in value between 31 December 2009 and 30 June 2010 is the net effect of the decrease in the Old Mutual plc share price, the reduction in excess own shares following employee share grants in March 2010 and the reduction in overall shares held due to exercises of rights to take delivery of, or net settle, share grants during the financial period.

 

 

 

 

B2 Adjusted operating MCEV earnings for the covered business

 

 

 

£m


6 months

ended 30 June 2010

6 months

ended 30 June 2009

Year ended

31 December

2009

Adjusted operating MCEV earnings before tax for the covered business

528

594

562

Long Term Savings

498

488

554

Emerging Markets

182

151

272

Nordic

79

42

78

Retail Europe

31

(17)

(58)

Wealth Management

77

15

(40)

US Life

129

297

302

Bermuda

30

106

8

 

 

 

 

Tax on adjusted operating MCEV earnings for the covered business

(76)

(107)

(70)

Long Term Savings

(76)

(79)

(43)

Emerging Markets

(38)

(41)

(60)

Nordic

(16)

-

3

Retail Europe

(7)

2

14

Wealth Management

(13)

(2)

36

US Life

(2)

(38)

(36)

Bermuda

-

(28)

(27)

 

 

 

 

Adjusted operating MCEV earnings after tax for the covered business

452

487

492

Long Term Savings

422

409

511

Emerging Markets

144

110

212

Nordic

63

42

81

Retail Europe

24

(15)

(44)

Wealth Management

64

13

(4)

US Life

127

259

266

Bermuda

30

78

(19)

 

 

 

 

Tax on adjusted operating MCEV earnings comprises

 

 

 

Tax on adjusted operating MCEV earnings for the covered business

(76)

(107)

(70)

Tax on adjusted operating MCEV earnings for other business

(79)

(76)

(139)

Tax on adjusted operating MCEV earnings

(155)

(183)

(209)

 

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

 

B3 Components of MCEV of the covered business

 

 

 

£m


At
30 June 2010

At
30 June 2009

At
31 December
2009

MCEV of the covered business

6,174

5,356

6,027

Adjusted net worth

2,966

2,615

2,815

Value of in-force business

3,208

2,741

3,212

Long Term Savings

 

 

 

Adjusted net worth

2,625

2,336

2,452

Free surplus

454

313

416

Required capital

2,171

2,023

2,036

Value of in-force business

3,381

2,924

3,377

Present value of future profits

4,192

3,573

4,156

Additional time value of financial options and guarantees

(239)

(112)

(220)

Frictional costs

(232)

(194)

(217)

Cost of residual non-hedgeable risks

(340)

(343)

(342)

Emerging Markets

 

 

 

Adjusted net worth

1,415

1,170

1,305

Free surplus

97

60

80

Required capital

1,318

1,110

1,225

Value of in-force business

1,231

1,054

1,158

Present value of future profits

1,525

1,302

1,424

Additional time value of financial options and guarantees

-

-

-

Frictional costs

(204)

(156)

(181)

Cost of residual non-hedgeable risks

(90)

(92)

(85)

Nordic

 

 

 

Adjusted net worth

143

180

195

Free surplus

34

60

91

Required capital

109

120

104

Value of in-force business

1,154

917

1,114

Present value of future profits

1,210

992

1,196

Additional time value of financial options and guarantees

-

-

-

Frictional costs

(5)

(9)

(11)

Cost of residual non-hedgeable risks

(51)

(66)

(71)

Retail Europe

 

 

 

Adjusted net worth

84

95

78

Free surplus

46

38

46

Required capital

38

57

32

Value of in-force business

451

441

453

Present value of future profits

504

505

507

Additional time value of financial options and guarantees

(10)

(5)

(6)

Frictional costs

(6)

(12)

(7)

Cost of residual non-hedgeable risks

(37)

(47)

(41)

 

 

 

B3 Components of MCEV of the covered business continued

 

 

 

£m


At
30 June 2010

At
30 June 2009

At
31 December
2009

Wealth management

 

 

 

Adjusted net worth

389

341

376

Free surplus

174

128

163

Required capital

215

213

213

Value of in-force business

1,526

1,358

1,468

Present value of future profits

1,601

1,438

1,540

Additional time value of financial options and guarantees

(1)

(1)

(1)

Frictional costs

(8)

(14)

(12)

Cost of residual non-hedgeable risks

(66)

(65)

(59)

US Life

 

 

 

Adjusted net worth

594

550

498

Free surplus

103

27

36

Required capital

491

523

462

Value of in-force business

(981)

(846)

(816)

Present value of future profits

(648)

(664)

(511)

Additional time value of financial options and guarantees

(228)

(106)

(213)

Frictional costs

(9)

(3)

(6)

Cost of residual non-hedgeable risks

(96)

(73)

(86)

Bermuda

 

 

 

Adjusted net worth

341

279

363

Free surplus

-

-

-

Required capital

341

279

363

Value of in-force business

(173)

(183)

(165)

Present value of future profits

77

(92)

99

Additional time value of financial options and guarantees

(217)

(15)

(196)

Frictional costs

(3)

(5)

(4)

Cost of residual non-hedgeable risks

(30)

(71)

(64)

 

 

 

 

 

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax)

 

Total covered business

£m

 

6 months ended 30 June 2010

 

 

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

 

Opening MCEV

416

2,399

2,815

3,212

6,027

 

New business value

(263)

124

(139)

231

92

 

Expected existing business contribution (reference rate)

8

43

51

94

145

 

Expected existing business contribution (in excess of reference rate)

-

14

14

81

95

 

Transfers from VIF and required capital to free surplus

482

(151)

331

(331)

-

 

Experience variances

54

7

61

47

108

 

Assumption changes

2

2

4

(4)

-

 

Other operating variance

27

(39)

(12)

24

12

 

Operating MCEV earnings

310

-

310

142

452

 

Economic variances

(105)

8

(97)

(67)

(164)

 

Other non-operating variance

(1)

-

(1)

1

-

 

Total MCEV earnings

204

8

212

76

288

 

Closing adjustments

(166)

105

(61)

(80)

(141)

 

Capital and dividend flows

(165)

(6)

(171)

(1)

(172)

 

Foreign exchange variance

(1)

111

110

(79)

31

 

MCEV of acquired/sold business

-

-

-

-

-

 

Closing MCEV

454

2,512

2,966

3,208

6,174

 

Return on MCEV (RoEV) % per annum

 

 

 

 

14.8%

 

 

Return on MCEV for total covered business is calculated as the operating MCEV earnings after tax divided by opening MCEV in sterling.  The operating assumption changes and other operating variances are not annualised.

 

 

 

 

 

   

£m

6 months ended 30 June 2009

Year ended 31 December 2009

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

358

2,025

2,383

1,800

4,183

358

2,025

2,383

1,800

4,183

(254)

80

(174)

244

70

(473)

170

(303)

470

167

6

55

61

58

119

7

114

121

142

263

25

2

27

199

226

32

6

38

355

393

379

(90)

289

(289)

-

813

(244)

569

(569)

-

(11)

5

(6)

(76)

(82)

54

(111)

(57)

(120)

(177)

2

-

2

24

26

(3)

(22)

(25)

(258)

(283)

(217)

240

23

105

128

(191)

301

110

19

129

(70)

292

222

265

487

239

214

453

39

492

(112)

32

(80)

632

552

(29)

93

64

940

1,004

24

(6)

18

(1)

17

39

(20)

19

168

187

(158)

318

160

896

1,056

249

287

536

1,147

1,683

113

(41)

72

45

117

(191)

87

(104)

265

161

110

-

110

-

110

(189)

(1)

(190)

-

(190)

(21)

(36)

(57)

70

13

(15)

85

70

289

359

24

(5)

19

(25)

(6)

13

3

16

(24)

(8)

313

2,302

2,615

2,741

5,356

416

2,399

2,815

3,212

6,027

 

 

 

 

19.6%

 

 

 

 

11.8%

 

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

 

 

£m

Long Term Savings (LTS)

6 months ended 30 June 2010

 

 

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

 

Opening MCEV

416

2,036

2,452

3,377

5,829

 

New business value

(263)

124

(139)

231

92

 

Expected existing business contribution (reference rate)

8

42

50

89

139

 

Expected existing business contribution (in excess of reference rate)

-

(2)

(2)

65

63

 

Transfers from VIF and required capital to free surplus

476

(129)

347

(347)

-

 

Experience variances

62

7

69

66

135

 

Assumption changes

-

2

2

(4)

(2)

 

Other operating variance

(43)

5

(38)

33

(5)

 

Operating MCEV earnings

240

49

289

133

422

 

Economic variances

(35)

8

(27)

(62)

(89)

 

Other non-operating variance

(1)

-

(1)

1

-

 

Total MCEV earnings

204

57

261

72

333

 

Closing adjustments

(166)

78

(88)

(68)

(156)

 

Capital and dividend flows

(165)

(6)

(171)

(1)

(172)

 

Foreign exchange variance

(1)

84

83

(67)

16

 

MCEV of acquired/sold business

-

-

-

-

-

 

Closing MCEV

454

2,171

2,625

3,381

6,006

 

Return on MCEV (RoEV) % per annum

 

 

 

 

14.6%

 

 

Return on MCEV is calculated as the operating MCEV earnings after tax divided by opening MCEV in sterling. The operating assumption changes and other operating variances are not annualised.

 

 

 

 

 

£m

6 months ended 30 June 2009

Year ended 31 December 2009

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

16

1,991

2,007

2,225

4,232

16

1,991

2,007

2,225

4,232

(254)

80

(174)

244

70

(473)

170

(303)

470

167

3

55

58

61

119

2

113

115

146

261

4

2

6

178

184

(1)

6

5

316

321

385

(88)

297

(297)

-

818

(240)

578

(578)

-

14

5

19

(68)

(49)

126

(111)

15

(99)

(84)

2

-

2

24

26

33

(22)

11

(212)

(201)

58

(35)

23

36

59

154

(44)

110

(63)

47

212

19

231

178

409

659

(128)

531

(20)

511

(61)

32

(29)

505

476

(131)

93

(38)

773

735

24

(6)

18

(1)

17

39

(20)

19

168

187

175

45

220

682

902

567

(55)

512

921

1,433

122

(13)

109

17

126

(167)

100

(67)

231

164

110

-

110

-

110

(189)

(1)

(190)

-

(190)

(12)

(8)

(20)

42

22

9

98

107

255

362

24

(5)

19

(25)

(6)

13

3

16

(24)

(8)

313

2,023

2,336

2,924

5,260

416

2,036

2,452

3,377

5,829

 

 

 

 

17.3%

 

 

 

 

12.1%

 

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

 

 

£m

Emerging Markets*

6 months ended 30 June 2010

 

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

Opening MCEV

80

1,225

1,305

1,158

2,463

New business value

(74)

59

(15)

53

38

Expected existing business contribution (reference rate)

4

35

39

59

98

Expected existing business contribution (in excess of reference rate)

-

(2)

(2)

8

6

Transfers from VIF and required capital to free surplus

183

(83)

100

(100)

-

Experience variances

4

13

17

2

19

Assumption changes

-

-

-

-

-

Other operating variance

1

-

1

(18)

(17)

Operating MCEV earnings

118

22

140

4

144

Economic variances

(45)

22

(23)

22

(1)

Other non-operating variance

-

-

-

-

-

Total MCEV earnings

73

44

117

26

143

Closing adjustments

(56)

49

(7)

47

40

Capital and dividend flows

(61)

-

(61)

-

(61)

Foreign exchange variance

5

49

54

47

101

MCEV of acquired/sold business

-

-

-

-

-

Closing MCEV

97

1,318

1,415

1,231

2,646

Return on MCEV (RoEV) % per annum

 

 

 

 

11.9%

*       The MCEV for Emerging Markets is presented after the adjustment for market value of life fund investments in Group equity and debt instruments.

 

The positive experience variances are mainly attributable to favourable persistency experience, as well as smaller positive contributions from expense and mortality experience.

The negative other operating variance was caused by various methodology changes and error corrections.

The small impact from economic variances was a combination of large negative investment variances, mainly caused by a decline in equity markets over the first half of 2010, and a positive effect from economic assumptions changes, mainly caused by the change in the shape of the swap yield curve.

The capital and dividend flows mainly consist of the purchase of additional Nedbank shares.

Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in rand (including conversion of results for Mexico to rand). The operating assumption changes and other operating variances are not annualised.

 

 

 

 

 

£m

6 months ended 30 June 2009

Year ended 31 December 2009

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

(92)

1,075

983

1,090

2,073

(92)

1,075

983

1,090

2,073

(52)

40

(12)

35

23

(136)

110

(26)

91

65

(3)

39

36

61

97

(7)

85

78

129

207

-

2

2

7

9

-

5

5

16

21

151

(70)

81

(81)

-

314

(146)

168

(168)

-

(1)

(15)

(16)

(22)

(38)

(9)

(9)

(18)

(35)

(53)

2

-

2

(1)

1

40

(29)

11

(90)

(79)

57

(35)

22

(4)

18

46

(27)

19

32

51

154

(39)

115

(5)

110

248

(11)

237

(25)

212

14

1

15

(81)

(66)

54

1

55

(39)

16

(1)

-

(1)

-

(1)

-

-

-

-

-

167

(38)

129

(86)

43

302

(10)

292

(64)

228

(15)

73

58

50

108

(130)

160

30

132

162

(44)

-

(44)

-

(44)

(146)

(3)

(149)

-

(149)

5

78

83

75

158

3

160

163

156

319

24

(5)

19

(25)

(6)

13

3

16

(24)

(8)

60

1,110

1,170

1,054

2,224

80

1,225

1,305

1,158

2,463

 

 

 

 

9.7%

 

 

 

 

9.8%

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010

B4 Analysis of covered business MCEV earnings (after tax) continued

 

 

£m

Nordic

6 months ended 30 June 2010

 

 

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

 

Opening MCEV

91

104

195

1,114

1,309

 

New business value

(24)

3

(21)

46

25

 

Expected existing business contribution (reference rate)

1

-

1

8

9

 

Expected existing business contribution (in excess of reference rate)

-

-

-

13

13

 

Transfers from VIF and required capital to free surplus

55

(4)

51

(51)

-

 

Experience variances

10

6

16

1

17

 

Assumption changes

-

-

-

(4)

(4)

 

Other operating variance

(39)

-

(39)

42

3

 

Operating MCEV earnings

3

5

8

55

63

 

Economic variances

5

-

5

(2)

3

 

Other non-operating variance

-

-

-

-

-

 

Total MCEV earnings

8

5

13

53

66

 

Closing adjustments

(65)

-

(65)

(13)

(78)

 

Capital and dividend flows

(59)

-

(59)

-

(59)

 

Foreign exchange variance

(6)

-

(6)

(13)

(19)

 

Closing MCEV

34

109

143

1,154

1,297

 

Return on MCEV (RoEV) % per annum

 

 

 

 

9.5%

 

 

The positive experience variances were largely caused by profit made on the sale of a private equity investment and higher than expected fee income. There were no one-off expense variances.

Operating assumption changes were made to recognise adjustments to pricing on the Waiver of Premium business.

The other operating variance was mainly due to modelling corrections related to the cost of non-hedgeable risk and modelling refinements to deferred tax assets.

The economic variances were mainly due to the positive effect of market movements on funds under management.

The capital and dividend flows mainly represent dividends, repayment of loans, internal re-classification and capital injections.

Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in Swedish krona. The operating assumption changes and other operating variances are not annualised.

 

 

 

 

 

£m

6 months ended 30 June 2009

Year ended 31 December 2009

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

58

105

163

882

1,045

58

105

163

882

1,045

(28)

3

(25)

46

21

(57)

6

(51)

95

44

1

-

1

9

10

4

-

4

18

22

-

-

-

7

7

-

-

-

14

14

14

17

31

(31)

-

81

(17)

64

(64)

-

13

(2)

11

2

13

28

(7)

21

10

31

-

-

-

1

1

3

-

3

(30)

(27)

-

-

-

(10)

(10)

-

-

-

(3)

(3)

-

18

18

24

42

59

(18)

41

40

81

(7)

8

1

102

103

(5)

17

12

192

204

21

-

21

1

22

18

-

18

1

19

14

26

40

127

167

72

(1)

71

233

304

(12)

(11)

(23)

(92)

(115)

(39)

-

(39)

(1)

(40)

(6)

-

(6)

-

(6)

(37)

-

(37)

-

(37)

(6)

(11)

(17)

(92)

(109)

(2)

-

(2)

(1)

(3)

60

120

180

917

1,097

91

104

195

1,114

1,309

 

 

 

 

9.4%

 

 

 

 

8.1%

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

 

 

£m

Retail Europe

6 months ended 30 June 2010

 

 

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

 

Opening MCEV

46

32

78

453

531

 

New business value

(33)

-

(33)

35

2

 

Expected existing business contribution (reference rate)

-

-

-

5

5

 

Expected existing business contribution (in excess of reference rate)

-

-

-

2

2

 

Transfers from VIF and required capital to free surplus

51

1

52

(52)

-

 

Experience variances

(6)

1

(5)

-

(5)

 

Assumption changes

2

-

2

(2)

-

 

Other operating variance

(5)

5

-

20

20

 

Operating MCEV earnings

9

7

16

8

24

 

Economic variances

1

1

2

11

13

 

Other non-operating variance

(1)

-

(1)

1

-

 

Total MCEV earnings

9

8

17

20

37

 

Closing adjustments

(9)

(2)

(11)

(22)

(33)

 

Capital and dividend flows

(7)

-

(7)

-

(7)

 

Foreign exchange variance

(2)

(2)

(4)

(22)

(26)

 

Closing MCEV

46

38

84

451

535

 

Return on MCEV (RoEV) % per annum

 

 

 

 

5.1%

 

 

The 'expected existing business contribution (in excess of reference rate)' is not significant. This is reasonable for business comprised mostly of unit-linked products where most of the profits emanate from premium charges, acquisition charges and fund based fees. Such fees and charges are largely captured in the 'expected existing business contribution (reference rate)'.

Experience variances were mainly due to higher than anticipated profit sharing on participating contracts in Germany, partly offset by positive mortality and morbidity experience and higher than expected fee income across all Retail Europe countries. There were no one-off expense variances.

There were no material operating assumption changes.

The other operating variance was mainly due to enhanced modelling of the Waiver of Premium business in Switzerland.

The economic variances were mainly due to the positive effect of market movements on funds under management as well as the beneficial impact of lower swap rates across the region.

There were no material other non-operating variances.

The capital and dividend flows mainly represent dividends, repayment of loans and capital injections.

Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in euro. The operating assumption changes and other operating variances are not annualised.

 

 

 

 

 

£m

6 months ended 30 June 2009

Year ended 31 December 2009

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

15

64

79

517

596

15

64

79

517

596

(37)

1

(36)

33

(3)

(74)

1

(73)

68

(5)

1

-

1

5

6

1

-

1

10

11

-

-

-

1

1

-

-

-

3

3

53

-

53

(53)

0

97

7

104

(104)

-

(8)

1

(7)

(2)

(9)

(20)

1

(19)

(4)

(23)

-

-

-

0

-

-

-

-

(26)

(26)

-

-

-

(10)

(10)

18

(19)

(1)

(3)

(4)

9

2

11

(26)

(15)

22

(10)

12

(56)

(44)

1

1

2

11

13

(1)

4

3

26

29

1

(3)

(2)

-

(2)

20

(20)

-

3

3

11

-

11

(15)

(4)

41

(26)

15

(27)

(12)

12

(7)

5

(61)

(56)

(10)

(6)

(16)

(37)

(53)

17

-

17

-

17

(10)

(3)

(13)

-

(13)

(5)

(7)

(12)

(61)

(73)

-

(3)

(3)

(37)

(40)

38

57

95

441

536

46

32

78

453

531

 

 

 

 

(3.6)%

 

 

 

 

(7.9)%

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

 

 

£m

Wealth Management

6 months ended 30 June 2010

 

 

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

 

Opening MCEV

163

213

376

1,468

1,844

 

New business value

(96)

14

(82)

113

31

 

Expected existing business contribution (reference rate)

3

3

6

11

17

 

Expected existing business contribution (in excess of reference rate)

-

-

-

6

6

 

Transfers from VIF and required capital to free surplus

146

(20)

126

(126)

-

 

Experience variances

(26)

11

(15)

20

5

 

Assumption changes

(2)

2

-

-

-

 

Other operating variance

-

-

-

5

5

 

Operating MCEV earnings

25

10

35

29

64

 

Economic variances

19

(3)

16

42

58

 

Other non-operating variance

-

-

-

-

-

 

Total MCEV earnings

44

7

51

71

122

 

Closing adjustments

(33)

(5)

(38)

(13)

(51)

 

Capital and dividend flows

(30)

(6)

(36)

(1)

(37)

 

Foreign exchange variance

(3)

1

(2)

(12)

(14)

 

Closing MCEV

174

215

389

1,526

1,915

 

Return on MCEV (RoEV) % per annum

 

 

 

 

6.7%

 

 

The 'expected existing business contribution (in excess of reference rate)' is not significant. This is reasonable for business comprised mostly of unit-linked products where most of the profits emanate from premium charges, acquisition charges and fund based fees. Such fees and charges are largely captured in the 'expected existing business contribution (reference rate)'.

Experience variances were caused by positive persistency experience and higher than expected fee income across all divisions, partly offset by adverse expense experience.

There were no material operating assumption changes.

The other operating variance was mainly due to the impact of modelling and methodology changes.

The economic variances were caused by lower swap yields and favourable exchange rate movements.

The capital and dividend flows mainly represent dividends, repayments of loans and capital injections.

Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in sterling. The operating assumption changes and other operating variances are not annualised.

 

 

 

 

 

£m

6 months ended 30 June 2009

Year ended 31 December 2009

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

120

197

317

1,461

1,778

120

197

317

1,461

1,778

(103)

3

(100)

122

22

(171)

12

(159)

208

49

5

5

10

17

27

7

7

14

34

48

-

-

-

13

13

(1)

-

(1)

26

25

142

(6)

136

(136)

-

274

(30)

244

(244)

-

2

(4)

(2)

(43)

(45)

(10)

7

(3)

(35)

(38)

-

-

-

11

11

(10)

7

(3)

(96)

(99)

1

-

1

(16)

(15)

90

2

92

(81)

11

47

(2)

45

(32)

13

179

5

184

(188)

(4)

(28)

22

(6)

(61)

(67)

2

12

14

38

52

3

(3)

-

(2)

(2)

1

-

1

164

165

22

17

39

(95)

(56)

182

17

199

14

213

(14)

(1)

(15)

(8)

(23)

(139)

(1)

(140)

(7)

(147)

(9)

-

(9)

-

(9)

(142)

5

(137)

-

(137)

(5)

(1)

(6)

(8)

(14)

3

(6)

(3)

(7)

(10)

128

213

341

1,358

1,699

163

213

376

1,468

1,844

 

 

 

 

1.7%

 

 

 

 

(0.3)%

 

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

 

 

£m

US Life

6 months ended 30 June 2010

 

 

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

 

Opening MCEV

36

462

498

(816)

(318)

 

New business value

(36)

48

12

(16)

(4)

 

Expected existing business contribution (reference rate)

-

4

4

6

10

 

Expected existing business contribution (in excess of reference rate)

-

-

-

36

36

 

Transfers from VIF and required capital to free surplus

41

(23)

18

(18)

-

 

Experience variances

80

(24)

56

43

99

 

Assumption changes

-

-

-

2

2

 

Other operating variance

-

-

-

(16)

(16)

 

Operating MCEV earnings

85

5

90

37

127

 

Economic variances

(15)

(12)

(27)

(135)

(162)

 

Other non-operating variance

-

-

-

-

-

 

Total MCEV earnings

70

(7)

63

(98)

(35)

 

Closing adjustments

(3)

36

33

(67)

(34)

 

Capital and dividend flows

(8)

-

(8)

-

(8)

 

Foreign exchange variance

5

36

41

(67)

(26)

 

Closing MCEV

103

491

594

(981)

(387)

 

Return on MCEV (RoEV) % per annum

 

 

 

 

79.7%

 

 

The results for US Life include allowance for Old Mutual Reassurance (Ireland) Limited (OMRe), which provides reinsurance to the United States Life Companies.

The 'expected existing business contribution (in excess of reference rate)' is calculated using the corporate bond spread that is expected to be earned over and above the adjusted risk free reference rate (inclusive of the liquidity premium adjustment). The expected existing business contribution for US Life is weighted towards the latter half of each reporting period because product crediting rates are set in advance of the reporting period and therefore there is less flexibility to improve earnings by varying crediting rates in the first half of the reporting period than in the second half.

The experience variances were largely caused by positive persistency experience.  There were no material experience variance items that were one-off in nature.

There were no material operating assumption changes.

The other operating variance was mainly due to modelling changes and error corrections.

The economic variances were mainly due to the reduction in the assumed liquidity premium from 100bps to 75bps and an increase in interest rate volatilities, partially offset by gains in the underlying investment portfolio.

The capital and dividend flows reflect interest payments on the capital injection made in 2009.

Return on MCEV was calculated as the operating MCEV earnings after tax divided by the absolute value of the opening MCEV in US dollars. The operating assumption changes and other operating variances are not annualised.

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

 

£m

6 months ended 30 June 2009

Year ended 31 December 2009

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

(85)

550

465

(1,725)

(1,260)

(85)

550

465

(1,725)

(1,260)

(34)

33

(1)

8

7

(35)

41

6

8

14

(1)

11

10

(31)

(21)

(3)

21

18

(45)

(27)

4

-

4

150

154

-

1

1

257

258

25

(29)

(4)

4

-

52

(54)

(2)

2

-

8

25

33

(3)

30

137

(103)

34

(35)

(1)

-

-

-

13

13

-

-

-

30

30

-

-

-

76

76

-

-

-

(8)

(8)

2

40

42

217

259

151

(94)

57

209

266

(41)

-

(41)

534

493

(181)

59

(122)

556

434

-

-

-

-

-

-

-

-

-

-

(39)

40

1

751

752

(30)

(35)

(65)

765

700

151

(67)

84

128

212

151

(53)

98

144

242

152

-

152

-

152

146

-

146

-

146

(1)

(67)

(68)

128

60

5

(53)

(48)

144

96

27

523

550

(846)

(296)

36

462

498

(816)

(318)

 

 

 

 

34.9%

 

 

 

 

22.7%

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

 

 

£m

Bermuda

6 months ended 30 June 2010

 

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

Opening MCEV

-

363

363

(165)

198

New business value

-

-

-

-

-

Expected existing business contribution (reference rate)

-

1

1

5

6

Expected existing business contribution (in excess of reference rate)

-

16

16

16

32

Transfers from VIF and required capital to free surplus

6

(22)

(16)

16

-

Experience variances

(8)

-

(8)

(19)

(27)

Assumption changes

2

-

2

-

2

Other operating variance

70

(44)

26

(9)

17

Operating MCEV earnings

70

(49)

21

9

30

Economic variances

(70)

-

(70)

(5)

(75)

Other non-operating variance

-

-

-

-

-

Total MCEV earnings

-

(49)

(49)

4

(45)

Closing adjustments

-

27

27

(12)

15

Capital and dividend flows

-

-

-

-

-

Foreign exchange variance

-

27

27

(12)

15

Closing MCEV

-

341

341

(173)

168

Return on MCEV (RoEV) % per annum

 

 

 

 

19.5%

 

The experience variances include adverse persistency experience, with less surrenders than expected on Variable Annuity contracts with heavily in-the-money guarantees. There were no material experience variance items that were one-off in nature.

There were no material operating assumption changes.  

The other operating variance was mainly due to modelling changes and error corrections.

The economic variances were largely due to the adverse equity market performances during the reporting period and the decrease in the US swap yield curve.

Return on MCEV was calculated as the operating MCEV earnings after tax divided by the absolute value of the opening MCEV in US dollars. The operating assumption changes and other operating variances are not annualised.

 

 

 

 

 

£m

6 months ended 30 June 2009

Year ended 31 December 2009

 

Free surplus

 

Required

Capital

Adjusted

net worth

Value of

in-force

MCEV

 

Free surplus

 

Required

capital

Adjusted

net worth

Value of

in-force

MCEV

342

34

376

(425)

(49)

342

34

376

(425)

(49)

-

-

-

-

-

-

-

-

-

-

3

-

3

(3)

-

5

1

6

(4)

2

21

-

21

21

42

33

-

33

39

72

(6)

(2)

(8)

8

-

(5)

(4)

(9)

9

-

(25)

-

(25)

(8)

(33)

(72)

-

(72)

(21)

(93)

-

-

-

-

-

(36)

-

(36)

(46)

(82)

(275)

275

-

69

69

(345)

345

-

82

82

(282)

273

(9)

87

78

(420)

342

(78)

59

(19)

(51)

-

(51)

127

76

102

-

102

167

269

-

-

-

-

-

-

-

-

-

-

(333)

273

(60)

214

154

(318)

342

24

226

250

(9)

(28)

(37)

28

(9)

(24)

(13)

(37)

34

(3)

-

-

-

-

-

-

-

-

-

-

(9)

(28)

(37)

28

(9)

(24)

(13)

(37)

34

(3)

-

279

279

(183)

96

-

363

363

(165)

198

 

 

 

 

182.1%

 

 

 

 

(41.0)%

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

C Other key performance information

C1 Adjustments applied in determining total Group MCEV earnings before tax

 

 

£m

 

6 months ended 30 June 2010

6 months ended 30 June 2009

Analysis of adjusting items

Covered business MCEV

Non-covered business IFRS

Total Group MCEV

Covered business MCEV

Non-covered business IFRS

Total Group MCEV

Income/(expense)

 

 

 

 

 

 

Goodwill impairment and amortisation of non-covered business acquired intangible assets and impact of acquisition accounting

-

(7)

(7)

-

(6)

(6)

Economic variances

(277)

(20)

(297)

517

(12)

505

Other non-operating variances

2

-

2

16

-

16

Acquired/divested business

-

(22)

(22)

-

(41)

(41)

Closure of unclaimed share trust

-

-

-

-

-

-

Dividends declared to holders of perpetual preferred callable securities

-

21

21

-

22

22

Adjusting items relating to US Asset Management equity plans and non-controlling interests

-

2

2

-

1

1

Fair value gains on Group debt instruments

-

(90)

(90)

-

12

12

Adjusting items

(275)

(116)

(391)

533

(24)

509

 

 

 

£m

 

Year ended 31 December 2009

Analysis of adjusting items

Covered business

MCEV

Non-covered business IFRS

Total Group

MCEV

Income/(expense)

 

 

 

Goodwill impairment and amortisation of non-covered business acquired intangible assets and impact of acquisition accounting

-

65

65

Economic variances

1,108

(10)

1,098

Other non-operating variances

18

-

18

Acquired/divested business

-

(48)

(48)

Closure of unclaimed share trust

-

-

-

Dividends declared to holders of perpetual preferred callable securities

-

45

45

Adjusting items relating to US Asset Management equity plans and non-controlling interests

-

(1)

(1)

Fair value gains on Group debt instruments

-

(264)

(264)

Adjusting items

1,126

913

 

 

 

C2 Other movements in IFRS net equity impacting Group MCEV

 

 

£m

 

6 months ended 30 June 2010

6 months ended 30 June 2009

 

Covered business MCEV

Non-covered business IFRS

Total Group MCEV

Covered business MCEV

Non-covered business IFRS

Total Group MCEV

Fair value gains/(losses)

-

(5)

(5)

-

(2)

(2)

Net investment hedge

-

(34)

(34)

-

2

2

Currency translation differences/exchange differences on translating foreign operations

31

200

231

13

22

35

Aggregate tax effects of items taken directly to or transferred from equity

-

6

6

-

1

1

Correction to transfers*

-

-

-

-

316

316

Other movements

-

(28)

(28)

-

(26)

(26)

Net income recognised directly into equity

31

139

170

13

313

326

Capital and dividend flows for the year

(172)

73

(99)

104

(126)

(22)

Net sale of treasury shares

-

(20)

(20)

-

-

-

Net issues of ordinary share capital by the Company

-

160

160

-

-

-

Acquisition of non-controlling interest in Mutual & Federal

-

(93)

(93)

-

-

-

Exercise of share options

-

3

3

-

-

-

Change in share based payment reserve

-

1

1

-

9

9

Other movements in net equity

(141)

263

122

117

196

313

 

 

£m

 

 

Year ended 31 December 2009

 

Covered business MCEV

Non-covered business IFRS

Total Group MCEV

Fair value gains/(losses)

-

2

2

Net investment hedge

-

(41)

(41)

Currency translation differences/exchange differences on translating foreign operations

359

197

556

Aggregate tax effects of items taken directly to or transferred from equity

-

13

13

Correction to transfers*

-

316

316

Other movements

(8)

(7)

(15)

Net income recognised directly into equity

351

480

831

Capital and dividend flows for the year

(190)

145

(45)

Net sales of treasury shares

-

-

-

Net issues of ordinary share capital by the Company

-

2

2

Acquisition of non-controlling interest in Mutual & Federal

-

-

-

Exercise of share options

-

3

3

Change in share based payment reserve

-

14

14

Other movements in net equity

161

644

805

 

*       Refinement arising from allocation of assets between covered and non-covered business at December 2008.

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

C3 Reconciliation of MCEV adjusted net worth to IFRS net asset value for the covered business

The table below provides a reconciliation of the MCEV adjusted net worth ('ANW') to the IFRS net asset value ('NAV') for the covered business.

£m

At 30 June 2010

Total

Long Term Savings

Emerging Markets

Nordic

Retail
Europe

Wealth Management

 

US Life

Bermuda

IFRS net asset value*

6,394

6,040

932

1,147

586

2,162

1,213

354

Adjustment to include long-term business on a statutory solvency basis

(2,779)

(2,766)

161

(818)

(314)

(1,176)

(619)

(13)

Inclusion of Group equity and debt instruments held in life funds

330

330

330

-

-

-

-

-

Goodwill

(979)

(979)

(8)

(186)

(188)

(597)

-

-

Adjusted net worth attributable to ordinary equity holders of the parent

2,966

2,625

1,415

143

84

389

594

341

 

£m

At 30 June 2009

Total

Long Term Savings

Emerging Markets

Nordic

Retail
Europe

Wealth Management

 

US Life

Bermuda

IFRS net asset value*

5,728

5,422

721

1,166

818

2,295

422

306

Adjustment to include long-term business on a statutory solvency basis

(2,194)

(2,167)

152

(817)

(349)

(1,281)

128

(27)

Inclusion of Group equity and debt instruments held in life funds

305

305

305

-

-

-

-

-

Goodwill

(1,224)

(1,224)

(8)

(169)

(374)

(673)

-

-

Adjusted net worth attributable to ordinary equity holders of the parent

2,615

2,336

1,170

180

95

341

550

279

 

£m

At 31 December 2009

Total

Long Term Savings

Emerging Markets

Nordic

Retail
Europe

Wealth Management

 

US Life

Bermuda

IFRS net asset value*

6,103

5,734

821

1,222

664

2,141

886

369

Adjustment to include long-term business on a statutory solvency basis

(2,632)

(2,626)

153

(841)

(382)

(1,168)

(388)

(6)

Inclusion of Group equity and debt instruments held in life funds

339

339

339

-

-

-

-

-

Goodwill

(995)

(995)

(8)

(186)

(204)

(597)

-

-

Adjusted net worth attributable to ordinary equity holders of the parent

2,815

2,452

1,305

195

78

376

498

363

 

*       IFRS net asset value is after elimination of inter-company loans.

 

The adjustment to include long-term business on a statutory solvency basis includes the following:

·      The excess of the IFRS amount of the deferred acquisition cost ('DAC') and value of business acquired ('VOBA') assets over the statutory levels included in the VIF.

·      When projecting future profits on a statutory basis, the VIF includes the shareholders' value of unrealised capital gains. To the extent that assets in IFRS are valued at market and the market value is higher than the statutory book value, these profits have already been taken into account in the IFRS equity.

 

 

 

C4 Value of new business (after tax)

The tables below set out the regional analysis of the value of new business ('VNB') after tax. New business profitability is measured by both the ratio of the VNB to the present value of new business premiums ('PVNBP') as well as to the annual premium equivalent ('APE'), and shown under PVNBP margin and APE margin below. APE is calculated as recurring premiums plus 10% of single premiums.

 

 

 

£m

 

6 months ended 30 June 2010

6 months ended 30 June 2009

Year ended

31 December

2009

Annualised recurring premiums

 

 

 

Long Term Savings (LTS)

344

346

699

Emerging Markets

143

104

249

Nordic

74

108

183

Retail Europe

29

28

62

Wealth Management

93

97

191

US Life

5

9

14

Bermuda

-

-

-

 

344

346

699

Single premiums

 

 

 

Long Term Savings (LTS)

4,696

2,875

6,806

Emerging Markets

803

569

1,437

Nordic

284

276

527

Retail Europe

34

25

53

Wealth Management

3,175

1,718

4,240

US Life

400

287

549

Bermuda

-

15

15

 

4,696

2,890

6,821

PVNBP

 

 

 

Long Term Savings (LTS)

6,400

4,672

10,202

Emerging Markets

1,561

1,231

2,834

Nordic

553

634

1,150

Retail Europe

243

228

537

Wealth Management

3,611

2,231

5,042

US Life

432

348

639

Bermuda

-

15

15

 

6,400

4,687

10,217

PVNBP capitalisation factors*

 

 

 

Long Term Savings (LTS)

5.0

5.2

4.9

Emerging Markets

5.3

6.4

5.6

Nordic

3.6

3.4

3.4

Retail Europe

7.2

7.3

7.8

Wealth Management

4.6

5.3

4.2

US Life

6.6

6.5

6.6

Bermuda

n/a

n/a

n/a

 

 

 

 

 

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

C4 Value of new business (after tax) continued

 

 

 

 

£m

 

6 months ended 30 June 2010

6 months ended 30 June 2009

Year ended

31 December

2009

APE

 

 

 

Long Term Savings (LTS)

814

634

1,380

Emerging Markets

223

165

393

Nordic

102

134

235

Retail Europe

32

30

67

Wealth Management

412

267

617

US Life

45

38

68

Bermuda

-

2

1

 

814

636

1,381

VNB

 

 

 

Long Term Savings (LTS)

92

70

167

Emerging Markets

38

23

65

Nordic

25

21

44

Retail Europe

2

(3)

(5)

Wealth Management

31

22

49

US Life

(4)

7

14

Bermuda

-

-

-

 

92

70

167

PVNBP margin

 

 

 

Long Term Savings (LTS)

1.4%

1.5%

1.6%

Emerging Markets

2.5%

1.9%

2.3%

Nordic

4.6%

3.3%

3.8%

Retail Europe

0.7%

(1.5)%

(1.0)%

Wealth Management

0.9%

1.0%

1.0%

US Life

(0.9)%

2.1%

2.2%

 

 

 

 

 

1.4%

1.5%

1.6%

APE margin

 

 

 

Long Term Savings (LTS)

11%

11%

12%

Emerging Markets

17%

14%

16%

Nordic

25%

16%

19%

Retail Europe

6%

(11)%

(8)%

Wealth Management

8%

8%

8%

US Life

(9)%

19%

20%

 

 

 

 

 

11%

11%

12%

 

*       The PVNBP capitalisation factors are calculated as follows: (PVNBP - single premiums)/annualised recurring premiums

 

 

 

 

C4 Value of new business (after tax) continued

The value of new individual unit trust linked retirement annuities and pension fund asset management business written by the Emerging Markets long-term business is excluded as the profits on this business arise in the asset management business. The value of new business also excludes premium increases arising from indexation arrangements in respect of existing business, as these are already included in the value of in-force business.

The value of new institutional investment platform pensions business written in Wealth Management is excluded as this is more appropriately classified as unit trust business.

 



£m

Gross premium excluded from value of new business

6 months ended 30 June 2010

6 months ended 30 June 2009

Year ended
31 December 2009

Emerging Markets

386

172

1,625

Wealth Management

75

83

153

 

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

C5 Product analysis of new covered business premiums

 

£m

 

6 months ended 30 June 2010

 

6 months ended 30 June 2009

 

Year ended 31 December 2009

Emerging Markets

Recurring

Single

 

Recurring

Single

 

Recurring

Single

Total business

143

803

 

104

569


249

1,437

Individual business

120

486

 

92

289


220

716

Savings

29

387

 

22

215


50

560

Protection

31

-

 

23

-


56

-

Annuity

-

98

 

-

73


-

155

Retail mass market

60

1

 

47

1


114

1

Group business

23

317

 

12

280


29

721

Savings

9

257

 

5

236


13

564

Protection

14

-

 

7

-


16

-

Annuity

-

60

 

-

44


-

157

 

£m

 

6 months ended 30 June 2010

 

6 months ended 30 June 2009

 

Year ended 31 December 2009

Nordic

Recurring

Single

 

Recurring

Single

 

Recurring

Single

Unit-linked and life assurance

74

284

 

108

276


183

527

 

£m

 

6 months ended 30 June 2010

 

6 months ended 30 June 2009

 

Year ended 31 December 2009

Retail Europe

Recurring

Single

 

Recurring

Single

 

Recurring

Single

Unit-linked and life assurance

29

34

 

28

25


62

53

 

 

£m

 

6 months ended 30 June 2010

 

6 months ended 30 June 2009

 

Year ended 31 December 2009

Wealth Management

Recurring

Single

 

Recurring

Single

 

Recurring

Single

Unit-linked and life assurance

93

3,175

 

97

1,718


191

4,240

 

£m

 

6 months ended 30 June 2010

 

6 months ended 30 June 2009

 

Year ended 31 December 2009

US Life

Recurring

Single

 

Recurring

Single

 

Recurring

Single

Total business

5

400

 

9

287

 

14

549

Fixed deferred annuity

-

79

 

-

27

 

-

30

Fixed indexed annuity

-

234

 

-

184

 

-

383

Variable annuity

-

-

 

-

1

 

-

-

Life

5

1

 

9

16

 

14

13

Immediate annuity

-

86

 

-

59

 

-

123

 

 

 

D Other income statement notes

D1 Drivers of new business value for covered business

 

PVNBP Margin

 

%

Total covered business

6 months ended

30 June
2010

Year ended

31 December

2009

Margin at the end of comparative period

1.5

0.8

Change in volume

(0.2)

0.8

Change in product mix

0.5

-

Change in country mix

-

-

Change in operating assumptions

(0.1)

0.1

Change in economic assumptions

(0.3)

-

Change in tax/regulation

-

0.1

Exchange rate movements

-

(0.2)

Margin at the end of the period

1.4

1.6


 


Long Term Savings

 


Margin at the end of comparative period

1.5

1.5

Change in volume

(0.2)

(0.1)

Change in product mix

0.5

-

Change in country mix

-

-

Change in operating assumptions

(0.1)

0.1

Change in economic assumptions

(0.3)

-

Change in tax/regulation

-

0.1

Exchange rate movements

-

-

Margin at the end of the period

1.4

1.6


 


Emerging Markets

 

 

Margin at the end of comparative period

1.9

2.2

Change in volume

0.2

(0.1)

Change in product mix

0.4

(0.2)

Change in country mix

-

-

Change in operating assumptions

0.1

0.4

Change in economic assumptions

(0.1)

-

Margin at the end of the period

2.5

2.3


 


Nordic

 

 

Margin at the end of comparative period

3.3

3.3

Change in volume

(0.1)

(0.1)

Change in product mix

1.4

-

Change in country mix

-

-

Change in operating assumptions

0.1

0.4

Change in economic assumptions

(0.1)

0.2

Margin at the end of the period

4.6

3.8

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

D1 Drivers of new business value for covered business continued

 

 

 

%

Total covered business

6 months ended

30 June
2010

Year ended

31 December

2009

Retail Europe

 

 

Margin at the end of comparative period

(1.5)

1.8

Change in volume

1.7

(2.1)

Change in product mix

0.1

(0.8)

Change in country mix

-

(0.1)

Change in operating assumptions

0.3

0.5

Change in economic assumptions

0.1

(0.3)

Margin at the end of the period

0.7

(1.0)


 


Wealth Management

 

 

Margin at the end of comparative period

1.0

1.2

Change in volume

-

(0.2)

Change in product mix

-

-

Change in country mix

-

-

Change in operating assumptions

(0.2)

(0.2)

Change in economic assumptions

-

-

Change in tax/regulation

0.1

0.2

Margin at the end of the period

0.9

1.0


 


US Life

 

 

Margin at the end of comparative period

2.1

(0.9)

Change in volume

(0.3)

-

Change in product mix

1.1

1.5

Change in country mix

-

-

Change in operating assumptions

(0.2)

-

Change in economic assumptions

(3.6)

1.6

Margin at the end of the period

(0.9)

2.2

 

 

 

 

 

E1 Sensitivity tests

The tables below show the sensitivity of the MCEV and value of in-force business at 30 June 2010 and the value of new business for the 6 months ended 30 June 2010 to changes in key assumptions.

For each sensitivity illustrated all other assumptions have been left unchanged except where they are directly affected by the revised conditions. Sensitivity scenarios therefore include consistent changes in cash flows directly affected by the changed assumption(s), for example future bonus participation in changed economic scenarios.

 

At 30 June 2010

£m

Total covered business

MCEV

Value of in-force business

Value of new business

Central assumptions

6,174

3,208

92

Effect of:

 

 

 

Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

5,898

2,858

94

Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

6,447

3,553

81

Recognising the present value of an additional 10bps of liquidity spreads assumed on corporate bonds over the lifetime of the liabilities, with credited rates and discount rates changing commensurately

6,215

3,249

94

 

 

At 30 June 2010

£m

Emerging Markets

MCEV

Value of in-force business

Value of new business

Central assumptions

2,646

1,231

38

Effect of:

 

 

 

Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

2,593

1,176

35

Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

2,693

1,279

41

Recognising the present value of an additional 10bps of liquidity spreads assumed on corporate bonds over the lifetime of the liabilities, with credited rates and discount rates changing commensurately

2,654

1,239

39

 

 

At 30 June 2010

£m

Nordic

MCEV

Value of in-force business

Value of new business

Central assumptions

1,297

1,154

25

Effect of:

 

 

 

Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

1,273

1,131

24

Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

1,324

1,181

26

 

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

E1 Sensitivity tests continued

 

 

At 30 June 2010

£m

Retail Europe

MCEV

Value of in-force business

Value of new business

Central assumptions

535

451

2

Effect of:

 

 

 

Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

520

436

1

Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

550

466

3

 

 


At 30 June 2010


£m

Wealth management

MCEV

Value of in-force business

Value of new business

Central assumptions

1,915

1,526

31

Effect of:

 

 

 

Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

1,892

1,519

30

Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

1,938

1,530

32

 

 

At 30 June 2010

£m

US Life

MCEV

Value of in-force business

Value of new business

Central assumptions

(387)

(981)

(4)

Effect of:

 

 

 

Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

(626)

(1,220)

4

Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

(149)

(743)

(21)

Recognising the present value of an additional 10bps of liquidity spreads assumed on corporate bonds over the lifetime of the liabilities, with credited rates and discount rates changing commensurately

(354)

(948)

(3)

Recognising the present value of an additional 50% of liquidity spreads assumed on corporate bonds over the lifetime of the liabilities, with credited rates and discount rates changing commensurately

(236)

(830)

2

 

 

At 30 June 2010

£m

Bermuda

MCEV

Value of in-force business

Value of new business

Central assumptions

168

(173)

-

Effect of:

 

 

 

Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

246

(184)

-

Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately

91

(160)

-

 

Shareholder information

Listings and shares in issue

The Company's shares are listed on the London, Malawi, Namibian and Zimbabwe Stock Exchanges and on the JSE Limited (JSE). The primary listing is on the London Stock Exchange and the other listings are all secondary listings. The Company's secondary listing on the Stockholm Stock Exchange ended on 7 September 2007, but the Company's shares may still be traded on the Xternal list of the Nordic Exchange in Stockholm. The ISIN number of the Company's shares is GB0007389926.

 

 

Websites

Further information on the Company can be found on the following websites:
www.oldmutual.com
www.oldmutual.co.za

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
IR UGUAWRUPUPUA
 
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