Old Mutual Ltd. · JSE:OMU
Old Mutual — Investor Day (May 2005)
122 slides from Old Mutual's investor day presentation, May 3, 2005
Slide 1: Old Mutual plc IFRS Analyst and Investor Briefing
Old Mutual plc International Financial Reporting Standards (“IFRS”) Analyst and Investor Briefing 3 May 2005
Slide 2: Overview
Overview Julian Roberts Group Finance Director
Slide 3: Agenda
Agenda Overview Julian Roberts Technical impacts Katie Murray Closing remarks Julian Roberts Q&A Slide 3 Old Mutual plc – IFRS Analyst and Investor Briefing – 3 May 2005
Slide 4: Overview
Overview Agenda Old Mutual supports common global standards Overview • Key financial highlights We are ready for IFRS • Business performance indicators Positive impact on adjusted operating profit while overall equity • What is driving the change? position remains broadly unchanged • Reconcili
Slide 5: Key Financial Highlights - 2004
Key Financial Highlights - 2004 Agenda Overview UK • Key financial highlights GAAP IFRS Change • Business performance indicators Adjusted operating profit (£m) 956 1,011 5.8% • What is driving the change? • Reconciliation of Adjusted operating EPS 15.3p 14.8p (0.5p) equity • Reconciliation of adjust
Slide 6: Business Performance Indicators – 2004
Business Performance Indicators – 2004 Agenda Overview UK • Key financial GAAP IFRS highlights • Business performance US Life Value of New Business ($m) * 113 113 indicators • What is driving the change? OMSA Value of New Business (Rm) ** 719 719 • Reconciliation of equity • Reconciliation of adjust
Slide 7: What is Driving the Change?
What is Driving the Change? Agenda Overview Key areas impacted by IFRS No significant impact • Key financial highlights • Business performance indicators Insurance Accounting Post-Retirement Benefits • What is driving the change? Revenue Recognition Consolidation • Reconciliation of equity •
Slide 8: Reconciliation of Equity
Reconciliation of Equity Agenda £m 31 Dec 04 30 Jun 04 1 Jan 04 Overview As reported under UK GAAP 3,245 2,741 2,754 • Key financial highlights Adjustments for • Business performance IFRS 4 Insurance Contracts (186) (86) (167) indicators • What is driving IAS 18 Revenue Recognition (8) (8) (12) the
Slide 9: Reconciliation of Adjusted Operating Profit
Reconciliation of Adjusted Operating Profit Agenda £m 31 Dec 04 30 Jun 04 Overview • Key financial As reported under UK GAAP 956 422 highlights • Business Adjustments for performance indicators • What is driving IFRS 4 Insurance Contracts (6) 6 the change? • Reconciliation of IAS 18 Revenue Recognit
Slide 10: Reconciliation of Basic EPS
Reconciliation of Basic EPS Agenda Profit After Basic Overview Tax and MI EPS • Key financial highlights £m p • Business performance UK GAAP 484 14.1 indicators • What is driving the change? Adjustments for: • Reconciliation of equity IFRS 3 Goodwill 83 2.4 • Reconciliation of adjusted operating pro
Slide 11: Technical Impacts
Technical Impacts Katie Murray Head of IFRS Implementation
Slide 12: Main IFRS Technical Impacts
Main IFRS Technical Impacts Agenda Overview IFRS 4 Insurance Contracts Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial instruments • IFRS 2 share- based payments IAS 32/39 Financial Instruments • IFRS 3 business combi
Slide 13: Main IFRS Technical Impacts
Main IFRS Technical Impacts IFRS 4 Insurance Contracts Agenda Overview Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial IAS 32/39 Financial Instruments instruments • IFRS 2 share- based payments • IFRS 3 business combi
Slide 14: IFRS 4 Insurance Contracts
IFRS 4 Insurance Contracts Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts £m 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Investment contract valuation (18) (105) (80) financial instruments • IFRS 2 share- Investment co
Slide 15: IFRS 4 Insurance Contracts
IFRS 4 Insurance Contracts Agenda Overview Most significant impact is definition of insurance Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition Products not qualifying as insurance (investment contracts) are valued under IAS 39 • IAS 32/39 financial instruments • IFRS 2
Slide 16: Insurance Products Classification – Life
Insurance Products Classification – Life Agenda Overview Note: Percentages based on UK GAAP reserves at 1/1/2004 Technical impacts IFRS 4: • IFRS 4 insurance contracts Remains at local • IAS 18 revenue GAAP recognition • IAS 32/39 Insurance financial instruments 57% Investment • IFRS 2 share- Contra
Slide 17: Investment Contract Valuation
Investment Contract Valuation UK GAAP IFRS Agenda Overview Technical impacts Liabilities are computed in IFRS allows an option to fair • IFRS 4 insurance contracts • IAS 18 revenue accordance with local GAAP value or hold at amortised cost recognition • IAS 32/39 requirements (FSV for Africa,
Slide 18: Investment Contract Valuation
Investment Contract Valuation Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts £m 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group (18) (105) (80) financial Main Business Unit impacted instruments • IFRS 2 share- based
Slide 19: Investment Contract Premiums and Claims
Investment Contract Premiums and Claims Agenda Overview UK GAAP IFRS Technical impacts Amounts received are recorded Deposit accounting is applied – • IFRS 4 insurance contracts as premiums amounts received from and paid to • IAS 18 revenue recognition Payments to contract-holders are policyho
Slide 20: Insurance Accounting Changes – Life
Insurance Accounting Changes – Life Agenda UK GAAP IFRS Overview Technical impacts In the US deferred acquisition costs This policy was “improved” to • IFRS 4 insurance contracts and present value of future profits reflect better matching between our • IAS 18 revenue recognition (DAC/PVFP) are a
Slide 21: Insurance Accounting Changes – Life
Insurance Accounting Changes – Life Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts £m 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group - (141) (131) financial instruments • IFRS 2 share- Main Business Unit impacted ba
Slide 22: Elimination of Equalisation Provisions
Elimination of Equalisation Provisions Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts £m 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group 12 60 44 financial instruments • IFRS 2 share- Main Business Unit impacted base
Slide 23: Main IFRS Technical Impacts
Main IFRS Technical Impacts IFRS 4 Insurance Contracts Agenda Overview Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial IAS 32/39 Financial Instruments instruments • IFRS 2 share- based payments • IFRS 3 business combi
Slide 24: IAS 18 Revenue Recognition
IAS 18 Revenue Recognition Agenda UK GAAP IFRS Overview Technical impacts • IFRS 4 insurance Initial and recurring fees are Applies to investment contracts, contracts • IAS 18 revenue recognised as received asset management and banking recognition segments • IAS 32/39 Acquisition costs are exp
Slide 25: IAS 18 Revenue Recognition
IAS 18 Revenue Recognition Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts £m 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group 7 (8) (12) financial instruments • IFRS 2 share- Main Business Units impacted based payment
Slide 26: Main IFRS Technical Impacts
Main IFRS Technical Impacts IFRS 4 Insurance Contracts Agenda Overview Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial IAS 32/39 Financial Instruments instruments • IFRS 2 share- based payments • IFRS 3 business combi
Slide 27: IAS 32/39 Financial Instruments
IAS 32/39 Financial Instruments Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts £m 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Classification and valuation of financial financial instruments instruments 16 108 29 • IFRS
Slide 28: Classification and Valuation of Financial Instruments
Classification and Valuation of Financial Instruments Agenda UK GAAP IFRS Overview Technical impacts Insurance business - investments Same accounting applies to all segments • IFRS 4 insurance are stated at fair value with gains and Instruments classified and measured as contracts losses inclu
Slide 29: Classification and Valuation of Financial Instruments
Classification and Valuation of Financial Instruments Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts £m 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group 16 108 29 financial Main Business Units impacted instruments • I
Slide 30: Derivatives and Hedge Accounting
Derivatives and Hedge Accounting Agenda UK GAAP IFRS Overview Technical impacts • IFRS 4 insurance Banking book derivatives All derivatives recorded on contracts • IAS 18 revenue balance sheet at fair value recognition – Record off balance sheet • IAS 32/39 financial Movements are recorded ins
Slide 31: Derivatives and Hedge Accounting
Derivatives and Hedge Accounting Agenda Adjusted Overview Operating Technical impacts Profit Equity Equity • IFRS 4 insurance contracts £m 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition Group - 9 4 • IAS 32/39 financial instruments Main Business Units impacted • IFRS 2 share- Head office
Slide 32: Embedded Derivatives
Embedded Derivatives Agenda UK GAAP IFRS Overview Technical impacts Insurance contracts and Financial instruments • IFRS 4 insurance contracts financial instruments embedded in non-financial • IAS 18 revenue recognition containing embedded products are required to be • IAS 32/39 financial instru
Slide 33: Embedded Derivatives
Embedded Derivatives Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts £m 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group - (1) (28) financial instruments • IFRS 2 share- Main Business Units impacted based payments • IF
Slide 34: Impairment of Loans and Receivables
Impairment of Loans and Receivables Agenda UK GAAP IFRS Overview Technical impacts The group creates provisions that IAS39 requires the use of an • IFRS 4 insurance contracts are a blend of incurred and incurred loss provisioning model • IAS 18 revenue recognition expected losses based on • IAS
Slide 35: Impairment of Loans and Receivables
Impairment of Loans and Receivables Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts £m 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group 17 10 (3) financial instruments • IFRS 2 share- Main Business Unit impacted based
Slide 36: IAS 39 and the EU Carve Out
IAS 39 and the EU Carve Out Agenda Overview £m 31 Dec 04 Technical impacts • IFRS 4 insurance Per Nedcor – liabilities designated at fair value 746 contracts • IAS 18 revenue recognition Per OM plc – liabilities as restated at amortised cost 691 • IAS 32/39 financial The EU-endorsed IAS 39 limits
Slide 37: Main IFRS Technical Impacts
Main IFRS Technical Impacts IFRS 4 Insurance Contracts Agenda Overview Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial IAS 32/39 Financial Instruments instruments • IFRS 2 share- based payments • IFRS 3 business combi
Slide 38: IFRS 2 Share-based Payments
IFRS 2 Share-based Payments Agenda UK GAAP IFRS Overview Technical impacts Costs of awards are recognised All grants now attract a charge • IFRS 4 insurance contracts over the service period • IAS 18 revenue Requires distinction between equity recognition Cost recognised is the difference an
Slide 39: IFRS 2 Share Based Payments
IFRS 2 Share Based Payments Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts £m 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group (17) (16) 1 financial instruments Main Business Units impacted • IFRS 2 share- based payme
Slide 40: Main IFRS Technical Impacts
Main IFRS Technical Impacts IFRS 4 Insurance Contracts Agenda Overview Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial IAS 32/39 Financial Instruments instruments • IFRS 2 share- based payments • IFRS 3 business combi
Slide 41: IFRS 3 Business Combinations – Goodwill
IFRS 3 Business Combinations – Goodwill Agenda Adjusted Overview Operating Technical impacts Profit Equity Equity • IFRS 4 insurance £m 31 Dec 04 31 Dec 04 1 Jan 04 contracts • IAS 18 revenue recognition Group - (91) (154) • IAS 32/39 financial instruments Main Business Units impacted • IFRS 2 share
Slide 42: Main IFRS Technical Impacts
Main IFRS Technical Impacts IFRS 4 Insurance Contracts Agenda Overview Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial IAS 32/39 Financial Instruments instruments • IFRS 2 share- based payments • IFRS 3 business combi
Slide 43: IAS 27 Consolidation
IAS 27 Consolidation Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts £m 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group (25) (40) 9 financial instruments • IFRS 2 share- Main Business Unit impacted based payments • IF
Slide 44: IAS 27 Consolidation
IAS 27 Consolidation Agenda Overview Technical impacts While there has been industry debate over the consolidation of • IFRS 4 insurance contracts investment funds where a company has more than 50% of the assets • IAS 18 revenue recognition invested or where a company would be deemed to have contr
Slide 45: Other Impacts
Other Impacts Agenda Property (IAS 16) Overview Technical impacts – Property is held at depreciated fair value • IFRS 4 insurance contracts • IAS 18 revenue Post Employment Benefits (IAS 19) recognition • IAS 32/39 financial instruments – Defined contribution schemes: no significant change • IFR
Slide 46: IFRS Presentational Issues
IFRS Presentational Issues Agenda Income statement Overview Technical impacts • IFRS 4 insurance – Publish a combined income statement with emphasis on segmental contracts information • IAS 18 revenue recognition – Continue to report a secondary income statement based on long term • IAS 32/39 fina
Slide 47: Closing Remarks
Closing Remarks Julian Roberts Group Finance Director
Slide 48: Black Economic Empowerment (BEE)
Black Economic Empowerment (BEE) Agenda Overview On 19 April 2005, Old Mutual plc announced BEE transactions across Technical impacts Closing remarks all of its South African businesses • Impact on BEE • Impact on other financial The transaction announcement documented the consolidated pro- meas
Slide 49: BEE – Financial Impact on Earnings
BEE – Financial Impact on Earnings Agenda Overview £m Initial Annual Total Year 1 Technical impacts Estimated impact on UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS Closing remarks earnings • Impact on BEE • Impact on other OMSA (6) (25) (4) (5) (10) (30) financial measures Nedcor (6) (6) (2) (14) (8) (20
Slide 50: BEE – Financial Impact on EPS
BEE – Financial Impact on EPS Agenda Overview UKGAAP IFRS Technical impacts Closing remarks Before After % Before After % • Impact on BEE • Impact on other Adjusted EPS 15.3 14.8 (3.3) 14.8 14.0 (5.4) financial measures Basic EPS 14.1 13.3 (5.7) 16.3 14.5 (11.0) • Timetable • Impact for 2005 • Summa
Slide 51: IFRS Impact on Other Financial Measures
IFRS Impact on Other Financial Measures Agenda Solvency / regulatory capital Overview Technical impacts – Capital requirements are driven by local regulatory accounting Closing remarks • Impact on BEE – No impact on capital requirements anticipated until local regulatory authorities • Impact on ot
Slide 52: Communications Timetable
Communications Timetable Agenda Date Event Overview Technical impacts 6 May 2005 Nedcor’s Presentation on 2004 Preliminary results Closing remarks • Impact on BEE under IFRS (and 2004 Opening Position under • Impact on other financial IFRS) measures • Timetable 11 May 2005 Q1 trading statement on an
Slide 53: Summary
Summary Agenda IFRS is embedded into our internal and external reporting process Overview Technical impacts Closing remarks There is no change in the underlying economics of the business • Impact on BEE • Impact on other financial – We will continue to use embedded value and return on equity as
Slide 54: Questions & Answers
Questions & Answers
Slide 55: Appendix: Adjusted operating profit by Business Unit
Appendix 1 Adjusted operating profit by Business Unit
Slide 56: Adjusted Operating Profit – OMSA
Adjusted Operating Profit – OMSA £m 31 Dec 04 30 Jun 04 As reported under UK GAAP 531 254 Adjustments for IFRS4 Insurance Contracts (17) - IAS 18 Revenue Recognition 11 5 IFRS 2 Share-based Payments (10) (4) IAS 27 Consolidation (13) - Reclassification of policyholder funds tax 62 23 Other (6 ) (11)
Slide 57: Adjusted Operating Profit – Nedcor
Adjusted Operating Profit – Nedcor £m 31 Dec 04 30 Jun 04 As reported under UK GAAP 205 59 Adjustments for IAS 39 Financial Instruments 41 19 IAS 18 Revenue Recognition (5 ) (2) IAS 19 Post Employment Benefits 16 - Reclassification of restructuring costs (21) (8) Other 19 5 As reported under IFRS 25
Slide 58: Adjusted Operating Profit – Mutual and Federal
Adjusted Operating Profit – Mutual and Federal £m 31 Dec 04 30 Jun 04 As reported under UK GAAP 89 47 Adjustments for Equalisation provision 12 6 Other 0 (1) As reported under IFRS 101 52 Slide 58 Old Mutual plc – IFRS Analyst and Investor Briefing – 3 May 2005
Slide 59: Adjusted Operating Profit – US Life
Adjusted Operating Profit – US Life £m 31 Dec 04 30 Jun 04 As reported under UK GAAP 96 40 Adjustments for Other 1 - As reported under IFRS 97 40 Slide 59 Old Mutual plc – IFRS Analyst and Investor Briefing – 3 May 2005
Slide 60: Adjusted Operating Profit – US Asset Management
Adjusted Operating Profit – US Asset Management £m 31 Dec 04 30 Jun 04 As reported under UK GAAP 89 47 Adjustments for Other (2) - As reported under IFRS 87 47 Slide 60 Old Mutual plc – IFRS Analyst and Investor Briefing – 3 May 2005
Slide 61: Adjusted Operating Profit – All Other Businesses
Adjusted Operating Profit – All Other Businesses * £m 31 Dec 04 30 Jun 04 As reported under UK GAAP 16 3 Adjustments for IAS 39 Financial Instruments (7) (1) IFRS 2 Share-based Payments (5) - Other (19) 3 As reported under IFRS (15) 5 * Includes, UK, Rest of World and Namibia Slide 61 Old Mutual plc
Slide 62: Appendix: IFRS Analyst and Investor Briefing in SA Rand
Appendix 2 IFRS Analyst and Investor Briefing in SA Rand
Slide 63: Overview
Overview Julian Roberts Group Finance Director
Slide 64: Agenda
Agenda Overview Julian Roberts Technical impacts Katie Murray Closing remarks Julian Roberts Q&A Slide 64 Old Mutual plc – IFRS Analyst and Investor Briefing – 3 May 2005
Slide 65: Overview
Overview Agenda Old Mutual strongly supports global standards Overview • Key financial highlights We are ready for IFRS • Business performance indicators Positive impact on adjusted operating profit while overall equity • What is driving the change? position remains broadly unchanged • Reconci
Slide 66: Key Financial Highlights - 2004
Key Financial Highlights - 2004 Agenda Overview UK • Key financial highlights GAAP IFRS Change • Business performance indicators Adjusted operating profit (Rm) 11,279 11,928 5.8% • What is driving the change? • Reconciliation of Adjusted operating EPS 181c 175c (6c) equity • Reconciliation of adjust
Slide 67: Business Performance Indicators – 2004
Business Performance Indicators – 2004 Agenda Overview UK • Key financial GAAP IFRS highlights • Business performance US Life Value of New Business ($m) * 113 113 indicators • What is driving the change? OMSA Value of New Business (Rm) ** 719 719 • Reconciliation of equity • Reconciliation of adjust
Slide 68: What is Driving the Change?
What is Driving the Change? Agenda Overview Key areas impacted by IFRS No significant impact • Key financial highlights • Business performance indicators Insurance Accounting Post Retirement Benefits • What is driving the change? Revenue Recognition Consolidation • Reconciliation of equity •
Slide 69: Reconciliation of Equity
Reconciliation of Equity Agenda Rm 31 Dec 04 30 Jun 04 1 Jan 04 Overview As reported under UK GAAP 35,202 30,983 32,874 • Key financial highlights Adjustments for • Business performance IFRS 4 Insurance Contracts (2,018) (972) (1,994) indicators • What is driving IAS 18 Revenue Recognition (87) (90)
Slide 70: Reconciliation of Adjusted Operating Profit
Reconciliation of Adjusted Operating Profit Agenda Rm 31 Dec 04 30 Jun 04 Overview • Key financial As reported under UK GAAP 11,279 5,129 highlights • Business Adjustments for performance indicators • What is driving IFRS 4 Insurance Contracts (70) 73 the change? • Reconciliation of IAS 18 Revenue R
Slide 71: Reconciliation of Basic EPS
Reconciliation of Basic EPS Agenda Profit After Basic Overview Tax and MI EPS • Key financial highlights Rm c • Business performance UK GAAP 5,711 166 indicators • What is driving the change? Adjustments for: • Reconciliation of equity IFRS 3 Goodwill 979 28 • Reconciliation of adjusted operating pr
Slide 72: Technical Impacts
Technical Impacts Katie Murray Head of IFRS Implementation
Slide 73: Main IFRS Technical Impacts
Main IFRS Technical Impacts Agenda Overview IFRS 4 Insurance Contracts Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial instruments • IFRS 2 share- based payments IAS 32/39 Financial Instruments • IFRS 3 business combi
Slide 74: Main IFRS Technical Impacts
Main IFRS Technical Impacts IFRS 4 Insurance Contracts Agenda Overview Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial IAS 32/39 Financial Instruments instruments • IFRS 2 share- based payments • IFRS 3 business combi
Slide 75: IFRS 4 Insurance Contracts
IFRS 4 Insurance Contracts Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts Rm 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Investment contract valuation (212) (1,139) (955) financial instruments • IFRS 2 share- Investmen
Slide 76: IFRS 4 Insurance Contracts
IFRS 4 Insurance Contracts Agenda Overview Most significant impact is definition of insurance Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition Products not qualifying as insurance (investment contracts) are valued under IAS 39 • IAS 32/39 financial instruments • IFRS 2
Slide 77: Insurance Products Classification – Life
Insurance Products Classification – Life Agenda Overview Note: Percentages based on UK Technical impacts GAAP reserves at 1/1/2004 • IFRS 4 insurance IFRS 4: Remains at contracts local GAAP • IAS 18 revenue recognition • IAS 32/39 Insurance financial instruments 57% Investment • IFRS 2 share- Contra
Slide 78: Investment Contract Valuation
Investment Contract Valuation UK GAAP IFRS Agenda Overview Technical impacts Liabilities are computed in IFRS allows an option to fair • IFRS 4 insurance contracts • IAS 18 revenue accordance with local GAAP value or hold at amortised cost recognition • IAS 32/39 requirements (FSV for Africa,
Slide 79: Investment Contract Valuation
Investment Contract Valuation Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts Rm 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group (212) (1,139) (955) financial Main Business Unit impacted instruments • IFRS 2 share- ba
Slide 80: Investment Contract Premiums and Claims
Investment Contract Premiums and Claims Agenda Overview UK GAAP IFRS Technical impacts Amounts received are recorded Deposit accounting is applied – • IFRS 4 insurance contracts as premiums amounts received from and paid to • IAS 18 revenue recognition Payments to contract-holders are policyho
Slide 81: Insurance Accounting Changes – Life
Insurance Accounting Changes – Life Agenda UK GAAP IFRS Overview Technical impacts In the US deferred acquisition costs This policy was “improved” to • IFRS 4 insurance contracts and present value of future profits reflect better matching between our • IAS 18 revenue recognition (DAC/PVFP) are a
Slide 82: Insurance Accounting Changes – Life
Insurance Accounting Changes – Life Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts Rm 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group - (1,530) (1,564) financial instruments • IFRS 2 share- Main Business Unit impacte
Slide 83: Elimination of Equalisation Provisions
Elimination of Equalisation Provisions Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts Rm 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group 142 651 525 financial instruments • IFRS 2 share- Main Business Unit impacted b
Slide 84: Main IFRS Technical Impacts
Main IFRS Technical Impacts IFRS 4 Insurance Contracts Agenda Overview Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial IAS 32/39 Financial Instruments instruments • IFRS 2 share- based payments • IFRS 3 business combi
Slide 85: IAS 18 Revenue Recognition
IAS 18 Revenue Recognition Agenda UK GAAP IFRS Overview Technical impacts Initial and recurring fees are Applies to investment contracts, • IFRS 4 insurance contracts recognised as received asset management and banking • IAS 18 revenue segments recognition Acquisition costs are expensed as • I
Slide 86: IAS 18 Revenue Recognition
IAS 18 Revenue Recognition Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts Rm 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group 83 (87) (143) financial instruments • IFRS 2 share- Main Business Units impacted based paym
Slide 87: Main IFRS Technical Impacts
Main IFRS Technical Impacts IFRS 4 Insurance Contracts Agenda Overview Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial IAS 32/39 Financial Instruments instruments • IFRS 2 share- based payments • IFRS 3 business combi
Slide 88: IAS 32/39 Financial Instruments
IAS 32/39 Financial Instruments Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts Rm 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Classification and valuation of financial instruments financial instruments 189 1,172 346 •
Slide 89: Classification and Valuation of Financial Instruments
Classification and Valuation of Financial Instruments Agenda UK GAAP IFRS Overview Technical impacts Insurance business - investments Same accounting applies to all segments • IFRS 4 insurance are stated at fair value with gains and Instruments classified and measured as contracts losses inclu
Slide 90: Classification and Valuation of Financial Instruments
Classification and Valuation of Financial Instruments Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts Rm 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group 189 1,172 346 financial Main Business Units impacted instruments
Slide 91: Derivatives and Hedge Accounting
Derivatives and Hedge Accounting Agenda UK GAAP IFRS Overview Technical impacts • IFRS 4 insurance Banking book derivatives All derivatives recorded on contracts • IAS 18 revenue balance sheet at fair value recognition – Record off balance sheet • IAS 32/39 financial Movements are recorded ins
Slide 92: Derivatives and Hedge Accounting
Derivatives and Hedge Accounting Agenda Adjusted Overview Operating Technical impacts Profit Equity Equity • IFRS 4 insurance contracts Rm 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition Group - 98 48 • IAS 32/39 financial instruments Main Business Units impacted • IFRS 2 share- Head offic
Slide 93: Embedded Derivatives
Embedded Derivatives Agenda UK GAAP IFRS Overview Technical impacts Insurance contracts and Financial instruments • IFRS 4 insurance contracts financial instruments embedded in non financial • IAS 18 revenue recognition containing embedded products are required to be • IAS 32/39 financial instru
Slide 94: Embedded Derivatives
Embedded Derivatives Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts Rm 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group - (11) (334) financial instruments • IFRS 2 share- Main Business Units impacted based payments •
Slide 95: Impairment of Loans and Receivables
Impairment of Loans and Receivables Agenda UK GAAP IFRS Overview Technical impacts The group creates provisions that IAS39 requires the use of an • IFRS 4 insurance contracts are a blend of incurred and incurred loss provisioning model • IAS 18 revenue recognition expected losses based on • IAS
Slide 96: Impairment of Loans and Receivables
Impairment of Loans and Receivables Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts Rm 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group 201 108 (36) financial instruments • IFRS 2 share- Main Business Unit impacted bas
Slide 97: IAS 39 and the EU Carve Out
IAS 39 and the EU Carve Out Agenda Overview Rm 31 Dec 04 Technical impacts • IFRS 4 insurance Per Nedcor – liabilities designated at fair value 8,093 contracts • IAS 18 revenue recognition Per OM plc – liabilities as restated at amortised cost 7,496 • IAS 32/39 financial The EU-endorsed IAS 39 lim
Slide 98: Main IFRS Technical Impacts
Main IFRS Technical Impacts IFRS 4 Insurance Contracts Agenda Overview Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial IAS 32/39 Financial Instruments instruments • IFRS 2 share- based payments • IFRS 3 business combi
Slide 99: IFRS 2 Share-based Payments
IFRS 2 Share-based Payments Agenda UK GAAP IFRS Overview Technical impacts Costs of awards are recognised All grants now attract a charge • IFRS 4 insurance contracts over the service period • IAS 18 revenue Requires distinction between equity recognition Cost recognised is the difference an
Slide 100: IFRS 2 Share Based Payments
IFRS 2 Share Based Payments Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts Rm 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group (201) (174) 12 financial instruments Main Business Units impacted • IFRS 2 share- based pa
Slide 101: Main IFRS Technical Impacts
Main IFRS Technical Impacts IFRS 4 Insurance Contracts Agenda Overview Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial IAS 32/39 Financial Instruments instruments • IFRS 2 share- based payments • IFRS 3 business combi
Slide 102: IFRS 3 Business Combinations – Goodwill
IFRS 3 Business Combinations – Goodwill Agenda Adjusted Overview Operating Technical impacts Profit Equity Equity • IFRS 4 insurance Rm 31 Dec 04 31 Dec 04 1 Jan 04 contracts • IAS 18 revenue recognition Group - (987) (1,838) • IAS 32/39 financial instruments Main Business Units impacted • IFRS 2 sh
Slide 103: Main IFRS Technical Impacts
Main IFRS Technical Impacts IFRS 4 Insurance Contracts Agenda Overview Technical impacts • IFRS 4 insurance contracts • IAS 18 revenue recognition IAS 18 Revenue Recognition • IAS 32/39 financial IAS 32/39 Financial Instruments instruments • IFRS 2 share- based payments • IFRS 3 business combi
Slide 104: IAS 27 Consolidation
IAS 27 Consolidation Agenda Adjusted Overview Operating Technical impacts • IFRS 4 insurance Profit Equity Equity contracts Rm 31 Dec 04 31 Dec 04 1 Jan 04 • IAS 18 revenue recognition • IAS 32/39 Group (295) (434) 107 financial instruments • IFRS 2 share- Main Business Unit impacted based payments
Slide 105: IAS 27 Consolidation
IAS 27 Consolidation Agenda Overview Technical impacts While there has been industry debate over the consolidation of • IFRS 4 insurance contracts investment funds where a company has more than 50% of the assets • IAS 18 revenue recognition invested or where a company would be deemed to have contr
Slide 106: Other Impacts
Other Impacts Agenda Property (IAS 16) Overview Technical impacts – Property is held at depreciated fair value • IFRS 4 insurance contracts • IAS 18 revenue Post Employment Benefits (IAS 19) recognition • IAS 32/39 financial instruments – Defined contribution schemes: no significant change • IFR
Slide 107: IFRS Presentational Issues
IFRS Presentational Issues Agenda Income statement Overview Technical impacts • IFRS 4 insurance – Publish a combined income statement with emphasis on segmental information contracts • IAS 18 revenue – Continue to report a secondary income statement based on long term rate of recognition • IAS 32
Slide 108: Closing Remarks
Closing Remarks Julian Roberts Group Finance Director
Slide 109: Black Economic Empowerment (BEE)
Black Economic Empowerment (BEE) Agenda Overview On 19 April 2005, Old Mutual plc announced BEE transactions across Technical impacts Closing remarks all of its South African businesses • Impact on BEE • Impact on other financial The transaction announcement documented the consolidated pro- meas
Slide 110: BEE – Financial Impact
BEE – Financial Impact Agenda Rm Initial Annual Total Year 1 Overview Technical impacts Estimated impact on UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS Closing remarks earnings • Impact on BEE • Impact on other OMSA (75) (299) (49) (55) (124) (354) financial measures Nedcor (74) (76) (25) (163) (99) (239
Slide 111: BEE – Financial Impact on EPS
BEE – Financial Impact on EPS Agenda Overview UKGAAP IFRS Technical impacts Closing remarks Before After % Before After % • Impact on BEE • Impact on other Adjusted EPS 181.1 175.7 (3.0) 174.2 165.7 (4.9) financial measures Basic EPS 166.2 156.8 (5.7) 192.5 171.1 (11.1) • Timetable • Impact for 2005
Slide 112: IFRS Impact on Other Financial Measures
IFRS Impact on Other Financial Measures Agenda Solvency / regulatory capital Overview Technical impacts – Capital requirements are driven by local regulatory accounting Closing remarks • Impact on BEE – No impact on capital requirements anticipated until local regulatory • Impact on other financia
Slide 113: Communications Timetable
Communications Timetable Agenda Date Event Overview Technical impacts 6 May 2005 Nedcor’s Presentation on 2004 Preliminary results Closing remarks • Impact on BEE under IFRS (and 2004 Opening Position under • Impact on other financial IFRS) measures • Timetable 11 May 2005 Q1 trading statement on an
Slide 114: Summary
Summary Agenda IFRS is embedded into our internal and external reporting process Overview Technical impacts Closing remarks There is no change in the underlying economics of the business • Impact on BEE • Impact on other financial – We will continue to use embedded value and return on equity as
Slide 115: Appendix: Adjusted operating profit by Business Unit in SA Rand
Appendix 3 Adjusted operating profit by Business Unit in SA Rand
Slide 116: Adjusted Operating Profit – OMSA
Adjusted Operating Profit – OMSA Rm 31 Dec 04 30 Jun 04 As reported under UK GAAP 6,265 3,087 Adjustments for IFRS4 Insurance Contracts (201) - IAS 18 Revenue Recognition 130 61 IFRS 2 Share-based Payments (118) (49) IAS 27 Consolidation (153) - Reclassification of policyholder funds tax 732 280 Oth
Slide 117: Adjusted Operating Profit – Nedcor
Adjusted Operating Profit – Nedcor Rm 31 Dec 04 30 Jun 04 As reported under UK GAAP 2,419 717 Adjustments for IAS 39 Financial Instruments 484 231 IAS 18 Revenue Recognition (59) (24) IAS 19 Post Employment Benefits 189 - Reclassification of restructuring costs (248) (97) Other 224 60 As reported un
Slide 118: Adjusted Operating Profit – Mutual and Federal
Adjusted Operating Profit – Mutual and Federal Rm 31 Dec 04 30 Jun 04 As reported under UK GAAP 1,050 571 Adjustments for Equalisation provision 142 73 Other - -12 As reported under IFRS 1,192 632 Slide 118 Old Mutual plc – IFRS Analyst and Investor Briefing – 3 May 2005
Slide 119: Adjusted Operating Profit – US Life
Adjusted Operating Profit – US Life Rm 31 Dec 04 30 Jun 04 As reported under UK GAAP 1,133 486 Adjustments for Other 11 - As reported under IFRS 1,144 486 Slide 119 Old Mutual plc – IFRS Analyst and Investor Briefing – 3 May 2005
Slide 120: Adjusted Operating Profit – US Asset Management
Adjusted Operating Profit – US Asset Management Rm 31 Dec 04 30 Jun 04 As reported under UK GAAP 1,050 571 Adjustments for Other (24) - As reported under IFRS 1,026 571 Slide 120 Old Mutual plc – IFRS Analyst and Investor Briefing – 3 May 2005
Slide 121: Adjusted Operating Profit – All Other Businesses
Adjusted Operating Profit – All Other Businesses * Rm 31 Dec 04 30 Jun 04 As reported under UK GAAP 189 36 Adjustments for IAS 39 Financial Instruments (83) (12) IFRS 2 Share-based Payments (59) - Other (224) 37 As reported under IFRS (177) 61 * Includes, UK, Rest of World and Namibia Slide 121 Old
Slide 122: Old Mutual plc IFRS Analyst and Investor Briefing
Old Mutual plc International Financial Reporting Standards (“IFRS”) Analyst and Investor Briefing 3 May 2005