FINANCIAL STATEMENTS OF THE COMPANY COMPANY STATEMENT OF FINANCIAL POSITION

Transcription

1 COMPANY STATEMENT OF FINANCIAL POSITION Notes Restated Assets Investments in Group subsidiaries 2 5,729 5,760 Investments and securities Investments in associated undertakings and joint ventures Trade, other receivables and other assets 5 4,172 4,263 Derivative financial instruments assets Cash and cash equivalents Total assets 10,997 10,655 Liabilities Borrowed funds Provisions 8 2 Trade, other payables and other liabilities 9 4,403 4,299 Derivative financial instruments liabilities 6 1 Total liabilities 5,083 4,944 Net assets 5,914 5,711 Equity Equity attributable to equity holders of the parent 5,914 5,711 Total equity 5,914 5,711 The Company s financial statements on pages 229 to 237 were approved by the Board of Directors on 28 February Julian Roberts Group Chief Executive Ingrid Johnson Group Finance Director Annual Report and Accounts 229

2 COMPANY STATEMENT OF CASH FLOWS For the year ended Year ended Year ended Profit before tax Recognition of impairment losses 108 Fair value movement on derivatives and borrowed funds Foreign exchange movement on assets and liabilities (15) (2) Non-cash movements in profit before tax Other operating assets and liabilities (98) 274 Changes in working capital (98) 274 Net cash inflow from operating activities Acquisition of interests in subsidiaries, associates and strategic investments (89) Disposal of interests in subsidiaries, associates and joint ventures Other investing cash flows (193) 16 Net cash (outflow)/inflow from investing activities (259) 174 External interest received External interest paid (60) (65) Intercompany interest (paid) (152) (149) Dividends paid to: Ordinary shareholders of the Company (184) (162) Equity minority interests and preferred shares (33) (47) Net proceeds from issue of ordinary shares Net purchase of treasury shares (17) (14) Other debt repaid (156) Loan financing received from Group companies Net cash inflow/(outflow) from financing activities 98 (394) Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the year Annual Report and Accounts

3 COMPANY STATEMENT OF CHANGES IN EQUITY For the year ended Year ended Millions Number of shares issued and fully paid Share capital Share premium Other Reserves Retained earnings* Perpetual preferred callable securities Shareholders equity of the Company at beginning of the year 4, ,832 1, ,711 Profit for the year Items that will not be reclassified subsequently to profit and loss Actuarial gain on defined benefit plan (2) (2) Total comprehensive income for the year Dividends for the year (217) (33) (250) Merger reserve realised (375) 375 Net purchase of treasury shares (17) (17) Other movements in share capital and share-based payment reserve Fair value of equity settled share options Shareholders equity of the Company at end of the year 4, ,473 2, ,914 Total *Included within retained earnings of 2,498 million (: 1,948 million) are distributable reserves of 2,495 million (: 1,928 million) Year ended Millions Number of shares issued and fully paid Share capital Share premium Other Reserves Retained earnings* Perpetual preferred callable securities Shareholders equity of the Company at beginning of the year restated 4, ,815 2, ,065 Profit for the year Actuarial loss on defined benefit plan 3 3 Total comprehensive income for the year Dividends for the year (209) (47) (256) Preferred securities purchased (35) (156) (191) Other movements in share capital and share-based payment reserve Fair value of equity settled share options Shareholders equity of the Company at end of the year 4, ,832 1, ,711 Total Other reserves Merger reserve 1,342 1,717 Share-based payment reserve Cancellation of treasury shares tributable to equity holders of the Company at the end of the year 1,473 1,832 Annual Report and Accounts 231

4 NOTES TO THE COMPANY FINANCIAL STATEMENTS For the year ended 1 Financial assets and liabilities Company statement of financial position The Company is principally involved in the management of its investments in subsidiaries, with its risks considered to be consistent with those in the operations themselves. Full details of the financial risks are provided in the Group financial statements, note E1. The most important components of financial risk for the Company itself are interest rate risk, currency risk, liquidity risk and credit risk. These risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements. (a) Categories of financial instruments The financial instruments of the Company consist of derivative assets and liabilities, both of which are treated as held-for-trading, other assets and cash and cash equivalents which are treated as loan and receivables, borrowed funds of which 565 million is designated as fair value through the income statement and 114 million at amortised cost (: 531 million and 112 million respectively) and other liabilities which are also measured at amortised cost. For financial assets and liabilities measured at fair value through the income statement, the hierarchy classification (as detailed in the Group financial statements, note E1(p)) of derivative assets and liabilities is level 2 and borrowed funds level 1. (b) Capital risk management is the holding company of the Group and is responsible for the raising and allocation of capital in line with the Group s capital management policies set out in note E1 to the consolidated financial statements and for ensuring the operational funding and regulatory capital needs of the holding company and its subsidiaries are met at all times. (c) Currency risk The Company is exposed to effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows through the impact that currency movements have on its derivatives. The principal foreign currency risk arises from the fact that the Company s functional currency is Pounds Sterling, whereas the functional currencies of its principal operations are South African rand, US dollar and Euro. The exposure of the Group to currency risk is disclosed in the Group financial statements, note E1(s). The Company hedges some of this currency translation risk through currency swaps, currency borrowings and forward foreign exchange rate contracts. Exchange rate exposures are managed within approved policy parameters utilising forward exchange contracts and currency swap agreements. A 10% deterioration in the values of the major currencies the Company is exposed to in relation to GBP would result in a decrease in the Company s equity holders funds of 66 million (: increase of 63 million). (d) Credit risk The Company is principally exposed to credit risk through its derivative asset positions, investments and securities, holdings of cash and cash equivalents and the ability of its subsidiaries to repay amounts due to the Company, which it holds to back shareholder liabilities. The exposure of the Group to credit risk is disclosed in the consolidated financial statements, note E2. Credit risk is managed by placing limits on exposures to any single counterparty, or groups of counterparties and to geographical and industry segments. Credit risk is monitored with reference to established credit rating agencies with limits placed on exposure to below investment grade holdings or the financial position of companies within the Group. Of the Company s financial assets bearing credit risk, derivative assets, investment and securities, bonds and cash and cash equivalents are rated as investment grade (being AAA to BBB for Standard & Poor s or an equivalent). The other financial assets bearing credit risk are not rated. (e) Interest rate risk Interest rate risk is the risk that fluctuating interest rates will unfavourably affect the Company s earnings and the value of its assets, liabilities and capital. The Company employs currency and interest rate swap transactions to mitigate against the impact of changes in the fair values of its borrowed funds. Details of the arrangements in place are shown in the Group financial statements note E7 (Hedge accounting). (f) Liquidity risk Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Company s short, medium and long-term funding and liquidity management requirements. The Company has net current assets of 387 million (: 429 million), all of which represent liabilities to other Group companies. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and continuously monitoring forecast and actual cash flows of both the Company and its subsidiaries. The key information reviewed by the Company s executive directors and Executive Committee, together with the Capital Management Committee, is a detailed management report on the Company s current and planned capital and liquidity position. Forecasts are updated regularly based on when new information is received, and as part of the annual business planning cycle. The Company s liquidity and capital position and forecast is presented to the Company s Board of Directors on a regular basis. Further information on liquidity and the Company s cash flows is contained in other sections of this Annual Report, for example the business review and Group Finance Director s statement. 232 Annual Report and Accounts

5 2 Principal subsidiaries Balance at beginning of the year 5,760 8,151 Additions Disposal (23) (2,370) Impairments (110) (39) Balance at end of the year 5,729 5,760 On 14 April, the Company sold 970,384 shares of its investment in Old Mutual Wealth Management Limited to Old Mutual Wealth JSOP Trust No 1, for 15 million. On 4 April, the Company received a return of capital from Old Mutual Plc Brands AB of 8 million. On 19 May, the Company purchased an additional 88,900,000 ordinary shares of 1 each in OM Group (UK) Limited for cash. During, the Company impaired its investments in Skandia UK Limited, Old Mutual Europe GmbH and Old Mutual Plc Brands AB by 5 million, 103 million and 2 million respectively. Included within additions is the Company s investment in subsidiary undertakings in respect of movements on the share-based payments ( 13 million). The principal subsidiary undertakings of the Company are as follows: Country of incorporation Class of shares % interest held OM Group (UK) Ltd England and Wales Ordinary 100 Old Mutual Wealth Management Ltd England and Wales Ordinary 100 Old Mutual Europe GmbH England and Wales Ordinary 100 Old Mutual PLC Brands AB Sweden Ordinary 100 A complete list of subsidiaries is filed with the UK Registrar of Companies with the annual return. All the above companies have a year end of. 3 Investments and securities Government and government-guaranteed securities Other debt securities, preference shares and debentures Total investment and securities The government and government-guaranteed securities above are all rated AAA. The intention is to hold these investments to maturity. Other debt securities, preference shares and debentures are all rated AAA-BBB. The intention is to hold these investments to maturity. 4 Investments in associated undertakings The Company holds the following interest in associated undertakings: Country of % interest operation held Kotak Mahindra Old Mutual Life Insurance Limited India Annual Report and Accounts 233

6 NOTES TO THE COMPANY FINANCIAL STATEMENTS For the year ended 5 Other assets Year ended Other receivables 12 Corporation tax receivable 3 3 Accrued interest and rent 3 3 Other prepayments and accrued income 5 3 Amounts owed by Group undertakings Amounts falling due within one year Amounts falling due after one year 4,112 4,011 Total other assets 4,172 4,263 6 Derivative financial instruments The following tables provide a detailed breakdown of the fair values of the Company s derivative financial instruments outstanding at the year end. These instruments allow the Company to transfer, modify or reduce foreign exchange and interest rate risks. The Company undertakes transactions involving derivative financial instruments with other financial institutions. Management has established limits commensurate with the credit quality of the institutions with whom it deals, and manages the resulting exposures such that a default by any individual counterparty is unlikely to have a materially adverse impact on the Company. Fair values Fair values Assets Liabilities Assets Liabilities Exchange rate contracts Swaps 3 11 Forwards Total 4 23 Interest rate contracts Swaps Total The contractual maturities of the derivative liabilities held are as follows: More than 3 months less than 1 year No contractual maturity date Balance Between sheet Less than 1 and 5 More than amount 3 months years 5 years Total Derivative financial liabilities Derivative financial liabilities 234 Annual Report and Accounts

7 7 Borrowed funds Senior debt securities and term loans Subordinated debt securities Total borrowed funds Fair valued through income statement Amortised cost Total borrowed funds The following table is a maturity analysis of liability cash flows based on contractual maturity dates for borrowed funds. Maturity analysis is undiscounted and based on year end exchange rates. In addition to the contractual cash flows detailed below, the Company is obligated to make interest payments on borrowed funds, details of which are in the Group financial statements in note E9. Greater than 1 year and less than 5 years Greater than 5 years Borrowed funds Additional details of these borrowings and undrawn facilities are included in the Group financial statements in note E9. 8 Provisions Notes Post employment benefits 7 2 Total provisions 2 9 Post employment benefits The Company holds a provision in respect of the Old Mutual Staff Pension Fund Defined Benefit pension scheme, which provides benefits based on final pensionable pay for members within the Group. The assets of the scheme are held in separate trustee administered funds. Pension costs and contributions relating to the scheme are assessed in accordance with the advice of qualified actuaries. Actuarial advice confirms that the current level of contributions payable to the scheme, together with existing assets, are adequate to secure members benefits over the remaining lives of participating employees. The scheme is reviewed on a triennial basis. In the intervening years the actuary reviews the continuing appropriateness of the assumptions applied. During the year two employees (: two) were directly employed by the Company. The costs for these Directors and ex-directors are disclosed within the Remuneration Report on pages 94 to 117. Annual Report and Accounts 235

8 NOTES TO THE COMPANY FINANCIAL STATEMENTS For the year ended Liability for defined benefit obligation Pension plans Change in projected benefit obligation Projected benefit obligation at beginning of the year Interest cost on benefit obligation 3 3 Benefits paid (2) (1) Actuarial losses/(gains) 8 (2) Projected benefit obligation at end of the year Change in plan assets Plan assets at fair value at beginning of the year Actual return on plan assets 9 3 Benefits paid (2) (1) Company contributions 4 4 Plan assets at fair value at end of the year Net liability recognised in balance sheet Funded status of plan 2 Net amount recognised in balance sheet 2 Expense recognised in the income statement (1) (1) Actuarial assumptions used in calculating the projected benefit obligation are based on relevant mortality estimates, with a specific allowance made for future improvements in mortality which is broadly in line with that adopted for the 92 series of mortality tables prepared by the Continuous Mortality Investigation Bureau of the Institute of Actuaries. The expected returns on plan assets have been determined on the basis of long-term expectations, the carrying value of the assets and the market conditions at the balance sheet date specific to the relevant locations. The detailed actuarial assumptions can be viewed on the Group s website at % Pension plans Equity securities Debt securities Other investments Other liabilities Accruals and deferred income Corporation tax Amounts owed to Group undertakings: Amount falling due within one year Amount falling due after one year 3,661 3,869 Total other liabilities 4,403 4, Annual Report and Accounts

9 11 Contingent liabilities In February 2008, the Company issued a guarantee to a third party over a subsidiary s (Old Mutual Bermuda Limited) obligations under the reinsurance contracts relating to the offshore investment products sold by a third party. The maximum payment under this guarantee is $250 million. This guarantee is accounted for as an insurance contract and payments will only arise should Old Mutual Bermuda be unable to meet its obligations under the relevant reinsurance contracts as they fall due. 12 Related parties enters into transactions with its subsidiaries in the normal course of business. These are principally related to funding of the Group s businesses and head office functions. Details of loans, including balances due from/to the Company accounts are set out below. Disclosures in respect of the key management personnel of the Company are included in the Group accounts related parties disclosures in note G3. There are no transactions entered into by the Company with associated undertakings. Balances due from subsidiaries 4,161 4,242 Balances due to subsidiaries (4,367) (4,264) Balances due from other related parties Fairbarn Trust Company Limited 2 2 Income statement information Year ended Year ended Ordinary Other Ordinary Other dividends amounts dividends amounts Interest paid received paid Interest paid received paid Subsidiaries (31) (31) 147 (99) Annual Report and Accounts 237