28th Feb 2005 07:03
Old Mutual PLC27 February 2005 PART 2 Notes to the Financial Statementsfor the year ended 31 December 2004 1 FOREIGN CURRENCIES The information contained in these financial statements is expressed in bothSterling and South African Rand. This is in order both to meet the legalrequirements of the UK Companies Act 1985 and to provide the users of theaccounts in South Africa with illustrative information. The principal exchange rates used to translate the operating results, assetsand liabilities of key foreign business segments to Sterling are: Rand US$ 2004 2003 2004 2003Profit and loss account (average rate) 11.7986 12.3487 1.8327 1.6354Balance sheet (closing rate) 10.8482 11.9367 1.9158 1.7833 Foreign currency revenue transactions are translated at average exchange ratesfor the year. Foreign currency assets and liabilities are translated at yearend exchange rates. Exchange differences arising from the translation of netinvestments in foreign subsidiary undertakings are taken to the consolidatedstatement of total recognised gains and losses. Exchange differences arising onthe translation of foreign integrated operations are taken through thenon-technical account. Exchange differences on trading activities are includedin the profit and loss account. Notes to the Financial Statements continuedfor the year ended 31 December 2004 2 EARNINGS AND EARNINGS PER SHARE Basic earnings per share is calculated based upon the profit after taxattributable to equity shareholders. The directors' view is that adjustedoperating earnings per share derived from adjusted operating profit or lossafter tax and minority interests provides a better indication of the underlyingperformance of the Group. For life assurance and general insurance businesses,adjusted operating profit is based on a long term investment return andincludes investment return on own shares held in policyholders' funds. Forbanking business, adjusted operating profit excludes the loss on disposal ofinvestment in Dimension Data Holdings plc, restructuring and integration costsand the transitional impact of the change in credit provisioning methodology.For all businesses, adjusted operating profit excludes goodwill amortisationand impairment and fines and penalties. Adjusted operating earnings per shareis similarly based, but is stated after tax and minority interests, with thecalculation of the weighted average number of shares including own shares heldin policyholders' funds. A table reconciling operating profit on ordinaryactivities after tax and minority interests to adjusted operating profit aftertax and minority interests is set out below. GBPm Rm Year to Year to Year to Year to 31 Dec 31 Dec 31 Dec 31 Dec Notes 2004 2003 2004 2003Profit on ordinary activities after tax and minority interests 484 273 5,704 3,381Goodwill amortisation and impairment net of minority interests 83 128 971 1,581Loss on disposal of investment in Dimension Data Holdings plc net of tax and minority interests - 3 - 30Restructuring and integration costs net of tax and minority interests 3(d)(ii) 8 13 92 160Change in credit provisioning methodology net of tax and minority interests 3(d)(iii) - 31 - 376Fines and penalties net of tax 41 - 499 -Short term fluctuations in investment returns net of tax and minority interests (162) (95) (1,907) (1,170)Investment return adjustment for own shares held in policyholders' funds 3(b)(iv) 94 (12) 1,115 (148)Non-operating items net of tax and minority interests 26 32 312 404Adjusted operating profit after tax and minority interests 574 373 6,786 4,614 p cBasic earnings per share after tax and minority interests 14.1 8.0 166.2 99.1Impact of exclusion of own shares held in policyholders' funds on weighted average number of shares (1.2) (0.7) (14.0) (8.4) 12.9 7.3 152.2 90.7Goodwill amortisation and impairment net of minority interests 2.2 3.4 26.0 42.4Loss on disposal of investment in Dimension Data Holdings plc net of tax and minority interests - 0.1 - 0.8Restructuring and integration costs net of tax and minority interests 0.2 0.3 2.5 4.3Change in credit provisioning methodology net of tax and minority interests - 0.8 - 10.1Fees and penalties net of tax 1.1 - 13.3 -Short term fluctuations in investment returns net of tax and minority interests (4.3) (2.5) (50.9) (31.3)Investment return adjustment for own shares held in policyholders' funds 2.5 (0.3) 29.7 (4.0)Non-operating items net of tax 0.7 0.9 8.3 10.8Adjusted operating earnings per share after tax and minority interests 15.3 10.0 181.1 123.8 Notes to the Financial Statements continuedfor the year ended 31 December 2004 2 EARNINGS AND EARNINGS PER SHARE CONTINUED Basic earnings per share is calculated by reference to the profit on ordinaryactivities after tax and minority interests of GBP484 million (R5,704 million)for the year ended 31 December 2004 (2003: GBP273 million (R3,381 million)) anda weighted average number of shares in issue of 3,432 million (2003: 3,411million). The weighted average number of shares is calculated as follows: millions At At 31 Dec 31 Dec 2004 2003Total weighted average number of shares in issue 3,844 3,824Shares held in ESOP Trusts (96) (97)Adjusted weighted average number of shares 3,748 3,727Shares held in policyholders' funds (316) (316)Weighted average number of shares 3,432 3,411 In accordance with UITF Abstract 37 "Purchases and Sales of Own Shares", sharesin the Company held in policyholders' funds are not included in the weightedaverage number of shares used in basic earnings per share calculations. Noadjustment is required in respect of UITF Abstract 38 "Accounting for ESOPTrusts" as the shares in the Company held in ESOP Trusts have already beenexcluded from the calculation as, in the majority of cases, the ESOP Trustshave waived their rights to dividends on these shares. Notes to the Financial Statements continuedfor the year ended 31 December 2004 3 SEGMENTAL ANALYSIS3(a) Summary of operating profit on ordinary activities before tax GBPm UK & South United Rest of Notes Africa States World Total Year to 31 December 2004 Life assurance 3(b)(iii) Adjusted operating profit 480 96 18 594Inter-segment (revenue) / expenses (3) 12 2 11Adjusted operating profit net of inter- segment transaction 477 108 20 605Asset management 3(c)(i) Adjusted operating profit 53 89 10 152Inter-segment (revenue) / expenses (10) (11) 4 (17)Adjusted operating profit net of inter- segment transaction 43 78 14 135Banking 3(d)(i) Adjusted operating profit 177 - 14 191Inter-segment (revenue) / expenses 6 - - 6Adjusted operating profit net of inter- segmental transaction 183 - 14 197General insurance business 3(e) 89 - - 89Other shareholders' income / (expenses) 3(f) - - (33) (33)Debt service costs (3) - (34) (37)Adjusted operating profit / (loss), net of inter-segment transactions 789 186 (19) 956Goodwill amortisation and impairment 6 (57) (50) (3) (110)Restructuring and integration costs 3(d)(ii) (21) - - (21)Fines and penalties - (49) - (49)Short term fluctuations in investment return 134 85 7 226Investment return adjustment for own shares held in policyholders' funds 3(b)(i v) (94) - - (94)Operating profit / (loss) on ordinary activities before tax 751 172 (15) 908Analysed as: Life assurance 479 189 27 695Asset management 43 (17) 11 37Banking 107 - 14 121General insurance business 125 - - 125Other shareholders' income / (expenses) - - (33) (33)Debt service costs (3) - (34) (37)Operating profit / (loss) on ordinary activities before tax 751 172 (15) 908 Rm UK & South United Rest of Notes Africa States World Total Year to 31 December 2004 Life assurance 3(b)(iii) Adjusted operating profit 5,671 1,126 206 7,003Inter-segment (revenue) / expenses (32) 137 25 130Adjusted operating profit net of inter- segment transaction 5,639 1,263 231 7,133Asset management 3(c)(i) Adjusted operating profit 639 1,050 117 1,806Inter-segment (revenue) / expenses (120) (130) 47 (203)Adjusted operating profit net of inter- segment transaction 519 920 164 1,603Banking 3(d)(i) Adjusted operating profit 2,099 - 158 2,257Inter-segment (revenue) / expenses 73 - - 73Adjusted operating profit net of inter- segmental transaction 2,172 - 158 2,330General insurance business 3(e) 1,057 - - 1,057Other shareholders' income / (expenses) 3(f) - - (390) (390)Debt service costs (35) - (402) (437)Adjusted operating profit / (loss), net of inter-segment transactions 9,352 2,183 (239) 11,296Goodwill amortisation and impairment 6 (672) (583) (35) (1,290)Restructuring and integration costs 3(d)(ii) (246) - - (246)Fines and penalties - (596) - (596)Short term fluctuations in investment return 1,582 1,003 77 2,662Investment return adjustment for own shares held in policyholders' funds 3(b)(i v) (1,115) - - (1,115)Operating profit / (loss) on ordinary activities before tax 8,901 2,007 (197) 10,711Analysed as: Life assurance 5,657 2,219 308 8,184Asset management 519 (212) 129 436Banking 1,278 - 158 1,436General insurance business 1,482 - - 1,482Other shareholders' income / (expenses) - - (390) (390)Debt service costs (35) - (402) (437)Operating profit / (loss) on ordinary activities before tax 8,901 2,007 (197) 10,711 Notes to the Financial Statements continuedfor the year ended 31 December 2004 3 SEGMENTAL ANALYSIS CONTINUED3(a) Summary of operating profit on ordinary activities before tax continued GBPm UK & South United Rest of Notes Africa States World TotalYear to 31 December 2003 (Restated) Life assurance 3(b)(iii) Adjusted operating profit 438 85 20 543Inter-segment (revenue) / expenses (7) 11 4 8Adjusted operating profit net of inter- segment transactions 431 96 24 551Asset management 3(c)(i) Adjusted operating profit 55 81 (8) 128Inter-segment (revenue) / expenses (2) (10) 4 (8)Adjusted operating profit net of inter- segment transactions 53 71 (4) 120Banking 3(d)(i) Adjusted operating profit (10) - 4 (6)Inter-segment (revenue) / expenses - - - -Adjusted operating profit net of inter- segment transactions (10) - 4 (6)General insurance business 3(e) 73 - - 73Other shareholders' income / (expenses) 3(f) - - (40) (40)Debt service costs (4) - (44) (48)Adjusted operating profit, net of inter-segment transactions 543 167 (60) 650Goodwill amortisation 6 (140) (57) (9) (206)Loss on disposal of investment in Dimension Data Holdings plc (5) - - (5)Restructuring and integration costs 3(d)(ii) (32) - - (32)Change in credit provisioning methodology 3(d)(iii) (87) - - (87)Short term fluctuations in investment return (37) 196 (16) 143Investment return adjustment for own shares held in policyholders' funds 3(b)(iv) 12 - - 12Operating profit / (loss) on ordinary activities before tax 254 306 (85) 475Analysed as: Life assurance 402 288 12 702Asset management 53 18 (13) 58Banking (272) - 4 (268)General insurance business 75 - - 75Other shareholders' income / (expenses) - - (44) (44)Debt service costs (4) - (44) (48)Operating profit / (loss) on ordinary activities before tax 254 306 (85) 475 Rm UK & South United Rest of Notes Africa States World Total Year to 31 December 2003 (Restated) Life assurance (b)(iii) Adjusted operating profit 5,408 1,050 248 6,706Inter-segment (revenue) / expenses (86) 135 49 98Adjusted operating profit net of inter- segment transactions 5,322 1,185 297 6,804Asset management 3(c)(i) Adjusted operating profit 678 1,000 (95) 1,583Inter-segment (revenue) / expenses (22) (123) 47 (98)Adjusted operating profit net of inter- segment transactions 656 877 (48) 1,485Banking 3(d)(i) Adjusted operating profit (118) - 48 (70)Inter-segment (revenue) / expenses - - - -Adjusted operating profit net of inter- segment transactions (118) - 48 (70)General insurance business 3(e) 909 - - 909Other shareholders' income / (expenses) 3(f) - - (494) (494)Debt service costs (49) - (544) (593)Adjusted operating profit, net of inter-segment transactions 6,720 2,062 (741) 8,041Goodwill amortisation 6 (1,730) (703) (111) (2,544)Loss on disposal of investment in Dimension Data Holdings plc (60) - - (60)Restructuring and integration costs 3(d)(ii) (394) - - (394)Change in credit provisioning methodology 3(d)(iii) (1,074) - - (1,074)Short term fluctuations in investment return (456) 2,420 (197) 1,767Investment return adjustment for own shares held in policyholders' funds 3(b)(iv) 148 - - 148Operating profit / (loss) on ordinary activities before tax 3,154 3,779 (1,049) 5,884Analysed as: Life assurance 4,964 3,556 149 8,669Asset management 656 223 (159) 720Banking (3,350) - 48 (3,302)General insurance business 933 - - 933Other shareholders' income / (expenses) - - (543) (543)Debt service costs (49) - (544) (593)Operating profit / (loss) on ordinary activities before tax 3,154 3,779 (1,049) 5,884 The segmental analysis has been prepared on a gross of inter-segmenttransactions basis. 2003 comparatives have been restated to be consistent withthe current year segmental presentation. Notes to the Financial Statements continuedfor the year ended 31 December 2004 3 SEGMENTAL ANALYSIS CONTINUED GBPm South United UK & Rest 3(b) Life assurance Africa States of World Total(i) Gross premiums written Year to 31 December 2004 Individual business Single 633 2,169 135 2,937Recurring 940 205 46 1,191 1,573 2,374 181 4,128Group business Single 434 - 18 452Recurring 299 - 22 321 733 - 40 773Total gross premiums 2,306 2,374 221 4,901Year to 31 December 2003 Individual business Single 563 1,815 87 2,465Recurring 833 186 51 1,070 1,396 2,001 138 3,535Group business Single 715 - 20 735Recurring 294 - 13 307 1,009 - 33 1,042Total gross premiums 2,405 2,001 171 4,577 Rm South United UK & Rest 3(b) Life assurance Africa States of World Total(i) Gross premiums written Year to 31 December 2004 Individual business Single 7,467 25,594 1,597 34,658Recurring 11,088 2,415 544 14,047 18,555 28,009 2,141 48,705Group business Single 5,116 - 213 5,329Recurring 3,532 - 252 3,784 8,648 - 465 9,113Total gross premiums 27,203 28,009 2,606 57,818Year to 31 December 2003 Individual business Single 6,952 22,413 1,074 30,439Recurring 10,286 2,297 630 13,213 17,238 24,710 1,704 43,652Group business Single 8,829 - 247 9,076Recurring 3,631 - 161 3,792 12,460 - 408 12,868Total gross premiums 29,698 24,710 2,112 56,520 Notes to the Financial Statements continuedfor the year ended 31 December 2004 3 SEGMENTAL ANALYSIS CONTINUED GBPm South United UK & Rest 3(b) Life assurance Africa States of World Total(ii) Gross new business premiums written Year to 31 December 2004 Individual business Single 633 2,169 135 2,937Recurring 157 58 8 223 790 2,227 143 3,160Group business Single 434 - 18 452Recurring 15 - 2 17 449 - 20 469Total gross new business premiums written 1,239 2,227 163 3,629Annual premium equivalent 279 275 25 579Year to 31 December 2003 Individual business Single 563 1,815 87 2,465Recurring 158 76 7 241 721 1,891 94 2,706Group business Single 715 - 20 735Recurring 18 - 3 21 733 - 23 756Total gross new business premiums written 1,454 1,891 117 3,462Annual premium equivalent 304 258 21 583 Rm South United UK & Rest 3(b) Life assurance Africa States of World Total(ii) Gross new business premiums written Year to 31 December 2004 Individual business Single 7,467 25,594 1,597 34,658Recurring 1,858 679 97 2,634 9,325 26,273 1,694 37,292Group business Single 5,116 - 213 5,329Recurring 182 - 21 203 5,298 - 234 5,532Total gross new business premiums written 14,623 26,273 1,928 42,824Annual premium equivalent 3,298 3,238 299 6,835Year to 31 December 2003 Individual business Single 6,952 22,413 1,074 30,439Recurring 1,951 939 86 2,976 8,903 23,352 1,160 33,415Group business Single 8,829 - 247 9,076Recurring 222 - 37 259 9,051 - 284 9,335Total gross new business premiums written 17,954 23,352 1,444 42,750Annual premium equivalent 3,751 3,180 255 7,186 Annual premium equivalent is defined as one tenth of single premiums plus recurring premiums. Notes to the Financial Statements continuedfor the year ended 31 December 2004 3 SEGMENTAL ANALYSIS CONTINUED3(b) Life assurance continued GBPm South United UK & Rest of Africa States World Total(iii) Life assurance adjusted operating profit Year to 31 December 2004 Individual business 224 96 11 331Group business 89 - 2 91Life assurance technical result 313 96 13 422Long term investment return 167 - 5 172Total segmental result 480 96 18 594Inter-segment (revenue) / expenses (3) 12 2 11Adjusted operating profit, net of inter-segment transactions 477 108 20 605Year to 31 December 2003 Individual business 190 85 13 288Group business 70 - 2 72Life assurance technical result 260 85 15 360Long term investment return 178 - 5 183Adjusted operating profit 438 85 20 543Inter-segment (revenue) / expenses (7) 11 4 8Adjusted operating profit, net of inter-segment transactions 431 96 24 551 South United UK & Rest of Africa States World Total(iii) Life assurance adjusted operating profit Year to 31 December 2004 Individual business 2,643 1,126 123 3,892Group business 1,054 - 32 1,086Life assurance technical result 3,697 1,126 155 4,978Long term investment return 1,974 - 51 2,025Total segmental result 5,671 1,126 206 7,003Inter-segment (revenue) / expenses (32) 137 25 130Adjusted operating profit, net of inter-segment transactions 5,639 1,263 231 7,133Year to 31 December 2003 Individual business 2,346 1,050 161 3,557Group business 864 - 25 889Life assurance technical result 3,210 1,050 186 4,446Long term investment return 2,198 - 62 2,260Adjusted operating profit 5,408 1,050 248 6,706Inter-segment (revenue) / expenses (86) 135 49 98Adjusted operating profit, net of inter-segment transactions 5,322 1,185 297 6,804 Inter-segment revenue / expenses represents investment management fees paid tothe Group's asset management companies and administration fees paid to /received from Group life assurance companies. GBPm Rm Year to Year to Year to Year to 31 Dec 31 Dec 31 Dec 31 Dec 2004 2003 2004 2003(iv) Investment return adjustment for own shares held in policyholders' funds Dividend income 16 14 190 173Realised gains on investment in own shares 2 - 28 -Unrealised gains / (losses) on investment in own shares 76 (26) 897 (321)Net investment gain / (loss) on own shares 94 (12) 1,115 (148) (v) Other technical incomeOther technical income of GBP84 million (R991 million) (2003: GBP94 million(R1,161 million)) principally consists of fees earned in respect of SouthAfrican policyholders' funds and fees earned for healthcare administration. 31 Notes to the Financial Statements Notes to the Financial Statements continuedfor the year ended 31 December 2004 3 SEGMENTAL ANALYSIS CONTINUED3(c)(i) Asset management GBPm Adjusted operating Notes Revenue Expenses profitYear to 31 December 2004 South Africa Fund management Old Mutual Asset Managers 42 (24) 18Old Mutual Unit Trusts 23 (19) 4Other 52 (42) 10 117 (85) 32Other financial services 16 (3) 13Nedcor Unit Trusts and Portfolio Management 32 (24) 8 165 (112) 53US asset management 3(c)(ii) 367 (278) 89UK and Rest of World Fund management 48 (31) 17Selestia investment platform 7 (12) (5)Other financial services 18 (26) (8)Nedcor Unit Trusts and Portfolio Management 34 (28) 6 107 (97) 10Adjusted operating profit 639 (487) 152Inter-segment (revenue) / expenses South Africa (19) 9 (10)US asset management (11) - (11)United Kingdom and Rest of World 2 2 4 (28) 11 (17)Adjusted operating profit, net of inter segment transactions South Africa 146 (103) 43US asset management 356 (278) 78United Kingdom and Rest of World 109 (95) 14 611 (476) 135 Rm Adjusted operating Notes Revenue Expenses profitYear to 31 December 2004 South Africa Fund management Old Mutual Asset Managers 497 (282) 215Old Mutual Unit Trusts 273 (220) 53Other 619 (495) 124 1,389 (997) 392Other financial services 192 (40) 152Nedcor Unit Trusts and Portfolio Management 378 (283) 95 1,959 (1,320) 639US asset management 3(c)(ii) 4,330 (3,280) 1,050UK and Rest of World Fund management 566 (366) 200Selestia investment platform 83 (142) (59)Other financial services 212 (307) (95)Nedcor Unit Trusts and Portfolio Management 401 (330) 71 1,262 (1,145) 117Adjusted operating profit 7,551 (5,745) 1,806Inter-segment (revenue) / expenses South Africa (224) 104 (120)US asset management (130) - (130)United Kingdom and Rest of World 20 27 47 (334) 131 (203)Adjusted operating profit, net of inter segment transactions South Africa 1,735 (1,216) 519US asset management 4,200 (3,280) 920United Kingdom and Rest of World 1,282 (1,118) 164 7,217 (5,614) 1,603 Notes to the Financial Statements continuedfor the year ended 31 December 2004 3 SEGMENTAL ANALYSIS CONTINUED3(c)(i) Asset management GBPm Adjusted operating Notes Revenue Expenses profitYear to 31 December 2003 South Africa Old Mutual Asset Managers 37 (20) 17Old Mutual Unit Trusts 21 (15) 6Other 16 (12) 4 74 (47) 27Other financial services 42 (24) 18Nedcor Unit Trusts and Portfolio Management 36 (26) 10 152 (97) 55US asset management 3(c)(ii) 347 (266) 81UK and Rest of World Fund management 43 (37) 6Private client Gerrard 91 (83) 8Selestia investment platform 3 (12) (9)Other financial services 10 (24) (14)Nedcor Unit Trusts and Portfolio Management 42 (41) 1 189 (197) (8) 688 (560) 128Inter-segment (revenue) / expenses South Africa (4) 2 (2)US asset management (10) - (10)UK & Rest of World - 4 4 (14) 6 (8)Adjusted operating profit, net of inter-segment transactions South Africa 148 (95) 53US asset management 337 (266) 71UK & Rest of World 189 (193) (4) 674 (554) 120 Rm Adjusted operating Notes Revenue Expenses profitYear to 31 December 2003 South Africa Old Mutual Asset Managers 458 (247) 211Old Mutual Unit Trusts 259 (185) 74Other 200 (148) 52 917 (580) 337Other financial services 519 (302) 217Nedcor Unit Trusts and Portfolio Management 445 (321) 124 1,881 (1,203) 678US asset management 3(c)(ii) 4,285 (3,285) 1,000UK and Rest of World Fund management 531 (454) 77Private client Gerrard 1,124 (1,025) 99Selestia investment platform 37 (148) (111)Other financial services 123 (296) (173)Nedcor Unit Trusts and Portfolio Management 519 (506) 13 2,334 (2,429) (95) 8,500 (6,917) 1,583Inter-segment (revenue) / expenses South Africa (52) 30 (22)US asset management (123) - (123)UK & Rest of World - 47 47 (175) 77 (98)Adjusted operating profit, net of inter-segment transactions South Africa 1,829 (1,173) 656US asset management 4,162 (3,285) 877UK & Rest of World 2,334 (2,382) (48) 8,325 (6,840) 1,485 Adjusted operating profit includes GBP6 million (R73 million) in relation tointerest received on short-term funding provided to the Group's bankingsubsidiary. The remainder of the inter-segment revenue / expenses eliminationrepresent investment management fees paid to / received from the Group's lifeassurance companies and other asset management companies. Notes to the Financial Statements continuedfor the year ended 31 December 2004 3 SEGMENTAL ANALYSIS CONTINUED GBPm Rm Year to Year to Year to Year to 31 Dec 31 Dec 31 Dec 31 Dec3(c)(ii) US asset management 2004 2003 2004 2003Revenue Investment management fees 311 304 3,669 3,754Transaction, performance and other fees 56 43 661 531 367 347 4,330 4,285Expenses Remuneration expenses 121 117 1,428 1,445Other expenses 157 149 1,852 1,840 278 266 3,280 3,285Adjusted operating profit 89 81 1,050 1,000 Notes to the Financial Statements continuedfor the year ended 31 December 2004 3 SEGMENTAL ANALYSIS CONTINUED South UK & Rest GBPm3(d) Banking Notes Africa of World Total(i) Banking adjusted operating profit Year to 31 December 2004 Interest receivable 1,917 112 2,029Interest payable (1,320) (71) (1,391)Net interest income 597 41 638Dividend income 12 - 12Fees and commissions receivable 504 (48) 456Fees and commissions payable (59) (2) (61)Net other operating income 176 59 235Total operating income 1,230 50 1,280Specific and general provisions charge (116) (4) (120)Net income 1,114 46 1,160Operating expenses (942) (38) (980) 172 8 180Share of associated undertakings' profit 5 6 11Adjusted operating profit 177 14 191Inter-segment (revenue) / expenses 6 - 6Adjusted operating profit, net of inter- segment transactions 183 14 197Operating expenses include translation losses of GBP32 million (R372 million)(2003: GBP110 million (R1,356 million)). Adjusted operating profit includesGBP6 million (R73 million) in relation to inter-company interest payable forshort term funding now repaid.Year to 31 December 2003 Interest receivable 2,156 114 2,270Interest payable (1,643) (80) (1,723)Net interest income 513 34 547Dividend income 12 - 12Fees and commissions receivable 396 19 415Fees and commissions payable (36) (2) (38)Net other operating income 157 14 171Total operating income 1,042 65 1,107Specific and general provisions charge (232) (2) (234)Net income 810 63 873Operating expenses (824) (65) (889) (14) (2) (16)Share of associated undertakings' profit 4 6 10Adjusted operating (loss) / profit (10) 4 (6) South UK & Rest Rm3(d) Banking Africa of World Total(i) Banking adjusted operating profit Year to 31 December 2004 Interest receivable 22,619 1,325 23,944Interest payable (15,576) (839) (16,415)Net interest income 7,043 486 7,529Dividend income 143 - 143Fees and commissions receivable 5,940 (561) 5,379Fees and commissions payable (694) (21) (715)Net other operating income 2,082 691 2,773Total operating income 14,514 595 15,109Specific and general provisions charge (1,370) (45) (1,415)Net income 13,144 550 13,694Operating expenses (11,108) (454) (11,562) 2,036 96 2,132Share of associated undertakings' profit 63 62 125Adjusted operating profit 2,099 158 2,257Inter-segment (revenue) / expenses 73 - 73Adjusted operating profit, net of inter- segment transactions 2,172 158 2,330Operating expenses include translation losses of GBP32 million (R372 million)(2003: GBP110 million (R1,356 million)). Adjusted operating profit includesGBP6 million (R73 million) in relation to inter-company interest payable forshort term funding now repaid.Year to 31 December 2003 Interest receivable 26,619 1,411 28,030Interest payable (20,295) (981) (21,276)Net interest income 6,324 430 6,754Dividend income 150 2 152Fees and commissions receivable 4,891 229 5,120Fees and commissions payable (445) (28) (473)Net other operating income 1,946 172 2,118Total operating income 12,866 805 13,671Specific and general provisions charge (2,868) (18) (2,886)Net income 9,998 787 10,785Operating expenses (10,169) (807) (10,976) (171) (20) (191)Share of associated undertakings' profit 53 68 121Adjusted operating (loss) / profit (118) 48 (70) Notes to the Financial Statements continuedfor the year ended 31 December 20043 SEGMENTAL ANALYSIS CONTINUED GBPm Rm Year to Year to Year to Year to 31 Dec 31 Dec 31 Dec 31 Dec3(d) Banking continued 2004 2003 2004 2003(ii) Restructuring and integration costs Costs before tax and minority interests 21 32 246 394Tax (6) (6) (71) (74)Costs after tax and before minority interests 15 26 175 320Minority interests (7) (13) (83) (160)Costs after tax and minority interests 8 13 92 160 Restructuring and integration costs incurred in connection with the acquisitionof BoE by Nedcor Limited have been excluded from adjusted operating profit. GBPm Rm Year to Year to Year to Year to 31 Dec 31 Dec 31 Dec 31 Dec 2004 2003 2004 2003(iii) Change in credit provisioning methodology Charge before tax and minority interests - 87 - 1,074Tax - (26) - (322)Charge after tax and before minority interests - 61 - 752Minority interests - (30) - (376)Charge after tax and minority interests - 31 - 376 During 2003, the Group's banking subsidiary, Nedcor Limited, implemented arevised methodology for the calculation of credit provisions for loans andadvances in accordance with changes to local reporting requirements (AC133:"Financial Instruments Recognition and Measurement"). The revised methodologyrequiring the discounting of future cash flows on advances is acceptable underUK GAAP reporting and was therefore adopted in preparation of the Group'sfinancial statements, resulting in a one-off increase in opening specificprovisions due to the discounting effect. This adjustment has been taken to the profit and loss account in the Group'sfinancial statements, but excluded from adjusted operating profit. Notes to the Financial Statements continuedfor the year ended 31 December 2004 3 SEGMENTAL ANALYSIS CONTINUED Earned Claims GBPm Gross premiums incurred Adjusted premium net of net of operating3(e) General written reinsurance reinsurance profitinsurance result Year to 31 December 2004 Commercial 235 219 (133) 29Corporate 45 19 (10) 4Personal lines 249 244 (173) 8Risk financing 95 89 (53) 3 624 571 (369) 44Long term investmentRelated Shares:
Old Mutual PLC