Interim Results Part 1

RNS Number : 7264A

Old Mutual PLC

06 August 2008

 



06 August 2008

Old Mutual plc Interim Results
For the six months ended 30 June 2008

Solid progress in turbulent markets 

• Net client cash inflows of £3.2 billion, 2% of opening funds under management (FUM) on an annualised basis despite volatile market conditions

• FUM down 7% from 31 December 2007 to £259.4 billion, steady in the second quarter

• Life APE sales up 2% to £872 million

• Mutual fund sales down 18% to £3,420 million: strong Nordic (up 103%) and SA growth more than offset by market declines in UK and US

• Value of new business down 10% at £112 million

• Profit before tax from continuing operations (IFRS) down 2% to £835 million, with basic earnings per share of 11.2p

• Adjusted operating profit* from continuing operations (IFRS basis) up 3% to £745 million (30 June 2007: £721 million) 

• Bermuda variable annuity guarantee reserve strengthened, £63 million impacting adjusted operating profit, with a total £107 million impact on IFRS earnings; remedial management actions underway

• Adjusted operating profit* from continuing operations (EEV basis) up 26% to £937 million (30 June 2007: £746 million)

• Adjusted operating earnings per share** (IFRS basis) of 7.7p (30 June 2007: 8.2p)

• Adjusted Embedded Value per share of 143.2p at 30 June 2008 (31 December 2007: 173.3p)

• Interim dividend up 6.5% to 2.45p (34.84 cents***) per share

• Capital position remains strong; £1.5 billion pro-forma FGD surplus

Jim Sutcliffe, Chief Executive, commented:

'We have maintained our earnings at a similar level to last year despite extremely difficult market conditions, which is a testament to our strategy. We have big brands, a leading open architecture business and a track record of providing good investment returns to our clients. 

'I am determined to resolve the difficulties in our US Life business and to return it to a proper level of profitability.  

'We have solid foundations, a clear strategy and a robust business that is operating well. The dividend increase reflects our strong capital position and the Board's confidence in Old Mutual's prospects.'

Enquiries

Investor Relations
Mary Jackets	UK	[phone]
Aleida White	UK	[phone]
Deward Serfontein	SA	[phone]
Media
Matthew Gregorowski	UK	[phone]
Nad Pillay	SA	[phone]
Finsbury
Mike Smith / Brian Cattell		[phone]

Notes

Wherever the terms asterisked in the Financial Highlights are used, whether in the Financial Highlights, the Chief Executive's Statement, the Group Finance Director's Review or the Business Review, the following definitions apply:

*    For long-term business and general insurance businesses, adjusted operating profit is based on a long-term investment return, includes investment returns on life funds' investments in Group equity and debt instruments, and is 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 minority interests in accordance with IFRS. For all businesses, adjusted operating profit excludes 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 earnings per ordinary share is calculated on the same basis as adjusted operating profit. It is stated after tax attributable to adjusted operating profit and minority interests. It excludes income attributable to Black Economic Empowerment (BEE) trusts of listed subsidiaries. The calculation of the adjusted weighted average number of shares includes own shares held in policyholders' funds and BEE trusts.

***    Indicative only, being the Rand equivalent of 2.45p converted at the exchange rate prevailing on 4 August 2008. The actual amount to be paid by way of final dividend to holders of shares on the South African branch register will be calculated by reference to the exchange rate prevailing at the close of business on 16 October 2008, as determined by the Company, and will be announced on 17 October 2008.

Cautionary statement

This announcement has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. It should not be relied on by any other party or for any other purpose. 

This announcement contains forward-looking statements with respect to certain of Old Mutual plc's plans and its current goals and expectations relating to its future financial condition, performance and results. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond Old Mutual plc's control, including, among other things, UK domestic and global economic and business conditions, market-related risks such as fluctuations in interest rates and exchange rates, policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing and impact of other uncertainties or of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation and other regulations in territories where Old Mutual plc or its affiliates operate.

As a result, Old Mutual plc's actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in Old Mutual plc's forward-looking statements. Old Mutual plc undertakes no obligation to update any forward-looking statements contained in this announcement or any other forward-looking statements that it may make.

Notes to Editors:

A webcast of the presentation and Q&A will be broadcast live at 8.30 a.m. (UK time), 9.30 a.m. (Central European and South African time) today on the Company's website, www.oldmutual.com. Analysts and investors who wish to participate in the call should dial the following toll-free numbers:

UK (toll-free)                        0500 551 078
US (toll-free)                        877 491 0064
Sweden (toll-free)               0200 887 651
South Africa (toll-free)        0800 991 468

Playback (available until midnight on 19 August 2008), access code: 804745:

UK (toll-free)                       0800 358 1860
US (toll-free)                       888 365 0240
Sweden                              08 5052 0333
International                        [phone]

Copies of these Interim Results, together with high-resolution images and biographical details of the Executive Directors of Old Mutual plc, are available in electronic format to download from the Company's website at http://www.oldmutual.com.

A Financial Disclosure Supplement relating to the Company's Interim Results can be found on the website. This contains key financial data for 2008 and 2007.

Photographs of management are available at the Visual Media website www.vismedia.co.uk

Chief Executive's Statement 

Overview

Old Mutual continues to be robust in what are extremely difficult economic conditions and turbulent global markets. Our business model - specifically the breadth of our product offerings and our geographic spread - gives us resilience and provides an excellent foundation for growth. All but one of our continuing business units have produced good results and earnings have been maintained at a similar level to last year despite the downturn in markets. 

In line with our policy of seeking to achieve steadily increasing returns to shareholders, the Board has declared a 6.5% dividend increase which reflects its confidence in the Group's underlying progress and capital strength. 

Net client cash flows remain strong 

We have continued our strong investment performance. While most global equity markets have fallen some 15-20% during the first six months of the year (with the exception of the JSE) funds under management were down just 7%, an achievement that will not be lost on our clients. Net client cash inflows, at 2% of opening funds under management on an annualised basis is a good result in these difficult markets. 

We achieved this investment performance as a result of the dynamic investment strategies adopted by our US affiliates, the early success of Skandia Investment Group and an improved contribution from Old Mutual Investment Group South Africa (OMIGSA) as the boutique asset management model becomes more established. 

Steady growth in adjusted operating profit (IFRS basis) 

We have continued to maintain a tight control over costs and this has contributed to an increase in adjusted operating profit. In South Africa, profits at Nedbank and OMSA grew strongly, up 19% and 13% respectively in local currency.  Based on our '(Assets x Margins) - Expenses' model the delivery of solid earnings as asset prices decline reflects our focus on margin management and expense control.  

US

The major disappointment in the period relates to the Bermuda book in our US Life business which has overshadowed an otherwise robust performance by the Group.  

Last year we expanded our sales of offshore variable annuity product, with much of the new premium invested in Asian oriented unit trusts and sold predominantly to Asian clients. One of its features, in line with most US style variable annuity product, was minimum return guarantees. Whilst we believed we had hedge programmes to cover the guarantees, it has since become clear that these programmes have only provided, on average, about 60% protection against exceptional market falls.  

The volatility of equity markets, especially in Asia, has proved to be much higher than predicted when the products were priced, hence the allowance for the cost of guarantees is inadequate. On 25 June 2008, we announced that we intended to make an Investment Guarantee Reserve (IGR) provision. The position grew substantially worse in the last two weeks of June as well as in early July. We have therefore decided to take a substantially more defensive position than we thought appropriate at that time. 

We have set up an IGR through adjusted operating profit (IFRS basis) of £63 million and we have experienced a great deal of short-term volatility, resulting in a further £44 million which we have treated as short-term fluctuations in accordance with our long-term investment return policy. We are seeking ways to limit this volatility and cap the exposure. However, if unit prices remain unaltered in the second half, we expect to strengthen the IGR by a further £10 million to £15 million, and of course the Embedded Value will be affected by the values of the underlying unit trusts.

In order to cover the reserve strengthening, we have made a capital injection of £150 million into this business. Excluding these factors and after adjusting prior year for non recurring items, adjusted operating profit on an IFRS basis was up 14%.  

I have set up a far reaching exercise which is already underway to ensure we deal with the issue once and for all. US Life is an important part of our Group and I am determined that we take all the necessary steps to restore it to a proper level of profitability. We will report on our progress on remedial actions at the time of our preliminary results announcement in February next year.  

We withdrew the Asian product line in May, and we now intend to withdraw all other products with guarantees where hedging has proved ineffective, as of 15 August 2008. We are keeping all our other products under close scrutiny. Jonathan Nicholls, Group Finance Director and Rosie Harris, Group Head of Risk are leading a project team that will report to me, focussed on reviewing every aspect of our US Life business, paying particular attention to systems, management and risk.

We have already made a number of management changes. Bruce Parker was appointed as CEO of US Life in June and we asked the COO to leave the company. Don Hope, Group Treasurer is moving across to take control of the Bermuda business and we have recruited an additional Vice President of hedging and two of our senior London finance executives have joined the US hedging committee. 

We are significantly re-engineering our oversight functions, and have revised our systems that map our funds and products to the indices in order to improve our hedge performance. We are also implementing a review of all our product lines, covering their potential and their risk to introduce the most rigorous oversight of the future conduct of this business. We have also appointed a highly experienced external US Executive to join the review team, who brings significant knowledge of both the industry and turnaround situations. 

Longer-term, GDP growth in Asian economies should drive a recovery in Asian markets, and I believe that this business can produce a decent return.  

Separately, as a result of the difficult credit markets, impairment losses in our US Life business have increased which has depressed our investment returns. 

Our asset management business by contrast continued to prosper. Investment performance in the period remained attractive and the business generated positive net client cash flows in an environment where few have been able to achieve this.  

Skandia - a successful acquisition

The integration of Skandia is complete and the business is delivering against the targets we set following the acquisition. We are on track to achieve profits which are three times the 2005 level and we have delivered cost and revenue synergies of £79 million against the initial target of £70 million. We have built a solid foundation from which we can leverage further growth opportunities and operational excellence. Since the acquisition we have seen considerable growth in funds under management and have considerably enhanced our proposition for clients. 

Skandia is a leader in the Open Architecture platform model, and we continue to develop investment solutions to meet changing demands of clients in these challenging markets. The new Skandia Investment Group (SIG) is transforming the development of our investment products across Europe. We have launched a number of new funds in 2008, including European Best Ideas and SIG is in discussion with other businesses within Old Mutual regarding rolling out the Best Ideas concept.  

South Africa delivering excellent returns 

Much has been made of the challenges facing South Africa at the moment, but we remain confident that the strong economic policies and core approach of a disciplined orderly administration will persist, and we expect reasonable GDP growth this year. Our South African businesses continue to adapt and succeed in the face of the challenges and volatility of the macro-environment. 

Our South African business delivered excellent results and is extremely cash generative. Life sales were up 13% on an APE basis, margins were steady at 14% and return on capital was an outstanding 28.3%. We continue to successfully penetrate the retail mass market, which presents good growth opportunities, and unit trust sales increased 26% on an underlying basis as customers shift towards money market funds. 

Our boutique asset management model is bedding down well and is delivering improved investment performance and net client cash flows. Meanwhile we continued to strengthen our investment expertise in both our South African and US boutique businesses through small specialist bolt-on acquisitions. 

Despite the tougher economic climate, Nedbank delivered a 19% increase in adjusted operating profit (IFRS basis), helped by the profits on the sale of its shares in Visa. Its wholesale businesses continued to perform well, although earnings in the retail businesses fell as a result of higher impairment charges. This impacted on its return on equity, which was slightly lower than the comparative period but still strong at 18.7% including goodwill. Its return on equity was also affected by the strengthening of its capital position, a necessary step in the current market conditions. 

As announced on 5 August 2008, we will be initiating a competitive sale process for Mutual & Federal in September 2008.  

Continued growth in Asia 

In India, our joint venture business is performing well, we have continued to build our distribution channels and we have met our branch number target. Our new regional head office in Hong Kong is fully staffed and operational. Although markets have been weaker and are becoming more competitive, our team is focused on growing our geographic presence, distribution capability and product range, and continues to recruit high quality people. Our Chinese business faced a more difficult market, and we are busy renovating the product range to face ever increasing competition.

Outlook 

As difficult market conditions continue, we maintain our focus on delivering organic growth while keeping a tight rein on expenses and improving risk management. I hope I have left you in no doubt about my own and my team's absolute determination to address the issues at our Bermuda business.  

Overall, we should not lose sight of the fact that our business has produced a good result. We have solid foundations, a clear strategy and a robust business that is operating well, and we look forward with confidence.

Jim Sutcliffe

Chief Executive

6 August 2008

Group Finance Director's Review 

GROUP RESULTS

Group Highlights (£m)		H1 2008	H1 2007	% Change
Adjusted operating profit from continuing operations (IFRS basis)(pre-tax)		745	721	3%
Adjusted operating profit from discontinued operations1 (IFRS basis) (pre-tax)		28	36	(22%)
Adjusted operating earnings per share (IFRS basis)		7.7p	8.2p	(6%)
Profit before tax from continuing operations (IFRS)		835	851	(2%)
Basic earnings per share (IFRS basis)		11.2p	9.6p	17%
Adjusted operating profit from continuing operations (EEV basis) (pre-tax)		937	746	26%
Adjusted operating profit from discontinued operations1 (EEV basis) (pre-tax)		28	36	(22%)
Adjusted operating earnings per share (EEV basis)		10.8p	8.7p	24%
Life assurance sales (APE)		872	859	2%
Unit trust / mutual fund sales		3,420	4,171	(18%)
Value of new business		112	124	(10%)
PVNBP		6,668	6,843	(3%)
Net Client Cash Flows (£bn)		3.2	11.8	(73%)
Interim dividend		2.45p	2.30p	7%
Group Highlights		H1 2008	FY 2007	% Change
Adjusted group embedded value (£bn)		7.6	9.4	(19%)
Adjusted group embedded value per share		143.2p	173.3p	(17%)
Funds under management (£bn)		259.4	278.9	(7%)
Return on equity (annualised basis)2		11.2%	13.2%
Return on embedded value		14.0%	13.2%

Net client cash flows delivered during period of market volatility

During the six months ended 30 June 2008 ('H1 2008' or 'the period'), Old Mutual delivered strong investment performance in challenging markets with positive net client cash flows, despite actual flows finishing lower than the six months ended 30 June 2007 ('H1 2007' or 'the comparative period'). Continued momentum in net client cash flows of £3.2 billion represented 2% of opening funds under management on an annualised basis. Despite the challenges of delivering on absolute investment performance in such volatile markets, our Skandia businesses achieved £1.8 billion of net inflows while the US businesses produced net inflows of £1.6 billion.

Breadth of sales product offering in diverse geographic markets

Life sales on an APE basis were solid overall. In Nordic, we continued to see the benefits of our investment in the sales channel with strong life APE sales (up 39% in local currency). South African life sales were up 13% in Rand terms while in the US, sales were up 20% in local currency. However, UK single premium sales for the period suffered as a result of market conditions with lower pension sales. 

Whilst unit trust sales in Nordic and South Africa were pleasing, lower sales in the US, the UK and ELAM more than offset these gains, with weaker Old Mutual Capital mutual fund sales and OMAM UK unit trust sales directly impacted by the more difficult selling environment.

1.    The results of the Group's South Africa general insurance business, Mutual & Federal, are shown as a discontinued operation in these interim financial statements.

2.    Return on equity is calculated using adjusted operating profit after tax and minority interests on an IFRS basis with allowance for accrued coupon payments on the Group's hybrid capital. The average shareholders' equity used in the calculation excludes hybrid capital.

Value of new business 

The value of new business (VNB) was down 10% to £112 million but supported by excellent volumes in Nordic, a solid contribution from OMSA offset by lower volumes in the UK, ELAM and US Life. The APE profit margin was 13%. This was steady in the UK over the comparative period, but down marginally in Nordic and to a greater extent in ELAM where it fell to 10% mainly due to a change in product mix, after exceeding the margin target in 2007. The US Life margin was lower because of a reduction in the margin of variable annuities as a result of increased guarantee costs.

Adjusted operating earnings (IFRS basis)

In spite of the significant impact of Rand currency depreciation and the headwinds associated with the current market turbulence as well as the strengthening of the US Life IGR provision as outlined in the Chief Executive's statement, the Group delivered adjusted operating profit before tax and minority interests 3% above that of the comparative period and 8% above on a constant currency basis. 

Group Highlights (£m)		H1 2008	H1 2007	H1 2007 restated at 2008 rates
Adjusted operating profit (IFRS basis) (pre-tax)
Africa		617	572	535
United States		76	106	106
Europe		148	129	135
Other		(8)	2	2
		833	809	778
Other Shareholders' Expenses		(17)	(19)	(19)
Finance Costs		(71)	(69)	(69)
Adjusted operating profit before tax & minority interests		745	721	690
Tax		(215)	(167)	(159)
Adjusted operating profit from continuing operations (post-tax)		530	554	531
Adjusted operating profit from discontinued operations (post-tax)		23	26	24
Adjusted operating profit after tax		553	580	555
Minority interests		(148)	(138)	(129)
Adjusted operating profit after tax & minority interests		405	442	426
Adjusted operating EPS (pence)		7.7	8.2	7.9

Assuming constant exchange rates, H1 2007 adjusted operating EPS would have been 7.9p with the currency impact being negative 0.3p.

Adjusted group embedded value per share 143.2p

The adjusted group embedded value (EEV) per share was 143.2p and adjusted group EV was £7.6 billion at 30 June 2008 (31 December 2007: £9.4 billion). This represents a decrease from 173.3p. The movement in EV per share has been driven by the net impact of profit flows offset by the impact of weak equity markets and currency depreciation. The EV per share is after dividend payments and has also been affected by a reduction in the share price of the listed subsidiaries. 

Return on equity 

Return on equity for the Group declined to 11.2% from 13.2% at 31 December 2007 primarily due to the lower US Life profits. 

Return on embedded value

Return on embedded value for the Group improved to 14.0% from 13.2% at 31 December 2007. The interim results were positively impacted by the sale of Visa shares in Nedbank, favourable operating assumption changes in the South African and Europe life businesses and the reduction in the number of shares following the share buyback programme. Exchange rate movements, a lower new business contribution and the reserve strengthening in US Life to allow for the impact of the volatility inherent in the variable annuity product guarantees negatively impacted the result.

Group Highlights H1 2008 (£m)	Long-term business	Asset management	Banking	General Insurance	Other
Adjusted operating profit (IFRS basis) (pre-tax)	376	124	333	28	(88)
Adjusted operating profit (EEV basis) (pre-tax)	563	124	333	28	(83)
Profit before tax (IFRS)	329	143	389	18	(26)
Value of new business	112	-	-	-	-
Life assurance sales (APE)	872	-	-	-	-
Unit trust / mutual fund sales	-	3,420	-	-	-
Net client cash flows (£bn)	1.4	1.8	-	-	-
Funds under management (£bn)	75.6	180.5	-	-	3.3

Group Highlights H1 2007 (£m)	Long-term business	Asset management	Banking	General Insurance	Other
Adjusted operating profit (IFRS basis) (pre-tax)	369	144	296	36	(88)
Adjusted operating profit (EEV basis) (pre-tax)	389	144	296	36	(83)
Profit before tax (IFRS)	485	148	296	47	(78)
Value of new business	124	-	-	-	-
Life assurance sales (APE)	859	-	-	-	-
Unit trust / mutual fund sales	-	4,171	-	-	-
Net client cash flows (£bn)	2.2	9.6	-	-	-
Funds under management (£bn)*	82.0	193.3	-	-	3.6
* FY 2007

Robust capital position

The Group's gearing level remains within our target range, with senior debt gearing at 30 June 2008 of 2.8% (1.9% at 31 December 2007) and total gearing, including hybrid capital, of 24.3% (20.5% at 31 December 2007).

The Group has continued to develop its economic capital programme and a surplus existed as at 31 December 2007 within each of our South African, US and European regions. The group economic capital surplus at 31 December 2007 was £3.3 billion. 

Capital requirements are set by the Board whilst recognising the need to maintain appropriate credit ratings and to meet regulatory requirements at both the Group and local business level.

Capital of £45 million was transferred to Old Mutual Bermuda on 31 July 2008. A further amount of £105 million was transferred on 5 August 2008. 

Other

The Group is in compliance with the Financial Groups Directive capital requirements, which apply to all EU-based financial conglomerates. Our pro-forma FGD surplus was £1.5 billion at 30 June 2008, including current year profits. 

Our share buyback programme announced at the beginning of October 2007 was completed in May 2008 repurchasing approximately 239 million shares through the London and Johannesburg markets at a total cost of £351 million. 

Holding company cash generation

The table below shows the cash flows of the Old Mutual plc holding company and its satellite holding companies. We believe this provides a clear picture of the cash receipts and payments of the holding companies.

		H1 2008 £m		H1 2007 £m
Total net debt at start of period		2,420		2,407
Operational flows
Operational receipts	438		229
Operational expenses	(69)		(87)
Other expenses	-	369	(83)	59
Capital flows
Capital receipts	159		69
Acquisitions	-		(21)
Organic investment	(88)	71	(160)	(112)
Debt and equity movements
Old Mutual plc dividend paid	(227)		(218)
Share repurchase	(174)		-
New equity issuance	4		3
Other movements	(49)	(446)	7	(208)
Total net debt at end of period		2,426		2,668

Total net debt within the holding company at the end of H1 2008 was £2,426 million. A total of £597 million of operational and capital receipts were received from business units during H1 2008. £88 million was invested in the businesses and £227 million was used to pay the 2007 final dividend. In addition, £174 million was spent on repurchasing shares.

Taxation

The Group's effective adjusted operating profit (IFRS basis) tax rate has increased to 29% from 23% in the comparative period. This reflects the higher tax cost of secondary tax on companies in relation to Group. In addition to this, the non-recognition of deferred tax assets arising from US Life, combined with changes in overall profit mix from our businesses, has further increased the overall Group tax rate for the period. Over the year we would expect the rate to trend down to the 2007 full year rate. 

Risks and uncertainties

There are a number of potential risks and uncertainties that could have a material impact on the Group's performance over the remaining six months of the financial year and that could cause actual results to differ materially from expected and historical results. 

We have included our view of these principal risks as well as the impact of current economic and business conditions, in the Chief Executive's Statement and in the Business Review sections of this report. These are primarily: continued volatility in equity markets, inflationary pressures creating expectations of higher interest rates and increase in cost of living, the credit crunch and reduced investor confidence.

Appendix I to this announcement (outlining the Group's Economic Capital position) provides additional information relating to the risk types affecting the Group and the increasing use of Economic Capital measures to inform business decisions and actions. Further information on the principal long-term risks and uncertainties facing the Group is included in the Business Review in the Company's latest Annual Report (for the year ended 31 December 2007).

Market Consistent Embedded Value (MCEV)

MCEV will be mandatory from year end 2009 and will replace the EEV principles which underpin our current EV results. Old Mutual intends to adopt the new MCEV principles for the first time in our 2008 report and accounts. We will advise the timing of the release of the restated 2007 and first half 2008 results later in the year. One of the key issues for annuity based business is that under MCEV the recognition of any liquidity or credit risk premiums in excess of swap rates is not permitted until such profits have been realised. As a result, although the underlying profitability is the same, the timing of the recognition of profits under MCEV is different than under EEV. Therefore, we are expecting that the adoption of MCEV will result in the EV for our US annuity business reducing. Against this however, our early calculations show small increases in EV elsewhere in the Group. Our initial calculations indicate that at 31 December 2007, the MCEV valuation would be around 5p per share lower than the valuation under EEV. This is an estimate only at this stage and the figure has not been audited. 

Related party transactions

There have been no related party transactions or changes in the related party transactions described in the Company's latest Annual Report during the first half of 2008 that could have a material effect on the financial position or performance of the Group. 

Dividend

The Directors of Old Mutual plc have declared an interim dividend for the six months ended 30 June 2008 of 2.45p per share to be paid on Friday, 28 November 2008. The record date for this dividend payment is the close of business on Friday, 7 November 2008 for all the Exchanges where the Company's shares are listed. The last days to trade cum-dividend on the JSE and on the Namibian, Zimbabwe and Malawi Stock Exchanges will be Friday, 31 October 2008 and Tuesday, 4 November 2008 for the London Stock Exchange. The shares will trade ex-dividend from the opening of business on Monday, 3 November 2008 on the JSE and on the Namibian, Zimbabwe and Malawi Stock Exchanges and from the opening of business on Wednesday, 5 November 2008 on the London Stock Exchange. Shareholders on the South African, Zimbabwe and Malawi branch registers and the Namibian section of the principal register will be paid the local currency equivalents of the dividend under dividend access trust arrangements established in each country. Shareholders who hold their shares through VPC AB, the Swedish nominee, will be paid the equivalent of the dividend in Swedish Kronor (SEK). Local currency equivalents of the dividend, for all five territories, will be determined by the Company using exchange rates prevailing at close of business on Thursday, 16 October 2008 and will be announced by the Company on Friday, 17 October 2008. Share certificates may not be dematerialised or re-materialised on the South African branch register between Monday, 3 November 2008 and Friday, 7 November 2008, both dates inclusive, and transfers between the registers may not take place during that period.

Jonathan Nicholls

Group Finance Director

6 August 2008

Business Review 

EUROPE: UNITED KINGDOM AND OFFSHORE

A stable six months from Skandia UK

Highlights (£m)		H1 2008	H1 2007	% Change
Adjusted operating profit (IFRS basis) (pre-tax)		91	80	14%
Adjusted operating profit (covered business) (EEV basis) (pre-tax)		229	120	91%
Return on embedded value (covered business)		18.8%	16.3%
Total life assurance sales (APE)		327	389	(16%)
UK life assurance sales (APE)		185	249	(26%)
Offshore life assurance sales (APE)		142	140	1%
Unit trust / mutual fund sales		1,022	1,291	(21%)
Value of new business		36	42	(14%)
APE margin		11%	11%
PVNBP		2,668	3,377	(21%)
PVNBP margin		1.3%	1.2%
Net client cash flows (£bn)		1.1	2.4	(54%)
Highlights (£bn)		H1 2008	FY 2007	% Change
Funds under management		39.5	41.9	(6%)

Positive net client cash flows and market-led decline in funds under management

Skandia UK continued to deliver strong positive net client cash flows for the half year with net inflows of £1.1 billion representing 5% of opening funds under management on an annualised basis. Excellent International net inflows, which remain ahead of the comparative period, have compensated for lower net inflows in the UK arising from difficult market conditions where investor confidence remains low as markets continue their adverse volatile trend. The market downturn resulted in a 6% decrease in funds under management since the beginning of the year which compared favourably with the 13% drop in the FTSE 100 over the same period.

Investment volatility affects sales

The decline in life assurance sales APE for the period was largely driven by a reduction in pension sales. Pensions business in the comparative period was boosted by the lingering benefits of pensions A-day and investor confidence; business volumes in the period were consistent with the latter part of 2007 with investment volatility over the period driving down investor confidence. The levels of regular premium business increased 17% over the comparative period. Key niche areas are continuing to compete well as the market emphasis on consolidation of existing funds continues, which plays to Skandia's key strength. 

The market for single premium bonds has also been influenced by the volatility in the stock markets and the uncertainty over the continued suitability of bonds following the introduction of an 18% flat rate of CGT confirmed in the March 2008 Budget. This impacted on bond sales which were lower than the comparative period. With the platform approach and a full set of product wrappers, Skandia is better-placed than many competitors as the proposition supports mutual funds as well as bonds.

The performance of the International business for the period remains strong in many regions despite difficult market conditions. The effects of the UK CGT changes, have depressed the institutional portfolio bond market but the retail market remains positive. Sales within Europe are performing well including a number of larger cases which reflect the strength of the proposition but are intermittent in nature. New business in the Middle East has rapidly increased over the period, due in part to the good market reception to the MSPA (Managed Savings and Pensions Account) special offer. Like-for-like sales in the Far East are 5% above the comparative period. 

Unit trust performance impacted by revised business mix

Unit trust sales were 21% down on H1 2007. This reduction in sales reflects low investor confidence which resulted in one of the lowest ISA seasons on record. Skandia retained its market share in platform business and continued to increase the investment solutions on the platform to create wider appeal, especially during periods of market volatility. 

Value of new business

VNB decreased 14% to £36 million due to the impact of lower new business volumes. This reduction was partially mitigated by a strengthening of the assumptions for the amount of fee income that is rebated from fund managers. The change to the retained rebate assumption has been made in view of the continued favourable experience and to align more closely with market practice. This recognition has also been reflected in the new business margin, which ended the period at 11%.

Strong growth in adjusted operating profit (IFRS basis)

Adjusted operating profit (IFRS basis) increased by 14% to £91 million for the period. Since average funds under management were broadly consistent with the comparative period, asset based fees have not reduced in the period. Integration costs of £12 million were incurred in H1 2007, and although integration activity has continued, the direct impact on IFRS earnings is less significant. Further, significant tax benefits have been emerging in the year to date as an indirect consequence of the reduction in markets. 

Higher adjusted operating profit (covered business) (EEV basis)

Adjusted operating profit (EEV basis) before tax nearly doubled to £229 million. This increase includes £82 million of positive impact from operating assumption changes. This was due to increased recognition of retained unit trust company rebates referred to above (Skandia outsources the investment of policyholder funds to unit trust companies). Other, less material operating assumption changes were also made. Experience variances have had a positive impact, with persistency and expenditure continuing broadly in line with expectations.

Continued investment innovation

During the period, Skandia Investment Group (SIG) continued its track record of innovation with the launch of the Skandia Alternative Investments Fund which provides retail investors with access to a unique collection of alternative assets for the very first time. At the same time, with markets suffering a very volatile six months, SIG's risk controlled range of funds again showed that well diversified portfolios can offer some protection to rapidly falling markets. In addition to good relative performance, when assessed on a risk-adjusted return basis, the majority of these funds are ahead of their sectors from launch; a facet that will be increasingly important should market volatility continue. These volatile times have proved to be ideally suited to UK Strategic Best Ideas Fund as it has the ability to profit from falling share prices and therefore the relative performance of this fund is looking extremely strong. 

Spectrum Funds launch

SIG also supported the UK business in launching the Spectrum Funds on 28 April 2008. This new range offers an innovative selection of risk-rated funds that bring greater precision to the investment management decision making process by matching an appropriate portfolio to a level of risk acceptable to the client. Since launch date, the funds have attracted over £20 million of investment at 30 June 2008. 

Continued progress with integration activity

In June 2006, Skandia UK committed to a number of integration activities arising from the acquisition by Old Mutual delivering value-adding benefits. Skandia has fulfilled its original integration commitments and has evolved further to deliver an enhanced proposition for investors whilst reducing unit costs and increasing revenue potential. The full benefits of these enhanced initiatives will flow through following migration of Skandia MultiFUNDS investors on to the new platform. 

The Selestia Investment Solutions platform has been renamed Skandia Investment Solutions to bring greater clarity and a stronger sense of identity in the way Skandia interacts with both advisers and clients and reflects Skandia's future strategy and direction.

Changes in the UK Market

Skandia UK supports the FSA's proposals on the Retail Distribution Review, as it believes that the consumer and the market will benefit from a clearer distinction between 'advice' and 'sales'. Overall, Skandia has publicly stated that the Retail Distribution Review should create a thriving advice channel with a better-informed and more engaged consumer, which should lead to higher levels of business. Skandia's proposition is most suited to the advice proposition.

Treating Customers Fairly

Treating Customers Fairly ('TCF') is a major initiative of the FSA. The FSA confirmed that Skandia met its requirements at the focused visit in March on progress to date and management information that demonstrates that Skandia is continually looking to improve outcomes for its customers. Skandia will continue to work on further embedding TCF into its processes.

Awards

Skandia received two top awards at the FTAdviser.com Online Service Awards. Five stars awards were received for both Investment Provider and Life & Pension Provider. Winning these awards reflects the further investment made in developing investor and adviser focused e-commerce solutions, which is the cornerstone of Skandia's brand and proposition.

Skandia also received the Large Employer of the Year award at the LSC South East Learning and Skills Awards in May 2008. The award was for the Professional Vocational Qualifications offered to employees through the Apprenticeship programme. The highly successful apprenticeship programme is a testament to Skandia's commitment to high standards in training.

  EUROPE: NORDIC

Strong first half with excellent sales performance and strengthened relations with distributors

Highlights (SEKm)		H1 2008	H1 2007	% Change
Adjusted operating profit (IFRS basis) (pre-tax)		480	486	(1%)
Adjusted operating profit (covered business) (EEV basis) (pre-tax)		1,116	207	439%
Return on embedded value (covered business)		11.7%	8.0%
Life assurance sales (APE)		1,331	959	39%
Unit trust / mutual fund sales		1,667	821	103%
Value of new business		196	143	37%
APE margin		15%	15%
PVNBP		5,905	4,450	33%
PVNBP margin		3.3%	3.2%
Net client cash flows (SEKbn)		3.1	0.8	288%
Highlights (SEKbn)		H1 2008	FY 2007	% Change
Funds under management		103.1	116.7	(12%)

Strong net client cash flows 

Net client cash flows for the period were a pleasing SEK3.1 billion, equal to 5% of opening funds under management on an annualised basis. The positive performance was driven by strong net inflows in the life business benefiting from an excellent sales performance and reduced outflows. However, volatile equity markets negatively impacted asset growth during the period, with funds under management at H1 2008 down 12% on FY 2007 to SEK103.1 billion. 

Investment performance in Nordic was solid during the second quarter, in line with the first quarter. Skandia's Swedish unit-linked business has the best investment return of all unit-linked companies in Sweden in a three year timeframe (according to a Risk & Försäkring survey).

Sales performance continued to improve

Nordic continued to deliver excellent growth in sales during the period. Life sales on an APE basis exceeded the comparative period by 39% due to strong sales in Sweden and continued growth in Denmark where sales of unit-linked products were favourable over the comparative period.

In Sweden the second quarter of 2008 saw the highest new sales of any quarter since 2003. Skandia is now a popular player in the market among brokers following the launch of the new investment portfolio product, faster speed to market and a greater focus on broker relationships. This is evidenced through Skandia recently being ranked in the number one position among distributors. Within the internal sales force, there has been a continued focus on selling unit-linked products, which together with several sales initiatives have contributed to the positive trend in new sales. 

Excellent growth was experienced in mutual fund sales of SEK1,667 million, up 103% on the comparative period. The increase was mainly due to deposits in Skandia's interest based funds and a newly launched hedge fund, both of which are popular in times of volatile equity markets. 

Margins positively impacted by the improved new sales

VNB of SEK196 million for the period was up 37% on the comparative period, positively impacted by improved life sales on an APE basis which were offset by a change in business mix in Sweden, particularly since the Kapitalpension product tax advantages were removed, and the net negative impact from operating assumption changes that were mainly due to strengthened persistency assumptions during 2007. Life new business margin improved from the dip experienced at the 2007 year-end, and at 15% was consistent with that achieved in H1 2007. The improvement since 2007 year-end can be attributed to positive volume effects with strong sales coupled with a decrease in expenses. In the medium term, the new business margin is expected to improve to reach the high teens.

Underlying adjusted operating profits solid despite market turbulence and higher new sales

Adjusted operating profit (IFRS basis) remained in line with the comparative period despite the equity market downturn. This was due to the strong underlying results from lower administrative expenses and SkandiaBanken continuing to benefit from the current market situation, through an improved interest margin. H1 2008 includes a positive non-recurring item from refunded VAT costs of SEK44 million in SkandiaBanken. H1 2008 also included adjusted operating profit (IFRS basis) of SEK28 million from SkandiaBanken's car finance business divested in the first quarter.

An excellent performance in the adjusted operating profit (EEV basis), up 439% on H1 2007, was mainly due to strong sales performance in the unit-linked business in Sweden and the positive impact of the currency spread assumption change (SEK338 million pre-tax). Currency spread is a transactional cost for the policyholder when unit-linked policyholders make switches between funds that are denominated in different currencies. 

H1 2007 included a negative net impact from operating assumption changes of SEK-562 million pre-tax which was mainly due to lowered fund charges on 'tick-the-box' collective agreements. Experience variances were stable during the period, but include a negative impact caused by premium reductions due to new tax deduction rules in Sweden (a new tax legislation where the Swedish tax deductible amount of pension savings (tax P) has been lowered from SEK27,000 per annum to SEK12,000 per annum for private persons effective 1 January 2008).

Continued growth in banking business benefiting from market conditions with improved interest margin

Whilst the first half of the year has been characterised by the turbulent market resulting in lower net commission income, the bank business in Nordic benefited from an increased net interest margin. SkandiaBanken experienced a slight increase in impaired loans. However, the credit loss ratio remains on a low level of only 0.08% and we are confident SkandiaBanken's conservative lending policy means it is well positioned to any adverse developments. 

Both deposit and loan books at SkandiaBanken increased in H1 2008. Excluding the divested car finance business, lending increased to SEK42.8 billion, up 8% since 31 December 2007. The increase related mainly to Sweden where a successful mortgage campaign in the middle of March together with a highly competitive floating interest rate, has led to increased lending volumes. Deposits of SEK53.6 billion were up 6% since 31 December 2007 mainly as a result of the seasonal effect in Norway which temporarily increased savings in deposits. The number of customers increased 3% over 31 December 2007. SkandiaBanken's operating profit for H1 2008 was SEK156 million, 41% higher than H1 2007.

Other

As announced on 24 April 2008, Skandia and Livfösäkringsaktiebolaget Skandia (publ) (Skandia Liv) are reviewing the potential benefits to both the Group and to Skandia Liv policyholders of demutualising Skandia Liv. The review is at a very preliminary stage and a conclusion is not likely before late 2009.

The sales of SkandiaBanken's car finance business to DnB NOR was finalised during H1 2008 resulting in a total realised book profit of SEK1 billion gross of goodwill. 

Skandia Liv has submitted claims to Skandia relating to compensation for alleged prohibited profit distributions. These distributions relate to the sale of Skandia Liv's asset management business by Skandia to Den Norske Bank in 2002. The dispute is in arbitration, a ruling is expected in the latter part of 2008.

  EUROPE: EUROPE AND LATIN AMERICA (ELAM) 

Strong net inflows despite difficult market conditions

Highlights (€m)		H1 2008	H1 2007	% Change
Adjusted operating profit (IFRS basis) (pre-tax)		22	20	10%
Adjusted operating profit (covered business) (EEV basis) (pre-tax)		32	60	(47%)
Return on embedded value (covered business)		7.0%	9.7%
Life assurance sales (APE)		119	140	(15%)
Unit trust / mutual fund sales		1,011	1,306	(23%)
Value of new business		12	25	(52%)
APE margin		10%	18%
PVNBP		905	1,112	(19%)
PVNBP margin		1.3%	2.2%
Net client cash flows (€bn)		0.6	0.8	(25%)
Highlights (€bn)		H1 2008	FY 2007	% Change
Funds under management		11.5	13.0	(12%)

Strong net client cash flows

Net client cash flows for the period represented 9% of opening funds under management on an annualised like-for-like basis, adjusted for the disposal of Palladyne - a strong result in the current market conditions, driven by a focus on retention and persistency programmes to retain clients and assets in the current difficult conditions. Equity market movements have negatively impacted the value of funds under management, which decreased 12% from the start of the year. Excluding Palladyne, which was sold during the period, funds under management were 5% below 2007 year-end levels.

Life sales under pressure in difficult conditions

The majority of the ELAM countries saw the continuation of a challenging sales environment. In some markets, a lack of market confidence and capabilities of distributors to sell in depressed market conditions impacted on sales, while investors have been favouring non-equity based investments, including cash deposits. This effect has been more pronounced in our single premium markets such as France and Italy, while our regular premium business in Central Europe is proving more resilient. Life sales on an APE basis declined 15% over the comparative period. Furthermore, the first half of the year saw regulatory and legislative changes in Germany and Italy, which have preoccupied the market and negatively impacted sales. We have succeeded in maintaining and growing our market share in our chosen market segments in a number of countries and are now ranked third in the market in Poland and first in Austria. In addition, we have won several awards during the period, reinforcing our position in the market.

Mutual fund sales impacted by market conditions

Mutual fund sales were down 23% over H1 2007 (a 10% reduction when Palladyne is excluded). As expected, long-term mutual fund business (mainly in Latin America) were generally stable compared with the prior year, despite market conditions not being particularly favourable to our core differentiator of international equities. Continued product developments have provided some support in this regard.

Value of new business and profit margins down

VNB and profit margins for the half year were down against the comparative period. This was as a result of a number of factors including a change in the product mix and business mix, with H1 2008 seeing lower inflows from Poland, at a comparatively lower margin than the comparative period and a negative impact from persistency assumption changes. Since we have a predominantly fixed expense base, if sales volumes were to increase, profit margins would increase accordingly.

Continued strong adjusted operating profit (IFRS basis) result

Adjusted operating profit (IFRS basis), at 10% above the comparative period, demonstrated a strong result given the current market conditions. It was driven by revenues from the in-force book and a focus on expense control. Specifically, Poland and Colombia produced strong results over the comparative period.

Adjusted operating profit (EEV basis) suffered from weak new business contribution and impacted by changes in operating assumptions

Adjusted operating profit (EEV basis) was 47% down on H1 2007 due to the lower VNB noted above, as well as assumption changes relating to persistency trends in Austria. In addition, the H1 2008 EEV result is negatively affected by non-recurring business restructuring activity in Italy.

Business development remains a key focus area

In light of the market downturn, business development remains a key focus area and a number of important initiatives have been launched which we expect to contribute towards production and maintained persistency. Initiatives include the launch of a variable annuity product in Germany, the Life Time umbrella product in Austria, the cash alternative product, Liberte in France, the investment product Easy Plan in Switzerland, the launch of SIG's European Best Ideas Fund as well as significant expansion of distribution in Italy.

Leveraging operational efficiency

Initiatives continue to leverage operational efficiency across the division and during the period we successfully moved towards a common operational structure for Customer Services and IT in Central Europe largely based in Poland. The Southern Europe businesses have also been fully integrated. We believe these initiatives will provide a solid foundation for achieving further operational efficiencies in the future.

Market recognition

Skandia won several awards during the period, reinforcing our position in the market. These included second place in AssCompact Fondspolicen Award in Germany, based on feedback from distributors, first place in all categories in the Fonds Professionell Service Award in Austria and a Gold Pyramid in Investissement Conseilles Award for life insurance contracts rated by the main IFA associations.

  SOUTH AFRICA: LONG-TERM BUSINESS & ASSET MANAGEMENT - OLD MUTUAL SOUTH AFRICA (OMSA)

Excellent sales growth despite tightening economic conditions

Highlights (Rm)		H1 2008	H1 2007	% Change
Long-term business adjusted operating profit		1,793	1,714	5%
Asset management adjusted operating profit		557	510	9%
Long-term investment return (LTIR)		1,742	1,413	23%
Adjusted operating profit (IFRS basis) (pre-tax)		4,092	3,637	13%
Return on allocated capital		28.3%	31.3%
Adjusted operating profit (covered business) (EEV basis) (pre-tax)		3,237	3,638	(11%)
Return on embedded value (covered business) (post-tax)		13.3%	14.9%
Life assurance sales (APE)		2,411	2,148	12%
Unit trust / mutual fund sales		9,640*	6,688	44%
Value of new business		332	324	2%
APE margin		14%	15%
PVNBP		16,518	14,007	18%
PVNBP margin		2.0%	2.3%
Net client cash flows (Rbn)		(3.9)	(9.0)	57%
Highlights (Rbn)		H1 2008	FY 2007	% Change
SA client funds under management		429.0	445.0	(4%)
* OMSA Unit trust / mutual fund sales now includes Marriott

Funds under management of R429 billion were 4% lower than the opening position, with the movement attributable to lower asset values in volatile markets and net client outflows of R3.9 billion. Retention of third party assets has improved with the bedding down of the OMIGSA boutique structure, but outflows remained a challenge, especially in Employee Benefits. In our life business, benefits payments are higher as a result of higher bonuses declared in 2007 and early 2008, as well as higher member withdrawals caused by the tougher economic environment. The volatile equity environment has also introduced some caution in the investment decision-making process leading to longer sales processes especially in the institutional market. We have announced the acquisition of Futuregrowth, one of the leading specialist asset managers in South Africa in the areas of fixed interest, quantitative equity and socially responsible investments, subject to Competition Commission approval. This will result in substantially enhanced fixed income investment capabilities within OMIGSA. We continue to focus on improving investment performance, improving alignment of our unit trust fund offering to our boutique capability and allowing the OMIGSA boutiques to operate with independent investment philosophies and processes. 

Life assurance sales APE of R2,411 million, up 12%, showed good growth, supported by our extensive retail distribution channels and strong product range. We continue to successfully penetrate the mass market where we see further opportunity. Sales to that market were up 13% as a consequence of our growing sales force. This was pleasing considering the current economic climate where the effect of higher oil and food prices and increasing interest rates has had a negative effect on available consumer spend. High interest rates have adversely affected our credit life sales through the banking channel but conventional annuities, which become cheaper in this environment, have had strong sales. Unit trust sales of R9,640 million were 44% higher than the comparative period (up 26% on an underlying basis excluding Marriott) with a significant shift to money market funds.

VNB of R332 million was up 2% on H1 2007 and the APE margin declined from 15% to 14%. The decline in the APE margin was primarily as a result of December 2007 operating and economic assumption changes. More competitive pricing for some products and higher Corporate distribution costs reduced margins, but this was more than offset by the consequential increase in new business volumes and improvement in product mix.

Adjusted operating profit (IFRS basis) was 13% higher than H1 2007. Within this result the LTIR increased 23% after a 100bps increase in the rate applied, reflecting the high investment returns on shareholder funds achieved over the past year. This LTIR methodology was introduced in 2007 with an increase in rate from 15.6% to 16.6% in 2008. In spite of the volatile markets, our long-term business profits increased by 5%, benefiting from a number of non-repeating items including the receipt of an insurance claim of R37 million relating to a previous year, interest of R64 million received from a previous overpayment to SARS and an IFRS 2 credit of some R74 million compared to a debit of R21 million in H1 2007. These positive factors were partly offset by the negative impact of higher interest rates on the value of fixed policy fees, which has led to an increase in reserves for our traditional Flexi product book. 

Asset management adjusted operating profit was up 9% due to lower expenses attributable to the impact of a lower Old Mutual share price on incentive costs. 

Adjusted operating profit (EEV basis) before tax declined by 11% from H1 2007, due to unusually high experience variances in H1 2007 and lower (but still positive) experience variances in H1 2008. This was as a result of switches to lower margin Absolute Growth Portfolios in the Corporate Segment and adverse termination experience in the Retail businesses as a result of the tougher economic environment.

Retail Mass

Rm		H1 2008	H1 2007	% Change
Life sales (APE)
Savings		316	289	9%
Protection		245	206	19%
Total		561	495	13%
Value of new business		136	113	20%
APE margin		24%	23%
Net client cash flows (Rbn)		0.9	0.9	-

Retail Mass sales were up 13% on H1 2007 in line with a larger sales force distribution reach and substantial growth in broker channel sales. The APE margin improved by 1% benefiting from the lower corporate tax rate, as well as the higher proportion of higher margin risk business compared to H1 2007. As a result, VNB was 20% higher than H1 2007. 

Retail Affluent

Rm		H1 2008	H1 2007	% Change
Life sales (APE)
Savings		690	628	10%
Protection		483	506	(5%)
Annuity		114	100	14%
Total		1,287	1,234	4%
Life sales (APE)
Single		470	400	18%
Recurring		817	834	(2%)
Unit trust / mutual fund sales		8,266	6,688	24%
Value of new business		133	170	(22%)
APE margin		10%	14%
Net client cash flows (Rbn)		(1.7)	(1.1)	(55%)

Net client cash flows remained negative, despite the growth in inflows, as the prevailing adverse economic environment increased client withdrawals. 

Total Retail Affluent life sales on an APE basis increased 4% compared to H1 2007. Recurring premium sales experienced significant challenges with inflationary pressures and higher interest rates impacting negatively on consumer disposable income. Against this backdrop, life recurring premium sales and credit life sales were both 2% lower as a result of lower Greenlight sales and lower loan volumes in Nedbank respectively. The shift from life-wrapped savings business to other wrappers continues with non-life recurring premium growing at 45% from a relatively low base.

Single premium savings business was up 18% with Investment Frontiers contributing strongly to this position due to better rates and positioning of the Fixed Bond portfolio. Living annuities were up 50% on the comparative period and conventional annuity sales were also strong as a result of continued competitiveness of our annuity rates, combined with the effect of higher interest rates. Total annuity sales including living annuities were up 26% on the comparative period.

Unit trust sales were up 24% compared to H1 2007, recovering from the low sales of 2007 related to the OMIGSA boutique positioning. Pricing of the Galaxy offering was improved with the re-launch of Galaxy Elite in April 2008.

VNB decreased to R133 million, with the reduction to a large extent attributable to an increase in the risk discount rate, introduction of higher lapses on the Greenlight product and allowance for paid-ups on the Max savings product at the end of 2007. The lower VNB is also, in part, due to the lower proportion of higher margin risk business, with sales lower than last year.

Corporate Segment

Rm		H1 2008	H1 2007	% Change
Life sales (APE)
Savings		198	100	98%
Protection		68	68	-
Annuity		75	56	34%
Healthcare		81	110	(26%)
Total		422	334	26%
Life sales (APE)
Single		233	144	62%
Recurring		189	190	-
Value of new business		45	31	45%
APE margin		11%	9%
Net client cash flows (Rbn)		(2.7)	(2.1)	(29%)

Despite higher inflows, net client cash flows remained negative for the period. The offsetting higher outflows were due to the higher bonus declarations made during 2007 (Coregrowth and Genesis) and early 2008 (Annuities), which increased the level of normal benefits. In addition to this, a recent trend of increased benefit withdrawals from funds as a result of current economic pressures has led to increased outflows.

Total Corporate life sales on an APE basis were 26% higher in H1 2008, driven by higher sales in Employee Benefits with single premium business continuing to grow during the period. Risk business had a very good start to the year, but this has slowed in the last few months. Healthcare sales were below H1 2007 as this market continues to be very competitive and has been under pressure as government employees move to the heavily subsidised Government Employees Medical Scheme (GEMS). 

VNB increased significantly relative to the comparative period due to the higher sales and a better business mix (higher flows into higher margin old generation smoothed bonus products and annuities), although this was offset by the lower VNB in Healthcare due to lower sales volumes. Clients continue to transfer from the old smoothed bonus products to the lower margin, less capital intensive Absolute Growth Portfolios launched in 2007. Transfers of R19 billion occurred during the period.

Old Mutual Investment Group South Africa (OMIGSA)

Rm		H1 2008	H1 2007	% Change
Life sales (APE)		142	85	67%
Unit trust / mutual fund sales		1,374	-	-
Value of new business		18	9	100%
APE margin		13%	11%
Net client cash flows (Rbn)		(0.5)	(6.7)	93%

Sources of FUM (Rbn)		H1 2008	FY 2007	% Change
Life		304	319	(5%)
Unit trusts		47	48	(2%)
Third party		86	88	(2%)
Total OMIGSA managed assets		437	455	(4%)
Managed by external fund managers		34	34	-
Total OMSA FUM		471	489	(4%)
Less: managed by group companies for OMSA		(42)	(44)	5%
Total OMSA client funds managed in SA		429	445	(4%)

We continue to focus on stabilising the boutique structure and increasing investors' confidence in individual boutique investment philosophies. The acquisition of Futuregrowth will result in substantially enhanced fixed income investment capabilities within the cluster.

Investment performance across our diverse boutiques was mixed, with the percentage of funds performing above benchmark deteriorating since December 2007, but improved from March 2008. Three year performance slipped as poorer short-term equity performance fed through to the longer-term performance numbers. Many of the boutiques had anticipated a market correction from the second half of 2007 and, generally, the equity and balanced portfolios were defensively positioned. Overall, 35% of the funds outperformed their benchmarks over one year and just over half of the funds outperformed their benchmarks over three years to the end of June.

The overall percentage of funds performing above the median of competing funds increased from 38% to 41% for one year performance and from 28% to 37% for three year performance since the end of 2007. The Macro Strategy Investments boutique's Profile Balanced Fund was ranked eighth over one year, fifth over three years and fourth over five years ending 30 June 2008 in the Alexander Forbes Global Large Manager Watch survey. 

Compared to industry median, overall, 55% of unit trust funds were first and second quartile performers over one year, 31% were first and second quartile over three years and 50% over five years to the end of June 2008.

Life sales were ahead of the comparative period as a result of good repeat flows on a higher asset base in Symmetry. Non-life sales (OMIGSA) were lower than the comparative period as a result of current market volatility impacting investment decision processes, especially within large institutional clients.

Net client cash outflows were concentrated in the low margin index-tracking business Umbono. 

  SOUTH AFRICA: BANKING - NEDBANK GROUP (NEDBANK)

Tough macro-economic environment impacts retail but continued good performance in wholesale

The full text of Nedbank's interim results for the six months ended 30 June 2008, released on 6 August 2008, can be accessed on Nedbank's website http://www.nedbankgroup.co.za

Highlights (Rm)		H1 2008	H1 2007	% Change
Adjusted operating profit (IFRS basis) (pre-tax)		5,086	4,277	19%
Headline earnings*		2,943	2,775	6%
Net interest income*		7,960	6,568	21%
Non-interest revenue*		4,954	4,742	4%
Net interest margin*		3.83%	3.90%
Cost to income ratio*		51.5%	55.2%
ROE*		18.7%	21.2%
ROE* (excluding goodwill)		21.3%	24.7%
* As reported by Nedbank in their interim report to shareholders as at 30 June 2008

Banking environment

The South African economic environment continued to deteriorate during the first half of 2008. Supply-side inflationary pressures led to further interest rate increases in April and June 2008, adding to the credit stress levels of consumers. The resultant slowdown in economic growth was reflected in lower retail sales, vehicle sales and house price growth. Credit provisioning levels have increased in Nedbank Retail and Imperial Bank. Nedbank's wholesale banking bias has provided support within the current environment. Corporate advances growth remained resilient, boosted by the downstream activity from increasing fixed investment. 

In June 2008 the Competition Commission released a summary of its findings on the inquiry into bank charges in South Africa. Nedbank generally supports the recommendations that have been made by the Banking Enquiry Panel.

Financial performance

In the context of a tougher economic environment, Nedbank's wholesale businesses continued to perform well, but earnings in the retail businesses reduced as a result of higher impairment charges. In February this year, Nedbank cautioned that the deteriorating macroeconomic outlook was likely to make 2008 significantly more challenging for the South African economy and the banking sector. Underlying growth in assets and net interest income has remained solid, but impairment levels, arising mainly from the retail portfolios, have now risen above Nedbank's through-the-cycle expectations.

To manage the business through the current high interest rate cycle, Nedbank has for some time been strengthening collection and risk processes, controlling cost growth and improving capital ratios. At the same time, Nedbank continues to focus on and invest in areas with medium to long term growth potential and capitalise on the opportunities created by more volatile market conditions.

Adjusted operating profit (IFRS basis) was up 19% to R5,086 million. Diluted Headline Earnings per share increased 7% from 673 cents to 719 cents. Diluted earnings per share grew 30% from 678 cents in H1 2007 to 879 cents for the period. 

Nedbank's return on average ordinary shareholders' equity (ROE) excluding goodwill, reduced to below the medium to long term target, declining from 24.7% to 21.3% for the period. This decline was due to a reduction in gearing as Nedbank increased its core Tier 1 capital adequacy to position the bank in the current environment, and from a lower return on assets caused mainly by higher retail impairment levels. ROE declined from 21.2% to 18.7%.

Headline earnings was up 6% to R2,943 million for the period with basic earnings up 29% to R3,597 million (H1 2007: R2,798 million). 

Nedbank's wholesale businesses increased headline earnings, benefiting from favourable trading conditions and good client volumes. However, Nedbank's financial performance was unfavourably impacted by retail impairment levels rising above its through-the-cycle expectations. In addition, negative equity and property market movements have impacted private equity valuations. Basic earnings benefited from an after-tax profit of R637 million on the disposal of Nedbank's shares in Visa. Following the introduction of BEE and management shareholders into Bond Choice, Nedbank reduced its investment in the mortgage originator from 62.0% to 25.5%. Consequently Bond Choice is no longer classified as a subsidiary of Nedbank with effect from 1 January 2008. 

Net interest income (NII)

NII grew 21% to R7,960 million with the increase mainly driven by the 23% growth in average interest-earning banking assets. The net interest margin declined to 3.83% from 3.90% for the comparative period which was in line with our expectations as deposit margins were negatively impacted by strong competition for funding. Furthermore, the cost of the bank's funding increased as the proportion of assets funded through wholesale versus retail deposits continued to increase and as the maturity profile of liabilities was lengthened. 

Margins on advances declined during the period. This was due to asset mix changes with the growth of lower risk, lower margin assets, particularly within the personal loans portfolio. The pressure on home loan margins has begun to slow and wholesale margins on new assets are improving. This pressure on deposit and asset spreads was partially offset by the endowment benefits of higher interest rates. 

Impairment charge on loans and advances

The impairment charge to the income statement increased by 86% to R1,894 million (H1 2007: R1,016 million) resulting in the credit loss ratio increasing from 0.62% in June 2007 to 0.96%. While the credit loss ratios in both Nedbank Corporate and Nedbank Capital remained within through-the-cycle target levels, Nedbank Retail and Imperial Bank's credit loss ratios deteriorated further as a result of rising interest rates and increased levels of consumer indebtedness and are now above targeted through-the-cycle ranges.

Non-interest revenue (NIR)

NIR increased by 4% to R4,954 million for the period. Excluding Bond Choice's commission and sundry income in 2007, NIR grew by 11% on a like-for-like basis. The sale of Bond Choice reduced commission and fee income by R261 million. Commission and fee income (excluding Bond Choice) grew by 12%. In transactional banking, cheque processing fees continued to decline as clients shifted to more secure electronic banking systems. Cash handling fees and transactional banking volumes grew strongly due to an increase in customer numbers as a result of the Nedbank's investment in delivery channels from 2006 onwards. 

Nedbank's retail Bancassurance & Wealth division performed well, with headline earnings up 20% to R194 million for the period. Trading income for the period was up 56% to R813 million, benefiting from good client flows as a result of increased volatility in the currency and interest rate markets and improved equity trading. Private equity income declined sharply from R493 million to R53 million, reflecting the reduced prices in equity and property markets. 

Expenses

Despite high inflation and the increased distribution footprint, expenses continued to be tightly controlled, up 7% to R6,651 million (H1 2007: R6,238 million). On a like-for-like basis, excluding Bond Choice, expenses increased 10%. The efficiency ratio improved from 55.2% in H1 2007 (excluding Bond Choice 54.7%) to 51.5% for the period. The 'jaws' ratio improved to 7.6% from 3.6% in the comparative period as a result of revenue growth of 14.2% exceeding expense growth of 6.6%.

Associate income

Associate income decreased from R179 million in the comparative period to R84 million. This was primarily as a result of Nedbank's R65 million share of the profit on the sale of JSE Limited shares by BoE Private Clients joint venture in the comparative period as well as the sale of Nedbank's interests in Whirlprops and Kimberley Clark during 2007. 

Non-trading and capital items

Income after taxation from non-trading and capital items increased from R23 million in H1 2007 to R654 million for the period. The main sources of this income accounted for as a non-headline item related to the profit on the sale of Visa shares from the Visa initial public offering (IPO) in March 2008 and the subsequent disposal of Nedbank's remaining Visa shares in June 2008, resulting in a profit of R637 million after tax. In accordance with Old Mutual's accounting policies, this profit is included in adjusted operating profit for the purposes of these interim financial statements. Also, in Bond Choice, the sale of 26.5% to Kapela Investment Holdings and 10% to an employee trust realised a net capital profit of R14.5 million after tax.

Nedbank continues to be well-capitalised, with a Tier 1 capital adequacy ratio of 8.7% (FY 2007: 8.0% pro forma Basel II) and a total capital adequacy ratio of 11.7% (FY 2007: 11.2% pro forma Basel II), both within the upper half of target ranges. The core Tier 1 capital adequacy ratio was 7.4% (FY 2007: 6.9% pro forma Basel II). The profit from non-trading and capital items, headline earnings and the R1.2 billion Tier 1 capital raised as at 30 June 2008, together with ongoing initiatives to enhance risk weighted asset calculations, all helped to boost Nedbank's capital ratios. 

Advances and Deposits

Advances increased by 18% (on an annualised basis) to R408 billion, with strong asset growth across all business units. Overall deposits increased by 26% (on an annualised basis) from R385 billion at 31 December 2007 to R435 billion at 30 June 2008, with higher interest rates increasing demand for savings and investment products. 

Despite strong growth in retail funding, deposit growth was still largely concentrated in the wholesale market. Management has remained focused on optimising the funding mix and profile of the bank, through utilising alternate funding sources, a focused effort on the retail and business banking deposit bases and pricing competitively for term deposits. Nedbank's liquidity position and funding franchise remains strong. 

Prospects

There are a number of factors likely to influence Nedbank's performance in the second half of 2008 including continued slowing of economic growth in South Africa, a slowing growth in retail advances, Corporate Banking advances growth remaining more resilient, Business Banking starting to show signs of slowing advances growth, and an endowment benefit in the margin resulting from interest rate increases, offset by margin compression in certain categories of advances and continued reliance on wholesale funding. Further, credit loss ratios in the retail portfolios will stabilise unless market conditions deteriorate further and worsening credit loss ratios in the Business Banking area. Wholesale credit loss ratios are likely to remain below through-the-cycle levels and retail credit loss ratios are likely to remain above through-the-cycle levels. Nedbank will continue to focus on cost control and its ongoing capital management activities.

Nedbank currently expects to show positive earnings growth for the full year. However, in 2008 it is unlikely that Nedbank will meet its medium- to long-term target of a growth in diluted HEPS of at least average CPIX plus GDP growth plus 5% and an ROE (excluding goodwill) of 10% above the group's monthly weighted average cost of ordinary shareholders' equity.

  SOUTH AFRICA: GENERAL INSURANCE - MUTUAL & FEDERAL

Challenging trading conditions

The full text of Mutual & Federal's interim results for the six months ended 30 June 2008, released on 5 August 2008, can be accessed on Mutual & Federal's website http://www.mf.co.za

Highlights (Rm)		H1 2008	H1 2007	% Change
Adjusted operating profit (IFRS basis) (pre-tax)		427	509	(16%)
Gross premiums*		4,689	4,594	2%
Earned premiums*		3,914	3,813	3%
Claims ratio*		71.4%	68.8%
Combined ratio*		100.6%	97.1%
Solvency ratio*		43%	49%
Return on capital* (3 year average)		25.5%	31.7%
* As reported by Mutual & Federal in their interim report to shareholders as at 30 June 2008

Mutual & Federal reported weaker results in the context of a difficult trading environment and a continuing decline in the underwriting cycle. 

The underwriting account was negatively impacted during the period by a number of large commercial and industrial fire claims, as well as substantial weather-related claims in the personal portfolio. The annualised investment return for the period was 9% which was satisfactory in light of the highly volatile investment environment. The solvency margin at 30 June 2008 was 43%, which was largely unchanged from the figure at 31 December 2007. 

Growth 

Gross premiums grew by 2% over the comparative period. Whilst growth within the commercial portfolio was in line with inflation, the personal portfolio contracted following the cancellation of a number of underperforming group schemes. Risk finance premiums also declined following lower levels of reinsurance received from insurers in the retail sector.

Deterioration in underwriting result 

Mutual & Federal recorded an underwriting deficit of R23 million (H1 2007: surplus of R109 million), or a ratio of -0.6% to earned premiums (H1 2007: 2.9%). Although the 2007 result was flattered by R48 million following changes to estimation methods used in providing for claims, the deterioration remains highly disappointing and management have already taken corrective action to remedy the situation.

Return on capital in line with objectives

Despite the inclusion of R28 million arising from a change in the long-term investment return rate from 15.6% to 16.6%, the adjusted operating profit declined by 16%. The return on capital in 2008 was 25.5% which exceeded Mutual & Federal's targeted return of 20%.

Other

As announced on 5 August 2008, we will be initiating a competitive sale process for Mutual & Federal in September 2008. 

  UNITED STATES: US LIFE

Strong sales offset by investment volatility

Highlights ($m)		H1 2008	H1 2007	% Change
Adjusted operating profit (IFRS basis) (pre-tax)		12	60	(80%)
Return on equity (annualised basis)		(2.5%)	3.7%*
Adjusted operating profit (covered business) (EEV basis) (pre-tax)		(12)	(105)	89%
Return on embedded value (covered business)		(1.3%)	0.9%
Life assurance sales (APE)		346	288	20%
Value of new business		52	55	(5%)
APE margin		15%	19%
PVNBP		3,279	2,661	23%
PVNBP margin		1.6%	2.1%
Net client cash flows ($bn)		1.4	0.5	180%
Highlights ($bn)		H1 2008	FY 2007	% Change
Funds under management		23.6	24.1	(2%)
* Restated due to change in ROE methodology

Funds under management

Net client cash flows were 12% of opening funds under management on an annualised basis. Funds under management of $23.6 billion at H1 2008 were down 2% from the opening position, primarily due to a 6% decrease in the market value of funds under management, mainly as a result of unfavourable fixed income and equity market conditions. However, this was partially offset by positive net client cash flows of $1.4 billion, driven by Old Mutual Bermuda variable annuity sales. 

Sales driven by variable annuities 

Total life sales were $3.2 billion on a gross basis, up 25% over the comparative period. Total life sales on an APE basis were $346 million, a 20% increase over the comparative period. Sales by Old Mutual Bermuda were the largest contributor, representing 64% of APE sales in the US Life business, an increase of 76% or $96 million over the comparative period. Fixed indexed annuity sales were down 36% on an APE basis from the comparative period. As a consequence of high guarantee costs in the current volatile environment we have withdrawn the guaranteed variable annuity products effective 15 August 2008. We intend to restructure and relaunch the product later this year. 

Review of reserving basis

During the period, we conducted a review of our reserving bases and the hedging strategy on our guaranteed products. As a result, and in light of the current investment market conditions, we have strengthened our reserving basis which has had a downward impact on the Adjusted Net Worth, Value of In Force and VNB. The Return on Embedded Value, IFRS and EV earnings reduced accordingly in the period.

Underlying IFRS results

Adjusted operating profit (IFRS basis) decreased $48 million in period over the comparative period. In 2007, we recorded $60 million for assumption and modelling changes while in the current period, difficult credit markets resulted in higher impairment losses and volatile equity markets increased the costs associated with the guaranteed benefits on our variable annuity contracts. The impairment losses depressed our adjusted investment return. The current year charges included a $125 million adjustment for variable annuity guarantee reserves to pre-tax adjusted operating profits which was part of a total IFRS pre-tax charge of $212 million. Excluding these impacts, H1 2008 adjusted operating profit was up 14% primarily due to higher average variable annuity asset levels. 

Embedded Value results

Adjusted operating profit (EEV basis) and returns increased in the period over the comparative period. In 2007, various assumption and modelling changes recorded in H1 2007 comprised of $195 million pre-tax in respect of annuitant mortality assumptions and other modelling changes of $30 million pre-tax which were included within EV adjusted operating profit. In 2008, the assumption and modelling changes comprised $175 million pre-tax in respect of guarantee reserves. VNB reduced slightly as a result of increased prudence in the valuation assumptions in respect of the guaranteed variable annuity business.

The economic assumptions were strengthened in the light of the current environment by means of an increase in the credit default rate and increase of 100 basis points in the risk discount rate to allow for non-modelled risks. The effect of these changes was a loss of $127 million after tax.

Finally, negative investment variances of $349 million after tax arose primarily due to impairments and realised losses of $253 million and hedging losses of $59 million. 

Credit update

The markets continue to experience fallout from the housing crisis and inflation fears as general lack of confidence overshadows the financial markets. Negative impacts to credit valuations broadly affected whole categories of bonds, often with little regard to the underlying fundamentals of specific securities.

US Life's fixed income portfolio aggregate credit experience continues to be affected by poor economic and financial market conditions. First half impairments total $149 million on 21 securities with two of the 21 being subprime asset-backed securities and another ten indirectly linked to subprime or monoline insurer exposures. 3.6% of US Life's general account portfolio of $20 billion has direct exposure to sub-prime mortgage collateral. The sub-prime exposure is highly rated (85% is AAA, 99% is AA and higher, and 100% is A and higher) with a 78% fair value-to-book value ratio.

Approximately 3.0% of US Life's general account portfolio has exposure to monoline insurers, of which $530 million (89% of the total exposure) is indirect (wrapped) exposure, with an 86% fair value-to-book value ratio, and $66 million is direct (unsecured) exposure, with a 71% fair value-to-book value ratio. The indirect exposures include $202 million of sub-prime asset-backed securities which are wrapped by monoline guarantees.

Additional impairments during the second half of the year may be required if poor economic and financial market conditions persist. 

Raising brand awareness in the US

The US brand advertising campaign continued to gather momentum with sponsorships of Major League Baseball and Thoroughbred Racing on high profile, national television networks. Additionally, as a sponsor of Trevor Immelman, the Group was thrilled with the talented golfer's win at the 2008 Master's Tournament. The 'So Old Mutual' consumer campaign achieved its highest traffic numbers in June to the website - www.sayoldmutual.com - since the December 2007 launch. With the forthcoming November 2008 US presidential election, the focus will shift to a combination of news and lifestyle media programs to ensure potential viewer numbers are maximised throughout the lead up to election night.

  UNITED STATES: US ASSET MANAGEMENT

Results dampened due to poor equity markets, however net client cash flows continue to be positive

Highlights ($m)		H1 2008	H1 2007	% Change
Adjusted operating profit (IFRS basis) (pre-tax)		139	149	(7%)
Operating margin		26%	28%
Unit trust / mutual fund sales		1,179	2,219	(47%)
Net client cash flows ($bn)		1.9	17.2	(89%)
Highlights ($bn)		H1 2008	FY 2007	% Change
Funds under management		314.7	332.6	(5%)

Poor equity markets drive decline in funds under management

Our member firms continued to deliver strong long-term investment performance during this period of volatile global equity markets. At 30 June 2008, 65% of institutional assets had outperformed their benchmarks and 56% of institutional assets were ranked above the median of their peer group over the trailing three year period. 

Positive net client cash flows of $1.9 billion for the period were encouraging given the net outflows being experienced across the industry due to market volatility. The half year result was driven by positive flows at Heitman, Ashfield Capital Partners, Acadian Asset Management and Rogge Global Partners, partially offset by outflows at OMAM UK, Dwight Asset Management Company and Clay Finlay. Funds under management decreased 5% over the year end 2007 position to end at $314.7 billion, with the net inflows offset by a negative market impact of $19.8 billion. Our diversified asset mix helped to lessen the impact with fixed income products, which comprised 34% of total funds under management at the end of the period, being less volatile in periods of market instability.

Weaker Retail sales

Old Mutual Capital mutual fund sales and OMAM UK unit trust sales for the period were $446 million and $733 million respectively, down a combined $1,040 million (47%) on the comparative period as a result high redemptions in an unstable market. At H1 2008, 14 of Old Mutual Capital's mutual funds carried four or five star rankings by Morningstar, and we remain confident in the competitiveness of the underlying products on offer. 

Adjusted operating profit (IFRS basis) down 7%

Adjusted operating profit for the period was down 7% over the comparative period. The decrease is primarily as a result of lower performance fees, which were negatively impacted by the volatile markets. The operating margin, which is calculated inclusive of minority interest expense, also declined from the comparative period due to the impact of equity plans. Expense management remains a key area of management focus during this current operating climate.

Product development

We continue to maintain our position as a leader in the fast growing short extension space. During the period, Analytic Investors won a sub advisory mandate for assets in excess of $500 million within 130/30 strategy. Analytic performed pioneering work which helped lead to the adoption of short extension strategies within the industry.

We encourage new product development in the institutional space via an extensive seeding programme. Clients are increasingly looking for global strategies from bottom-up fundamental managers. Recognising this, we have recently seeded Global Equity and International Small Cap Value products with our affiliate Thompson, Siegel & Walmsley.

Acquisition of ING Ghent

On 1 July 2008, Rogge Global Partners acquired ING Ghent, which has funds under management of $1.5 billion. This acquisition will permit US Asset Management to broaden its fixed income capabilities to include below investment grade securities. 

  OTHER: ASIA PACIFIC

Continued focus on developing scale

Highlights (£m)		H1 2008	H1 2007	% Change
Adjusted operating loss (IFRS basis) (pre-tax)		(8)	(1)	(700%)
Australia unit trust / mutual fund sales		185	318	(42%)
Australia institutional sales		19	82	(77%)
Skandia:BSAM (China) Gross Premiums *		19	53	(64%)
KMOM (India) Gross Premiums *		150	82	83%
Highlights (£bn)		H1 2008	FY 2007
Funds under management		6.0	6.5	(8%)
* This represents 100% of the businesses; OM owns 50% of Skandia:BSAM and 26% of KMOM

Old Mutual is committed to the development of a credible portfolio of businesses in the Asia Pacific region. The new regional head office in Hong Kong is now fully staffed and operational. The team are focusing on growing the current portfolio of businesses as well as ensuring continued geographical and distribution expansion.

The current portfolio of businesses consists of a retail mutual funds platform and institutional asset manager in Australia, a joint venture with the Beijing State-owned Asset Management Company in China selling unit-linked products (Skandia:BSAM) and a 26% holding in a life assurance venture in India (Kotak Mahindra Old Mutual). 

A combination of stock market volatility and increased competition has resulted in tough business conditions for the period. Sales and net fund inflows have been disappointing, primarily as a result of the lower equity markets. Funds under management have reduced accordingly, partially offset by the strengthening of local underlying currencies against the pound sterling.

The focus in the second half of the year will be on improving infrastructure, increasing distribution footprint and broadening product range.

 

END

 

 

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