Interim Results - Part 2 (IFR

RNS Number : 8874W

Old Mutual PLC

05 August 2009

 



Consolidated income statement

For the six months ended 30 June 2009

£m
	Notes	6 months ended 30 June 2009		6 months ended  30 June 2008 Restated*	Year ended  31 December  2008
Revenue
Gross earned premiums	3(iii)	1,817		2,861	5,156
Outward reinsurance		(180)		(164)	(335)
Net earned premiums		1,637		2,697	4,821
Investment return (non-banking)		1,553		(4,074)	(11,578)
Banking interest and similar income		2,112		1,894	4,059
Banking trading, investment and similar income		73		70	162
Fee and commission income, and income from service activities		1,119		1,189	2,313
Other income		61		190	270
Total revenues		6,555		1,966	47
Expenses
Claims and benefits (including change in insurance contract provisions)		(1,377)		(2,023)	(3,610)
Reinsurance recoveries		176		149	262
Net claims and benefits incurred		(1,201)		(1,874)	(3,348)
Change in investment contract liabilities		(1,142)		3,842	10,051
Losses on loans and advances		(253)		(126)	(319)
Finance costs		(19)		(9)	392
Banking interest payable and similar expenses		(1,437)		(1,302)	(2,853)
Fee and commission expenses, and other acquisition costs		(406)		(389)	(937)
Other operating and administrative expenses		(1,446)		(1,349)	(2,834)
Goodwill impairment	4(ii)	-		-	(74)
Change in third party interest in consolidated funds		(282)		210	779
Amortisation of PVIF and other acquired intangibles	4(ii)	(164)		(176)	(361)
Total expenses		(6,350)		(1,173)	496
Share of associated undertakings' loss after tax		-		(2)	(1)
(Loss)/profit on disposal of subsidiaries, associated undertakings and strategic investments	4(iii)	(45)		62	53
Profit before tax		160		853	595
Income tax (expense)/credit	5(i)	(133)		(168)	88
Profit after tax for the financial period		27		685	683
(Loss)/profit for the financial period attributable to:
Equity holders of the parent		(70)		549	441
Non-controlling interests
Ordinary shares		63		110	188
Preferred securities		34		26	54
Profit after tax for the financial period		27		685	683
(Loss)/earnings per share
Basic (loss)/earnings per ordinary share (pence)	6(i)		(1.8)	11.2	8.6
Diluted (loss)/earnings per ordinary share (pence)	6(i)		(1.7)	10.5	8.1
Weighted average number of shares - millions			4,757	4,771	4,755

*    Interim 2008 results have been restated to include Mutual & Federal as a continuing operation.

Consolidated statement of comprehensive income

For the six months ended 30 June 2009

£m
		6 months  ended 30 June 2009	6 months ended 30 June 2008	Year ended  31 December  2008
Profit after tax for the financial period		27	685	683
Other comprehensive income
Fair value gains/(losses):
Property revaluation		2	6	16
Net investment hedge		2	5	281
Available-for-sale investments:
Fair value gains/(losses)		453	(528)	(1,635)
Recycled to the income statement		117	85	414
Shadow accounting		(63)	227	26
Currency translation differences/exchange differences on translating foreign operations		(248)	(269)	429
Other movements		47	(14)	68
Income tax relating to components of other comprehensive income		(149)	67	366
Total comprehensive income		188	264	648
Equity holders of the parent		1	245	305
Non-controlling interests
Ordinary shares		151	(7)	299
Preferred securities		36	26	44
Total comprehensive income		188	264	648

  Reconciliation of adjusted operating profit to profit after tax

For the six months ended 30 June 2009

£m
	Notes	6 months ended 30 June 2009	6 months ended  30 June 2008 Restated*	Year ended  31 December 2008
Long Term Savings	3(ii)	317	420	452
Nedbank	3(ii)	211	337	575
M&F	3(ii)	20	28	76
USAM	3(ii)	30	70	97
Bermuda	3(ii)	4	(47)	(137)
		582	808	1,063
Finance costs		(47)	(71)	(140)
Long term investment return on excess assets		46	53	108
Other shareholders' expenses		(43)	(17)	(32)
Adjusted operating profit before tax		538	773	999
Adjusting items	4(i)	(403)	146	(168)
Profit for the financial period before tax (excluding policyholder tax)		135	919	831
Income tax attributable to policyholder returns	3(ii)	25	(66)	(236)
Profit for the financial period before tax		160	853	595
Total income tax (expense)/credit	5(i)	(133)	(168)	88
Profit after tax for the financial period		27	685	683

*    Interim 2008 results have been restated to include Mutual & Federal as a continuing operation

Adjusted operating profit after tax attributable to ordinary equity holders

£m
	Notes	6 months ended 30 June 2009	6 months ended 30 June 2008*	Year ended  31 December 2008
Adjusted operating profit before tax		538	773	999
Tax on adjusted operating profit	5(iii)	(149)	(220)	(86)
Adjusted operating profit after tax		389	553	913
Non-controlling interest - ordinary shares		(72)	(122)	(218)
Non-controlling interest - preferred securities		(34)	(26)	(54)
Adjusted operating profit after tax attributable to ordinary equity holders		283	405	641
Adjusted weighted average number of shares (millions)	6(i)	5,232	5,245	5,230
Adjusted operating earnings per share (pence)	6(ii)	5.4	7.7	12.2

*    Interim 2008 results have been restated to include Mutual & Federal as a continuing operation

Basis of preparation

The reconciliation of adjusted operating profit to profit after tax has been prepared so as to reflect the Directors' view of the underlying long-term performance of the Group. The statement reconciles adjusted operating profit to profit after tax as reported under IFRS as adopted by the EU.

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 non-controlling interests in accordance with IFRS. For all businesses, adjusted operating profit excludes goodwill impairment, the impact of acquisition accounting, revaluations of put options 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 non-controlling interests. It excludes income attributable to Black Economic Empowerment trusts of listed subsidiaries. The calculation of the adjusted weighted average number of shares includes own shares held in policyholders' funds and Black Economic Empowerment trusts.

Consolidated statement of financial position

At 30 June 2009

£m
	Notes	At 30 June 2009	At 30 June 2008	At 31 December 2008*
Assets
Goodwill and other intangible assets		5,397	5,453	5,882
Mandatory reserve deposits with central banks		856	610	734
Property, plant and equipment		763	549	682
Investment property		1,578	1,265	1,478
Deferred tax assets		1,434	764	1,590
Investments in associated undertakings and joint ventures		115	69	111
Deferred acquisition costs		2,933	2,728	3,199
Reinsurers' share of long-term business policyholder liabilities		1,162	1,411	1,148
Reinsurers' share of general insurance liabilities		130	-	115
Deposits held with reinsurers		137	185	164
Loans and advances		37,835	29,890	35,745
Investments and securities		84,493	83,789	83,522
Current tax receivable		149	47	118
Client indebtedness for acceptances		146	201	220
Other assets		3,229	3,244	3,137
Derivative financial instruments - assets		2,486	3,149	3,228
Cash and cash equivalents		2,672	3,129	2,862
Non-current assets held-for-sale		-	571	7
Total assets		145,515	137,054	143,942
Liabilities
Long-term business policyholder liabilities		80,801	78,954	81,269
General insurance liabilities		403	-	344
Third party interests in consolidated funds		2,610	2,674	2,591
Borrowed funds	8	2,515	2,236	2,295
Provisions		409	429	477
Deferred revenue		604	521	598
Deferred tax liabilities		1,466	1,389	1,452
Current tax payable		195	206	219
Other liabilities		3,947	5,622	3,733
Liabilities under acceptances		146	201	220
Amounts owed to bank depositors		40,590	32,033	38,171
Derivative financial instruments - liabilities		2,109	3,062	2,990
Non-current liabilities held-for-sale		-	373	6
Total liabilities		135,795	127,700	134,365
Net assets		9,720	9,354	9,577
Shareholders' equity
Equity attributable to equity holders of the parent		7,731	7,802	7,737
Non-controlling interests
Ordinary shares		1,293	849	1,147
Preferred securities		696	703	693
Total non-controlling interests		1,989	1,552	1,840
Total equity		9,720	9,354	9,577

*    The 31 December 2008 financial position has been restated by an amount of £1,405 million for both derivative financial instruments assets and liabilities on a consistent basis to 30 June 2009. There was no impact on the consolidated net assets at 31 December 2008 as a result of the restatement.

Condensed consolidated statement of cash flows

For the six months ended 30 June 2009

£m
	6 months ended 30 June 2009	6 months ended 30 June 2008	Year ended  31 December 2008
Cash flows from operating activities
Profit before tax	160	853	595
Non-cash movements in profit before tax	1,851	1,083	14,656
Changes in working capital	(2,275)	811	(13,249)
Taxation paid	(160)	(262)	(458)
Net cash (outflow)/inflow from operating activities	(424)	2,485	1,544
Cash flows from investing activities
Net disposal/(acquisitions) of financial investments	477	(2,388)	(1,170)
Net acquisition of investment properties	(22)	(19)	(7)
Net acquisition of property, plant and equipment	(98)	(64)	(110)
Net acquisition of intangible assets	(12)	(2)	(18)
Acquisition of interests in subsidiaries	(2)	(65)	(93)
Disposal of interests in subsidiaries, associated undertakings and strategic investments	16	1,133	1,138
Net cash inflow/(outflow) from investing activities	359	(1,405)	(260)
Cash flows from financing activities
Dividends paid to:
Equity holders of the Company	-	(227)	(352)
Equity non-controlling interests and preferred security interests	(103)	(109)	(208)
Interest paid (excluding banking interest paid)	(120)	(61)	(87)
Proceeds from issue of ordinary shares (including by subsidiaries to non-controlling interests)	46	(226)	31
Net sale of treasury shares	4	-	5
Shares repurchased in buyback programme	-	-	(175)
Issue of subordinated and other debt	290	76	374
Other debt repaid	(33)	(13)	(225)
Net cash inflow/(outflow) from financing activities	84	(560)	(637)
Net increase in cash and cash equivalents	19	520	647
Effects of exchange rate changes on cash and cash equivalents	(175)	(235)	399
Cash and cash equivalents at beginning of the year	4,642	3,596	3,596
Cash and cash equivalents at end of the period	4,486	3,881	4,642
Consisting of:
Cash and cash equivalents	2,672	3,129	2,862
Mandatory reserve deposits with central banks	856	610	734
Short term cash balances held in policyholder funds	1,744	1,084	2,043
Cash and cash equivalents subject to consolidation of funds	(785)	(942)	(997)
Total	4,486	3,881	4,642

Cash flows presented in this statement include all cash flows relating to policyholders' funds for the long-term business.

Cash and cash equivalents subject to consolidation of funds are not included in the cash flow as they relate to the minority holding in the funds.

Management do not consider that there are material amounts of cash and cash equivalents which are not available for use by the Group.

Mandatory reserve deposits with central banks held by Nedbank are included in cash and cash equivalents for the purposes of the statement of cash flows in line with market practice in South Africa.

Consolidated statement of changes in equity

For the six months ended 30 June 2009 

Six months ended 30 June 2009		Millions				£m
	Notes	Number of shares issued and fully paid		Attributable to equity holders of the parent	Total non-controlling  interest	Total  equity
Equity holders' funds at beginning of the period		5,516		7,737	1,840	9,577
(Loss)/profit after tax for the financial period		-		(70)	97	27
Other comprehensive income		-		-	-	-
Fair value gains:
Property revaluation		-		2	-	2
Net investment hedge		-		2	-	2
Available-for-sale investments:
Fair value gains		-		453	-	453
Recycled to the income statement		-		117	-	117
Shadow accounting		-		(63)	-	(63)
Currency translation differences/exchange differences on translating foreign operations		-		(327)	79	(248)
Other movements		-		36	11	47
Income tax relating to components of other comprehensive income		-		(149)	-	(149)
Total comprehensive income		-		1	187	188
Dividends for the period	9	-		(22)	(81)	(103)
Net sale of treasury shares		-		5	(1)	4
Change in participation in subsidiaries		-		(4)	42	38
Fair value of equity settled share options		-		14	2	16
Transactions with shareholders		-		(7)	(38)	(45)
Equity holders' funds at end of the period		5,516		7,731	1,989	9,720

Six months ended 30 June 2009	£m
	Notes	Share  capital	Share premium	Other  reserves	Translation reserve	Retained earnings	Perpetual  preferred  callable  securities	Total
Attributable to equity holders of the parent at beginning of the period		552	766	2,130	386	3,215	688	7,737
(Loss)/profit for the financial period attributable to equity holders of the parent		-	-	-	-	(86)	16	(70)
Other comprehensive income
Fair value gains:
Property revaluation		-	-	2	-	-	-	2
Net investment hedge		-	-	-	2	-	-	2
Available-for-sale investments:
Fair value gains		-	-	453	-	-	-	453
Recycled to income statement on realisation		-	-	117	-	-	-	117
Shadow accounting		-	-	(63)	-	-	-	(63)
Currency translation differences/exchange differences on translating foreign operations		-	-	-	(327)	-	-	(327)
Other movements		-	3	(6)	2	37	-	36
Income tax relating to components of other comprehensive income		-	-	(150)	-	(5)	6	(149)
Total comprehensive income		-	3	353	(323)	(54)	22	1
Dividends for the period	9	-	-	-	-	-	(22)	(22)
Net sale of treasury shares		-	-	-	-	5	-	5
Change in participation in subsidiaries		-	-	(4)	-	-	-	(4)
Fair value of equity settled share options		-	-	14	-	-	-	14
Transactions with shareholders		-	-	10	-	5	(22)	(7)
Attributable to equity holders of the parent at end of the period		552	769	2,493	63	3,166	688	7,731

£m
Other reserves			At  30 June 2009
Merger reserve			2,716
Available-for-sale reserve			(482)
Property revaluation reserve			83
Share-based payments reserve			179
Other reserves			(3)
Attributable to equity holders of the parent at end of the period			2,493

Retained earnings were reduced by £342 million at 30 June 2009 (£550 million at 30 June 2008, £280 million at 31 December 2008) in respect of own shares held in policyholders' funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings.

Included within other reserves is the merger reserve for the additional share consideration made in respect of the Skandia acquisition, being the difference between the market value of the shares on the date of issue and the nominal value included as share capital.

  Consolidated statement of changes in equity continued

For the six months ended 30 June 2009

Six months ended 30 June 2008		Millions				£m
	Notes	Number of shares issued and fully paid		Attributable to equity holders of the parent	Total non- controlling  interest	Total  equity
Equity holders' funds at beginning of the period		5,510		7,961	1,636	9,597
Profit after tax for the financial period		-		549	136	685
Other comprehensive income
Fair value gains:
Property revaluation		-		6	-	6
Net investment hedge		-		5	-	5
Available-for-sale investments:
Fair value losses		-		(528)	-	(528)
Recycled to the income statement		-		85	-	85
Shadow accounting		-		227	-	227
Currency translation differences/exchange differences on translating foreign operations		-		(150)	(119)	(269)
Other movements		-		(16)	2	(14)
Income tax relating to components of other comprehensive income		-		67	-	67
Total comprehensive income		-		245	19	264
Dividends for the period	9	-		(249)	(87)	(336)
Net sale of treasury shares		-		(5)	-	(5)
Shares repurchased in the buyback programme		-		(174)	-	(174)
Issue of ordinary share capital by the Company		-		4	-	4
Change in participation in subsidiaries		-		-	(16)	(16)
Exercise of share options		4		3	-	3
Fair value of equity settled share options		-		17	-	17
Transactions with shareholders		4		(404)	(103)	(507)
Equity holders' funds at end of the period		5,514		7,802	1,552	9,354

Six months ended 30 June 2008								£m
	Notes	Share  capital	Share premium	Other  reserves	Translation reserve	Retained earnings	Perpetual  preferred  callable  securities	Total
Attributable to equity holders of the parent at beginning of the period		551	757	2,908	(304)	3,361	688	7,961
Profit for the financial period attributable to equity holders of the parent		-	-	-	-	533	16	549
Other comprehensive income
Fair value gains/(losses):
Property revaluation		-	-	6	-	-	-	6
Net investment hedge		-	-	-	5	-	-	5
Available-for-sale investments:
Fair value gains/(losses)		-	-	(528)	-	-	-	(528)
Recycled to income statement		-	-	85	-	-	-	85
Shadow accounting		-	-	227	-	-	-	227
Currency translation differences/exchange differences on translating foreign operations		-	-	-	(150)	-	-	(150)
Other movements		-	2	(9)	-	(9)	-	(16)
Income tax relating to components of other comprehensive income		-	-	61	-	-	6	67
Total comprehensive income		-	2	(158)	(145)	524	22	245
Dividends for the period	9	-	-	-	-	(227)	(22)	(249)
Net purchase of treasury shares		-	-	-	-	(5)	-	(5)
Shares repurchased in the buyback programme		-	-	-	-	(174)	-	(174)
Issue of ordinary share capital by the Company		-	4	-	-	-	-	4
Exercise of share options		-	3	-	-	-	-	3
Fair value of equity settled share options		-	-	17	-	-	-	17
Transactions with shareholders		-	7	17	-	(406)	(22)	(404)
Attributable to equity holders of the parent at end of the period		551	766	2,767	(449)	3,479	688	7,802

£m
Other reserves			At  30 June 2008
Merger reserve			2,716
Available-for-sale reserve			(180)
Property revaluation reserve			75
Share-based payments reserve			156
Other reserves			-
Attributable to equity holders of the parent at end of the period			2,767

  Consolidated statement of changes in equity continued

For the six months ended 30 June 2009 

Year ended 31 December 2008		Millions				£m
	Notes	Number of shares issued and fully paid		Attributable to equity holders of the parent	Total non- controlling  interest	Total  equity
Equity holders' funds at beginning of the year		5,510		7,961	1,636	9,597
Profit after tax for the financial period		-		441	242	683
Other comprehensive income
Fair value gains/(losses):
Property revaluation		-		16	-	16
Net investment hedge		-		281	-	281
Available-for-sale investments:
Fair value losses		-		(1,635)	-	(1,635)
Recycled to the income statement		-		414	-	414
Shadow accounting		-		26	-	26
Currency translation differences/exchange differences on translating foreign operations		-		419	10	429
Other movements		-		(23)	91	68
Income tax relating to components of other comprehensive income		-		366	-	366
Total comprehensive income		-		305	343	648
Dividends for the year	9	-		(395)	(165)	(560)
Net sale of treasury shares		-		5	-	5
Shares repurchased in the buyback programme		-		(175)	-	(175)
Issue of ordinary share capital by the Company		-		5	-	5
Change in participation in subsidiaries		-		-	26	26
Exercise of share options		6		5	-	5
Fair value of equity settled share options		-		26	-	26
Transactions with shareholders		6		(529)	(139)	(668)
Equity holders' funds at end of the year		5,516		7,737	1,840	9,577

Year ended 31 December 2008								£m
	Notes	Share  capital	Share premium	Other  reserves	Translation reserve	Retained earnings	Perpetual  preferred  callable  securities	Total
Attributable to equity holders of the parent at beginning of the year		551	757	2,908	(304)	3,361	688	7,961
Profit for the financial year attributable to equity holders of the parent		-	-	-	-	410	31	441
Other comprehensive income
Fair value gains/(losses):
Property revaluation		-	-	16	-	-	-	16
Net investment hedge		-	-	-	281	-	-	281
Available-for-sale investments:
Fair value losses		-	-	(1,635)	-	-	-	(1,635)
Recycled to income statement		-	-	414	-	-	-	414
Shadow accounting		-	-	26	-	-	-	26
Currency translation differences/exchange differences on translating foreign operations		-	-	-	419	-	-	419
Other movements		-	-	8	3	(34)	-	(23)
Income tax relating to components of other comprehensive income		-	-	367	(13)	-	12	366
Total comprehensive income		-	-	(804)	690	376	43	305
Dividends for the year	9	-	-	-	-	(352)	(43)	(395)
Net sale of treasury shares		-	-	-	-	5	-	5
Shares repurchased in the buyback programme		-	-	-	-	(175)	-	(175)
Issue of ordinary share capital by the Company		-	5	-	-	-	-	5
Exercise of share options		1	4	-	-	-	-	5
Fair value of equity settled share options		-	-	26	-	-	-	26
Transactions with shareholders		1	9	26	-	(522)	(43)	(529)
Attributable to equity holders of the parent at end of the year		552	766	2,130	386	3,215	688	7,737

£m
Other reserves			At 31 December 2008
Merger reserve			2,716
Available-for-sale reserve			(844)
Property revaluation reserve			85
Share-based payments reserve			171
Other reserves			2
Attributable to equity holders of the parent at end of the period			2,130

.

Notes to the consolidated financial statements

For the six months ended 30 June 2009

1 Accounting policies

Basis of preparation

The consolidated financial information contained herein has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards adopted by the EU and in accordance with the requirements of IAS 34 'Interim Financial Reporting'. The Group's results for the six months ended 30 June 2009 and the position at that date have been prepared using accounting policies consistent with those applied in the preparation of the Group's 2008 Annual Report and Accounts, except for the revised IAS 1 set out below.

The consolidated financial information has been prepared on the going concern basis which the directors believe appropriate having taken into consideration the matters discussed in the Group Finance Director's Review in the section headed Risk and Uncertainties.

The comparative figures for the financial year ended 31 December 2008 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

Implementation of revised IAS 1 'Presentation of Financial Statements'

The financial information set out herein incorporates changes introduced as a result of the publication of a revised version of IAS 1 'Presentation of Financial Statements', effective for accounting periods commencing on or after 1 January 2009. The principal change is the inclusion of a new statement, a consolidated statement of comprehensive income, separately from the consolidated statement of changes in equity. Comparative information has been restated accordingly. There were no impacts on the Group's results or net assets as a result of the introduction of the revised standard.

Segment presentation

There has been a presentational change in the way segmental information is reflected in the consolidated financial information following a change in the way that management and the Board of Directors considers information when making operating decisions and the basis on which resources are allocated and performance assessed by management and the Board of Directors. The reported segments are Long-term savings, Nedbank, Mutual & Federal (M&F), US Asset Management (USAM), Bermuda and Other operating segments.

The long-term savings segment is further analysed by major operating segments, namely OMSA (including Rest of Africa), Europe, US Life and Asia Pacific. Results of other business activities and operating segments are disclosed in the 'Other operating segments' category. Other operating segments comprise Group head office. 

There are four principal business activities from which the Group generates revenues. These are long-term business (premium income), asset management business (fee and commission income), banking (banking interest receivable) and general insurance (premium income). The revenues generated in each reported segment can be seen in the analysis of profits and losses in note 3(ii).

The information reflected in note 3 reflects the measures of profit and loss, assets and liabilities for each segment as regularly provided to management and the Board of Directors. There are no differences between the measurement of the assets and liabilities reflected in the primary statements and that reported for the segments. A reconciliation between the reported segment revenues and expenses and the Group's revenues and expenses is shown in note 3(ii). 

Assets, liabilities, revenues or expenses that are not directly attributable to a particular segment are allocated between segments where there is a reasonable basis for doing so. The Group accounts for inter-segment revenues and transfers as if the transactions were with third parties at current market prices. Given the nature of the operations, there are no major customers within any of the segments.

Reclassifications of comparative segment information have been made to align to the Group management reporting structure described above. There was no impact on net profit or net assets.

  1 Accounting policies continued

Amendments to IAS 39 'Financial instruments: Recognition and Measurement' - reclassification of financial assets

The amendments to IAS 39 'Financial instruments: Recognition and Measurement', issued in October 2008, in respect of the reclassification of financial assets, were adopted in the Group's 2008 financial statements. Under the extended reclassification rules introduced by the amendments an entity has the ability to reclassify financial instruments from the held-for-trading and available-for-sale categories in certain specified rare circumstances. The Group's accounting policies were updated in 2008 to reflect the amendments to the standard. The Group's US Life on-shore business applied the amendments to certain financial assets previously categorised as available-for-sale, which it reclassified to the loans and receivables category. This reclassification was implemented as at 1 July 2008 in accordance with the transitional provisions in the IAS 39 amendment, with no impact on the comparative interim financial information shown in this report. There was no impact on the Group's IFRS profit or adjusted operating profit, before or after tax, as a result of the introduction of the amendments.

2 Foreign currencies

The principal exchange rates used to translate the operating results, assets and liabilities of foreign operations to Sterling are:

	Income statement  (average rate)	Statement of financial position  (closing rate)
30 June 2009
Rand	13.7363	12.7351
US Dollars	1.4947	1.6453
Swedish Kronor	12.1787	12.6989
Euro	1.1193	1.1725
30 June 2008
Rand	15.1008	15.5673
US Dollars	1.9746	1.9908
Swedish Kronor	12.1128	12.0009
Euro	1.2903	1.2651
31 December 2008
Rand	15.2948	13.7194
US Dollars	1.8524	1.4575
Swedish Kronor	12.2209	11.4494
Euro	1.2594	1.0446

3 Segment information

(i) Basis of segmentation

The Group's results are analysed across the following reportable segments:

●     Long-term savings - long-term business, asset management and banking 

●     Nedbank - banking and asset management

●     Mutual & Federal (M&F) - general insurance

●     US Asset Management (USAM) - asset management 

●     Bermuda - long-term business and asset management

●     Other operating segments.

For purposes of presentation the long-term savings segment is further analysed by major operating segments, namely OMSA (including Rest of Africa), Europe, US Life and Asia Pacific. Results of other business activities and operating segments are disclosed in the 'other operating segments' category. Other operating segments comprise Group head office.

The segmental information is consistent with the way that management and the Board of Directors consider information when making operating decisions and is the basis on which resources are allocated and performance assessed by management and the Board of Directors. 

Adjusted operating profit is one of the key measures reported to the Group's management and Board of Directors for their consideration in the allocation of resources to and the review of performance of the segments. The Group utilises additional measures to assess the performance of each of the segments, in particular the level of funds under management. Additional performance measures considered by management and the Board of Directors in assessing the performance of the segments can be found in the Old Mutual Market Consistent Embedded Value information presented on pages 83-120.

Comparative segment information has been revised in accordance with the changes in presentation made in the current financial period.

Notes to the consolidated financial statements

For the six months ended 30 June 2009

3 Segment information continued

(ii) Adjusted operating profit statement - segment information six months ended 30 June 2009

	Long Term Savings
	OMSA	Europe	US Life	Asia  Pacific	Total
Revenue
Gross earned premiums	877	215	421	-	1,513
Outward reinsurance	(28)	(47)	(51)	-	(126)
Net earned premiums	849	168	370	-	1,387
Investment return (non-banking)	(98)	1,120	303	-	1,325
Banking interest and similar income	-	96	-	-	96
Banking trading, investment and similar income	-	-	-	-	-
Fee and commission income, and income from service activities	105	558	-	4	667
Other income	12	11	1	-	24
Inter-segment revenues	29	18	-	-	47
Total revenues	897	1,971	674	4	3,546
Expenses
Claims and benefits (including change in insurance contract provisions)	(219)	(218)	(589)	-	(1,026)
Reinsurance recoveries	28	55	54	-	137
Net claims and benefits incurred	(191)	(163)	(535)	-	(889)
Change in investment contract liabilities	(114)	(1,026)	-	-	(1,140)
Losses on loans and advances	-	(3)	-	-	(3)
Finance costs	-	-	-	-	-
Banking interest payable and similar expenses	-	(51)	-	-	(51)
Fee and commission expenses, and other acquisition costs	(77)	(256)	(71)	(1)	(405)
Other operating and administrative expenses	(291)	(351)	(32)	(11)	(685)
Goodwill impairment	-	-	-	-	-
Change in third party interest in consolidated funds	-	-	-	-	-
Amortisation of PVIF and other acquired intangibles	-	-	-	-	-
Income tax attributable to policyholder returns	(2)	(23)	-	-	(25)
Inter-segment expenses	(4)	(22)	(7)	-	(33)
Total expenses	(679)	(1,895)	(645)	(12)	(3,231)
Share of associated undertakings' profit/(loss) after tax	1	-	-	1	2
(Loss)/profit on disposal of subsidiaries, associated undertakings and strategic investments	-	-	-	-	-
Adjusted operating profit/(loss) before tax and non-controlling interests	219	76	29	(7)	317
Tax expense	(60)	(6)	(8)	(4)	(78)
Non-controlling interests	(2)	-	-	-	(2)
Adjusted operating profit/(loss) after tax and non-controlling interests	157	70	21	(11)	237
Adjusting items net of tax and non-controlling interests	(63)	(115)	(98)	(45)	(321)
Profit/(loss) after tax attributable to equity holders of the parent	94	(45)	(77)	(56)	(84)

3 Segment information continued

(ii) Adjusted operating profit statement - segment information six months ended 30 June 2009 continued

£m
Nedbank	M&F	USAM	Bermuda	Other operating segments	Consolidation adjustments	Adjusted operating profit Total reportable segments	Adjusting items (Note 4)	IFRS Income statement
-	297	-	7	-	-	1,817	-	1,817
-	(54)	-	-	-	-	(180)	-	(180)
-	243	-	7	-	-	1,637	-	1,637
-	26	-	124	43	310	1,828	(275)	1,553
2,016	-	-	-	-	-	2,112	-	2,112
73	-	-	-	-	-	73	-	73
293	9	206	-	-	-	1,175	(56)	1,119
24	-	2	11	-	-	61	-	61
14	18	5	-	12	(96)	-	-	-
2,420	296	213	142	55	214	6,886	(331)	6,555
-	(221)	-	(130)	-	-	(1,377)	-	(1,377)
-	40	-	1	-	-	176	-	176
-	(181)	-	(131)	-	-	(1,201)	-	(1,201)
-	-	-	(2)	-	-	(1,142)	-	(1,142)
(250)	-	-	-	-	-	(253)	-	(253)
-	-	-	-	(47)	-	(47)	28	(19)
(1,392)	-	-	-	-	-	(1,443)	6	(1,437)
-	(53)	(8)	4	-	(25)	(487)	81	(406)
(529)	(30)	(175)	(8)	(38)	(3)	(1,468)	22	(1,446)
-	-	-	-	-	-	-	-	-
-	-	-	-	-	(282)	(282)	-	(282)
-	-	-	-	-	-	-	(164)	(164)
-	-	-	-	-	-	(25)	25	-
(40)	(12)	-	(1)	(10)	96	-	-	-
(2,211)	(276)	(183)	(138)	(95)	(214)	(6,348)	(2)	(6,350)
2	-	-	-	(4)	-	-	-	-
-	-	-	-	-	-	-	(45)	(45)
211	20	30	4	(44)	-	538	(378)	160
(48)	(4)	(9)	-	(10)	-	(149)	16	(133)
(84)	(4)	-	-	(16)	-	(106)	9	(97)
79	12	21	4	(70)	-	283	(353)	(70)
10	(5)	11	(49)	1	-	(353)
89	7	32	(45)	(69)	-	(70)

Notes to the consolidated financial statements

For the six months ended 30 June 2009 continued

3 Segment information continued

(ii) Adjusted operating profit statement - segment information six months ended 30 June 2008

	Long Term Savings
	OMSA	Europe	US Life	Asia  Pacific	Total
Revenue
Gross earned premiums	790	126	582	-	1,498
Outward reinsurance	(24)	(44)	(51)	-	(119)
Net earned premiums	766	82	531	-	1,379
Investment return (non-banking)	(193)	(3,798)	96	-	(3,895)
Banking interest and similar income	-	129	-	-	129
Banking trading, investment and similar income	-	2	-	-	2
Fee and commission income, and income from service activities	103	606	-	19	728
Other income	55	21	13	-	89
Inter-segment revenues	100	130	-	-	230
Total revenues	831	(2,828)	640	19	(1,338)
Expenses
Claims and benefits (including change in insurance contract provisions)	(289)	(68)	(567)	-	(924)
Reinsurance recoveries	35	22	54	-	111
Net claims and benefits incurred	(254)	(46)	(513)	-	(813)
Change in investment contract liabilities	44	3,795	-	-	3,839
Losses on loans and advances	-	(1)	-	-	(1)
Finance costs	-	-	-	-	-
Banking interest payable and similar expenses	-	(89)	-	-	(89)
Fee and commission expenses, and other acquisition costs	(72)	(267)	(43)	(6)	(388)
Other operating and administrative expenses	(243)	(348)	(27)	(17)	(635)
Goodwill impairment	-	-	-	-	-
Change in third party interest in consolidated funds	-	-	-	-	-
Amortisation of PVIF and other acquired intangibles	-	-	-	-	-
Income tax attributable to policyholder returns	(4)	70	-	-	66
Inter-segment expenses	(79)	(138)	(4)	(1)	(222)
Total expenses	(608)	2,976	(587)	(24)	1,757
Share of associated undertakings' profit/(loss) after tax	4	-	-	(3)	1
Profit on disposal of subsidiaries, associated undertakings and strategic investments	-	-	-	-	-
Adjusted operating profit/(loss) before tax and non-controlling interests	227	148	53	(8)	420
Tax expense	(78)	(44)	(15)	-	(137)
Non-controlling interests	(2)	(1)	-	-	(3)
Adjusted operating profit/(loss) after tax and non-controlling interests	147	103	38	(8)	280
Adjusting items net of tax and non-controlling interests	176	(12)	(52)	-	112
Profit/(loss) after tax attributable to equity holders of the parent	323	91	(14)	(8)	392

3 Segment information continued

(ii) Adjusted operating profit statement - segment information six months ended 30 June 2008 continued

£m
Nedbank	M&F	USAM	Bermuda	Other operating segments	Consolidation adjustments	Adjusted operating profit Total reportable segments	Adjusting items (Note 4)	IFRS Income statement
-	301	-	1,062	-	-	2,861	-	2,861
-	(45)	-	-	-	-	(164)	-	(164)
-	256	-	1,062	-	-	2,697	-	2,697
-	28	10	(237)	60	(184)	(4,218)	144	(4,074)
1,765	-	-	-	-	-	1,894	-	1,894
68	-	-	-	-	-	70	-	70
254	8	250	-	-	1	1,241	(52)	1,189
67	-	8	10	-	16	190	-	190
8	5	4	-	7	(254)	-	-	-
2,162	297	272	835	67	(421)	1,874	92	1,966
-	(221)	-	(878)	-	-	(2,023)	-	(2,023)
-	38	-	-	-	-	149	-	149
-	(183)	-	(878)	-	-	(1,874)	-	(1,874)
-	-	-	3	-	-	3,842	-	3,842
(125)	-	-	-	-	-	(126)	-	(126)
-	-	-	-	(71)	-	(71)	62	(9)
(1,213)	-	-	-	-	-	(1,302)	-	(1,302)
-	(58)	(5)	4	-	(39)	(486)	97	(389)
(466)	(24)	(197)	(10)	(22)	(4)	(1,358)	9	(1,349)
-	-	-	-	-	-	-	-	-
-	-	-	-	-	210	210	-	210
-	-	-	-	-	-	-	(176)	(176)
-	-	-	-	-	-	66	(66)	-
(24)	(4)	-	(1)	(3)	254	-	-	-
(1,828)	(269)	(202)	(882)	(96)	421	(1,099)	(74)	(1,173)
3	-	-	-	(6)	-	(2)	-	(2)
-	-	-	-	-	-	-	62	62
337	28	70	(47)	(35)	-	773	80	853
(77)	(5)	(13)	(3)	15	-	(220)	52	(168)
(130)	(7)	-	-	(8)	-	(148)	12	(136)
130	16	57	(50)	(28)	-	405	144	549
14	(6)	(1)	(50)	75	-	144
144	10	56	(100)	47	-	549

Notes to the consolidated financial statements

For the six months ended 30 June 2009 continued

3 Segment information continued

(ii) Adjusted operating profit statement - segment information year ended 31 December 2008

	Long Term Savings
	OMSA	Europe	US Life	Asia  Pacific	Total
Revenue
Gross earned premiums	1,672	315	1,269	-	3,256
Outward reinsurance	(47)	(90)	(106)	-	(243)
Net earned premiums	1,625	225	1,163	-	3,013
Investment return (non-banking)	(427)	(9,918)	211	1	(10,133)
Banking interest and similar income	-	266	-	-	266
Banking trading, investment and similar income	-	24	-	-	24
Fee and commission income, and income from service activities	189	1,167	-	33	1,389
Other income	97	36	3	-	136
Inter-segment revenues	230	237	-	-	467
Total revenues	1,714	(7,963)	1,377	34	(4,838)
Expenses
Claims and benefits (including change in insurance contract provisions)	(700)	(209)	(1,478)	-	(2,387)
Reinsurance recoveries	42	40	106	-	188
Net claims and benefits incurred	(658)	(169)	(1,372)	-	(2,199)
Change in investment contract liabilities	200	9,847	-	-	10,047
Losses on loans and advances	-	(4)	-	-	(4)
Finance costs	-	-	-	-	-
Banking interest payable and similar expenses	-	(183)	-	-	(183)
Fee and commission expenses, and other acquisition costs	(156)	(530)	(158)	(10)	(854)
Other operating and administrative expenses	(497)	(692)	(68)	(37)	(1,294)
Goodwill impairment	-	-	-	-	-
Change in third party interest in consolidated funds	-	-	-	-	-
Amortisation of PVIF and other acquired intangibles	-	-	-	-	-
Income tax attributable to policyholder returns	6	230	-	-	236
Inter-segment expenses	(183)	(270)	(9)	-	(462)
Total expenses	(1,288)	8,229	(1,607)	(47)	5,287
Share of associated undertakings' profit/(loss) after tax	6	-	-	(3)	3
Profit on disposal of subsidiaries, associated undertakings and strategic investments	-	-	-	-	-
Adjusted operating profit/(loss) before tax and non-controlling interests	432	266	(230)	(16)	452
Tax expense	(135)	(81)	76	-	(140)
Non-controlling interests	(5)	-	-	-	(5)
Adjusted operating profit/(loss) after tax and non-controlling interests	292	185	(154)	(16)	307
Adjusting items net of tax and non-controlling interests	148	(83)	(341)	(1)	(277)
Profit/(loss) after tax attributable to equity holders of the parent	440	102	(495)	(17)	30

3 Segment information continued

(ii) Adjusted operating profit statement - segment information year ended 31 December 2008 continued

								£m
Nedbank	M&F	USAM	Bermuda	Other operating segments	Consolidation adjustments	Adjusted operating profit Total reportable segments	Adjusting items (Note 4)	IFRS Income statement
-	570	-	1,330	-	-	5,156	-	5,156
-	(91)	-	(1)	-	-	(335)	-	(335)
-	479	-	1,329	-	-	4,821	-	4,821
-	56	(3)	(543)	94	(713)	(11,242)	(336)	(11,578)
3,793	-	-	-	-	-	4,059	-	4,059
138	-	-	-	-	-	162	-	162
533	16	473	-	-	(1)	2,410	(97)	2,313
85	-	17	19	-	13	270	-	270
19	26	8	-	66	(586)	-	-	-
4,568	577	495	805	160	(1,287)	480	(433)	47
-	(401)	-	(822)	-	-	(3,610)	-	(3,610)
-	72	-	2	-	-	262	-	262
-	(329)	-	(820)	-	-	(3,348)	-	(3,348)
-	-	-	4	-	-	10,051	-	10,051
(315)	-	-	-	-	-	(319)	-	(319)
-	-	-	-	(140)	-	(140)	532	392
(2,684)	-	-	-	-	-	(2,867)	14	(2,853)
-	(101)	(10)	(106)	-	(44)	(1,115)	178	(937)
(928)	(59)	(388)	(16)	(38)	(34)	(2,757)	(77)	(2,834)
-	-	-	-	-	-	-	(74)	(74)
-	-	-	-	-	779	779	-	779
-	-	-	-	-	-	-	(361)	(361)
-	-	-	-	-	-	236	(236)	-
(71)	(12)	-	(4)	(37)	586	-	-	-
(3,998)	(501)	(398)	(942)	(215)	1,287	520	(24)	496
5	-	-	-	(9)	-	(1)	-	(1)
-	-	-	-	-	-	-	53	53
575	76	97	(137)	(64)	-	999	(404)	595
(123)	(17)	2	-	192	-	(86)	174	88
(227)	(19)	-	-	(21)	-	(272)	30	(242)
225	40	99	(137)	107	-	641	(200)	441
29	(49)	1	(228)	324	-	(200)
254	(9)	100	(365)	431	-	441

Notes to the consolidated financial statements

For the six months ended 30 June 2009

3 Segment information continued    

(iii) Gross earned premiums

Six months ended 30 June 2009	Long Term Savings
	OMSA	Europe	US Life	Asia  Pacific	Total
Long-term business-insurance contracts	582	215	421	-	1,218
Long-term business-investment contracts with discretionary  participation features	295	-	-	-	295
General insurance	-	-	-	-	-
Gross earned premiums	877	215	421	-	1,513
Long-term business - other investment contracts recognised as deposits	1,213	3,064	82	-	4,359
	Long Term Savings
Six months ended 30 June 2008	OMSA	Europe	US Life	Asia  Pacific	Total
Long-term business-insurance contracts	526	126	582	-	1,234
Long-term business-investment contracts with discretionary  participation features	264	-	-	-	264
General insurance	-	-	-	-	-
Gross earned premiums	790	126	582	-	1,498
Long-term business - other investment contracts recognised as deposits	597	3,938	53	-	4,588
	Long Term Savings
Year ended 31 December 2008	OMSA	Europe	US Life	Asia  Pacific	Total
Long-term business-insurance contracts	1,148	315	1,269	-	2,732
Long-term business-investment contracts with discretionary  participation features	524	-	-	-	524
General insurance	-	-	-	-	-
Gross earned premiums	1,672	315	1,269	-	3,256
Long-term business - other investment contracts recognised as deposits	1,391	6,920	115	-	8,426

(iv) Impairments on financial assets

		£m
		6 months ended 30 June 2009	6 months  ended 30 June 2008	Year ended  31 December 2008
Europe		3	1	5
US Life		133	68	392
Total Long Term Savings		136	69	397
Nedbank		250	125	315
Bermuda		14	7	22
Total		400	201	734

3 Segment information continued    

(iii) Gross earned premiums

				£m
Nedbank	M&F	USAM	Bermuda	Total
-	-	-	7	1,225
-	-	-	-	295
	297			297
-	297	-	7	1,817
-	-	-	8	4,367
				£m
Nedbank	M&F	USAM	Bermuda	Total
-	-	-	1,062	2,296
-	-	-	-	264
-	301	-	-	301
-	301	-	1,062	2,861
-	-	-	63	4,651
				£m
Nedbank	M&F	USAM	Bermuda	Total
-	-	-	1,330	4,062
-	-	-	-	524
-	570	-	-	570
-	570	-	1,330	5,156
-	-	-	115	8,541

Notes to the consolidated financial statements

For the six months ended 30 June 2009

3 Segment information continued    

(v) Funds under management 

	Long Term Savings
As at 30 June 2009	OMSA	Europe	US Life	Asia  Pacific	Total
Long-term business policyholder funds	21,380	39,102	347	257	61,086
Unit trusts and mutual funds	4,044	12,668	-	-	16,712
Third party client funds	6,988	-	-	-	6,988
Total client funds under management	32,412	51,770	347	257	84,786
Shareholder funds	1,776	1,289	-	-	3,065
Total funds under management	34,188	53,059	347	257	87,851
	Long Term Savings
As at 30 June 2008	OMSA	Europe	US Life	Asia  Pacific	Total
Long-term business policyholder funds	18,435	42,665	235	167	61,502
Unit trusts and mutual funds	3,318	13,249	-	2,346	18,913
Third party client funds	6,221	-	-	3,453	9,674
Total client funds under management	27,974	55,914	235	5,966	90,089
Shareholder funds	1,721	1,348	-	-	3,069
Total funds under management	29,695	57,262	235	5,966	93,158
	Long Term Savings
As at 31 December 2008	OMSA	Europe	US Life	Asia  Pacific	Total
Long-term business policyholder funds	20,301	38,791	241	193	59,526
Unit trusts and mutual funds	3,613	12,399	-	1,859	17,871
Third party client funds	8,841	-	-	1,484	10,325
Total client funds under management	32,755	51,190	241	3,536	87,722
Shareholder funds	1,632	1,614	-	-	3,246
Total funds under management	34,387	52,804	241	3,536	90,968

3 Segment information continued    

(v) Funds under management

			£m
Nedbank	M&F	USAM	Bermuda	Total
549	-	12,359	2,327	76,321
2,863	-	3,132	-	22,707
3,361	-	134,529	-	144,878
6,773	-	150,020	2,327	243,906
-	139	163	-	3,367
6,773	139	150,183	2,327	247,273
				£m
Nedbank	M&F	USAM	Bermuda	Total
412	-	11,404	2,298	75,616
2,321	-	4,878	-	26,112
3,096	-	141,613	-	154,383
5,829	-	157,895	2,298	256,111
-	78	176	-	3,323
5,829	78	158,071	2,298	259,434
				£m
Nedbank	M&F	USAM	Bermuda	Total
425	-	13,623	2,401	75,975
2,617	-	3,127	-	23,615
3,375	-	147,956	-	161,656
6,417	-	164,706	2,401	261,246
-	145	177	-	3,568
6,417	145	164,883	2,401	264,814

Notes to the consolidated financial statements

For the six months ended 30 June 2009

3 Segment information continued

(vi) Statement of financial position - segment information at 30 June 2009 

	Long Term Savings
At 30 June 2009	OMSA	Europe	US Life	Asia  Pacific	Total
Assets
Goodwill and other intangible assets	35	3,543	101	-	3,679
Mandatory reserve deposits with central banks	-	-	-	-	-
Property, plant and equipment	327	38	1	-	366
Investment property	1,405	3	-	-	1,408
Deferred tax assets	58	283	918	-	1,259
Investments in associated undertakings and joint ventures	8	1	-	(3)	6
Deferred acquisition costs	111	1,000	1,554	-	2,665
Reinsurers' share of long-term business policyholder liabilities	11	682	450	-	1,143
Reinsurers' share of general insurance liabilities	-	-	-	-	-
Deposits held with reinsurers	-	99	35	-	134
Loans and advances	151	3,739	56	-	3,946
Investments and securities	23,458	40,997	9,376	-	73,831
Current tax receivable	3	101	-	-	104
Client indebtedness for acceptances	-	-	-	-	-
Other assets	567	461	288	-	1,316
Derivative financial instruments - assets	98	7	68	-	173
Cash and cash equivalents	74	932	(17)	-	989
Inter-segment assets	1,208	421	57	-	1,686
Total assets	27,514	52,307	12,887	(3)	92,705
Liabilities
Long-term business policyholder liabilities	24,393	40,254	11,475	-	76,122
General insurance liabilities	-	-	-	-	-
Third party interests in consolidated funds	-	-	-	-	-
Borrowed funds	255	25	-	-	280
Provisions	136	177	-	-	313
Deferred revenue	23	573	-	-	596
Deferred tax liabilities	165	474	647	-	1,286
Current tax payable	61	55	(9)	-	107
Other liabilities	938	673	331	-	1,942
Liabilities under acceptances	-	-	-	-	-
Amounts owed to bank depositors	-	4,907	-	-	4,907
Derivative financial instruments - liabilities	6	23	16	-	45
Inter-segment liabilities	37	369	142	20	568
Total liabilities	26,014	47,530	12,602	20	86,166
Net assets	1,500	4,777	285	(23)	6,539
Equity
Equity attributable to equity holders of the parent	1,501	4,777	285	(23)	6,540
Non-controlling interests	(1)	-	-	-	(1)
Non-controlling interests - ordinary shares	(1)	-	-	-	(1)
Non-controlling interests - preference shares	-	-	-	-	-
Total equity	1,500	4,777	285	(23)	6,539

3 Segment information continued

(vi) Statement of financial position - segment information at 30 June 2009

						£m
Nedbank	M&F	USAM	Bermuda	Other operating segments	Consolidation  adjustments	Total reportable segments
508	31	1,163	3	13	-	5,397
856	-	-	-	-	-	856
351	22	21	-	3	-	763
18	-	-	-	-	152	1,578
17	8	141	-	9	-	1,434
76	-	7	-	26	-	115
2	17	34	215	-	-	2,933
18	-	-	1	-	-	1,162
-	130	-	-	-	-	130
-	3	-	-	-	-	137
33,886	3	-	-	-	-	37,835
5,194	370	156	2,915	76	1,951	84,493
44	1	-	-	-	-	149
146	-	-	-	-	-	146
376	84	124	831	45	453	3,229
1,401	-	-	(35)	163	784	2,486
632	80	125	38	23	785	2,672
33	45	2	508	684	(2,958)	-
43,558	794	1,773	4,476	1,042	1,167	145,515
548	-	-	4,131	-	-	80,801
-	403	-	-	-	-	403
-	-	-	-	-	2,610	2,610
1,064	-	-	-	1,171	-	2,515
-	18	2	-	76	-	409
-	8	-	-	-	-	604
158	1	-	-	21	-	1,466
18	-	7	16	47	-	195
877	97	180	20	96	735	3,947
146	-	-	-	-	-	146
35,683	-	-	-	-	-	40,590
1,244	-	-	-	40	780	2,109
412	-	803	3	1,172	(2,958)	-
40,150	527	992	4,170	2,623	1,167	135,795
3,408	267	781	306	(1,581)	-	9,720
1,941	217	754	306	(2,027)	-	7,731
1,467	50	27	-	446	-	1,989
1,217	50	27	-	-	-	1,293
250	-	-	-	446	-	696
3,408	267	781	306	(1,581)	-	9,720

  Notes to the consolidated financial statements

For the six months ended 30 June 2009

3 Segment information continued

(vi) Statement of financial position - segment information at 30 June 2008 

	Long Term Savings
At 30 June 2008	OMSA	Europe	US Life	Asia  Pacific	Total
Assets
Goodwill and other intangible assets	22	3,849	193	16	4,080
Mandatory reserve deposits with central banks	-	-	-	-	-
Property, plant and equipment	227	42	1	4	274
Investment property	1,028	3	-	-	1,031
Deferred tax assets	57	151	459	6	673
Investments in associated undertakings and joint ventures	21	-	-	(11)	10
Deferred acquisition costs	89	853	1,546	9	2,497
Reinsurers' share of long-term business policyholder liabilities	18	730	658	-	1,406
Deposits held with reinsurers	-	156	29	-	185
Loans and advances	72	3,647	44	-	3,763
Investments and securities	21,000	44,085	8,963	-	74,048
Current tax receivable	3	39	-	-	42
Client indebtedness for acceptances	-	-	-	-	-
Other assets	392	452	213	8	1,065
Derivative financial instruments - assets	44	19	21	-	84
Cash and cash equivalents	122	976	-	11	1,109
Non-current assets held-for-sale	8	-	-	-	8
Inter-segment assets	2	558	(1)	-	559
Total assets	23,105	55,560	12,126	43	90,834
Liabilities
Long-term business policyholder liabilities	21,223	43,814	9,620	-	74,657
Third party interests in consolidated funds	-	-	-	-	-
Borrowed funds	209	55	-	-	264
Provisions	113	182	-	10	305
Deferred revenue	22	488	-	10	520
Deferred tax liabilities	228	548	496	-	1,272
Current tax payable	52	59	(1)	-	110
Other liabilities	707	817	1,045	11	2,580
Liabilities under acceptances	-	-	-	-	-
Amounts owed to bank depositors	-	4,442	-	-	4,442
Derivative financial instruments - liabilities	53	9	-	-	62
Non-current liabilities held-for-sale	6	-	-	-	6
Inter-segment liabilities	(795)	502	(28)	33	(288)
Total liabilities	21,818	50,916	11,132	64	83,930
Net assets	1,287	4,644	994	(21)	6,904
Equity
Equity attributable to equity holders of the parent	1,281	4,639	994	(21)	6,893
Non-controlling interests	6	5	-	-	11
Non-controlling interests - ordinary shares	6	5	-	-	11
Non-controlling interests - preference shares	-	-	-	-	-
Total equity	1,287	4,644	994	(21)	6,904

3 Segment information continued

(vi) Statement of financial position - segment information at 30 June 2008

						£m
Nedbank	M&F	USAM	Bermuda	Other operating segments	Consolidation  adjustments	Total reportable segments
399	-	958	3	13	-	5,453
610	-	-	-	-	-	610
252	-	20	-	3	-	549
12	-	-	-	-	222	1,265
8	-	95	(12)	-	-	764
56	-	-	-	3	-	69
2	-	27	202	-	-	2,728
5	-	-	-	-	-	1,411
-	-	-	-	-	-	185
26,127	-	-	-	-	-	29,890
4,808	-	176	2,787	186	1,784	83,789
2	-	-	-	3	-	47
201	-	-	-	-	-	201
897	-	168	823	89	202	3,244
1,077	-	-	1	123	1,864	3,149
744	-	178	42	114	942	3,129
2	561	-	-	-	-	571
(1)	(1)	-	-	1,433	(1,990)	-
35,201	560	1,622	3,846	1,967	3,024	137,054
413	-	-	3,884	-	-	78,954
-	-	-	-	-	2,674	2,674
783	-	-	-	1,189	-	2,236
11	-	2	-	111	-	429
1	-	-	-	-	-	521
117	-	-	-	-	-	1,389
22	-	1	4	69	-	206
2,121	-	247	46	109	519	5,622
201	-	-	-	-	-	201
27,591	-	-	-	-	-	32,033
1,106	-	-	-	73	1,821	3,062
-	367	-	-	-	-	373
300	(34)	1,441	(17)	588	(1,990)	-
32,666	333	1,691	3,917	2,139	3,024	127,700
2,535	227	(69)	(71)	(172)	-	9,354
1,460	183	(97)	(71)	(566)	-	7,802
1,075	44	28	-	394	-	1,552
818	44	28	-	(52)	-	849
257	-	-	-	446	-	703
2,535	227	(69)	(71)	(172)	-	9,354

  Notes to the consolidated financial statements

For the six months ended 30 June 2009

3 Segment information continued

(vi) Statement of financial position - segment information at 31 December 2008 

	Long Term Savings
At 31 December 2008*	OMSA	Europe	US Life	Asia  Pacific	Total
Assets
Goodwill and other intangible assets	32	3,930	132	11	4,105
Mandatory reserve deposits with central banks	-	-	-	-	-
Property, plant and equipment	267	44	1	1	313
Investment property	1,281	3	-	-	1,284
Deferred tax assets	65	295	1,036	3	1,399
Investments in associated undertakings and joint ventures	26	-	-	7	33
Deferred acquisition costs	105	988	1,896	8	2,997
Reinsurers' share of long-term business policyholder liabilities	6	625	505	-	1,136
Reinsurers' share of general insurance liabilities	-	-	-	-	-
Deposits held with reinsurers	-	121	40	-	161
Loans and advances	59	3,987	62	-	4,108
Investments and securities	22,326	40,151	10,284	-	72,761
Current tax receivable	3	88	-	2	93
Client indebtedness for acceptances	-	-	-	-	-
Other assets	443	441	252	4	1,140
Derivative financial instruments - assets	209	-	36	-	245
Cash and cash equivalents	101	757	(18)	10	850
Non-current assets held-for-sale	7	-	-	-	7
Inter-segment assets	1,322	516	46	-	1,884
Total assets	26,252	51,946	14,272	46	92,516
Liabilities
Long-term business policyholder liabilities	23,162	39,559	13,338	-	76,059
General insurance liabilities	-	-	-	-	-
Third party interests in consolidated funds	-	-	-	-	-
Borrowed funds	237	1	-	-	238
Provisions	128	240	-	4	372
Deferred revenue	23	559	-	8	590
Deferred tax liabilities	172	526	578	-	1,276
Current tax payable	97	51	(15)	-	133
Other liabilities	831	879	267	16	1,993
Liabilities under acceptances	-	-	-	-	-
Amounts owed to bank depositors	-	4,622	-	-	4,622
Derivative financial instruments - liabilities	31	1	-	-	32
Non-current liabilities held-for-sale	6	-	-	-	6
Inter-segment liabilities	31	765	1	35	832
Total liabilities	24,718	47,203	14,169	63	86,153
Net assets	1,534	4,743	103	(17)	6,363
Equity
Equity attributable to equity holders of the parent	1,526	4,743	103	(17)	6,355
Non-controlling interests	8	-	-	-	8
Non-controlling interests - ordinary shares	8	-	-	-	8
Non-controlling interests - preference shares	-	-	-	-	-
Total equity	1,534	4,743	103	(17)	6,363

*    The 31 December 2008 financial position has been restated by an amount of £1,405 million for both derivative financial instruments assets and liabilities on a consistent basis to 30 June 2009. There was no impact on the consolidated net assets at 31 December 2008 as a result of the restatement.

3 Segment information continued

(vi) Statement of financial position - segment information at 31 December 2008

						£m
Nedbank	M&F	USAM	Bermuda	Other operating segments	Consolidation  adjustments	Total reportable segments
425	29	1,305	5	13	­-	5,882
734	-	-	-	-	-	734
316	24	26	-	3	-	682
15	-	-	-	-	179	1,478
25	8	158	-	-	-	1,590
75	-	-	-	3	-	111
2	15	40	145	-	-	3,199
9	-	-	3	-	-	1,148
-	115	-	-	-	-	115
-	3	-	-	-	-	164
31,634	2	-	-	1	-	35,745
5,043	322	177	3,676	88	1,455	83,522
25	-	-	-	-	-	118
220	-	-	-	-	-	220
486	68	139	789	96	419	3,137
1,627	-	-	21	226	1,109	3,228
631	56	220	29	79	997	2,862
-	-	-	-	-	-	7
19	46	99	377	1,632	(4,057)	-
41,286	688	2,164	5,045	2,141	102	143,942
426	-	-	4,784	-	-	81,269
-	344	-	-	-	-	344
-	-	-	-	-	2,591	2,591
960	-	-	-	1,097	-	2,295
1	21	3	-	80	-	477
-	8	-	-	-	-	598
162	2	-	-	12	-	1,452
18	2	8	19	39	-	219
747	71	299	9	149	465	3,733
220	-	-	-	-	-	220
33,549	-	-	-	-	-	38,171
1,731	-	-	-	124	1,103	2,990
-	-	-	-	-	-	6
427	(1)	1,452	3	1,344	(4,057)	-
38,241	447	1,762	4,815	2,845	102	134,365
3,045	241	402	230	(704)	-	9,577
1,717	193	365	230	(1,123)	-	7,737
1,328	48	37	-	419	-	1,840
1,081	48	37	-	(27)	-	1,147
247	-	-	-	446	-	693
3,045	241	402	230	(704)	-	9,577

  Notes to the consolidated financial statements

For the six months ended 30 June 2009

4 Operating profit adjusting items

(i) Summary of adjusting items

In determining the adjusted operating profit of the Group certain adjustments are made to profit before tax to reflect the directors' view of the underlying long-term performance of the Group. The following table shows an analysis of those adjustments from adjusted operating profit to profit before and after tax.

£m
Six months ended 30 June 2009	Notes	Long Term Savings
		OMSA	Europe	US Life	Asia Pacific	Total
Income/(expense)
Goodwill impairment and impact of acquisition accounting	4(ii)	-	(109)	(9)	-	(118)
Loss on disposal of subsidiaries, associated undertakings and strategic investments	4(iii)	(1)	-	-	(45)	(46)
Short-term fluctuations in investment return	4(iv)	(32)	(27)	(93)	-	(152)
Investment return adjustment for Group equity and debt instruments held in life funds	4(v)	(40)	-	-	-	(40)
Dividends declared to holders of perpetual preferred callable securities	4(vi)	-	-	-	-	-
US Asset Management equity plans and minority holders	4(vii)	-	-	-	-	-
Credit-related fair value gains on Group debt instruments	4(viii)	-	-	-	-	-
Total adjusting items		(73)	(136)	(102)	(45)	(356)
Tax on adjusting items	5(iii)	10	21	4	-	35
Non-controlling interest in adjusting items	6(iii)	-	-	-	-	-
Total adjusting items after tax and non-controlling interests		(63)	(115)	(98)	(45)	(321)

£m
Six months ended 30 June 2008	Notes	Long Term Savings
		OMSA	Europe	US Life	Asia Pacific	Total
Income/(expense)
Goodwill impairment and impact of acquisition accounting	4(ii)	-	(114)	(13)	-	(127)
(Loss)/profit on disposal of subsidiaries, associated undertakings and strategic investments	4(iii)	(13)	75	-	-	62
Short-term fluctuations in investment return	4(iv)	40	9	(32)	-	17
Investment return adjustment for Group equity and debt instruments held in life funds	4(v)	150	-	-	-	150
Dividends declared to holders of perpetual preferred callable securities	4(vi)	-	-	-	-	-
US Asset Management equity plans and minority holders	4(vii)	-	-	-	-	-
Credit-related fair value gains on Group debt instruments	4(viii)	-	-	-	-	-
Total adjusting items		177	(30)	(45)	-	102
Tax on adjusting items	5(iii)	(1)	18	(7)	-	10
Non-controlling interest in adjusting items	6(iii)	-	-	-	-	-
Total adjusting items after tax and non-controlling interests		176	(12)	(52)	-	112

4 Operating profit adjusting items

(i) Summary of adjusting items

£m
Nedbank	M&F	USAM	Bermuda	Other	Total
-	-	-	-	-	(118)
-	-	1	-	-	(45)
-	(11)	-	(49)	(23)	(235)
-	-	-	-	-	(40)
-	-	-	-	22	22
-	-	1	-	-	1
6	-	-	-	6	12
6	(11)	2	(49)	5	(403)
(2)	3	9	-	(4)	41
6	3	-	-	-	9
10	(5)	11	(49)	1	(353)

£m
Nedbank	M&F	USAM	Bermuda	Other	Total
-	-	-	-	-	(127)
1	-	(1)	-	-	62
-	(10)	-	(50)	37	(6)
-	-	-	-	-	150
-	-	-	-	22	22
-	-	5	-	-	5
-	-	-	-	40	40
1	(10)	4	(50)	99	146
-	-	-	-	(24)	(14)
13	4	(5)	-	-	12
14	(6)	(1)	(50)	75	144

Notes to the consolidated financial statements

For the six months ended 30 June 2009

4 Operating profit adjusting items continued

(i) Summary of adjusting items continued

Year ended 31 December 2008	Notes		Long Term Savings
			OMSA	Europe		US Life	Asia Pacific	Total
Income/(expense)
Goodwill impairment and impact of acquisition accounting	4(ii)		-	(341)		(96)	(1)	(438)
(Loss)/profit on disposal of subsidiaries, associated undertakings and strategic investments	4(iii)		(11)	72		-	-	61
Short-term fluctuations in investment return	4(iv)		(95)	145		(248)	-	(198)
Investment return adjustment for Group equity and debt instruments held in life funds	4(v)		234	-		-	-	234
Dividends declared to holders of perpetual preferred callable securities	4(vi)		-	-		-	-	-
US Asset Management equity plans and minority holders	4(vii)	-			-	-	-	-
Credit-related fair value gains on Group debt instruments	4(viii)	-			-	-	-	-
Total adjusting items		128			(124)	(344)	(1)	(341)
Tax on adjusting items	5(iii)	20			41	3	-	64
Non-controlling interest in adjusting items	6(iii)	-			-	-	-	-
Total adjusting items after tax and non-controlling interests		148			(83)	(341)	(1)	(277)

4 Operating profit adjusting items continued

(i) Summary of adjusting items continued

					£m
Nedbank	M&F	USAM	Bermuda	Other	Total
-	-	-	-	-	(438)
1	(10)	1	-	-	53
-	(72)	-	(228)	(72)	(570)
-	-	-	-	-	234
-	-	-	-	43	43
-	-	7	-	-	7
14	-	-	-	489	503
15	(82)	8	(228)	460	(168)
(4)	14	-	-	(136)	(62)
18	19	(7)	-	-	30
29	(49)	1	(228)	324	(200)

Notes to the consolidated financial statements

For the six months ended 30 June 2009

4 Operating profit adjusting items continued

(ii) Goodwill impairment and impact of acquisition accounting

In applying acquisition accounting in accordance with IFRS deferred acquisition costs and deferred revenue are not recognised. These are reversed in the acquisition statement of financial position and replaced by goodwill, other intangible assets and the value of the acquired present value of in-force business ('acquired PVIF'). In determining its adjusted operating profit the Group recognises deferred revenue and acquisition costs in relation to policies sold by acquired businesses pre-acquisition, and excludes the impairment of goodwill and the amortisation of acquired other intangibles and acquired PVIF.

Goodwill impairment and acquisition accounting adjustments to adjusted operating profit are summarised below:

£m
Six months ended 30 June 2009	Long Term Savings				Total
	OMSA	Europe	US Life	Asia Pacific
Amortisation of acquired PVIF	-	(117)	(9)	-	(126)
Amortisation of acquired deferred costs and revenue	-	23	-	-	23
Amortisation of other acquired intangible assets	-	(38)	-	-	(38)
Change in acquisition statement of financial position provisions	-	23	-	-	23
Goodwill impairment	-	-	-	-	-
	-	(109)	(9)	-	(118)

£m
Six months ended 30 June 2008	Long Term Savings				Total
	OMSA	Europe	US Life	Asia Pacific
Amortisation of acquired PVIF	-	(126)	(13)	-	(139)
Amortisation of acquired deferred costs and revenue	-	45	-	-	45
Amortisation of other acquired intangible assets	-	(37)	-	-	(37)
Change in acquisition statement of financial position provisions	-	4	-	-	4
Goodwill impairment	-	-	-	-	-
	-	(114)	(13)	-	(127)

£m
Year ended 31 December 2008	Long Term Savings				Total
	OMSA	Europe	US Life	Asia Pacific
Amortisation of acquired PVIF	-	(251)	(35)	-	(286)
Amortisation of acquired deferred costs and revenue	-	81	-	-	81
Amortisation of other acquired intangible assets	-	(75)	-	-	(75)
Change in acquisition statement of financial position provisions	-	(84)	-	-	(84)
Goodwill impairment	-	(12)	(61)	(1)	(74)
	-	(341)	(96)	(1)	(438)

Notes to the consolidated financial statements

For the six months ended 30 June 2009

4 Operating profit adjusting items continued

(iii) (Loss)/profit on disposal of subsidiaries, associated undertakings and strategic investments

On 6 March 2009 the Group disposed of its interest in OM Australia at a loss of £4 million.

In August 2008, an agreement with ABN AMRO Asset Management Asia and their parent company, Fortis Bank had been entered into to acquire the 49% stake that Fortis holds in AATEDA, a major Chinese asset management joint venture for €165 million. On 27 May 2009 termination of AATEDA transaction with ABN AMRO Asset Management Asia and Fortis Bank was announced, with an exit fee of £41 million which has been accounted for as a loss on disposal.

On 11 June 2008, ELAM completed the disposal of its controlling shareholding in Palladyne, an asset management business, resulting in a profit on disposal of £17 million.

Part of the Nordic segment's banking business, Skandia's Nordic vehicle finance operation, SkandiaBanken Bilfinans, was sold during the six months ended 30 June 2008, resulting in a profit on disposal of £55 million.

During 2008, the Group has closed its project to develop a direct financial services capability in South Africa due to adverse market conditions. Costs relating to the closure amounting to £25 million have been excluded from the adjusted operating profit. OMSA realised a profit of £4 million on the sale of its administration business and Nedbank recognised a £1 million profit on the disposal of Bond Choice. 

(Loss)/profits on the disposal of subsidiaries, associated undertakings and strategic investments are analysed below:

£m
	Notes	6 months  ended 30 June 2009	6 months  ended 30 June 2008	Year ended  31 December 2008
OMSA		(1)	(13)	(11)
Europe		-	75	72
US Life		-	-	-
Asia Pacific		(45)	-	-
Total Long Term Savings		(46)	62	61
Nedbank		-	1	1
M&F		-	-	(10)
USAM		1	(1)	1
Other		-	-	-
(Loss)/profit on disposal of subsidiaries, associated undertakings and strategic investments		(45)	62	53

(iv) Long-term investment return

Profit before tax includes actual investment returns earned on the shareholder assets of the Group's long-term and general insurance businesses. Adjusted operating profit is stated after recalculating shareholder asset investment returns based on a long-term investment return rate. The difference between the actual and the long-term investment returns are short-term fluctuations in investment return.

Long-term rates of return are based on achieved real rates of return appropriate to the underlying asset base, adjusted for current inflation expectations, default assumptions, costs of investment management and consensus economic investment forecasts, and are reviewed frequently, usually annually, for appropriateness. These rates of return have been selected with a view to ensuring that returns credited to adjusted operating profit are consistent with the actual returns expected to be earned over the long-term.

For South Africa long-term business, the return is applied to an average value of investible shareholders' assets, adjusted for net fund flows. For South Africa general insurance business, the return is an average value of investible assets supporting shareholders' funds and insurance liabilities, adjusted for net fund flows. For US and Europe long-term businesses, the return is applied to average investible assets.

  Notes to the consolidated financial statements

For the six months ended 30 June 2009

4 Operating profit adjusting items continued

(iv) Long-term investment return continued

Long-term investment rates	6 months ended 30 June 2009	6 months ended  30 June 2008 Restated	Year ended  31 December 2008
OMSA	13.3%	16.6%	16.6%
Europe	4.3%	4.8%	4.8%
US Life	5.6%	5.9%	5.9%
M&F	13.3%	16.6%	16.6%

(iv) Long-term investment return continued

Analysis of short-term fluctuations in investment return

£m
	Long Term Savings				M&F	Bermuda	Other	Total
Six months ended 30 June 2009	OMSA	Europe	US Life	Total
Long-term investment return	61	53	303	417	28	69	46	560
Less: Actual shareholder investment return	29	26	210	265	17	74	23	379
Short-term fluctuations in investment return	32	27	93	152	11	(5)	23	181
Hedge losses on Bermuda guarantees treated as short-term fluctuations	-	-	-	-	-	54	-	54
Total short-term fluctuations in investment return	32	27	93	152	11	49	23	235
								£m
	Long Term Savings				M&F	Bermuda	Other	Total
Six months ended 30 June 2008	OMSA	Europe	US Life	Total
Long-term investment return	67	5	98	170	29	74	53	326
Less: Actual shareholder investment return	107	14	66	187	19	68	90	364
Short-term fluctuations in investment return	(40)	(9)	32	(17)	10	6	(37)	(38)
Hedge losses on Bermuda guarantees treated as short-term fluctuations	-	-	-	-	-	44	-	44
Total short-term fluctuations in investment return	(40)	(9)	32	(17)	10	50	(37)	6
								£m
	Long Term Savings				M&F	Bermuda	Other	Total
Year ended 31 December 2008	OMSA	Europe	US Life	Total
Long-term investment return	133	66	213	412	60	541	108	1,121
Less: Actual shareholder investment return	38	211	(35)	214	(12)	519	36	757
Short-term fluctuations in investment return	95	(145)	248	198	72	22	72	364
Hedge losses on Bermuda guarantees treated as short-term fluctuations	-	-	-	-	-	206	-	206
Total short-term fluctuations in investment return	95	(145)	248	198	72	228	72	570

The actual investment return attributable to shareholders for the US long-term business reflects total investment income, as a distinction is not drawn between shareholder and policyholder funds.

(v) Investment return adjustment for Group equity and debt instruments held in life funds

Adjusted operating profit includes investment returns on policyholder investments in Group equity and debt instruments by the Group's life funds. These include investments in the Company's ordinary shares, and the subordinated liabilities and ordinary securities of the Group's South Africa banking subsidiary. These investment returns are eliminated within the consolidated income statement in arriving at profit before tax, but are included in adjusted operating profit. For the six months ended 30 June 2009, the investment return adjustment increased adjusted operating profit by £40 million (six months ended 30 June 2008: decrease of £150 million, year ended 31 December 2008: decrease of 
£234 million).

(vi) Dividends declared to holders of perpetual preferred callable securities

Dividends declared to the holders of the Group's perpetual preferred callable securities were £22 million for the six months ended 30 June 2009 (six months ended 30 June 2008: £22 million, year ended 31 December 2008: £43 million). These are recognised in finance costs on an accruals basis for the purpose of determining adjusted operating profit. In the IFRS financial statements this cost is recognised in equity.

  Notes to the consolidated financial statements

For the six months ended 30 June 2009 

4 Operating profit adjusting items continued

(vii) US Asset Management equity plans and non-controlling interests

US Asset Management has entered into a number of long-term incentive arrangements with its asset management affiliates.

In accordance with IFRS requirements the cost of these schemes is disclosed as being attributable to non-controlling interests. However, this is treated as a compensation expense in determining adjusted operating profit. The amount recognised in relation to this for the six months ended 30 June 2009 was less than £1 million (six months ended 30 June 2008: £5 million, year ended 31 December 2008: £7 million).

The Group has issued put options to employees as part of some of its US affiliate incentive schemes. The impact of revaluing these instruments is recognised in accordance with IFRS, but excluded from adjusted operating profit. As at 30 June 2009 these instruments were revalued, the impact of which was £1 million (six months ended 30 June 2008: less than £1 million, year ended 31 December 2008: nil).

(viii) Credit-related fair value gains on Group debt instruments

The widening of credit spread of the Group's debt instruments in the market price has resulted in gains of £6 million for the six months ended 30 June 2009 (six months ended 30 June 2008: £40 million gain, year ended 31 December 2008: £489 million gain) at Group head office and £6 million for the six months ended 30 June 2009 (six months ended 30 June 2008: nil, year ended 31 December 2008: £14 million gain) in Nedbank being recorded in the Group's income statement for those instruments that are recorded at fair value.

In the directors' view, this gain is not reflective of the underlying performance of the Group and will reverse over time. The gain has therefore been excluded from adjusted operating profit.

  5 Income tax expense/(credit) 

(i) Analysis of total income tax expense/(credit)

£m
	6 months ended 30 June 2009	6 months ended 30 June 2008	Year ended  31 December 2008
Current tax
United Kingdom tax
Corporation tax	65	96	93
Double tax relief	(44)	(93)	(145)
Overseas tax
South Africa	107	132	264
United States	2	(7)	4
Europe	22	39	68
Secondary Tax on Companies (STC)	5	5	22
Prior year adjustments	6	18	1
Total current tax	163	190	307
Deferred tax
Origination of temporary differences	(73)	(44)	(548)
Changes in tax rates/bases	-	(5)	(1)
Write down/recognition of deferred tax assets	44	27	154
Total deferred tax	(29)	(22)	(395)
Total income tax expense/(credit)	133	168	(88)
(ii) Reconciliation of total income tax expense/(credit)
£m
	6 months ended 30 June 2009	6 months ended 30 June 2008	Year ended  31 December 2008
Profit before tax	160	853	595
Tax at standard rate of 28% (2008: 28.5%)	44	243	169
Different tax rate or basis on overseas operations	9	9	(23)
Untaxed and low taxed income	(49)	(128)	(218)
Disallowable expenses	66	23	8
Net movement on deferred tax assets not recognised	49	34	123
Effect on deferred tax of changes in tax rates	(2)	(5)	(5)
STC	6	41	53
Income tax attributable to policyholder returns	20	(46)	(169)
Other	(10)	(3)	(26)
Total income tax expense/(credit)	133	168	(88)

  (iii) Income tax on adjusted operating profit

£m
	6 months ended 30 June 2009	6 months ended 30 June 2008	Year ended  31 December 2008
Income tax expense/(credit)	133	168	(88)
Tax on adjusting items
Impact of acquisition accounting	19	20	46
(Loss)/profit on disposal of subsidiaries, associated undertakings and strategic investments	-	1	12
Short-term fluctuations in investment return	23	(18)	35
Income tax attributable to policyholders returns	(25)	66	236
Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity	(6)	(6)	(12)
Fair value gains on group debt instruments	(3)	(11)	(143)
IAS 34 effective tax rate adjustment	8	-	-
Income tax on adjusted operating profit	149	220	86

6 (Losses)/earnings and (loss)/earnings per share

(i) Basic and diluted (loss)/earnings per share

Basic (loss)/earnings per share is calculated by dividing the (loss)/profit for the financial period attributable to ordinary equity shareholders by the weighted average number of ordinary shares in issue during the period excluding own shares held in policyholder funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings.

£m
	6 months ended 30 June 2009	6 months ended 30 June 2008	Year ended  31 December 2008
(Loss)/profit for the financial period attributable to equity holders of the parent	(70)	549	441
Dividends declared to holders of perpetual preferred callable securities	(16)	(16)	(31)
(Loss)/profit attributable to ordinary equity holders	(86)	533	410
Total dividends declared to holders of perpetual preferred callable securities of £22 million in 2008 (six months ended 30 June 2008: £22 million, year ended 31 December 2008: £43 million) are stated net of tax credits of £6 million (six months ended 30 June 2008: £6 million, year ended 31 December 2008: £12 million).
Millions
	6 months ended 30 June 2009	6 months ended 30 June 2008	Year ended 31 December 2008
Weighted average number of ordinary shares in issue	5,277	5,311	5,294
Shares held in charitable foundations	(7)	(21)	(19)
Shares held in ESOP trusts	(38)	(45)	(45)
Adjusted weighted average number of ordinary shares	5,232	5,245	5,230
Shares held in life funds	(239)	(239)	(240)
Shares held in Black Economic Empowerment trusts	(236)	(235)	(235)
Weighted average number of ordinary shares	4,757	4,771	4,755
Basic (loss)/earnings per ordinary share (pence)	(1.8)	11.2	8.6
Diluted earnings per share recognises the dilutive impact of share options held in ESOP trusts and Black Economic Empowerment trusts which are currently in the money in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full period.
Millions
	6 months ended 30 June 2009	6 months ended 30 June 2008	Year ended 31 December 2008
Weighted average number of ordinary shares	4,757	4,771	4,755
Adjustments for share options held by ESOP trusts	109	51	61
Adjustments for shares held in Black Economic Empowerment trusts	236	235	235
	5,102	5,057	5,051
Diluted (loss)/earnings per ordinary share (pence)	(1.7)	10.5	8.1

  Notes to the consolidated financial statements

For the six months ended 30 June 2009

6 Earnings and earnings per share continued

(ii) Adjusted operating earnings per ordinary share

Adjusted operating earnings per ordinary share is determined based on adjusted operating profit. Adjusted operating profit represents the directors' view of the underlying performance of the Group. For long-term and general insurance business 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 non-controlling interests in accordance with IFRS. For all businesses, adjusted operating profit excludes goodwill impairment, the impact of acquisition accounting, revaluations of put options 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, income/(expense) from closure of unclaimed shares trusts and fair value gains/(losses) on Group debt instruments.

The reconciliation of (loss)/profit for the financial period to adjusted operating profit after tax attributable to ordinary equity holders is as follows:

£m
	6 months ended 30 June 2009	6 months ended 30 June 2008	Year ended 31 December 2008
(Loss)/profit for the financial period attributable to equity holders of the parent	(70)	549	441
Adjusting items	403	(146)	168
Tax on adjusting items	(41)	14	62
Non-controlling interest on adjusting items	(9)	(12)	(30)
Adjusted operating profit after tax attributable to ordinary equity holders	283	405	641
Adjusted weighted average number of ordinary shares (millions)	5,232	5,245	5,230
Adjusted operating earnings per ordinary share (pence)	5.4	7.7	12.2

(iii) Headline earnings per share

In accordance with the JSE Limited (JSE) listing requirements, the Group is required to calculate a 'headline earnings per share' (HEPS), determined by reference to the South African Institute of Chartered Accountants' circular 8/2007 'Headline Earnings'. The table below sets out a reconciliation of basic earnings per ordinary share and HEPS in accordance with that circular. Disclosure of HEPS is not a requirement of International Financial Reporting Standards.

£m
	6 months ended 30 June 2009		6 months ended 30 June 2008		Year ended 31 December 2008
	Gross	Net	Gross	Net	Gross	Net
(Loss)/profit for the financial period attributable to equity holders of the parent	(70)	(70)	549	549	441	441
Dividends declared to holders of perpetual preferred callable securities	(16)	(16)	(16)	(16)	(31)	(31)
(Loss)/profit attributable to ordinary equity holders	(86)	(86)	533	533	410	410
Adjustments:
Impairments of goodwill and intangible assets	-	-	-	-	100	100
Loss/(profit) on disposal of subsidiaries, associated undertakings and strategic investments	45	45	(62)	(63)	(53)	(67)
Realised gains/losses (including impairments) on available-for-sale financial assets	117	111	85	81	414	381
Headline earnings	76	70	556	551	871	824
Weighted average number of ordinary shares	4,757	4,757	4,771	4,771	4,755	4,755
Diluted weighted average number of ordinary shares	5,102	5,102	5,057	5,057	5,051	5,051
Headline earnings per share (pence)	1.6	1.5	11.7	11.5	18.3	17.3
Diluted headline earnings per share (pence)	1.5	1.4	11.0	10.9	17.2	16.3

Notes to the consolidated financial statements

For the six months ended 30 June 2009

7 Goodwill

£m
		At  30 June 2009	At  30 June 2008	At  31 December 2008
US Asset Management		1,134	932	1,271
US Life		-	57	-
Nedbank		378	303	308
UK		644	644	644
Nordic		199	223	222
ELAM		511	467	574
Other		54	46	62
Goodwill, net of impairment losses		2,920	2,672	3,081

Goodwill is reviewed annually for impairment for each cash generating unit (CGU) as part of the process for preparation of the Group's annual financial statements and in accordance with the Group's accounting policy. Recognised goodwill amounts are compared to the recoverable amounts, which are the higher of the value in use or net selling price calculations for the CGU in question. Goodwill is further reviewed at other points in the financial year if there are indicators of impairment of the goodwill amount for a particular CGU. No impairment charges have been made to any of the goodwill balances, for any of the CGUs, in the interim financial information.

8 Borrowed funds

£m
	Notes	At  30 June 2009	At  30 June 2008		At  31 December 2008
Senior debt securities and term loans	8(i)	732	449		557
Mortgage backed securities	8(ii)	111	91		104
Subordinated debt securities	8(iii)	1,672	1,696		1,634
Borrowed funds		2,515	2,236	2,295
(i) Senior debt securities and term loans
		£m
		At 30 June 2009	At  30 June 2008		At  31 December 2008
Floating rate notes1		67	75		85
Fixed rate notes2		137	46		152
Revolving credit facility3		528	192		294
Term loan and other loans		-	23		26
Investment fund borrowings		-	113		-
Total senior debt securities and term loans		732	449		557

Senior debt securities and term loan comprises:

1. Floating rate notes

●     £6 million note repayable in December 2010, with holders having the option to elect for early redemption every 6 months with coupon referenced against 6 month LIBOR less 0.50 per cent

●     US$150 million repayable September 2014 at 3 month LIBOR plus 0.63 per cent - repaid 2008

●     US$50 million repayable September 2011 at 3 month LIBOR plus 0.50 per cent

●     US$10 million repayable September 2009 at 3 month LIBOR plus 0.35 per cent

●     SEK100 million repayable March 2009 at 3 month STIBOR plus 0.20 per cent - repaid 2009

●     €22 million repayable January 2010 at 3 month EURIBOR plus 0.35 per cent

●     SEK50 million repayable March 2010 at 3 month STIBOR plus 0.38 per cent.

2. Fixed rate notes

●     €30 million Euro bond repayable July 2010, capital and interest swapped into fixed rate US Dollars at 5.28 per cent

●     €10 million Euro bond repayable December 2010, capital and interest swapped into floating rate US Dollars at 3 month LIBOR plus 0.95 per cent

●     €20 million Euro bond repayable August 2013, capital and interest swapped into floating rate US Dollars at 3 month LIBOR plus 1.30 per cent

●     €100 million Euro bond repayable December 2009 at 3.46 per cent.

The total fair value of the swap derivatives associated with the Senior notes is £11 million (six months ended 30 June 2008: £11 million, year ended 31 December 2008: £11 million). These are recognised as derivative assets. 

3. Revolving credit facility

The Group has a £1,250 million five-year multi-currency revolving credit facility, which had an original maturity date of September 2010. On 18 August 2007 syndicate banks agreed to extend the maturity date of £1,232 million of the facility until September 2012. At 30 June 2009 £999 million (six months ended 30 June 2008: £443 million, year ended 31 December 2008: £826 million) of this facility was utilised, £528 million (six months ended 30 June 2008: £192 million, year ended 31 December 2008: £294 million) in the form of drawn debt and £471 million (six months ended 30 June 2008: £264 million, year ended 31 December 2008: £532 million) in the form of irrevocable letters of credit.

The Group has a SEK1,000 million revolving credit facility, which has a maturity date of 2 July 2009. At 30 June 2009 this facility was undrawn. As of 3 July 2009 the maturity date was extended by 364 days to 2 July 2010.

(ii) Mortgage backed securities

	£m
	At 30 June 2009	At 30 June 2008	At  31 December 2008
R291 million notes (class A1) repayable 18 November 2039 (11.467%)1	23	19	22
R1.4 billion notes (class A2A) repayable 18 November 2039 (11.817%)1	78	64	73
R98 million notes (class B note) repayable 18 November 2039 (12.067%)1	6	5	5
R76 million notes (class C note) repayable 18 November 2039 (13.317%)1	4	3	4
	111	91	104

1    Issued on 10 December 2007 by the Group's South African banking business and are callable on 18 November 2012. 

8 Borrowed funds continued

(iii) Subordinated debt securities

	£m
	At 30 June 2009	At 30 June 2008	At  31 December 2008
Banking
US$18 million repayable 31 August 2009 (6 month LIBOR less 1.5%)1	10	9	12
R1.5 billion repayable 24 April 2016 (7.85%)2	116	86	108
R1.8 billion repayable 20 September 2018 (9.84%)3	139	107	135
R515 million repayable on 4 December 2008 (13.5%)4 - repaid	-	33	-
R500 million repayable on 30 December 2010 (8.38%)5	38	28	36
R650 million repayable 8 February 2017 (9.03%)6	51	39	49
R1.7 billion repayable 8 February 2019 (8.9%)7	125	98	125
R2.0 billion repayable 6 July 2022 (3 month JIBAR plus 0.47%)8	160	132	150
R500 million repayable 15 August 2012 (3 month JIBAR plus 0.45%)9	40	33	37
R1.0 billion repayable 17 September 2015 (10.54%)10	78	61	77
R500 million repayable 14 December 2017 (3 month JIBAR plus 0.70%)11	40	32	37
R120 million repayable 14 December 2017 (10.38%)12	9	7	9
R487 million repayable 20 November 2018 (15.05%)13	38	30	40
R1,265 million repayable 20 November 2018 (JIBAR plus 4.75%)14	101	46	94
R300 million repayable on 4 December 2013 (JIBAR plus 2.5%)15	12	-	11
US$100 million repayable on 3 March 2022 (3 month US Dollar LIBOR)16	61	-	-
	1,018	741	920
Other
R3.0 billion repayable 27 October 2020 (8.9%)17	235	193	219
£300 million repayable 21 January 2016 (5.0%)18	147	273	239
R250 million preference shares repayable 9 June 201119	20	16	18
€750 million repayable 18 January 2017 (4.5%)20	318	522	303
	720	1,004	779
Less: Banking subordinated debt securities held by other Group companies	(66)	(49)	(65)
Total subordinated liabilities	1,672	1,696	1,634

The subordinated notes rank behind the claims against the Group depositors and other unsecured, unsubordinated creditors. None of the Group's subordinated notes are secured.

1.     This instrument is matched either by advances to clients or covered against exchange rate fluctuations.

2.     Unsecured secondary callable note was issued 24 April 2005 with a call date of 24 April 2011.

3.     Unsecured secondary callable note was issued 20 September 2006 at R1.5 billion with a call date of 20 September 2013. On 18 May 2007 an additional R0.3 billion was issued.

4.     Unsecured callable bonds issued 10 June 2002 - repaid.

5.     Unsecured callable bonds issued 30 March 2006.

6.     Unsecured secondary callable note was issued 8 February 2007 with a call date of 8 February 2012.

7.     Unsecured secondary callable note was issued 8 February 2007 at R1.0 billion. On 19 March 2007 an additional R0.7 billion was issued.

8.     Unsecured secondary capital callable note issued 6 July 2007 and has a call date of 6 July 2017.

9.     This bond issued on 15 August 2007 is an unsecured secondary capital callable floating rate note with a call date of 15 August 2012.

10. This bond issued on 17 September 2007 is an unsecured fixed rate note with a term of 13 years (non-call 8).

11. This bond issued on 14 December 2007 is a 10 year (non-call 5) floating rate note. After its call date on 14 December 2012 its terms become JIBAR plus 1.70 per cent until maturity.

12. This bond issued on 14 December 2007 is a 10 year (non-call 5) fixed rate note. After its call date its terms become floating 3 month JIBAR plus initial margin over mid swaps plus 1.0 per cent until maturity.

13. This bond issued on 20 May 2008 is a perpetual (non-call 10 year) fixed rate note with a call date of 20 November 2018.

14. This bond issued on 20 May 2008 is a perpetual (non-call 10 year) floating rate note with a call date of 20 November 2018.

15. This bond issued on 4 December 2008 is a floating rate note with a call date of 4 December 2013.

16. Dated Tier 2 Notes issued 3 March 2009 with call date of 3 March 2017.

17. These bonds have a maturity date of 27 October 2020 and pay a coupon of 8.92 per cent to 27 October 2015 and 3 month JIBAR plus 1.59 per cent thereafter. The Group has the option to repay the bonds at par on 27 October 2015 and at 3 monthly intervals thereafter.

18. These bonds issued on 20 January 2006 have a maturity date of 21 January 2016 and pay a coupon of 5.0 per cent to 21 January 2011 and 6 month LIBOR plus 1.13 per cent thereafter. The coupon on the bonds was swapped into floating rate of 6 month STIBOR plus 0.50 per cent. The Group has the option to repay the bonds at par on 21 January 2011 and at 6 monthly intervals thereafter.

19. These preference shares are redeemable on 9 June 2011 and pay a variable cumulative coupon of 61.0 per cent of the Prime Rate as quoted by Nedbank Limited. The Group has the option to redeem the shares at par at any time before the final redemption date but after giving an agreed period of notice.

20. This bond issued on 16 January 2007 has a maturity date of 18 January 2017 and pays a coupon of 4.5 per cent to 17 January 2012 and 6 month EURIBOR plus 0.96 per cent thereafter. The principal and coupon on the bond were swapped equally into Sterling and US Dollars with coupons of 6 month LIBOR plus 0.34 per cent and 6 month US LIBOR plus 0.31 per cent respectively. The Group has the option to repay the bonds at par on 17 January 2012 and at 6 monthly intervals thereafter.

Notes to the consolidated financial statements

For the six months ended 30 June 2009

9 Dividends

Dividends paid were as follows:

£m
	6 months ended 30 June 2009	6 months ended 30 June 2008	Year ended 31 December 2008
2007 Final dividend paid - 4.55p per 10p share	-	227	227
2008 Interim dividend paid - 2.45p per 10p share	-	-	125
Dividends to ordinary equity holders	-	227	352
Dividends declared to holders of perpetual preferred callable securities	22	22	43
Dividend payments for the year	22	249	395

Dividends paid to ordinary equity holders, as above, are calculated using the number of shares in issue at the record date, less treasury shares held in ESOP trusts, life funds of Group companies, Black Economic Empowerment trusts and related undertakings.

As a consequence of the exchange control arrangements in place in certain African territories, dividends to ordinary equity holders on the branch registers of those countries (or, in the case of Namibia, the Namibian section of the principal register) are settled through Dividend Access Trusts established for that purpose.

In March 2009, £22 million was declared and paid to holders of perpetual preferred callable securities (March 2008: £22 million and November 2008: £21 million).

10 Contingent liabilities

£m
	At 30 June 2009	At 30 June 2008	At 31 December 2008
Guarantees and assets pledged as collateral security	2,038	1,315	1,839
Irrevocable letters of credit	110	286	760
Secured lending	412	1,038	383
Other contingent liabilities	36	151	393

Nedbank structured financing

Historically a number of the Group's South African banking businesses entered into structured finance transactions with third parties using the tax base of these companies. Pursuant to the terms of the majority of these transactions, the underlying third party has contractually agreed to accept the risk of any tax being imposed by the South African Revenue Service (SARS), although the obligation to pay in the first instance rests with the Group's companies. It is only in limited cases where, for example, the credit quality of a client becomes doubtful, or where the client has specifically contracted out of the re-pricing of additional taxes, that the recovery from a client could be less than the liability that could arise on assessment, in which case provisions are made. SARS has examined the tax aspects of some of these types of structures and SARS could assess these structures in a manner different to that initially envisaged by the contracting parties. As a result Group companies could be obliged to pay additional amounts to SARS and recover these from clients under the applicable contractual arrangements.

American Skandia

The sale of American Skandia to Prudential Financial contained customary representations and warranties. The indemnity in respect of this is limited to US$1 billion. Investigations by various US regulators have given rise to potential settlements and claims in relation to market timing. American Skandia's exposure to market timing is part of a wider investigation of the US industry. The exposure is covered by the aforementioned indemnity which also covers the matter of American Skandia's failure to administer the annuitisation provisions contained in certain contracts. This was an administrative error made by the American Skandia business between 1996 and 2003. American Skandia has been provided for in the acquisition accounting.

Other contingent liabilities

The reduction within other contingent liabilities reflects a reclassification of utilised facilities to commitments.

 

END

 

 

IR FZLLBKVBEBBL