Interim Results Part 2

RNS Number : 7271A

Old Mutual PLC

06 August 2008

Financial Information

Index to the financial Information

Statement of directors responsibilities in respect of the half-yearly financial statements 32

Independent review report by KPMG Audit Plc to Old Mutual plc 33

Consolidated income statement 34

Adjusted operating profit 35

Consolidated balance sheet 36

Condensed consolidated cash flow statement 37

Consolidated statement of changes in equity 38

Notes to the consolidated financial statements

1 Basis of preparation 44

2 Foreign currencies 45

3 Segment information 45

4 Operating profit adjusting items 54

5 Income tax expense 60

6 Earnings and earnings per share 61

7 Dividends 63

8 Discontinued operations, assets and liabilities held-for-sale 63

9 Borrowed funds 65

10 Commitments and contingent liabilities 67

11 Post balance sheet events 67

European embedded value basis supplementary information

Income statement on a European embedded value basis 68

Notes to the European embedded value basis supplementary information

1 Basis of preparation 70

2 Adjustments applied in determining adjusted operation profit 70

3 Reconciliation of movements in Group embedded value 70

4 Components of Group embedded value 71

5 Components of adjusted Group embedded value 71

6 Reconciliation of Group embedded value of the covered business to the

adjusted Group embedded value 72

7 Components of embedded value of the covered business 73

8 Analysis of covered business embedded value results (after tax) 74

9 Value of new business (after tax) 82

10 Product analysis of new covered business premiums 83

11 Drivers of new business 84

12 Assumptions 86

13 Sensitivity tests 90

Statement of directors' responsibilities in respect of the half-yearly financial statements
For the six months ended 30 June 2008

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

• the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

Jim Sutcliffe Jonathan Nicholls

Chief Executive Group Finance Director

6 August 2008 6 August 2008

Independent review report by KPMG Audit Plc to Old Mutual plc
For the six months ended 30 June 2008

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the Consolidated income statement, the Adjusted operating profit, the Consolidated balance sheet, the Condensed consolidated cash flow statement, the Consolidated statement of changes in equity and the related explanatory notes and to review the European embedded value basis supplementary information for the six months ended 30 June 2008 as set out on pages 68 to 90 ('the Supplementary Information').

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements or the Supplementary Information.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Services Authority ('the UK FSA') and also to provide a review conclusion to the company on the Supplementary Information. Our review of the condensed set of financial statements has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. Our review of the Supplementary Information has been undertaken so that we might state to the company those matters we have been engaged to state in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA. The directors have accepted responsibility for preparing the Supplementary Information contained in the half-yearly financial report in accordance with the European Embedded Value Principles issued in May 2004 by the European CFO Forum and supplemented by the Additional Guidance on European Embedded Value Disclosures issued in October 2005 (together the 'EEV Principles') and for determining the methodology and assumptions used in the application of those principles.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

The Supplementary Information has been prepared in accordance with the EEV Principles, using the methodology and assumptions set out in notes 1 and 12 to the Supplementary Information. The Supplementary Information should be read in conjunction with the group's condensed financial statements which are set out on pages 34 to 67.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements and the Supplementary Information in the half-yearly financial report based on our review.

Scope of review

We conducted our reviews in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information and Supplementary Information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

Based on our review, nothing has come to our attention that causes us to believe that the Supplementary Information for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with the EEV Principles, using the methodology and assumptions set out in notes 1 and 12 to the Supplementary Information.

KPMG Audit Plc

Chartered Accountants

Registered Auditor
8 Salisbury Square

London EC4Y 8BB

6 August 2008

Consolidated income statement For the six months ended 30 June 2008 Notes				£m
		6 months ended 30 June 2008	6 months ended 30 June 2007 Restated	Year ended 31 December 2007
Revenue
Gross earned premiums	3(iii)	2,560	2,202	4,941
Outward reinsurance		(119)	(105)	(201)
Net earned premiums		2,441	2,097	4,740
Investment return (non-banking)		(4,092)	5,298	6,071
Banking interest and similar income		1,894	1,450	3,190
Banking trading, investment and similar income		70	90	170
Fee and commission income, and income from service activities		1,181	1,148	2,457
Other income		185	106	212
Share of associated undertakings' (loss)/profit after tax		(2)	2	(1)
Profit on disposal of subsidiaries, associated undertakings and strategic investments	4(i)	62	7	25
Total revenues		1,739	10,198	16,864
Expenses
Claims and benefits (including change in insurance contract provisions)		(1,802)	(3,475)	(6,612)
Reinsurance recoveries		111	84	184
Net claims and benefits incurred		(1,691)	(3,391)	(6,428)
Change in investment contract liabilities		3,842	(2,877)	(2,618)
Losses on loans and advances		(126)	(74)	(157)
Finance costs		(9)	(47)	(50)
Banking interest payable and similar expenses		(1,302)	(928)	(2,053)
Fee and commission expense, and other acquisition costs		(331)	(358)	(650)
Other operating and administrative expenses		(1,321)	(1,269)	(2,724)
Change in third party interest in consolidated funds		210	(220)	(156)
Amortisation of PVIF and other acquired intangibles		(176)	(183)	(360)
Total expenses		(904)	(9,347)	(15,196)
Profit before tax		835	851	1,668
Total income tax expense	5(i)	(163)	(276)	(479)
Profit from continuing operations after tax		672	575	1,189
Profit from discontinued operations after tax	8(i)	13	36	57
Profit after tax for the financial period		685	611	1,246
Profit for the financial period attributable to:
Equity holders of the parent	6(ii)	549	483	972
Minority interests
Ordinary shares		110	104	224
Preferred securities		26	24	50
Profit after tax for the financial period		685	611	1,246

Earnings per share
Based on profit from continuing operations (pence)		11.0	9.0	18.3
Based on profit from discontinued operations (pence)		0.2	0.6	0.9
Basic earnings per ordinary share (pence)	6(i)	11.2	9.6	19.2
Based on profit from continuing operations (pence)		10.3	8.5	17.3
Based on profit from discontinued operations (pence)		0.2	0.5	0.8
Diluted earnings per ordinary share (pence)	6(i)	10.5	9.0	18.1
Weighted average number of shares - millions	6(i)	4,771	4,880	4,894

Adjusted operating profit

For the six months ended 30 June 2008

Reconciliation of adjusted operating profit to profit after tax

Notes		£m
Notes		6 months ended 30 June 2008	6 months ended 30 June 2007 Restated	Year ended 31 December 2007
South Africa	3(ii)	617	572	1,165
United States	3(ii)	76	106	260
Europe	3(ii)	148	129	268
Other	3(ii)	(8)	2	2
		833	809	1,695
Finance costs		(71)	(69)	(119)
Other shareholders’ expenses		(17)	(19)	(41)
*Adjusted operating profit before tax**		745	721	1,535
Adjusting items	4(i)	156	24	73
Profit for the financial period before tax (excluding policyholder tax)		901	745	1,608
Total income tax expense	5(i)	(163)	(276)	(479)
Income tax attributable to policyholder returns		(66)	106	60
Profit from continuing operations after tax		672	575	1,189
Profit from discontinued operations after tax	8(i)	13	36	57
Profit after tax for the financial period		685	611	1,246

Adjusted operating profit after tax attributable to ordinary equity holders

Notes		£m
Notes		6 months ended 30 June 2008	6 months ended 30 June 2007 Restated	Year ended 31 December 2007
Adjusted operating profit* before tax		745	721	1,535
Tax on adjusted operating profit	5(iii)	(215)	(167)	(390)
Adjusted operating profit* after tax from continuing operations		530	554	1,145

Adjusted operating profit* after tax from continuing operations		530	554	1,145
Adjusted operating profit* after tax from discontinued operations	8(iii)	23	26	61
Adjusted operating profit* after tax		553	580	1,206

Minority interest - ordinary shares		(122)	(114)	(242)
Minority interest - preferred securities		(26)	(24)	(50)
Adjusted operating profit* after tax attributable to ordinary equity holders		405	442	914

Adjusted weighted average number of ordinary shares - (millions)	6(ii)	5,245	5,407	5,411
Based on adjusted operating profit from continuing operations** (pence)	6(ii)	7.4	7.8	16.1
Based on adjusted operating profit from discontinued operations** (pence)	6(ii)	0.3	0.4	0.8
Adjusted operating earnings per share** (pence)	6(ii)	7.7	8.2	16.9

* 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, 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 minority 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 balance sheet At 30 June 2008 Notes		£m
Consolidated balance sheet At 30 June 2008 Notes		At 30 June 2008	At 30 June 2007 Restated	At 31 December 2007
Assets
Goodwill and other intangible assets		5,453	5,340	5,459
Mandatory reserve deposits with central banks		610	546	615
Property, plant and equipment		549	493	608
Investment property		1,265	1,361	1,479
Deferred tax assets		764	574	683
Investments in associated undertakings and joint ventures		69	100	81
Deferred acquisition costs		2,728	1,908	2,253
Reinsurers' share of long-term business policyholder liabilities		1,411	1,368	1,394
Reinsurers' share of general insurance liabilities		-	63	-
Deposits held with reinsurers		898	344	806
Loans and advances		29,890	27,545	30,687
Investments and securities		83,789	87,297	89,627
Current tax receivable		47	103	83
Client indebtedness for acceptances		201	188	165
Other assets		2,531	3,460	2,181
Derivative financial instruments - assets		3,149	758	1,527
Cash and cash equivalents		3,129	3,438	3,469
Non-current assets held-for-sale	8(v)	566	573	1,617
Total assets		137,049	135,459	142,734
Liabilities
Long-term business policyholder liabilities		78,954	79,963	84,251
General insurance liabilities		-	288	-
Third party interests in consolidation of funds		2,674	3,589	3,547
Borrowed funds	9	2,236	2,301	2,353
Provisions		429	519	499
Deferred revenue		521	381	462
Deferred tax liabilities		1,389	1,443	1,413
Current tax payable		206	220	320
Other liabilities		5,622	7,710	6,180
Liabilities under acceptances		201	188	165
Amounts owed to bank depositors		32,033	28,382	31,817
Derivative financial instruments - liabilities		3,062	981	1,716
Non-current liabilities held-for-sale	8(vi)	368	553	414
Total liabilities		127,695	126,518	133,137
Net assets		9,354	8,941	9,597

Shareholders' equity
Equity attributable to equity holders of the parent		7,802	7,359	7,961
Minority interests
Ordinary shares		849	879	933
Preferred securities		703	703	703
Total minority interests		1,552	1,582	1,636
Total equity		9,354	8,941	9,597

				£m
Condensed consolidated cash flow statement For the six months ended 30 June 2008	Notes	6 months ended 30 June 2008	6 months ended 30 June 2007 Restated	Year ended 31 December 2007
Cash flows from operating activities
Profit before tax from continuing operations		835	851	1,668
Profit before tax from discontinued operations	8(i)	18	47	82
Total profit before tax		853	898	1,750
Non-cash movements in profit before tax		1,083	(1,400)	(1,155)
Changes in working capital		811	2,646	4,368
Taxation paid		(262)	(303)	(563)
Net cash inflow from operating activities		2,485	1,841	4,400
Cash flows from investing activities
Acquisition of financial investments		(2,388)	(1,786)	(3,896)
(Acquisition)/disposal of investment properties		(19)	15	(26)
Net acquisition of property, plant & equipment		(64)	(50)	(186)
Net acquisition of intangible assets		(2)	(34)	(67)
Acquisition of interests in subsidiaries		(65)	(175)	(278)
Disposal of interests in subsidiaries, associated undertakings and strategic investments		1,133	1	106
Net cash outflow from investing activities		(1,405)	(2,029)	(4,347)
Cash flows from financing activities
Dividends paid to:
Equity holders of the Company	7	(227)	(218)	(333)
Equity minority interests and preferred security interests		(109)	(92)	(205)
Interest payable (excluding banking interest payable)		(61)	(25)	(83)
Net proceeds from issue of ordinary shares (including by subsidiaries to minority interests)		(226)	199	42
Net receipts from unclaimed shares trust		-	90	95
Issue of subordinated debt		76	430	699
Other debt repaid		(13)	(277)	(356)
Net cash (outflow)/inflow from financing activities		(560)	107	(141)
Net (decrease)/increase in cash and cash equivalents		520	(81)	(88)
Effects of exchange rate changes on cash and cash equivalents		(235)	(45)	50
Cash and cash equivalents at beginning of the period		3,596	3,634	3,634
Cash and cash equivalents at end of the period		3,881	3,508	3,596
Consisting of:
Cash and cash equivalents		3,129	3,438	3,469
Mandatory reserve deposits with central banks		610	546	615
Other cash equivalents		1,084	671	808
Cash and cash equivalents subject to consolidation of funds		(942)	(1,147)	(1,296)
Total		3,881	3,508	3,596

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.

Consolidated statement of changes in equity For the six months ended 30 June 2008 Six months ended 30 June 2008		Millions			£m
	Notes	Number of shares issued and fully paid	Attributable to equity holders of the parent	Total minority interest	Total equity
Equity holders' funds at beginning of the period		5,510	7,961	1,636	9,597
Change in equity arising in the period
Fair value gains/(losses):
Property revaluation		-	6	-	6
Available for sale investments:
Fair value losses		-	(528)	-	(528)
Recycled to income statement		-	85	-	85
Shadow accounting		-	227	-	227
Currency translation differences/exchange differences on translating foreign operations		-	(145)	(119)	(264)
Other movements		-	(16)	2	(14)
Aggregate tax effect of items taken directly to or transferred from equity		-	67	-	67
Net income recognised directly in equity		-	(304)	(117)	(421)
Profit for the period		-	549	136	685
Total recognised income and expense for the period		-	245	19	264
Dividends for the period	7	-	(249)	(87)	(336)
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
Change in participation in subsidiaries		-	-	(16)	(16)
Exercise of share options		4	3	-	3
Fair value of equity settled share options		-	17	-	17
Equity holders' funds at end of the period		5,514	7,802	1,552	9,354

Six months ended 30 June 2008		£m
Six months ended 30 June 2008	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
Changes in equity arising in the period:
Fair value gains/(losses):
Property revaluation		-	-	6	-	-	-		6
Available for sale investments:
Fair value losses		-	-	(528)	-	-	-		(528)
Recycled to income statement		-	-	85	-	-	-		85
Shadow accounting		-	-	227	-	-	-		227
Currency translation differences/exchange differences
on translating foreign operations		-	-	-	(145)	-	-		(145)
Other movements		-	2	(9)	-	(9)	-		(16)
Aggregate tax effect of items taken directly to
or transferred from equity		-	-	61	-	6	-		67
Net income recognised directly in equity		-	2	(158)	(145)	(3)	-		(304)
Profit for the period		-	-	-	-	549	-		549
Total recognised income and expense for the period		-	2	(158)	(145)	546	-		245
Dividends for the period	7	-	-	-	-	(249)	-		(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
Attributable to equity holders of the
parent at end of the period		551	766	2,767	(449)	3,479	688		7,802
Other reserves								£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
Attributable to equity holders of the parent at end of the period								2,767

Retained earnings have been reduced by £550 million at 30 June 2008 in respect of own shares held in policyholders' funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings. Included in the dividend for the period is £22 million of dividends declared to holders of perpetual preferred callable securities. 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.

Six months ended 30 June 2007	Notes	Millions			£m
		Number of	Attributable to
		shares issued	equity holders of	Total minority	Total
		and fully paid	the parent	interest	equity

Equity holders' funds at beginning of the period		5,501	7,237	1,526	8,763
Change in equity arising in the period
Fair value gains/(losses):
Property revaluation		-	5	-	5
Net investment hedge		-	31	-	31
Available for sale investments
Fair value losses		-	(177)	-	(177)
Shadow accounting		-	93	-	93
Currency translation differences/exchange differences on translating foreign operations		-	(162)	(33)	(195)
Other movements		-	(16)	(4)	(20)
Aggregate tax effect of items taken directly to or transferred from equity		-	29	-	29
Net expense recognised directly in equity		-	(197)	(37)	(234)
Profit for the period		-	483	128	611
Total recognised income and expense for the period		-	286	91	377
Dividends for the period	7	-	(240)	(70)	(310)
Net sale of treasury shares		-	55	-	55
Change in participation in subsidiaries		-	-	35	35
Exercise of share options		4	3	-	3
Fair value of equity settled share options		-	18	-	18
Equity holders' funds at end of the period		5,505	7,359	1,582	8,941

Six months ended 30 June 2007								£m
							Perpetual
							preferred
	Notes	Share	Share	Other	Translation	Retained	callable
	Notes	capital	premium	reserves	reserve	earnings	securities	Total

Attributable to equity holders of the parent at beginning of the period		550	746	2,901	(421)	2,773	688	7,237
Changes in equity arising in the period:
Fair value gains/(losses):
Property revaluation		-	-	5	-	-	-	5
Net investment hedge		-	-	-	31	-	-	31
Available for sale investments
Fair value losses		-	-	(177)	-	-	-	(177)
Shadow accounting		-	-	93	-	-	-	93
Currency translation differences/exchange differences on translating foreign operations		-	-	-	(162)	-	-	(162)
Other movements		-	-	(12)	-	(4)	-	(16)
Aggregate tax effect of items taken directly to or transferred from equity		-	-	27	(5)	7	-	29
Net expense recognised directly in equity		-	-	(64)	(136)	3	-	(197)
Profit for the period		-	-	-	-	483	-	483
Total recognised income and expense for the period		-	-	(64)	(136)	486	-	286

Dividends for the period	7	-	-	-	-	(240)	-	(240)
Net sale of treasury shares		-	-	-	-	55	-	55
Exercise of share options		-	3	-	-	-	-	3
Fair value of equity settled share options		-	-	18	-	-	-	18
Attributable to equity holders of the parent at end of the period		550	749	2,855	(557)	3,074	688	7,359

Other reserves									£m
									At
									30 June
									2007
Merger reserve									2,716
Available for sale reserve									(33)
Investment property revaluation reserve									48
Share-based payments reserve									124
Attributable to equity holders of the parent at end of the period									2,855

Retained earnings have been reduced by £649 million at 30 June 2007 in respect of own shares held in policyholders' funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings. Included in the dividend for the period is £22 million of dividends declared to holders of perpetual preferred callable securities. 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.

Year ended 31 December 2007		Millions			£m
Year ended 31 December 2007	Notes	Number of shares issued and fully paid	Attributable to equity holders of the parent	Total minority interest	Total equity
Equity holders' funds at beginning of the year		5,501	7,237	1,526	8,763
Change in equity arising in the year
Fair value gains/(losses):
Property revaluation		-	95	1	96
Net investment hedge		-	(13)	-	(13)
Available for sale investments:
Fair value losses		-	(197)	-	(197)
Recycled to income statement		-	36	-	36
Shadow accounting		-	25	-	25
Currency translation differences/exchange differences on translating foreign operations		-	129	4	133
Other movements		-	(4)	-	(4)
Aggregate tax effect of items taken directly to or transferred from equity		-	34	-	34
Net income recognised directly in equity		-	105	5	110
Profit for the year		-	972	274	1,246
Total recognised income and expense for the year		-	1,077	279	1,356
Dividends for the year	7	-	(373)	(165)	(538)
Net sale of treasury shares		-	149	-	149
Shares repurchased in the buyback programme		-	(177)	-	(177)
Issue of ordinary share capital by the Company		-	3	-	3
Change in participation in subsidiaries		-	-	(4)	(4)
Exercise of share options		9	9	-	9
Fair value of equity settled share options		-	36	-	36
Equity holders' funds at end of the year		5,510	7,961	1,636	9,597

Year ended 31 December 2007		£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		550	746	2,901	(421)		2,773	688		7,237
Changes in equity arising in the year:
Fair value gains/(losses):
Property revaluation		-	-	95	-		-	-		95
Net investment hedge		-	-	-	(13)		-	-		(13)
Available for sale investments:
Fair value losses		-	-	(197)	-		-	-		(197)
Recycled to income statement		-	-	36	-		-	-		36
Shadow accounting		-	-	25	-		-	-		25
Currency translation differences/exchange differences
on translating foreign operations		-	-	-	129		-	-		129
Other movements		-	-	(10)	(2)		8	-		(4)
Aggregate tax effect of items taken directly to
or transferred from equity		-	-	22	3		9	-		34
Net income recognised directly in equity		-	-	(29)	117		17	-		105
Profit for the year		-	-	-	-		972	-		972
Total recognised income and expense for the year		-	-	(29)	117		989	-		1,077
Dividends for the year	7	-	-	-	-		(373)	-		(373)
Net sale of treasury shares		-	-	-	-		149	-		149
Shares repurchased in the buyback programme		-	-	-	-		(177)	-		(177)
Issue of ordinary share capital by the Company		-	3	-	-		-	-		3
Exercise of share options		1	8	-	-		-	-		9
Fair value of equity settled share options		-	-	36	-		-	-		36
Attributable to equity holders of the
parent at end of the year		551	757	2,908	(304)	3,361		688		7,961
Other reserves									£m
									At 31 December 2007
Merger reserve									2,716
Available for sale reserve									(30)
Property revaluation reserve									75
Share-based payments reserve									147
Attributable to equity holders of the parent at end of the year									2,908

Retained earnings have been reduced by £588 million at 31 December 2007 in respect of own shares held in policyholders' funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings. Included in the dividend for the year is £40 million of dividends declared to holders of perpetual preferred callable securities. 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.

Notes to the consolidated financial statements

For the six months ended 30 June 2008

1 Basis of preparation

Old Mutual plc ('the Company') is a company incorporated in England and Wales.

These interim consolidated financial statements comprise the results of the Company and its subsidiaries (together referred to as the 'Group') and equity account the Group's interest in associates and jointly controlled entities.

These interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) IAS 34 Interim Financial Reporting. They do not include all of the information required for a full set of consolidated financial statements.

These consolidated interim financial statements were approved by the Board of Directors on 6 August 2008.

The accounting policies applied by the Group in these consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2007, presented in accordance with IFRS as adopted by the EU.

The interim consolidated financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments, financial instruments classified as fair valued through the income statement or as available for sale, owner-occupied property and investment property. Non-current assets and disposal groups held-for-sale are stated at the lower of previous carrying amount and fair value less costs to sell.

The results for the six months ended 30 June 2008 and 2007 are unaudited, but have been reviewed by the Auditors whose report is presented on page 33. The comparative figures for the financial year ended 31 December 2007 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. Consequently these interim financial statements should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2007.

Revised and new reporting standards

The Group had previously chosen to adopt IFRS 8 'Operating Segments' in preparing its financial statements for the year ended 31 December 2007.

Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2007.

Further commentary on management's reassessment of estimates made during the six months ended 30 June 2008 is provided in the Business Review

Financial and insurance risk management

The Group's financial and insurance risk management objectives and policies are consistent with that disclosed in the consolidated financial statements as at and for the year ended 31 December 2007.

Restatement of comparative information

The Group has made certain restatements of comparative information to reflect Mutual & Federal as a discontinued operation and to reflect changes in presentation of the income statement and balance sheet line items that were made in the Group's annual report for the year ended 31 December 2007 following the adoption of IFRS 7 'Financial Instruments: Disclosures'. Reclassifications have also been made to income and expense items to more appropriately reflect the nature of these items.

2 Foreign currencies

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

	Income statement (average rate)	Balance sheet (closing rate)
30 June 2008
Rand	15.1008	15.5673
US Dollars	1.9746	1.9908
Swedish Krona	12.1128	12.0009
Euro	1.2903	1.2651
30 June 2007
Rand	14.1123	14.1677
US Dollars	1.9703	2.0071
Swedish Krona	13.6668	13.7266
Euro	1.4820	1.4826
31 December 2007
Rand	14.1109	13.6043
US Dollars	2.0014	1.9827
Swedish Krona	13.5253	12.8320
Euro	1.4602	1.3596

3 Segment information

(i) Basis of segmentation

The Group's results are analysed across four geographic segments. This is consistent with the way the Group manages the business. The four geographic segments, based on the Group's management structure, are South Africa, United States, Europe and Other. Within the geographic segments, the Group generates revenue from four principal lines of business: long-term business, asset management, banking and general insurance. For IFRS purposes, the general insurance line of business has been discontinued during the 2007 financial year, however for the purposes of reporting adjusted operating profit, the result of the general insurance line of business is included in the following analyses.

The income statement information that follows is based on the Group's geographical management structure with revenue and expenses allocated to the lines of business. This follows the same format as the Consolidated income statement and is reconciled to Adjusted Operating Profit which is one of the key measures reported to the Group's chief operating decision makers 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. These measures are also presented and include an analysis of gross earned premiums and funds under management.

The basis of segmentation and the basis of measurement of segment profit or loss applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2007.

3 Segment information continued

(ii) Income statement - segment information six months ended 30 June 2008

	South Africa			United States
	Long-term business	Asset management	Banking	Long-term business	Asset management
Revenue
Gross earned premiums	790	-	-	1,644	-
Outward reinsurance	(24)	-	-	(51)	-
Net earned premiums	766	-	-	1,593	-
Investment return (non-banking)	29	58		(223)	10
Banking interest and similar income	-	-	1,765	-	-
Banking trading, investment and similar income	-	-	68	-	-
Fee and commission income, and income from service activities	53	77	227	-	250
Other income	36	26	60	23	8
Share of associated undertakings' profit/(loss) after tax	4	-	3	-	-
Profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments	(13)	-	1	-	(1)
Inter-segment revenues	86	14	8	-	4
Total revenue	961	175	2,132	1,393	271
Expenses
Claims and benefits (including change in insurance contract provisions)	(288)	-	-	(1,446)	-
Reinsurance recoveries	35	-	-	54	-
Net claims and benefits incurred	(253)	-	-	(1,392)	-
Change in investment contract liabilities	44	-	-	3	-
Losses on loans and advances	-	-	(125)	-	-
Finance costs	-	-	-	-	-
Banking interest payable and similar expenses	-	-	(1,213)	-	-
Fee and commission expense, and other acquisition costs	(71)	1	-	(40)	(5)
Other operating and administrative expenses	(199)	(64)	(449)	(35)	(192)
Change in third party interest in consolidated funds	-	-	-	-	-
Amortisation of PVIF and other acquired intangibles	-	-	-	(13)	-
Inter-segment expenses	(22)	(57)	(24)	(5)	-
Total expenses	(501)	(120)	(1,811)	(1,482)	(197)
Profit/(loss) before tax	460	55	321	(89)	74
Adjusting items	(214)	-	(1)	95	(4)
Income tax attributable to policyholder returns	(4)	-	-	-	-
Adjusted operating profit/(loss) before tax	242	55	320	6	70

3 Segment information continued

(ii) Income statement - segment information six months ended 30 June 2008 continued

Europe			Other	Group				£m
Long-term business	Asset management	Banking	Asset management	Corporate	Inter-segment (revenues)/ expenses	Total continuing operations	Discontinued operations	Total

126	-	-	-	-	-	2,560	301	2,861
(44)	-	-	-	-	-	(119)	(45)	(164)
82	-	-	-	-	-	2,441	256	2,697
(3,797)	8	-	-	7	(184)	(4,092)	18	(4,074)
-	-	129	-	-	-	1,894	-	1,894
-	-	2	-	-	-	70	-	70
375	166	13	19	-	1	1,181	-	1,181
14	3	4	-	-	16	190	-	190
-	-	-	(3)	(6)	-	(2)	-	(2)
-	17	58	-	-	-	62	-	62
111	11	8	-	7	(254)	(5)	5	-
(3,215)	205	214	16	8	(421)	1,739	279	2,018

(68)	-	-	-	-	-	(1,802)	(221)	(2,023)
22	-	-	-	-	-	111	38	149
(46)	-	-	-	-	-	(1,691)	(183)	(1,874)
3,795	-	-	-	-	-	3,842	-	3,842
-	-	(1)	-	-	-	(126)	-	(126)
-	-	-	-	(9)	-	(9)	-	(9)
-	-	(89)	-	-	-	(1,302)	-	(1,302)
(120)	(51)	-	(6)	-	(39)	(331)	(50)	(381)
(249)	(61)	(33)	(17)	(22)	(4)	(1,325)	(24)	(1,349)
-	-	-	-	-	210	210	-	210
(158)	(2)	(3)	-	-	-	(176)	-	(176)
(49)	(69)	(20)	(1)	(3)	254	4	(4)	-
3,173	(183)	(146)	(24)	(34)	421	(904)	(261)	(1,165)
(42)	22	68	(8)	(26)	-	835	18	853
100	(15)	(55)	-	(62)	-	(156)	10	(146)
70	-	-	-	-	-	66	-	66
128	7	13	(8)	(88)	-	745	28	773

3 Segment information continued

(ii) Income statement - segment information six months ended 30 June 2007

	South Africa			United States
	Long-term business	Asset management	Banking	Long-term business	Asset management
Revenue
Gross earned premiums	730	-	-	1,355	-
Outward reinsurance	(20)	-	-	(50)	-
Net earned premiums	710	-	-	1,305	-
Investment return (non-banking)	2,216	29	-	340	3
Banking interest and similar income	-	-	1,352	-	-
Banking trading, investment and similar income	-	-	71	-	-
Fee and commission income, and income from service activities	52	83	218	-	250
Other income	37	30	24	(1)	13
Share of associated undertakings' profit/(loss) after tax	7	-	7	-	-
Profit on disposal of subsidiaries, associated undertakings and strategic investments	-	1	-	-	6
Inter-segment revenues	61	15	22	-	6
Total revenue	3,083	158	1,694	1,644	278
Expenses
Claims and benefits (including change in insurance contract provisions)	(1,865)	-	-	(1,558)	-
Reinsurance recoveries	16	-	-	58	-
Net claims and benefits incurred	(1,849)	-	-	(1,500)	-
Change in investment contract liabilities	(534)	-	-	-	-
Losses on loans and advances	-	-	(73)	-	-
Finance costs	-	-	-	-	-
Banking interest payable and similar expenses	-	-	(869)	-	-
Fee and commission expense, and other acquisition costs	(71)	(2)	-	(96)	(5)
Other operating and administrative expenses	(192)	(61)	(430)	(28)	(191)
Change in third party interest in consolidated funds	-	-	-	-	-
Goodwill impairment	-	-	-	-	-
Amortisation of PVIF and other acquired intangibles	-	-	-	(18)	-
Inter-segment expenses	(19)	(40)	(34)	(7)	-
Total expenses	(2,665)	(103)	(1,406)	(1,649)	(196)
Profit/(loss) before tax	418	55	288	(5)	82
Adjusting items	(127)	(1)	-	35	(6)
Income tax attributable to policyholder returns	(61)	-	-	-	-
Adjusted operating profit/(loss) before tax	230	54	288	30	76

3 Segment information continued

(ii) Income statement - segment information 6 months ended 30 June 2007 continued

Europe			Other	Group				£m
Long-term business	Asset management	Banking	Asset management	Corporate	Inter-segment (revenues)/ expenses	Total continuing operations	Discontinued operations	Total Restated

117	-	-	-	-	-	2,202	302	2,504
(35)	-	-	-	-	-	(105)	(48)	(153)
82	-	-	-	-	-	2,097	254	2,351
2,427	1	-	-	7	275	5,298	39	5,337
-	-	98	-	-	-	1,450	-	1,450
-	-	19	-	-	-	90	-	90
344	168	13	20	-	-	1,148	-	1,148
10	4	1	1	4	1	124	-	124
-	-	-	(1)	(11)	-	2	-	2
-	-	-	-	-	-	7	-	7
64	6	10	1	5	(208)	(18)	18	-
2,927	179	141	21	5	68	10,198	311	10,509

(52)	-	-	-	-	-	(3,475)	(206)	(3,681)
10	-	-	-	-	-	84	36	120
(42)	-	-	-	-	-	(3,391)	(170)	(3,561)
(2,343)	-	-	-	-	-	(2,877)	-	(2,877)
-	-	(1)	-	-	-	(74)	-	(74)
-	-	-	-	(47)	-	(47)	-	(47)
-	-	(59)	-	-	-	(928)	-	(928)
(92)	(47)	-	(5)	-	(40)	(358)	(49)	(407)
(217)	(70)	(37)	(13)	(33)	(16)	(1,288)	(25)	(1,313)
-	-	-	-	-	(220)	(220)	-	(220)
-	-	-	-	-	-	-	(1)	(1)
(161)	(2)	(2)	-	-	-	(183)	-	(183)
-	(51)	(34)	(1)	(3)	208	19	(19)	-
(2,855)	(170)	(133)	(19)	(83)	(68)	(9,347)	(264)	(9,611)
72	9	8	2	(78)	-	851	47	898
82	3	-	-	(10)	-	(24)	(11)	(35)
(45)	-	-	-	-	-	(106)	-	(106)
109	12	8	2	(88)	-	721	36	757

3 Segment information continued

(ii) Income statement - segment information year ended 31 December 2007

	South Africa			United States
	Long-term business	Asset management	Banking	Long-term business	Asset management
Revenue
Gross earned premiums	1,563	-	-	3,148	-
Outward reinsurance	(41)	-	-	(88)	-
Net earned premiums	1,522	-	-	3,060	-
Investment return (non-banking)	3,203	89	-	528	13
Banking interest and similar income	-	-	2,979	-	-
Banking trading, investment and similar income	-	-	167	-	-
Fee and commission income, and income from service activities	108	161	474	-	570
Other income	77	36	52	9	12
Share of associated undertakings' profit/(loss) after tax	11	-	8	-	-
Profit on disposal of subsidiaries, associated undertakings and strategic investments	-	-	1	-	8
Inter-segment revenues	144	49	39	-	12
Total revenue	5,065	335	3,720	3,597	615
Expenses
Claims and benefits (including change in insurance contract provisions)	(2,981)	-	-	(3,480)	-
Reinsurance recoveries	39	-	-	95	-
Net claims and benefits incurred	(2,942)	-	-	(3,385)	-
Change in investment contract liabilities	(767)	-	-	-	-
Losses on loans and advances	-	-	(154)	-	-
Finance costs	-	-	-	-	-
Banking interest payable and similar expenses	-	-	(1,928)	-	-
Fee and commission expense, and other acquisition costs	(153)	-	-	(102)	(10)
Other operating and administrative expenses	(410)	(153)	(940)	(54)	(424)
Change in third party interest in consolidated funds	-	-	-	-	-
Goodwill impairment	-	-	-	-	-
Amortisation of PVIF and other acquired intangibles	-	-	-	(24)	-
Inter-segment expenses	(63)	(84)	(75)	(13)	-
Total expenses	(4,335)	(237)	(3,097)	(3,578)	(434)
Profit/(loss) before tax	730	98	623	19	181
Adjusting items	(222)	-	(1)	79	(19)
Income tax attributable to policyholder returns	(63)	-	-	-	-
Adjusted operating profit/(loss) before tax	445	98	622	98	162

3 Segment information continued

(ii) Income statement - segment information year ended 31 December 2007 continued

Europe			Other	Group				£m
Long-term business	Asset management	Banking	Asset management	Corporate	Inter-segment (revenues)/ expenses	Total continuing operations	Discontinued operations	Total

230	-	-	-	-	-	4,941	625	5,566
(72)	-	-	-	-	-	(201)	(92)	(293)
158	-	-	-	-	-	4,740	533	5,273
2,019	-	-	-	8	211	6,071	56	6,127
-	-	211	-	-	-	3,190	-	3,190
-	-	3	-	-	-	170	-	170
730	345	27	42	-	-	2,457	-	2,457
8	23	2	3	-	23	245	-	245
-	-	-	(3)	(17)	-	(1)	-	(1)
-	-	16	-	-	-	25	-	25
178	27	13	2	15	(512)	(33)	33	-
3,093	395	272	44	6	(278)	16,864	622	17,486

(151)	-	-	-	-	-	(6,612)	(390)	(7,002)
50	-	-	-	-	-	184	52	236
(101)	-	-	-	-	-	(6,428)	(338)	(6,766)
(1,851)	-	-	-	-	-	(2,618)	-	(2,618)
-	-	(3)	-	-	-	(157)	-	(157)
-	-	-	-	(50)	-	(50)	-	(50)
-	-	(125)	-	-	-	(2,053)	-	(2,053)
(201)	(103)	-	(11)	-	(70)	(650)	(110)	(760)
(468)	(137)	(80)	(30)	(56)	(8)	(2,760)	(53)	(2,813)
-	-	-	-	-	(156)	(156)	-	(156)
-	-	-	-	-	-	-	(3)	(3)
(326)	(5)	(5)	-	-	-	(360)	-	(360)
(73)	(132)	(32)	(1)	(3)	512	36	(36)	-
(3,020)	(377)	(245)	(42)	(109)	278	(15,196)	(540)	(15,736)
73	18	27	2	(103)	-	1,668	82	1,750
152	8	(13)	-	(57)	-	(73)	7	(66)
3	-	-	-	-	-	(60)	-	(60)
228	26	14	2	(160)	-	1,535	89	1,624

3 Segment information continued

(iii) Gross earned premiums

Six months ended 30 June 2008	£m
Six months ended 30 June 2008	South Africa	United States	Europe	Other	Total
Long-term business - insurance contracts	526	1,644	126	-	2,296
Long-term business - investment contracts with
discretionary participation features	264	-	-	-	264
Gross earned premiums	790	1,644	126	-	2,560
Long-term business - other investment contracts recognised as deposits	597	116	3,938	-	4,651

Six months ended 30 June 2007	£m
Six months ended 30 June 2007	South Africa	United States	Europe	Other	Total
Long-term business - insurance contracts	518	1,355	117	-	1,990
Long-term business - investment contracts with
discretionary participation features	212	-	-	-	212
Gross earned premiums	730	1,355	117	-	2,202
Long-term business - other investment contracts recognised as deposits	556	83	4,431	-	5,070

Year ended 31 December 2007	£m
Year ended 31 December 2007	South Africa	United States	Europe	Other	Total
Long-term business - insurance contracts	1,048	3,148	230	-	4,426
Long-term business - investment contracts with
discretionary participation features	515	-	-	-	515
Gross earned premiums	1,563	3,148	230	-	4,941
Long-term business - other investment contracts recognised as deposits	1,315	177	8,450	-	9,942

3 Segment information continued

(iv) Funds under management

At 30 June 2008	£m
At 30 June 2008	South Africa	United States	Europe	Other	Total
Long-term business policyholder funds	18,808	13,937	42,665	167	75,577
Unit trusts and mutual funds	5,639	4,878	13,249	2,346	26,112
Third party client funds	9,317	141,613	-	3,453	154,383
Total client funds under management	33,764	160,428	55,914	5,966	256,072
Shareholder funds	1,838	176	1,348	-	3,362
Total funds under management	35,602	160,604	57,262	5,966	259,434

At 30 June 2007	£m
At 30 June 2007	South Africa	United States	Europe	Other	Total
Long-term business policyholder funds	20,195	14,056	42,496	72	76,819
Unit trusts and mutual funds	5,782	5,577	11,703	2,468	25,530
Third party client funds	12,480	138,470	1,926	4,064	156,940
Total client funds under management	38,457	158,103	56,125	6,604	259,289
Shareholder funds	2,167	233	1,437	-	3,837
Total funds under management	40,624	158,336	57,562	6,604	263,126

At 31 December 2007	£m
At 31 December 2007	South Africa	United States	Europe	Other	Total
Long-term business policyholder funds	22,469	14,822	44,674	122	82,087
Unit trusts and mutual funds	6,693	5,260	14,416	2,535	28,904
Third party client funds	10,517	149,850	-	3,833	164,200
Total client funds under management	39,679	169,932	59,090	6,490	275,191
Shareholder funds	2,042	191	1,454	-	3,687
Total funds under management	41,721	170,123	60,544	6,490	278,878

4 Operating profit adjusting items

(i) Summary of adjusting items

In determining the adjusted operating profit of the Group adjustments are made to profit before tax to reflect the directors' view of the underlying long-term performance of the Group. These items are summarised below:

						£m
Six months ended 30 June 2008	Notes	South Africa	United States	Europe	Corporate	Total
Income/(expense)
Goodwill impairment and impact of acquisition accounting	4(ii)	-	(13)	(114)	-	(127)
Profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments	4(iii)	(12)	(1)	75	-	62
Short-term fluctuations in investment return	4(iv)	77	(82)	9	-	4
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)	-	-	-	22	22
US Asset Management equity plans and minority holders	4(viii)	-	5	-	-	5
Fair value gains on Group debt instruments	4(ix)	-	-	-	40	40
Total adjusting items		215	(91)	(30)	62	156
Tax on adjusting items	5(iii)	(8)	(7)	18	(17)	(14)
Minority interest in adjusting items		13	(5)	-	-	8
Total adjusting items after tax and minority interests		220	(103)	(12)	45	150

						£m
Six months ended 30 June 2007	Notes	South Africa	United States	Europe	Corporate	Total
Income/(expense)
Goodwill impairment and impact of acquisition accounting	4(ii)	-	(18)	(92)	-	(110)
Profit on disposal of subsidiaries, associated undertakings and strategic investments	4(iii)	1	6	-	-	7
Short-term fluctuations in investment return	4(iv)	125	(17)	7	-	115
Investment return adjustment for Group equity and debt instruments held in life funds	4(v)	2	-	-	-	2
Dividends declared to holders of perpetual preferred callable securities	4(vi)	-	-	-	22	22
Closure of unclaimed shares trusts	4(vii)	-	-	-	(12)	(12)
Total adjusting items		128	(29)	(85)	10	24
Tax on adjusting items	5(iii)	(23)	10	17	(7)	(3)
Minority interest in adjusting items		11	-	-	-	11
Total adjusting items after tax and minority interests		116	(19)	(68)	3	32

4 Operating profit adjusting items continued

(i) Summary of adjusting items continued

						£m
Year ended 31 December 2007	Notes	South Africa	United States	Europe	Corporate	Total
Income/(expense)
Goodwill impairment and impact of acquisition accounting	4(ii)	-	(24)	(218)	-	(242)
Profit on disposal of subsidiaries, associated undertakings and strategic investments	4(iii)	1	8	16	-	25
Short-term fluctuations in investment return	4(iv)	195	(55)	55	-	195
Investment return adjustment for Group equity and debt instruments held in life funds	4(v)	14	-	-	-	14
Dividends declared to holders of perpetual preferred callable securities	4(vi)	-	-	-	40	40
Closure of unclaimed shares trusts	4(vii)	13	-	-	(12)	1
US Asset Management equity plans and minority holders	4(viii)	-	11	-	-	11
Fair value gains on Group debt instruments	4(ix)	-	-	-	29	29
Total adjusting items		223	(60)	(147)	57	73
Tax on adjusting items	5(iii)	(101)	30	51	(9)	(29)
Minority interest in adjusting items		23	(11)	-	-	12
Total adjusting items after tax and minority interests		145	(41)	(96)	48	56

(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 balance sheet 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 2008	South Africa	United States	Europe	Corporate	Total
Amortisation of acquired PVIF
Long-term business	-	13	126	-	139
Amortisation of acquired deferred costs and revenue
Long-term business	-	-	(45)	-	(45)
Amortisation of other acquired intangible assets
Long-term business	-	-	32	-	32
Asset management	-	-	2	-	2
Banking	-	-	3	-	3
Release of acquisition balance sheet provisions
Long-term business	-	-	(4)	-	(4)
	-	13	114	-	127

4 Operating profit adjusting items continued

(ii) Goodwill impairment and impact of acquisition accounting continued

					£m
Six months ended 30 June 2007	South Africa	United States	Europe	Corporate	Total
Amortisation of acquired PVIF
Long-term business	-	18	132	-	150
Amortisation of acquired deferred costs and revenue
Long-term business	-	-	(65)	-	(65)
Asset management	-	-	3	-	3
Amortisation of other acquired intangible assets
Long-term business	-	-	29	-	29
Asset management	-	-	2	-	2
Banking	-	-	2	-	2
Release of acquisition balance sheet provisions
Long-term business	-	-	(7)	-	(7)
Asset management	-	-	(2)	-	(2)
Banking	-	-	(2)	-	(2)
	-	18	92	-	110

					£m
Year ended 31 December 2007	South Africa	United States	Europe	Corporate	Total
Amortisation of acquired PVIF
Long-term business	-	24	266	-	290
Amortisation of acquired deferred costs and revenue
Long-term business	-	-	(112)	-	(112)
Asset management	-	-	6	-	6
Amortisation of other acquired intangible assets
Long-term business	-	-	60	-	60
Asset management	-	-	5	-	5
Banking	-	-	5	-	5
Release of acquisition balance sheet provisions
Long-term business	-	-	(7)	-	(7)
Asset management	-	-	(3)	-	(3)
Banking	-	-	(2)	-	(2)
	-	24	218	-	242

4 Operating profit adjusting items continued

(iii) Profit on disposal of subsidiaries, associated undertakings and strategic investments

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

Part of the Europe 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 £58 million.

During 2007 the Europe banking subsidiary sold its Danish operation. An accounting profit on sale of £16 million was recognised. The US Asset Management business disposed of its interests in certain affiliate asset managers, resulting in a profit on disposal of £8 million in 2007.

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 £13 million have been excluded from the adjusted operating profit.

Profits on the disposal of subsidiaries, associated undertakings and strategic investments are analysed below:

					£m
Six months ended 30 June 2008	South Africa	United States	Europe	Corporate	Total
Long-term business	(13)	-	-	-	(13)
Asset management	-	(1)	17	-	16
Banking	1	-	58	-	59
					£m
Six months ended 30 June 2007	South Africa	United States	Europe	Corporate	Total
Long-term business	1	6	-	-	7
					£m
Year ended 31 December 2007	South Africa	United States	Europe	Corporate	Total
Long-term business	-	8	-	-	8
Banking	1	-	16	-	17

(iv) Long-term investment return

Profit before tax includes actual investment returns earned on the shareholder assets of the Group. 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 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 the South Africa long-term business, the return is applied to an average value of investible shareholders' assets. For US and Europe long-term businesses, the return is applied to average investible assets.

For all businesses mis-matches attributed to the timing of the recognition of policyholder tax and related receipts from policyholders are eliminated with reference to the historic net gains/(losses) in respect of this item.

Long-term investment rates	6 months ended 30 June 2008	6 months ended 30 June 2007	Year ended 31 December 2007
South Africa long-term business	16.6%	15.6%	15.6%
United States long-term business	5.9%	6.0%	5.7%
Europe long-term business	4.8%	4.8%	4.9%

4 Operating profit adjusting items continued

(iv) Long-term investment return continued

Analysis of short-term fluctuations in investment return

					£m
Six months ended 30 June 2008	South Africa	United States	Europe	Corporate	Total
Long-term business
Actual investment return attributable to shareholders	197	90	14	-	301
Less: long-term investment return	(120)	(172)	(5)	-	(297)
Total short-term fluctuations in investment return	77	(82)	9	-	4

					£m
Six months ended 30 June 2007	South Africa	United States	Europe	Corporate	Total
Long-term business
Actual investment return attributable to shareholders	229	309	10	-	548
Less: long-term investment return	(104)	(326)	(3)	-	(433)
Total short-term fluctuations in investment return	125	(17)	7	-	115

					£m
Year ended 31 December 2007	South Africa	United States	Europe	Corporate	Total
Long-term business
Actual investment return attributable to shareholders	416	527	61	-	1,004
Less: long-term investment return	(221)	(582)	(6)	-	(809)
Total short-term fluctuations in investment return	195	(55)	55	-	195

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 2008 the investment return adjustment decreased adjusted operating profit by £150 million (six months ended 30 June 2007: decrease of £2 million, year ended 31 December 2007: decrease of £14 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 2008 (six months ended 30 June 2007: £22 million, year ended 31 December 2007: £40 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.

4 Operating profit adjusting items continued

(vii) Closure of unclaimed shares trusts

During 2006 Old Mutual announced the closure of the Old Mutual South Africa Unclaimed Shares Trust (UST) and similar trusts set up in Namibia, Zimbabwe, Malawi and Bermuda. Proceeds of sale of the Old Mutual plc shares held by those trusts were remitted to Old Mutual plc in 2006 and 2007. Old Mutual intends to use substantially all of the proceeds realised to discharge late claims in cash for a further period of three years (to 31 August 2009), to fund good causes in the jurisdictions of the trust concerned or to enhance benefits for certain specific groups of policyholders of the Group's South African and Namibian life businesses. Provisions are held in this regard.

During 2007 payments of the proceeds were made by the trusts to Old Mutual plc. These payments resulted in the realisation of foreign exchange losses of £14 million in the year ended 31 December 2007. Furthermore, as a result of remeasurement of certain provisions for obligations, an amount of £13 million was released in the year ended 31 December 2007. Consistent with the treatment of the original sales proceeds and costs in 2006, these amounts were excluded from adjusted operating profit. During 2008 the capital gains payable by the unclaimed share trusts were settled.

(viii) US Asset Management equity plans and minority interests
During 2007, US Asset Management entered into a number of new long-term incentive arrangements with certain of its asset management affiliates.

In accordance with IFRS requirements the cost of these schemes is disclosed as being attributable to minority 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 2008 was £5 million (six months ended 30 June 2007: nil, year ended 31 December 2007: £11 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 2008 these instruments were revalued, the impact of which was less than £1 million (six months ended 30 June 2007: less than £1 million, year ended 31 December 2007: less than £1 million).

(ix) Fair value gains/losses on Group debt instruments
The significant widening of credit spreads since the second half of 2007 has led to a reduction in the market price of the Group's debt instruments. This decline in market price has resulted in a gain of £40 million (six months ended 30 June 2007: nil, year ended 31 December 2007: £29 million gain) being recorded in the Group's income statement for those instruments that are recorded at fair value.

In the directors' view, these gains are not reflective of the underlying performance of the Group and will reverse over time. The gains/losses have therefore been excluded from adjusted operating profit.

5 Income tax expense

(i) Analysis of total income tax expense			£m
	6 months ended 30 June 2008	6 months ended 30 June 2007 Restated	Year ended 31 December 2007
Current tax
United Kingdom tax - Corporation tax	96	56	436
- Double tax relief	(93)	(28)	(399)
Overseas tax - South Africa	129	117	379
- United States	(7)	7	26
- Europe	39	30	73
Secondary Tax on Companies (STC)	4	5	65
Prior year adjustments	18	2	(25)
Total current tax	186	189	555
Deferred tax
Origination of temporary differences	(45)	97	(58)
Changes in tax rates/bases	(5)	(11)	(13)
Write down/(recognition) of deferred tax assets	27	1	(5)
Total deferred tax	(23)	87	(76)
Total income tax expense	163	276	479

(ii) Reconciliation of total income tax expense				£m
	6 months ended 30 June 2008		6 months ended 30 June 2007 Restated	Year ended 31 December 2007
Profit before tax	835		851	1,668
Tax at standard average rate of 28.5% (2007: 30%)	238		255	500
Different tax rate or basis on overseas operations	8		(7)	(20)
Untaxed and low taxed income	(128)		(69)	(154)
Disallowable expenses	23		17	88
Net movement on deferred tax assets not recognised	34		(5)	(38)
Effect on deferred tax of changes in tax rates	(5)		(10)	(18)
STC	41		11	47
Income tax attributable to policyholder returns	(46)		81	51
Other	(2)		3	23
Total income tax expense	163		276	479
(iii) Income tax on adjusted operating profit				£m
6 months ended 30 June 2008			6 months ended 30 June 2007 Restated	Year ended 31 December 2007
Total income tax expense		163	276	479
Tax on adjusting items
Impact of acquisition accounting		20	22	65
Profit on disposal of subsidiaries, associated undertakings and strategic investments		1	-	(10)
Short-term fluctuations in investment return		(18)	(18)	(40)
Income tax attributable to policyholders returns		66	(106)	(60)
STC on dividends paid		-	-	(35)
Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity		(6)	(7)	(9)
Fair value gains on group debt instruments		(11)	-	-
Income tax on adjusted operating profit		215	167	390

6 Earnings and earnings per share

(i) Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the 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 2008	6 months ended 30 June 2007	Year ended 31 December 2007
Profit for the financial period attributable to equity holders of the parent from continuing operations	539	456	929
Profit for the financial period attributable to equity holders of the parent from discontinued operations	10	27	43
Profit for the financial period attributable to equity holders of the parent	549	483	972
Dividends declared to holders of perpetual preferred callable securities	(16)	(15)	(31)
Profit attributable to ordinary equity holders	533	468	941

Total dividends declared to holders of perpetual preferred callable securities of £22 million (six months ended 30 June 2007: £22 million, year ended 31 December 2007: £40 million) for the six months ended 30 June 2008 are stated net of tax credits of £6 million (six months ended 30 June 2007: £7 million, year ended 31 December 2007: £9 million).

				£m
	6 months ended 30 June 2008	6 months ended 30 June 2007		Year ended 31 December 2007
Weighted average number of ordinary shares in issue	5,311	5,503	5,492
Shares held in charitable foundations	(21)	(20)	(20)
Shares held in ESOP trusts	(45)	(76)	(61)
Adjusted weighted average number of ordinary shares	5,245	5,407	5,411
Shares held in life funds	(239)	(292)	(282)
Shares held in Black Economic Empowerment trusts	(235)	(235)	(235)
Weighted average number of ordinary shares	4,771	4,880	4,894
Basic earnings per ordinary share from continuing operations (pence)	11.0	9.0	18.3
Basic earnings per ordinary share from discontinued operations (pence)	0.2	0.6	0.9
Basic earnings per ordinary share (pence)	11.2	9.6	19.2

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 2008	6 months ended 30 June 2007	Year ended 31 December 2007
Weighted average number of ordinary shares	4,771	4,880	4,894
Adjustments for share options held by ESOP trusts	51	69		63
Adjustments for shares held in Black Economic Empowerment trusts	235	235	235
	5,057	5,184	5,192
Diluted earnings per ordinary share from continuing operations (pence)	10.3	8.5	17.3
Diluted earnings per ordinary share from discontinued operations (pence)	0.2	0.5	0.8
Diluted earnings per ordinary share (pence)	10.5	9.0	18.1

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 long-term performance of the Group. For long-term and general insurance business adjusted operating profit is based on a long-term investment return. It 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, 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 on Group debt instruments.

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

£m
	Continuing	Discontinued
Six months ended 30 June 2008	operations	operations	Total
Profit for the financial period attributable to equity holders of the parent	539	10	549
Adjusting items	(156)	10	(146)
Tax on adjusting items	14	-	14
Minority interest on adjusting items	(8)	(4)	(12)
Adjusted operating profit after tax attributable to ordinary equity holders	389	16	405
Adjusted weighted average number of ordinary shares (millions)			5,245
Adjusted operating earnings per ordinary share (pence)	7.4	0.3	7.7

			£m
Six months ended 30 June 2007	Continuing	Discontinued
Six months ended 30 June 2007	operations	operations	Total
Profit for the financial period attributable to equity holders of the parent	456	27	483
Adjusting items	(24)	(11)	(35)
Tax on adjusting items	3	1	4
Minority interest on adjusting items	(11)	1	(10)
Adjusted operating profit after tax attributable to ordinary equity holders	424	18	442
Adjusted weighted average number of ordinary shares (millions)			5,407
Adjusted operating earnings per ordinary share (pence)	7.8	0.4	8.2

£m
	Continuing	Discontinued
Year ended 31 December 2007	operations	operations	Total
Profit for the financial year attributable to equity holders of the parent	929	43	972
Adjusting items	(73)	7	(66)
Tax on adjusting items	29	(3)	26
Minority interest on adjusting items	(12)	(6)	(18)
Adjusted operating profit after tax attributable to ordinary equity holders	873	41	914
Adjusted weighted average number of ordinary shares (millions)			5,411
Adjusted operating earnings per ordinary share (pence)	16.1	0.8	16.9

7 Dividends

Dividends declared and paid were as follows:

			£m
	6 months ended 30 June 2008	6 months ended 30 June 2007	Year ended 31 December 2007
2006 Final dividend paid - 4.15p per 10p share	-	218	218
2007 Interim dividend paid - 2.3p per 10p share	-	-	115
2007 Final dividend paid - 4.55p per 10p share	227	-	-
Dividends to ordinary equity holders	227	218	333
Dividends declared to holders of perpetual preferred callable securities	22	22	40
Dividend payments for the period	249	240	373

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.

The directors have declared a 2008 interim dividend of 2.45p per share (2007 interim: 2.3p per share), which will be paid on 28 November 2008 to all ordinary equity holders on the register at the close of business on 7 November 2008, being the record date for the dividend. In accordance with IFRS requirements, no provision has been recognised in respect of this dividend.

In March 2008, £22 million was declared and paid to holders of perpetual preferred callable securities (March 2007: £22 million, November 2007: £18 million).

8 Discontinued operations, assets and liabilities held-for-sale

Discontinued operations

The results of the Group's South Africa general insurance business, Mutual & Federal, are shown as a discontinued operation in these interim financial statements. The Group is actively seeking a buyer for Mutual & Federal which is expected to result in the sale of a controlling interest in Mutual & Federal.

An analysis of the results of Mutual & Federal is shown in the segmental income statement in note 3 to the Group financial statements. Further analysis of the results of discontinued operations is given below.

(i) Reconciliation of adjusted operating profit from discontinued operations to profit after tax from discontinued operations

			£m
	6 months ended 30 June 2008	6 months ended 30 June 2007	Year ended 31 December 2007
Adjusted operating profit from discontinued operations	28	36	89
Adjusting items from discontinued operations	(10)	11	(7)
Profit for the financial year before tax from discontinued operations	18	47	82
Income tax expense on discontinued operations	(5)	(11)	(25)
Profit for the financial period after tax on discontinued operations	13	36	57

(ii) Adjusting items from discontinued operations

			£m
	6 months ended 30 June 2008	6 months ended 30 June 2007	Year ended 31 December 2007
Goodwill impairment and impact of acquisition accounting	-	(1)	(3)
Short-term fluctuations in investment return	(10)	12	(4)
Total adjusting items from discontinued operations	(10)	11	(7)
Tax on adjusting items	-	(1)	3
Minority interest in adjusting items	4	(1)	6
Adjusting items from discontinued operations after tax and minority interests	(6)	9	2

8 Discontinued operations, assets and liabilities held-for-sale continued

(iii) Adjusted operating profit from discontinued operations attributable to ordinary equity holders

			£m
	6 months ended 30 June 2008	6 months ended 30 June 2007	Year ended 31 December 2007
Adjusted operating profit from discontinued operations	28	36	89
Tax on adjusted operating profit from discontinued operations	(5)	(10)	(28)
Adjusted operating profit after tax from discontinued operations	23	26	61
Minority interests - ordinary shares	(7)	(8)	(20)
Adjusted operating profit after tax from discontinued operations attributable to ordinary equity holders	16	18	41

(iv) Net cash flows from discontinued operations

			£m
	6 months ended 30 June 2008	6 months ended 30 June 2007	Year ended 31 December 2007
Operating activities	15	67	66
Investing activities	(10)	(48)	(28)
Financing activities	7	(32)	(61)
Net cash inflow/(outflow)	12	(13)	(23)

(v) Non-current assets held-for-sale

			£m
	6 months ended 30 June 2008	6 months ended 30 June 2007	Year ended 31 December 2007
Loans and advances	3	365	994
Investments and securities	327	144	359
Other assets	197	39	232
Derivative financial instruments	-	3	-
Cash and cash equivalents	39	22	32
	566	573	1,617

(vi) Non-current liabilities held-for-sale

			£m
	6 months ended 30 June 2008	6 months ended 30 June 2007	Year ended 31 December 2007
General insurance liabilities	291	-	299
Amounts owed to other depositors	-	502	-
Other liabilities	77	51	115
	368	553	414

Europe vehicle finance business

Skandia's Nordic vehicle finance operation, SkandiaBanken Bilfinans, was sold to DnB NOR during the six months ended 30 June 2008. As at 31 December 2007 the assets and liabilities were classified as held-for-sale.

South Africa general insurance business

The assets and liabilities of Mutual & Federal have been shown as non-current assets and liabilities held-for-sale as at 30 June 2008 and 31 December 2007.

9 Borrowed funds

				£m
	Notes	At 30 June 2008	At 30 June 2007 Restated	At 31 December 2007
Senior debt securities and term loans	9(i)	449	570	461
Mortgage backed securities	9(ii)	91	-	103
Subordinated debt securities	9(iii)	1,696	1,731	1,789
Borrowed funds		2,236	2,301	2,353

(i) Senior debt securities and term loans

			£m
	At 30 June 2008	At 30 June 2007 Restated	At 31 December 2007
Floating rate notes1	75	147	151
Fixed rate notes2	46	57	44
Revolving credit facility3	192	249	161
Term loan and other loans	23	11	26
Investment fund borrowings	113	106	79
Total senior debt securities and term loans	449	570	461

Senior debt securities and term loans comprise:

1 Floating rate notes:

- £12 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%.

- US$150 million repayable September 2014 at 3 month LIBOR plus 0.63%, repaid 9 June 2008.

- US$50 million repayable September 2011 at 3 month LIBOR plus 0.50%.

- US$10 million repayable September 2009 at 3 month LIBOR plus 0.35%.

- SEK100 million repayable March 2009 at 3 month STIBOR plus 0.20%.

- €22 million repayable January 2010 at 3 month EURIBOR plus 0.35%.

- SEK50 million repayable March 2010 at 3 month STIBOR plus 0.38%.

2 Fixed rate notes:

- €30 million Euro bond repayable July 2010, capital and interest swapped into fixed rate US Dollars at 5.28%.

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

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

The total fair value of the swap derivatives associated with the Senior Notes is £11 million (six months ended 30 June 2007: £5 million, year ended 31 December 2007: £8 million).

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 until September 2012. At 30 June 2008 £443 million (six months ended 30 June 2007: £424 million, year ended 31 December 2007: £413 million) of this facility was utilised, £192 million (six months ended 30 June 2007: £249 million, year ended 31 December 2007: £161million) in the form of drawn debt and £264 million (six months ended 30 June 2007: £175 million, year ended 31 December 2007: £252m) in the form of irrevocable letters of credit.

(ii) Mortgage backed securities

			£m
	At 30 June 2008	At 30 June 2007	At 31 December 2007
R291 million notes (class A1) repayable 18 November 2039 (11.467%)1	19	-	21
R1.4 billion notes (class A2A) repayable 18 November 2039 (11.817%)1	64	-	73
R98 million notes (class B note) repayable 18 November 2039 (12.067%)1	5	-	5
R76 million notes (class C note) repayable 18 November 2039 (12.317%)1	3	-	4
	91	-	103

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

9 Borrowed funds continued

(iii) Subordinated debt securities

			£m
	At 30 June 2008	At 30 June 2007	At 31 December 2007
Banking
US$18 million repayable 31 August 2009 (6 month LIBOR less 1.5%)1	9	9	9
R4.0 billion repayable 9 July 2012 (13.0%) - Repaid	-	300	-
R1.5 billion repayable 24 April 2016 (7.85%)2	86	100	103
R1.8 billion repayable 20 September 2018 (9.84%)3	107	131	135
R515 million repayable on 4 December 2008 (13.5%)4	33	38	39
R500 million repayable on 30 December 2010 (8.38%)5	28	34	34
R650 million repayable 8 February 2017 (9.03%)6	39	46	47
R1.7 billion repayable 8 February 2019 (8.9%)7	98	119	123
R2.0 billion repayable 6 July 2022 (3 month JIBAR plus 0.47%)8	132	-	151
R500 million repayable 15 August 2017 (3 month JIBAR plus 0.45%)9	33	-	37
R1.0 billion repayable 17 September 2015 (10.54%)10	61	-	77
R500 million repayable 14 December 2017 (3 month JIBAR plus 0.70%)11	32	-	37
R120 million repayable 14 December 2017 (10.38%)12	7	-	9
R487 million repayable 20 November 2018 (15.05%)13	30	-	-
R700 million repayable 20 November 2018 (JIBAR plus 4.75%)14	46	-	-
	741	777	801
Other
R3.0 billion repayable 27 October 2020 (8.9%)15	193	212	220
£300 million repayable 21 January 2016 (5.0%)16	273	286	291
R250 million preference shares repayable 9 June 201117	16	18	18
€750 million repayable 18 January 2017 (4.5%)18	522	492	519
	1,004	1,008	1,048

Less: banking subordinated debt securities held by other Group companies	(49)	(54)	(60)
Total subordinated liabilities	1,696	1,731	1,789

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 R1.5bn with a call date of 20 September 2013. On 18 May 2007 an additional R0.3bn was issued.

4 Unsecured callable bonds issued 10 June 2002

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 R1.0bn. On 19 March 2007 an additional R0.7bn 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 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%

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% until maturity.

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

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

15 These bonds have a maturity date of 27 October 2020 and pay a coupon of 8.92% to 27 October 2015 and 3 month JIBAR plus 1.59% thereafter. The Group has

the option to repay the bonds at par on 27 October 2015 and at 3 monthly intervals thereafter.

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

17 These preference shares are redeemable on 9 June 2011 and pay a variable cumulative coupon of 61.0% 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.

18 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 six month EURIBOR plus 0.96 per cent thereafter. The principal and coupon on the bond was swapped equally into Sterling and US Dollars with coupons of six month LIBOR plus 0.3425 per cent and six month US LIBOR plus 0.3095 per cent respectively. The Group has the option to repay the bonds at par on 17 January 2012 and at six monthly intervals thereafter.

10 Commitments and contingent liabilities

			£m
	At	At	At
	30 June	30 June	31 December
	2008	2007	2007
Guarantees and assets pledged as collateral security	1,315	1,361	1,489
Irrevocable letters of credit	286	398	426
Secured lending	1,038	804	1,052
Other contingent liabilities	151	296	136

Nedbank structured financing

Historically a number of the Group's South Africa 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.

Skandia Liv

Livfösäkringsaktiebolaget Skandia (publ) (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.

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.

The exposures referred to above as Skandia Liv and American Skandia have been provided for in the acquisition accounting.

11 Post balance sheet events

On 1 July 2008, Rogge Global Partners acquired ING Ghent which has funds under management of $1.5 billion.