Part 2 - Prelims Financial St

RNS Number : 2715O

Old Mutual PLC

04 March 2009

 



Consolidated income statement

For the year ended 31 December 2008

£m
Notes		Year ended  31 December 2008	Year ended  31 December 2007 Restated*
Revenue
Gross earned premiums	3(iii)	5,156	5,566
Outward reinsurance		(335)	(293)
Net earned premiums		4,821	5,273
Investment return (non-banking)		(11,578)	6,318
Banking interest and similar income		4,059	3,190
Banking trading, investment and similar income		162	170
Fee and commission income, and income from service activities		2,313	2,475
Other income		270	245
Total revenues		47	17,671
Expenses
Claims and benefits (including change in insurance contract provisions)		(3,610)	(7,193)
Reinsurance recoveries		262	236
Net claims and benefits incurred		(3,348)	(6,957)
Change in investment contract liabilities		10,051	(2,618)
Losses on loans and advances		(319)	(157)
Finance costs		392	(50)
Banking interest payable and similar expenses		(2,853)	(2,053)
Fee and commission expenses, and other acquisition costs		(937)	(778)
Other operating and administrative expenses		(2,834)	(2,813)
Goodwill impairment	4(ii)	(74)	(3)
Change in third party interest in consolidated funds		779	(156)
Amortisation of PVIF and other acquired intangibles	4(ii)	(361)	(360)
Total expenses		496	(15,945)
Share of associated undertakings' loss after tax		(1)	(1)
Profit on disposal of subsidiaries, associated undertakings and strategic investments	4(iii)	53	25
Profit before tax		595	1,750
Income tax credit/(expense)	5(i)	88	(504)
Profit after tax for the financial year		683	1,246
Profit for the financial year attributable to:
Equity holders of the parent		441	972
Minority interests
Ordinary shares	6(i)	188	224
Preferred securities	6(ii)	54	50
Profit after tax for the financial year		683	1,246
Earnings per share
Basic earnings per ordinary share (pence)	7(i)	8.6	19.2
Diluted earnings per ordinary share (pence)	7(i)	8.1	18.1
Weighted average number of shares - millions		4,755	4,894

*2007 results have been restated to include Mutual & Federal as a continuing operation.

Reconciliation of adjusted operating profit to profit after tax

For the year ended 31 December 2008

Reconciliation of adjusted operating profit to profit after tax £m
	Notes	Year ended  31 December  2008	Year ended  31 December  2007 Restated*
Europe	3(ii)	266	268
South Africa	3(ii)	1,191	1,254
United States	3(ii)	(270)	260
Other	3(ii)	(17)	2
		1,170	1,784
Finance costs		(140)	(119)
Other shareholders' expenses		(31)	(41)
Adjusted operating profit2 before tax		999	1,624
Adjusting items	4(i)	(168)	66
Profit for the financial year before tax (excluding policyholder tax)		831	1,690
Income tax attributable to policyholder returns	3(ii)	(236)	60
Profit for the financial year before tax		595	1,750
Total income tax expense	5(i)	88	(504)
Profit after tax for the financial year		683	1,246

Adjusted operating profit after tax attributable to ordinary equity holders

£m
Notes		Year ended 31 December 2008	Year ended 31 December 2007 Restated
Adjusted operating profit2 before tax		999	1,624
Tax on adjusted operating profit	5(iii)	(86)	(418)
Adjusted operating profit2 after tax		913	1,206
Minority interest - ordinary shares	6(iii)	(218)	(242)
Minority interest - preferred securities	6(ii)	(54)	(50)
Adjusted operating profit2 after tax attributable to ordinary equity holders		641	914
Adjusted weighted average number of shares - (millions)	7(i)	5,230	5,411
Adjusted operating earnings per share3 - (pence)	7(ii)	12.2	16.9

Basis of preparation

1 The reconciliation of adjusted operating profit 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.

2 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.

3 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

*2007 results have been restated to include Mutual & Federal as a continuing operation.

Consolidated balance sheet

At 31 December 2008

£m
	Notes	At 31 December 2008	At 31 December 2007
Assets
Goodwill and other intangible assets		5,882	5,459
Mandatory reserve deposits with central banks		734	615
Property, plant and equipment		682	608
Investment property		1,478	1,479
Deferred tax assets		1,590	683
Investments in associated undertakings and joint ventures		111	81
Deferred acquisition costs		3,199	2,253
Reinsurers' share of long-term business policyholder liabilities		1,148	1,394
Reinsurers' share of general insurance liabilities		115	-
Deposits held with reinsurers		164	213
Loans and advances		35,745	30,687
Investments and securities		83,522	89,627
Current tax receivable		118	83
Client indebtedness for acceptances		220	165
Other assets		3,137	2,774
Derivative financial instruments - assets		4,633	1,527
Cash and cash equivalents		2,862	3,469
Non-current assets held-for-sale		7	1,623
Total assets		145,347	142,740
Liabilities
Long-term business policyholder liabilities		81,269	84,251
General insurance liabilities		344	-
Third party interests in consolidated funds		2,591	3,547
Borrowed funds	8	2,295	2,353
Provisions	9	477	499
Deferred revenue		598	462
Deferred tax liabilities		1,452	1,413
Current tax payable		219	320
Other liabilities		3,733	6,180
Liabilities under acceptances		220	165
Amounts owed to bank depositors		38,171	31,817
Derivative financial instruments - liabilities		4,395	1,716
Non-current liabilities held-for-sale		6	420
Total liabilities		135,770	133,143
Net assets		9,577	9,597
Shareholders' equity
Equity attributable to equity holders of the parent		7,737	7,961
Minority interests
Ordinary shares		1,147	933
Preferred securities		693	703
Total minority interests		1,840	1,636
Total equity		9,577	9,597

Consolidated cash flow statement

For the year ended 31 December 2008

£m
	Year ended 31 December 2008	Year ended 31 December 2007
Cash flows from operating activities
Profit before tax	595	1,750
Capital losses/(gains) included in investment income	14,183	(1,836)
Loss on disposal of property, plant and equipment	3	4
Depreciation of property, plant and equipment	74	73
Amortisation and impairment of goodwill and other intangible assets	504	403
Impairment of loans and receivables	320	183
Share-based payment expense	21	15
Share of associated undertakings' loss after tax	1	(1)
Profit arising on disposal of subsidiaries, associated undertakings and strategic investments	(53)	(25)
Other non-cash amounts in profit	(397)	29
Non-cash movements in profit before tax	14,656	(1,155)
Reinsurers' share of long-term business policyholder liabilities	486	(53)
Reinsurers' share of general insurance liabilities	(49)	-
Deferred acquisition costs	(370)	(482)
Loans and advances	(5,206)	(5,339)
Insurance liabilities	282	1,962
Investment contracts	(10,260)	4,124
Amounts owed to bank depositors	6,110	4,647
Other operating assets and liabilities	(4,242)	(491)
Changes in working capital	(13,249)	4,368
Taxation paid	(458)	(563)
Net cash inflow from operating activities	1,544	4,400
Cash flows from investing activities
Net acquisitions of financial investments	(1,170)	(3,896)
Net acquisition of investment properties	(7)	(26)
Net acquisition of property, plant and equipment	(110)	(186)
Net acquisition of intangible assets	(18)	(67)
Acquisition of interests in subsidiaries	(93)	(278)
Disposal of interests in subsidiaries, associated undertakings and strategic investments	1,138	106
Net cash outflow from investing activities	(260)	(4,347)
Cash flows from financing activities
Dividends paid to:
Equity holders of the Company	(352)	(333)
Equity minority interests and preferred security interests	(208)	(205)
Interest paid (excluding banking interest paid)	(87)	(83)
Proceeds from issue of ordinary shares (including by subsidiaries to minority interests)	31	70
Net sale of treasury shares	5	149
Shares repurchased in buyback programme	(175)	(177)
Net receipts from unclaimed shares trust	-	95
Issue of subordinated and other debt	374	699
Other debt repaid	(225)	(356)
Net cash outflow from financing activities	(637)	(141)

£m
	Year ended 31 December 2008	Year ended 31 December 2007
Net increase/(decrease) in cash and cash equivalents	647	(88)
Effects of exchange rate changes on cash and cash equivalents	399	50
Cash and cash equivalents at beginning of the year	3,596	3,634
Cash and cash equivalents at end of the year	4,642	3,596
Consisting of:
Coins and bank notes	221	211
Money at call and short notice	2,453	3,169
Balances with central banks (other than mandatory reserve deposits)	188	121
Cash and cash equivalents from non-current assets held-for-sale	-	(32)
Cash and cash equivalents	2,862	3,469
Mandatory reserve deposits with central banks	734	615
Short term cash balances held in policy holder funds	2,043	808
Cash and cash equivalents subject to consolidation of funds	(997)	(1,296)
Total	4,642	3,596
Other supplementary cash flow disclosures
Interest income received (including banking interest)	5,370	4,858
Dividend income received	493	388
Interest paid (including banking interest)	3,064	2,130

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 cash flow statement in line with market practice in South Africa.

Consolidated statement of changes in equity

For the year ended 31 December 2008

		Millions				£m
Year ended 31 December 2008	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		5,510		7,961	1,636	9,597
Changes in equity arising in the year
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
Aggregate tax effect of items taken directly to or transferred from equity		-		366	-	366
Net income recognised directly in equity		-		(136)	101	(35)
Profit after tax for the financial year		-		441	242	683
Total recognised income and expense for the year		-		305	343	648
Dividends for the year	10	-		(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
Equity holders' funds at end of the year		5,516		7,737	1,840	9,577

								£m
Year ended 31 December 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 year		551	757	2,908	(304)	3,361	688	7,961
Changes in equity arising in the year:
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)
Aggregate tax effect of items taken directly to
or transferred from equity		-	-	367	(13)	-	12	366
Net income recognised directly in equity		-	-	(804)	690	(34)	12	(136)
Profit for the financial year attributable to
equity holders of the parent		-	-	-	-	410	31	441
Total recognised income and expense for		-	-	(804)	690	376	43	305
the year
Dividends for the year	10	-	-	-	-	(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
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 year	2,130

Retained earnings were reduced by £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

For the year ended 31 December 2008 continued

		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
Changes 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 the 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 after tax for the financial year		-		972	274	1,246
Total recognised income and expense for the year		-		1,077	279	1,356
Dividends for the year	10	-		(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

								£m
Year ended 31 December 2007	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 on realisation		-	-	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	8	9	105
Profit for the financial year attributable to
equity holders of the parent		-	-	-	-	941	31	972
Total recognised income and expense for
the year		-	-	(29)	117	949	40	1,077
Dividends for the year	10	-	-	-	-	(333)	(40)	(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

£m
Other reserves	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 were 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 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 year ended 31 December 2008

1 Accounting policies

Basis of preparation

The consolidated financial information contained herein has been prepared in accordance with International Financial Reporting Standards adopted by the EU. The Group's results for the year ended 31 December 2008 and the position at that date have been prepared using accounting policies consistent with those applied in the preparation of the Group's 2007 Annual Report and Accounts, except as set out below.

The financial information set out herein does not constitute the Company's statutory accounts for the years ended 31 December 2008 or 2007. Statutory accounts for 2007 have been delivered to the Registrar of Companies, and those for 2008 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports, and (iii) did not contain statements under section 237(2) or (3) of the Companies Act 1985.

Segment presentation

There has been a presentational change in the way segmental information is reflected in the notes to more closely align the disclosure with the way that management and the Board of Directors considers information when making operating decisions and is the basis on which resources are allocated and performance assessed by management and the Board of Directors. The Group's results are now analysed across nine reportable segments. For purposes of presentation these are grouped in geographical areas. The reported segments are Skandia UK, Nordic and ELAM, Old Mutual South Africa, Nedbank, Mutual & Federal, Rest of Africa, US Life and US Asset Management. Information about other business activities and operating segments is disclosed in the 'other reportable segments' category. Other segments comprise the Asia Pacific asset management business and 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) 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.

Reallocations of certain comparative segment information have been made following changes in the Group's management reporting structure, effective 1 January 2008. There was no impact on net profit or net assets.

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, have been adopted in these 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 have been updated to reflect the amendments to the standard. The Group's US Life business has applied the amendments to certain financial assets previously categorised as available-for-sale, which it has 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. As a result, assets with a carrying value of £926m at 1 July 2008 have been reclassified from available-for-sale to loans and receivables. Net decreases in the fair value of the reclassified assets in the period from 1 July 2008 to 31 December 2008, amounting to £284m, have consequently not been reflected in the available-for-sale reserve in equity. 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 key foreign business segments to Sterling are:

	Income  statement  (average rate)	Balance sheet  (closing rate)
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
31 December 2007
Rand	14.1109	13.6043
US Dollars	2.0014	1.9827
Swedish Kronor	13.5253	12.8320
Euro	1.4602	1.3596

3 Segment information

(i) Basis of segmentation

The Group's results are analysed across nine reportable segments. For purposes of presentation these are grouped in geographical areas. This is consistent with the way that management and the Board of Directors considers information when making operating decisions and is the basis on which resources are allocated and performance assessed by management and the Board of Directors. The Group generates revenue from four principal business activities: long-term business, asset management, banking and general insurance. The types of products and services from which each reportable segment derives its revenues are as follows:

Europe - Skandia UK - long-term business and asset management

Europe - Nordic - long-term business, asset management and banking

Europe - ELAM - long-term business and asset management

South Africa - OMSA - long-term business and asset management

South Africa - Nedbank - banking and asset management

South Africa - Mutual & Federal - general insurance

South Africa - Rest of Africa - long-term business and asset management (includes Namibia)

United States - US Life - long-term business

United States - USAM - asset management

Information about other business activities and operating segments is disclosed in the 'other reportable segments' category. Other segments comprise the Asia Pacific asset management business and Group head office.

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 80-117.

Comparative segment information has been revised in accordance with the improvements in presentation made in the current financial year.

In the analysis that follows, consolidation adjustments include the elimination of inter-segment revenues, expenses, assets and liabilities together with the impacts of the consolidation of the Group's interest in unit trusts, mutual funds and similar entities.

Notes to the consolidated financial statements

For the year ended 31 December 2008 continued

3 Segment information continued

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

	Europe			South Africa
	UK	Nordic	ELAM	OMSA	Nedbank
Revenue
Gross earned premiums	131	92	92	1,587	-
Outward reinsurance	(78)	(4)	(8)	(45)	-
Net earned premiums	53	88	84	1,542	-
Investment return (non-banking)	(6,165)	(2,317)	(1,436)	(305)	-
Banking interest and similar income	-	266	-	-	3,793
Banking trading, investment and similar income	-	24	-	-	138
Fee and commission income, and income from service activities	667	184	316	185	533
Other income	14	20	2	97	85
Inter-segment revenues	104	104	29	227	19
Total revenues	(5,327)	(1,631)	(1,005)	1,746	4,568
Expenses
Claims and benefits (including change in insurance contract provisions)	(38)	(68)	(103)	(648)	-
Reinsurance recoveries	34	4	2	41	-
Net claims and benefits incurred	(4)	(64)	(101)	(607)	-
Change in investment contract liabilities	5,991	2,390	1,466	184	-
Losses on loans and advances	-	(4)	-	-	(315)
Finance costs	-	-	-	-	-
Banking interest payable and similar expenses	-	(183)	-	-	(2,684)
Fee and commission expenses, and other acquisition costs	(330)	(49)	(151)	(150)	-
Other operating and administrative expenses	(333)	(193)	(166)	(487)	(928)
Goodwill impairment	-	-	-	-	-
Change in third party interest in consolidated funds	-	-	-	-	-
Amortisation of PVIF and other acquired intangibles	-	-	-	-	-
Income tax attributable to policyholder returns	283	(52)	(1)	7	-
Inter-segment expenses	(113)	(126)	(31)	(177)	(71)
Total expenses	5,494	1,719	1,016	(1,230)	(3,998)
Share of associated undertakings' profit/(loss) after tax	-	-	-	6	5
Profit on disposal of subsidiaries, associated undertakings and strategic investments	-	-	-	-	-
Adjusted operating profit/(loss) before tax and minority interests	167	88	11	522	575
Tax expense	(56)	(11)	(14)	(155)	(123)
Minority interests	-	-	-	(5)	(227)
Adjusted operating profit/(loss) after tax and minority interests	111	77	(3)	362	225
Adjusting items net of tax and minority interests	55	(122)	(16)	104	29
Profit/(loss) after tax attributable to equity holders of the parent	166	(45)	(19)	466	254

3 Segment information continued

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

		United States						£m
M & F	Rest of Africa	US Life	USAM	Other operating segments	Consolidation adjustments	Adjusted operating profit Total reportable segments	Adjusting items (Note 4)	IFRS Income statement
570	85	2,599	-	-	-	5,156	-	5,156
(91)	(2)	(107)	-	-	-	(335)	-	(335)
479	83	2,492	-	-	-	4,821		4,821
56	(14)	(332)	(3)	(13)	(713)	(11,242)	(336)	(11,578)
-	-	-	-	-	-	4,059	-	4,059
-	-	-	-	-	-	162	-	162
16	4	-	473	33	(1)	2,410	(97)	2,313
-	-	22	17	-	13	270	-	270
26	3	-	8	66	(586)	-	-	-
577	76	2,182	495	86	(1,287)	480	(433)	47
(401)	(52)	(2,300)	-	-	-	(3,610)	-	(3,610)
72	1	108	-	-	-	262	-	262
(329)	(51)	(2,192)	-	-	-	(3,348)	-	(3,348)
-	16	4	-	-	-	10,051	-	10,051
-	-	-	-	-	-	(319)	-	(319)
-	-	-	-	(140)	-	(140)	532	392
-	-	-	-	-	-	(2,867)	14	(2,853)
(101)	(6)	(264)	(10)	(10)	(44)	(1,115)	178	(937)
(59)	(10)	(84)	(388)	(75)	(34)	(2,757)	(77)	(2,834)
-	-	-	-	-	-	-	(74)	(74)
-	-	-	-	-	779	779	-	779
-	-	-	-	-	-	-	(361)	(361)
-	(1)	-	-	-	-	236	(236)	-
(12)	(6)	(13)	-	(37)	586	-	-	-
(501)	(58)	(2,549)	(398)	(262)	1,287	520	(24)	496
-	-	-	-	(12)	-	(1)	-	(1)
-	-	-	-	-	-	-	53	53
76	18	(367)	97	(188)	-	999	(404)	595
(17)	(2)	76	2	214	-	(86)	174	88
(19)	-	-	-	(21)	-	(272)	30	(242)
40	16	(291)	99	5	-	641	(200)	441
(49)	(13)	(569)	1	380	-	(200)
(9)	3	(860)	100	385	-	441

Notes to the consolidated financial statements

For the year ended 31 December 2008 continued

3 Segment information continued

(ii) Adjusted operating profit statement - segment information year ended 31 December 2007

	Europe			South Africa
	UK	Nordic	ELAM	OMSA	Nedbank
Revenue
Gross earned premiums	129	73	28	1,474	-
Outward reinsurance	(66)	(3)	(3)	(39)	-
Net earned premiums	63	70	25	1,435	-
Investment return (non-banking)	1,565	349	50	3,006	-
Banking interest and similar income	-	211	-	-	2,979
Banking trading, investment and similar income	-	3	-	-	167
Fee and commission income, and income from service activities	706	184	295	209	529
Other income	15	17	1	100	65
Inter-segment revenues	82	92	44	190	39
Total revenues	2,431	926	415	4,940	3,779
Expenses
Claims and benefits (including change in insurance contract provisions)	(79)	(46)	(26)	(2,842)	-
Reinsurance recoveries	47	1	2	38	-
Net claims and benefits incurred	(32)	(45)	(24)	(2,804)	-
Change in investment contract liabilities	(1,525)	(293)	(33)	(768)	-
Losses on loans and advances	-	(3)	-	-	(154)
Finance costs	-	-	-	-	-
Banking interest payable and similar expenses	-	(125)	-	-	(1,928)
Fee and commission expenses, and other acquisition costs	(327)	(35)	(131)	(148)	-
Other operating and administrative expenses	(325)	(223)	(149)	(533)	(977)
Goodwill impairment	-	-	-	-	-
Change in third party interest in consolidated funds	-	-	-	-	-
Amortisation of PVIF and other acquired intangibles	-	-	-	-	-
Income tax attributable to policyholder returns	42	(39)	-	(62)	-
Inter-segment expenses	(91)	(98)	(48)	(139)	(75)
Total expenses	(2,258)	(861)	(385)	(4,454)	(3,134)
Share of associated undertakings' profit/(loss) after tax	-	-	-	11	8
Profit on disposal of subsidiaries, associated undertakings and strategic investments	-	-	-	-	-
Adjusted operating profit/(loss) before tax and minority interests	173	65	30	497	653
Tax expense	(43)	(10)	(15)	(128)	(173)
Minority interests	-	-	(1)	(6)	(252)
Adjusted operating profit/(loss) after tax and minority interests	130	55	14	363	228
Adjusting items net of tax and minority interests	(13)	(69)	(14)	121	23
Profit/(loss) after tax attributable to equity holders of the parent	117	(14)	-	484	251

3 Segment information continued

(ii) Adjusted operating profit statement - segment information year ended 31 December 2007 continued

		United States						£m
M & F	Rest of Africa	US Life	USAM	Other operating segments	Consolidation  adjustments	Adjusted operating profit Total reportable segments	Adjusting items (Note 4)	IFRS Income statement Restated
625	89	3,148	-	-	-	5,566	-	5,566
(92)	(2)	(88)	-	-	-	(293)	-	(293)
533	87	3,060	-	-	-	5,273	-	5,273
60	77	774	13	8	211	6,113	205	6,318
-	-	-	-	-	-	3,190	-	3,190
-	-	-	-	-	-	170	-	170
18	5	-	570	42	-	2,558	(83)	2,475
-	-	9	12	3	23	245	-	245
33	3	-	12	17	(512)	-	-	-
644	172	3,843	607	70	(278)	17,549	122	17,671
(390)	(139)	(3,671)	-	-	-	(7,193)	-	(7,193)
52	1	95	-	-	-	236	-	236
(338)	(138)	(3,576)	-	-	-	(6,957)	-	(6,957)
-	1	-	-	-	-	(2,618)	-	(2,618)
-	-	-	-	-	-	(157)	-	(157)
-	-	-	-	(119)	-	(119)	69	(50)
-	-	-	-	-	-	(2,053)	-	(2,053)
(128)	(5)	(102)	(10)	(11)	(70)	(967)	189	(778)
(53)	(6)	(54)	(435)	(74)	(8)	(2,837)	24	(2,813)
-	-	-	-	-	-	-	(3)	(3)
-	-	-	-	-	(156)	(156)	-	(156)
-	-	-	-	-	-	-	(360)	(360)
-	(1)	-	-	-	-	(60)	60	-
(36)	(8)	(13)	-	(4)	512	-	-	-
(555)	(157)	(3,745)	(445)	(208)	278	(15,924)	(21)	(15,945)
-	-	-	-	(20)	-	(1)	-	(1)
-	-	-	-	-	-	-	25	25
89	15	98	162	(158)	-	1,624	126	1,750
(28)	(1)	(33)	(27)	40	-	(418)	(86)	(504)
(20)	-	-	-	(13)	-	(292)	18	(274)
41	14	65	135	(131)	-	914	58	972
2	1	(49)	8	48	-	58
43	15	16	143	(83)	-	972

Notes to the consolidated financial statements

For the year ended 31 December 2008 continued

3 Segment information continued    

(iii) Gross earned premiums

Year ended 31 December 2008	Europe			South Africa
	UK	Nordic	ELAM	OMSA	Nedbank
Long-term business-insurance contracts	131	92	92	1,111	-
Long-term business-investment contracts with discretionary  participation features	-	-	-	476	-
General insurance	-	-	-	-	-
Gross earned premiums	131	92	92	1,587	-
Long- term business-other investment contracts recognised  as deposits	4,892	976	1,052	1,358	-
	Europe			South Africa
Year ended 31 December 2007	UK	Nordic	ELAM	OMSA	Nedbank
Long-term business-insurance contracts	129	73	28	1,011	-
Long-term business-investment contracts with discretionary  participation features	-	-	-	463	-
General insurance	-	-	-	-	-
Gross earned premiums	129	73	28	1,474	-
Long- term business-other investment contracts recognised  as deposits	6,335	694	1,421	1,293	-
(iv) Impairments on financial assets
	Europe			South Africa
Year ended 31 December 2008	UK	Nordic	ELAM	OMSA	Nedbank
Impairment losses	-	5	-	-	315
	Europe			South Africa
Year ended 31 December 2007	UK	Nordic	ELAM	OMSA	Nedbank
Impairment losses	-	2	-	5	154
(v) Funds under management
	Europe			South Africa
As at 31 December 2008	UK	Nordic	ELAM	OMSA	Nedbank
Long-term business policyholder funds	26,889	6,605	5,297	20,048	425
Unit trusts and mutual funds	7,108	1,000	4,291	3,613	2,617
Third party client funds	-	-	-	8,613	3,375
Total client funds under management	33,997	7,605	9,588	32,274	6,417
Shareholder funds	885	418	311	1,596	-
Total funds under management	34,882	8,023	9,899	33,870	6,417
	Europe			South Africa
As at 31 December 2007	UK	Nordic	ELAM	OMSA	Nedbank
Long-term business policyholder funds	31,735	7,595	5,344	21,784	430
Unit trusts and mutual funds	9,211	1,182	4,023	3,918	2,775
Third party client funds	-	-	-	6,945	3,335
Total client funds under management	40,946	8,777	9,367	32,647	6,540
Shareholder funds	915	315	224	1,846	-
Total funds under management	41,861	9,092	9,591	34,493	6,540

3  Segment information continued

		United States		Other	£m
M & F	Rest of Africa	US Life	USAM		Total
-	37	2,599	-	-	4,062
-	48	-	-	-	524
570	-	-	-	-	570
570	85	2,599	-	-	5,156
-	33	230	-	-	8,541
		United States		Other	£m
M &F	Rest of Africa	US Life	USAM		Total
-	37	3,148	-	-	4,426
-	52	-	-	-	515
625	-	-	-	-	625
625	89	3,148	-	-	5,566
-	22	177	-	-	9,942
		United States		Other	£m
M &F	Rest of Africa	US Life	USAM		Total
-	-	414	-	-	734
		United States		Other	£m
M &F	Rest of Africa	US Life	USAM		Total
-	-	32	-	-	193
		United States		Other	£m
M & F	Rest of Africa	US Life	USAM		Total
-	253	2,642	13,623	193	75,975
-	-	-	3,127	1,859	23,615
-	228	-	147,956	1,484	161,656
-	481	2,642	164,706	3,536	261,246
145	36	-	177	-	3,568
145	517	2,642	164,883	3,536	264,814
		United States		Other	£m
M &F	Rest of Africa	US Life	USAM		Total
-	255	2,368	12,454	122	82,087
-	-	-	5,260	2,535	28,904
-	237	-	149,850	3,833	164,200
-	492	2,368	167,564	6,490	275,191
136	60	-	191	-	3,687
136	552	2,368	167,755	6,490	278,878

Notes to the consolidated financial statements

For the year ended 31 December 2008 continued

3 Segment information continued

(vi) Balance sheet - segment information year ended 31 December 2008 

	Europe			South Africa
At 31 December 2008	UK	Nordic	ELAM	OMSA	Nedbank
Assets
Goodwill and other intangible assets	1,609	1,183	1,138	28	425
Goodwill	644	222	574	24	308
Present value of acquired in-force business	713	742	375	-	-
Software development	22	1	6	4	117
Other intangibles	230	218	183	-	-
Mandatory reserve deposits with central banks	-	-	-	-	734
Property, plant and equipment	23	4	17	254	316
Investment property	2	-	1	1,273	15
Deferred tax assets	166	78	51	65	25
Investments in associated undertakings and joint ventures	-	-	-	26	75
Deferred acquisition costs	639	34	315	102	2
Insurance contracts	24	2	25	-	-
Investment contracts	552	32	282	92	-
Asset management	63	-	8	10	2
Reinsurers' share of long-term business policyholder liabilities	607	13	5	6	9
Insurance contracts	42	10	3	6	9
Unit-linked investment contracts and similar contracts	551	-	-	-	-
Outstanding claims	14	3	2	-	-
Reinsurers' share of general insurance liabilities	-	-	-	-	-
Deposits held with reinsurers	-	121	-	-	-
Loans and advances	116	3,846	25	49	31,634
Policyholder loans	116	-	24	49	-
Other loans and advances	-	3,846	1	-	31,634
Investments and securities	27,167	7,595	5,389	21,700	5,043
Government and government-guaranteed securities	163	214	610	3,631	2,255
Listed other debt securities, preference shares and debentures	2	813	41	1,781	2,172
Unlisted other debt securities, preference shares and debentures	-	-	67	2,106	-
Listed equity securities	1	-	1	6,678	38
Unlisted equity securities	23	12	9	873	152
Listed pooled investments	638	155	11	283	426
Unlisted pooled investments	26,340	6,401	4,650	4,233	-
Short-term funds and securities treated as investments	-	-	-	2,114	-
Other securities	-	-	-	1	-
Current tax receivable	80	-	8	3	25
Client indebtedness for acceptances	-	-	-	-	220
Other assets	178	138	125	433	486
Derivative financial instruments - assets	-	-	-	1,614	1,627
Cash and cash equivalents	202	372	183	97	631
Non-current assets held-for-sale	-	-	-	7	-
Inter-segment assets	163	264	89	1,308	19
Total assets	30,952	13,648	7,346	26,965	41,286

3 Segment information continued

(vi) Balance sheet - segment information year ended 31 December 2008 continued 

		United States				£m
M&F	Rest of Africa	US Life	USAM	Other operating segments	Consolidation  adjustments	Total reportable segments
29	4	137	1,305	24	­-	5,882
10	4	-	1,271	24	-	3,081
-	-	120	-	-	-	1,950
19	-	17	1	-	-	187
-	-	-	33	-	-	664
-	-	-	-	-	-	734
24	13	1	26	4	-	682
-	8	-	-	-	179	1,478
8	-	1,036	158	3	-	1,590
-	-	-	-	10	-	111
15	3	2,041	40	8	-	3,199
15	-	2,041	-	-	-	2,107
-	3	-	-	-	-	961
-	-	-	40	8	-	131
-	-	508	-	-	-	1,148
-	-	480	-	-	-	550
-	-	-	-	-	-	551
-	-	28	-	-	-	47
115	-	-	-	-	-	115
3	-	40	-	-	-	164
2	10	62	-	1	-	35,745
-	10	61	-	-	-	260
2	-	1	-	1	-	35,485
322	626	13,960	177	88	1,455	83,522
-	64	97	-	-	1,942	8,976
1	9	7,555	-	-	1,695	14,069
2	7	2,690	-	-	175	5,047
67	253	-	-	-	7,938	14,976
5	11	118	-	-	-	1,203
36	128	2,093	135	-	1,310	5,215
-	-	18	42	-	(11,853)	29,831
211	150	1,389	-	-	125	3,989
-	4	-	-	88	123	216
-	-	-	-	2	-	118
-	-	-	-	-	-	220
68	10	1,041	139	100	419	3,137
-	-	57	-	226	1,109	4,633
56	4	11	220	89	997	2,862
-	-	-	-	-	-	7
46	14	423	99	1,632	(4,057)	-
688	692	19,317	2,164	2,187	102	145,347

Notes to the consolidated financial statements

For the year ended 31 December 2008 continued

3 Segment information continued

(vi) Balance sheet - segment information year ended 31 December 2008 continued

	Europe			South Africa
At 31 December 2008	UK	Nordic	ELAM	OMSA	Nedbank
Liabilities
Long-term business policyholder liabilities	27,327	6,884	5,348	22,569	426
Insurance contracts	157	71	700	10,310	-
Unit-linked investment contracts and similar contracts	27,154	6,704	4,641	6,525	-
Other investment contracts	-	-	-	105	426
Discretionary participating investment contracts	-	-	-	5,428	-
Outstanding claims	16	109	7	201	-
General insurance liabilities	-	-	-	-	-
Third party interests in consolidated funds	-	-	-	-	-
Borrowed funds	1	-	-	237	960
Senior debt securities	1	-	-	-	-
Mortgage backed securities	-	-	-	-	104
Subordinated debt securities	-	-	-	237	856
Provisions	22	203	15	126	1
Deferred revenue	401	3	155	22	-
Long-term business	320	3	149	16	-
Asset management	81	-	6	6	-
General insurance	-	-	-	-	-
Deferred tax liabilities	221	93	212	172	162
Current tax payable	26	22	3	96	18
Other liabilities	508	198	173	826	747
Liabilities under acceptances	-	-	-	-	220
Amounts owed to bank depositors	-	4,622	-	-	33,549
Derivative financial instruments - liabilities	1	-	-	1,436	1,731
Non-current liabilities held-for-sale	-	-	-	6	-
Inter-segment liabilities	185	174	406	26	427
Total liabilities	28,692	12,199	6,312	25,516	38,241
Net assets	2,260	1,449	1,034	1,449	3,045
Equity
Equity attributable to equity holders of the parent	2,260	1,449	1,034	1,441	1,717
Minority interests	-	-	-	8	1,328
Minority interests - ordinary shares	-	-	-	8	1,081
Minority interests - preference shares	-	-	-	-	247
Total equity	2,260	1,449	1,034	1,449	3,045

The net assets of South African businesses are stated after eliminating investments in Group equity and debt instruments of £236 million (2007: £493 million) held in policyholder funds. These include investments in the Company's ordinary shares and subordinated liabilities and preferred securities issued by the Group's banking subsidiary Nedbank Limited. All South Africa debt relates to long-term business. All other debt relates to other shareholders' net assets.

3 Segment information continued

(vi) Balance sheet - segment information year ended 31 December 2008 continued

		United States				£m
M& F	Rest of Africa	US Life	USAM	Other operating segments	Consolidation  adjustments	Total reportable segments
-	593	18,122	-	-	-	81,269
-	238	16,630	-	-	-	28,106
-	137	-	-	-	-	45,161
-	-	1,434	-	-	-	1,965
-	218	-	-	-	-	5,646
-	-	58	-	-	-	391
344	-	-	-	-	-	344
-	-	-	-	-	2,591	2,591
-	-	-	-	1,097	-	2,295
-	-	-	-	556	-	557
-	-	-	-	-	-	104
-	-	-	-	541	-	1,634
21	2	-	3	84	-	477
8	1	-	-	8	-	598
-	1	-	-	-	-	489
-	-	-	-	8	-	101
8	-	-	-	-	-	8
2	-	578	-	12	-	1,452
2	1	4	8	39	-	219
71	5	276	299	165	465	3,733
-	-	-	-	-	-	220
-	-	-	-	-	-	38,171
-	-	-	-	124	1,103	4,395
-	-	-	-	-	-	6
(1)	5	4	1,452	1,379	(4,057)	-
447	607	18,984	1,762	2,908	102	135,770
241	85	333	402	(721)	-	9,577
193	85	333	365	(1,140)	-	7,737
48	-	-	37	419	-	1,840
48	-	-	37	(27)	-	1,147
-	-	-	-	446	-	693
241	85	333	402	(721)	-	9,577

  Notes to the consolidated financial statements

For the year ended 31 December 2008 continued

3 Segment information continued

(vi) Balance sheet -  segment information year ended 31 December 2007

	Europe			South Africa
At 31 December 2007	UK	Nordic	ELAM	OMSA	Nedbank
Assets
Goodwill and other intangible assets	1,716	1,180	939	26	420
Goodwill	639	196	436	14	320
Present value of acquired in-force business	794	760	338	-	-
Software development	24	1	4	12	100
Other intangibles	259	223	161	-	-
Mandatory reserve deposits with central banks	-	-	-	-	615
Property, plant and equipment	19	5	14	241	291
Investment property	2	-	1	1,096	13
Deferred tax assets	40	74	13	106	12
Investments in associated undertakings and joint ventures	-	-	-	25	62
Deferred acquisition costs	524	15	182	93	1
Insurance contracts	20	1	3	-	-
Investment contracts	439	14	175	86	-
Asset management	65	-	4	7	1
Reinsurers' share of long-term business policyholder liabilities	702	8	4	4	13
Insurance contracts	56	5	2	4	13
Unit-linked investment contracts and similar contracts	636	-	-	-	-
Outstanding claims	10	3	2	-	-
Deposits held with reinsurers	-	183	-	-	-
Loans and advances	64	3,117	19	83	27,360
Policyholder loans	63	-	15	83	-
Other loans and advances	1	3,117	4	-	27,360
Investments and securities	31,964	7,867	5,426	24,394	4,686
Government and government-guaranteed securities	163	165	44	3,074	1,414
Listed other debt securities, preference shares and debentures	-	105	80	1,969	2,660
Unlisted other debt securities, preference shares and debentures	-	16	3	2,083	-
Listed equity securities	1	1	7	9,402	44
Unlisted equity securities	1	16	3	680	138
Listed pooled investments	2,520	197	11	214	430
Unlisted pooled investments	29,279	7,367	5,278	4,703	-
Short-term funds and securities treated as investments	-	-	-	2,269	-
Other securities	-	-	-	-	-
Current tax receivable	45	5	2	4	4
Client indebtedness for acceptances	-	-	-	-	165
Other assets	161	63	166	513	611
Derivative financial instruments - assets	-	15	-	43	666
Cash and cash equivalents	599	202	125	195	763
Non-current assets held-for-sale	-	1,024	-	2	2
Inter-segment assets	198	549	137	844	102
Total assets	36,034	14,307	7,028	27,669	35,786

  3 Segment information continued

(vi) Balance sheet -  segment information year ended 31 December 2007 continued

		United States				£m
M&F	Rest of Africa	US Life	USAM	Other operating segments	Consolidation  adjustments	Total reportable segments
-	4	184	959	31	-	5,459
-	4	57	932	31	-	2,629
-	-	116	-	-	-	2,008
-	-	11	10	-	-	162
-	-	-	17	-	-	660
-	-	-	-	-	-	615
-	13	1	17	7	-	608
-	8	-	-	-	359	1,479
-	-	327	106	5	-	683
-	-	-	-	(6)	-	81
-	3	1,398	24	13	-	2,253
-	-	1,398	-	-	-	1,422
-	3	-	-	-	-	717
-	-	-	24	13	-	114
-	1	662	-	-	-	1,394
-	1	646	-	-	-	727
-	-	-	-	-	-	636
-	-	16	-	-	-	31
-	-	30	-	-	-	213
-	-	44	-	-	-	30,687
-	-	43	-	-	-	204
-	-	1	-	-	-	30,483
-	675	11,560	192	155	2,708	89,627
-	80	240	-	-	2,054	7,234
-	15	6,881	-	-	911	12,621
-	-	2,179	-	-	-	4,281
-	320	-	-	-	11,586	21,361
-	10	115	-	-	-	963
- -	104	1,656	169	-	897	6,198
-	-	11	23	-	(13,261)	33,400
-	106	478	-	-	489	3,342
-	40	-	-	155	32	227
-	-	-	-	23	-	83
-	-	-	-	-	-	165
-	13	876	182	85	104	2,774
-	-	20	-	72	711	1,527
-	5	3	205	76	1,296	3,469
595	-	-	-	-	-	1,623
52	11	46	-	2,112	(4,051)	-
647	733	15,151	1,685	2,573	1,127	142,740

--

Notes to the consolidated financial statements

For the year ended 31 December 2008 continued

3 Segment information continued

(vi) Balance sheet -  segment information year ended 31 December 2007 continued 

	Europe			South Africa
At 31 December 2007	UK	Nordic	ELAM	OMSA	Nedbank
Liabilities
Long-term business policyholder liabilities	32,311	7,909	5,371	24,632	430
Insurance contracts	188	72	103	11,105	-
Unit-Linked investment contracts and similar contracts	32,111	7,738	5,263	6,936	-
Other investment contracts	-	-	-	85	430
Discretionary participating investment contracts	-	-	-	6,194	-
Outstanding claims	12	99	5	312	-
General insurance liabilities	-	-	-	-	-
Third party interests in consolidated funds	-	-	-	-	-
Borrowed funds	22	20	17	238	845
Senior debt securities	22	20	17	-	-
Mortgage backed securities	-	-	-	-	103
Subordinated debt securities	-	-	-	238	742
Provisions	21	180	5	134	18
Deferred revenue	345	1	76	23	3
Long-term business	261	1	72	16	-
Asset management	84	-	4	7	3
Deferred tax liabilities	332	111	155	281	128
Current tax payable	34	15	8	149	29
Other liabilities	618	219	152	772	2,406
Liabilities under acceptances	-	-	-	-	165
Amounts owed to bank depositors	-	3,936	-	-	27,881
Derivative financial instruments - liabilities	-	21	3	115	840
Non-current liabilities held-for-sale	-	22	-	2	-
Inter-segment liabilities	198	579	212	75	379
Total liabilities	33,881	13,013	5,999	26,421	33,124
Net assets	2,153	1,294	1,029	1,248	2,662
Equity
Equity attributable to equity holders of the parent	2,153	1,294	1,024	1,238	1,520
Minority interests	-	-	5	10	1,142
Minority interests - ordinary shares	-	-	5	10	885
Minority interests - preference shares	-	-	-	-	257
Total equity	2,153	1,294	1,029	1,248	2,662

  3 Segment information continued

(vi) Balance sheet -  segment information year ended 31 December 2007 continued

		United States				£m
M&F	Rest of Africa	US Life	USAM	Other operating segments	Consolidation  adjustments	Total reportable segments
-	602	12,996	-	-	-	84,251
-	269	11,900	-	-	-	23,637
-	123	-	-	-	-	52,171
-	-	1,059	-	-	-	1,574
-	210	-	-	-	-	6,404
-	-	37	-	-	-	465
-	-	-	-	-	-	-
-	-	-	-	-	3,547	3,547
-	-	-	-	1,211	-	2,353
-	-	-	-	402	-	461
-	-	-	-	-	-	103
-	-	-	-	809	-	1,789
-	3	-	2	136	-	499
-	-	-	-	14	-	462
-	-	-	-	-	-	350
-	-	-	-	14	-	112
-	-	401	-	5	-	1,413
-	1	13	(5)	76	-	320
-	33	555	364	137	924	6,180
-	-	-	-	-	-	165
-	-	-	-	-	-	31,817
-	-	-	-	30	707	1,716
396	-	-	-	-	-	420
4	2	-	1,638	964	(4,051)	-
400	641	13,965	1,999	2,573	1,127	133,143
247	92	1,186	(314)	-	-	9,597
200	92	1,186	(346)	(400)	-	7,961
47	-	-	32	400	-	1,636
47	-	-	32	(46)	-	933
-	-	-	-	446	-	703
247	92	1,186	(314)	-	-	9,597

  Notes to the consolidated financial statements

For the year ended 31 December 2008 continued

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
Year ended 31 December 2008	Notes	Europe	South Africa	United States	Other	Total
Income/(expense)
Goodwill impairment and impact of acquisition accounting	4(ii)	(341)	-	(96)	(1)	(438)
Profit/(loss) on disposal of subsidiaries, associated
undertakings and strategic investments	4(iii)	72	(20)	1	-	53
Short-term fluctuations in investment return	4(iv)	145	(239)	(476)	-	(570)
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)	-	-	-	43	43
US Asset Management equity plans and minority holders	4(viii)	-	-	7		7
Credit-related fair value gains on Group debt instruments	4(ix)	-	14	-	489	503
Total adjusting items		(124)	(11)	(564)	531	(168)
Tax on adjusting items	5(iii)	41	45	3	(151)	(62)
Minority interest in adjusting items	6(iii)	-	37	(7)	-	30
Total adjusting items after tax and minority interests		(83)	71	(568)	380	(200)

£m
Year ended 31 December 2007	Notes	Europe	South Africa	United States	Other	Total
Income/(expense)
Goodwill impairment and impact of acquisition accounting	4(ii)	(218)	(3)	(24)	-	(245)
Profit/(loss) on disposal of subsidiaries, associated
undertakings and strategic investments	4(iii)	16	1	8	-	25
Short-term fluctuations in investment return	4(iv)	55	191	(55)	-	191
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
Credit-related fair value gains on Group debt instruments	4(ix)	-	-	-	29	29
Total adjusting items		(147)	216	(60)	57	66
Tax on adjusting items	5(iii)	51	(98)	30	(9)	(26)
Minority interest in adjusting items	6(iii)	-	29	(11)	-	18
Total adjusting items after tax and minority interests		(96)	147	(41)	48	58

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 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
Year ended 31 December 2008		Europe	South Africa	United States	Other	Total
Amortisation of acquired PVIF
UK	(86)		-	-	-	(86)
Nordic	(105)		-	-	-	(105)
ELAM	(60)		-	-	-	(60)
US Life	-		-	(35)	-	(35)
Amortisation of acquired deferred costs and revenue
UK	33		-	-	-	33
Nordic	22		-	-	-	22
ELAM	26		-	-	-	26
Amortisation of other acquired intangible assets
UK	(30)		-	-	-	(30)
Nordic	(24)		-	-	-	(24)
ELAM	(21)		-	-	-	(21)
Change in acquisition balance sheet provisions
UK	(8)		-	-	-	(8)
Nordic	(76)		-	-	-	(76)
Goodwill impairment
Nordic	(12)		-	-	-	(12)
US Life	-		-	(61)	-	(61)
Other	-		-	-	(1)	(1)
		(341)	-	(96)	(1)	(438)
£m
Year ended 31 December 2007	Europe		South Africa   Restated	United States	Other	Total
Amortisation of acquired PVIF
UK	(95)		-	-	-	(95)
Nordic	(92)		-	-	-	(92)
ELAM	(79)		-	-	-	(79)
US Life	-		-	(24)	-	(24)
Amortisation of acquired deferred costs and revenue
UK	35		-	-	-	35
Nordic	20		-	-	-	20
ELAM	51		-	-	-	51
Amortisation of other acquired intangible assets
UK	(30)		-	-	-	(30)
Nordic	(22)		-	-	-	(22)
ELAM	(18)		-	-	-	(18)
Change in acquisition balance sheet provisions
Nordic	12		-	-	-	12
Goodwill impairment
M & F	-		(3)	-	-	(3)
	(218)		(3)	(24)	-	(245)

Notes to the consolidated financial statements

For the year ended 31 December 2008 continued

4 Operating profit adjusting items continued

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

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 2007, the Nordic segment's 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 £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 in the disposal of Bond Choice.  

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

£m
Year ended 31 December 2008	Europe	South Africa	United States	Total
Nordic	55	-	-	55
ELAM	17	-	-	17
OMSA	-	(11)	-	(11)
Nedbank	-	1	-	1
M & F	-	(10)	-	(10)
USAM	-	-	1	1
	72	(20)	1	53
				£m
Year ended 31 December 2007	Europe	South Africa	United States	Total
Nordic	16	-	-	16
Nedbank	-	1	-	1
USAM	-	-	8	8
	16	1	8	25

(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 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 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	Year ended 31 December 2008	Year ended 31 December 2007
Europe long-term business	4.8%	4.9%
South Africa long-term business	16.6%	15.6%
United States long-term business	5.9%	5.7%

4 Operating profit adjusting items continued

(iv) Long-term investment return continued

Analysis of short-term fluctuations in investment return

								£m
At 31 December 2008	UK	Nordic	ELAM	OMSA	M & F	Rest of Africa	US Life	Total
Long-term investment return	65	1	-	230	60	11	754	1,121
Less: Actual shareholder investment return	205	5	1	76	(12)	(2)	484	757
Short-term fluctuations in investment return	(140)	(4)	(1)	154	72	13	270	364
Hedge losses on Bermuda guarantees treated as short-term fluctuations	-	-	-	-	-	-	206	206
Total short-term fluctuations in investment return	(140)	(4)	(1)	154	72	13	476	570
								£m
At 31 December 2007	UK	Nordic	ELAM	OMSA	M & F	Rest of Africa	US Life	Total
Long-term investment return	6	-	1	212	65	9	582	875
Less: Actual shareholder investment return	60	-	2	406	61	10	527	1,066
Short-term fluctuations in investment return	(54)	-	(1)	(194)	4	(1)	55	(191)
Hedge losses on Bermuda guarantees treated as short-term fluctuations	-	-	-	-	-	-	-	-
Total short-term fluctuations in investment return	(54)	-	(1)	(194)	4	(1)	55	(191)

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 instrument 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. In 2008 the investment return adjustment decreased adjusted operating profit by £234 million (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 £43 million in the year ended 31 December 2008 (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.

(vii) Closure of unclaimed shares trusts

During 2006 Old Mutual plc announced that the Old Mutual South Africa Unclaimed Shares Trust (UST), together with similar trusts set up in Namibia, Zimbabwe, Malawi and Bermuda, would be closed. 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 adjustments were made in respect of the realisation of certain foreign exchange losses (£14 million) and the remeasurement of certain provisions (£13 million). Consistent with the original accounting treatment in 2006, these amounts have been excluded from adjusted operating profit. 

Notes to the consolidated financial statements

For the year ended 31 December 2008 continued

4 Operating profit adjusting items continued

(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 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 in 2008 was £7 million (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 31 December 2008 these instruments were revalued, the impact of which was nil (2007: less than £1 million).

(ix) 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 £489 million (2007: £29 million gain) at Group head office and £14 million (2007: nil) 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 (credit)/expense 

(i) Analysis of total income tax (credit)/expense	£m
	Year ended 31 December 2008	Year ended 31 December 2007 Restated
Current tax
United Kingdom tax
Corporation tax	93	436
Double tax relief	(145)	(399)
Overseas tax
South Africa	264	403
United States	4	26
Europe	68	73
Secondary Tax on Companies (STC)	22	74
Prior year adjustments	1	(25)
Total current tax	307	588
Deferred tax
Origination of temporary differences	(548)	(66)
Changes in tax rates/bases	(1)	(13)
Write down/recognition of deferred tax assets	154	(5)
Total deferred tax	(395)	(84)
Total income tax expense	(88)	504
(ii) Reconciliation of total income tax (credit)/expense		£m
Year ended 31 December 2008		Year ended 31 December 2007 Restated
Profit before tax	595	1,750
Tax at standard rate of 28.5% (2007: 30%)	169	525
Different tax rate or basis on overseas operations	(23)	(20)
Untaxed and low taxed income	(218)	(166)
Disallowable expenses	8	90
Net movement on deferred tax assets not recognised	123	(38)
Effect on deferred tax of changes in tax rates	(5)	(18)
STC	53	57
Income tax attributable to policyholder returns	(169)	51
Other	(26)	23
Total income tax (credit)/expense	(88)	504

5 Income tax (credit)/expense continued

(iii) Income tax on adjusted operating profit

		£m
Year ended 31 December 2008		Year ended  31 December 2007 Restated
Income tax (credit)/expense	(88)	504
Tax on adjusting items
Impact of acquisition accounting	46	65
Profit on disposal of subsidiaries, associated undertakings and strategic investments	12	(10)
Short-term fluctuations in investment return	35	(37)
Income tax attributable to policyholders returns	236	(60)
Secondary Tax on Companies (STC) on dividends paid	-	(35)
Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity	(12)	(9)
Fair value gains on group debt instruments	(143)	-
Income tax on adjusted operating profit	86	418
6 Minority interests - Income statement
(i) Minority interests - ordinary shares
The minority interest charge to profit for the financial year has been calculated on the basis of the Group's effective ownership of the subsidiaries in which it does not own 100 per cent of the ordinary equity. The principal subsidiaries where a minority exists are the Group's banking and general insurance businesses in South Africa. For the year ended 31 December 2008 the minority interest attributable to ordinary shares was £188 million (2007: £224 million).
(ii) Minority interests - preferred securities
		£m
	At  31 December  2008	At  31 December  2007
R2,000 million non-cumulative preference shares	14	13
R792 million non-cumulative preference shares	5	5
R300 million non-cumulative preference shares	1	1
US$750 million cumulative preferred securities	32	30
R364 million non-cumulative preference shares	2	1
Minority interest - preferred securities	54	50
(iii) Minority interests - adjusted operating profit
The following table reconciles minority interests' share of profit for the financial year to minority interests' share of adjusted operating profit:
		£m
Reconciliation of minority interests share of profit for the financial year	Year ended 31 December 2008	Year ended 31 December 2007
The minority interest charge is analysed as follows:
Minority interest - ordinary shares	188	224
Goodwill impairment and impact of acquisition accounting	-	-
Profit on disposal of subsidiaries, associated undertakings and strategic investments	2	-
Short-term fluctuations in investment return	11	-
Income attributable to Black Economic Empowerment trusts of listed subsidiaries	30	29
Fair value gains on group debt instruments	(6)	-
Income attributable to US Asset Management minority holdings	(7)	(11)
Minority interest share of adjusted operating profit	218	242

The Group uses revised weighted average effective ownership interests when calculating the minority interest applicable to the adjusted operating profit of its South Africa banking and general insurance businesses. This reflects the legal ownership of these businesses following the implementation for Black Economic Empowerment (BEE) schemes in 2005. In accordance with IFRS accounting rules the shares issued for BEE purposes are deemed to be, in substance, options. Therefore the effective ownership interest of the minorities reflected in arriving at profit after tax in the consolidated income statement is lower than that applied in arriving at adjusted operating profit after tax. In 2008 the increase in adjusted operating profit attributable to minority interests as a result of this was £30 million (2007: £29 million).

Notes to the consolidated financial statements

For the year ended 31 December 2008 continued

7 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 year attributable to ordinary equity shareholders by the weighted average number of ordinary shares in issue during the year excluding own shares held in policyholder funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings.

		£m
	Year ended 31 December 2008	Year ended 31 December 2007
Profit for the financial year attributable to equity holders of the parent	441	972
Dividends declared to holders of perpetual preferred callable securities	(31)	(31)
Profit attributable to ordinary equity holders	410	941
Total dividends declared to holders of perpetual preferred callable securities of £43 million in 2008 (2007: £40 million) are stated net of tax credits of £12 million (2007: £9 million).
Millions
	Year ended 31 December 2007	Year ended 31 December 2007
Weighted average number of ordinary shares in issue	5,294	5,492
Shares held in charitable foundations	(19)	(20)
Shares held in ESOP trusts	(45)	(61)
Adjusted weighted average number of ordinary shares	5,230	5,411
Shares held in life funds	(240)	(282)
Shares held in Black Economic Empowerment trusts	(235)	(235)
Weighted average number of ordinary shares	4,755	4,894
Basic earnings per ordinary share (pence)	8.6	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
	Year ended 31 December 2008	Year ended 31 December 2007
Weighted average number of ordinary shares	4,755	4,894
Adjustments for share options held by ESOP trusts	61	63
Adjustments for shares held in Black Economic Empowerment trusts	235	235
	5,051	5,192
Diluted earnings per ordinary share (pence)	8.1	18.1

7 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 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/(losses) on Group debt instruments.

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

£m
	Year ended  31 December  2008	Year ended  31 December 2007
Profit for the financial year attributable to equity holders of the parent	441	972
Adjusting items	168	(66)
Tax on adjusting items	62	26
Minority interest on adjusting items	(30)	(18)
Adjusted operating profit after tax attributable to ordinary equity holders	641	914
Adjusted weighted average number of ordinary shares - (millions)	5,230	5,411
Adjusted operating earnings per ordinary share - (pence)	12.2	16.9

8 Borrowed funds
		£m
Notes		At 31 December 2008	At 31 December 2007
Senior debt securities and term loans	8(i)	557	461
Mortgage backed securities	8(ii)	104	103
Subordinated debt securities	8(iii)	1,634	1,789
Borrowed funds		2,295	2,353
(i) Senior debt securities and term loans
		£m
		At 31 December 2008	At 31 December 2007
Floating rate notes1		85	151
Fixed rate notes2		152	44
Revolving credit facility3		294	161
Term loan and other loans		26	26
Investment fund borrowings		-	79
Total senior debt securities and term loans		557	461

 Notes to the consolidated financial statements

For the year ended 31 December 2008 continued

(i) Senior debt securities and term loans continued

The maturities of the senior debt securities and term loans are as follows:

At 31 December 2008	£m
	Less than 1 year	Greater than 1 year and less than 5 years	Greater than 5 years	Total
Floating rate notes	16	69	-	85
Fixed rate notes	96	56	-	152
Revolving credit facility	-	294	-	294
Term loans and other loans	26	-	-	26
Investment fund borrowings	-	-	-	-
Total senior debt securities and term loan	138	419	-	557
At 31 December 2007
Floating rate notes	-	75	76	151
Fixed rate notes	-	29	15	44
Revolving credit facility	-	161	-	161
Term loans and other loans	17	9	-	26
Investment fund borrowings	79	-	-	79
Total senior debt securities and term loan	96	274	91	461

Senior debt securities and term loan comprise:

1    Floating rate notes

- £7 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.

- 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.

- €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 (2007: £8 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 31 December 2008 £826 million 
(2007: £413 million) of this facility was utilised, £294 million (2007: £161 million) in the form of drawn debt and £532 million (2007: £252 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 31 December 2008 this facility was undrawn.

 (ii) Mortgage backed securities

	£m
	At 31 December 2008	At 31 December 2007
R291 million notes (class A1) repayable 18 November 2039 (11.467 per cent)1	22	21
R1.4 billion notes (class A2A) repayable 18 November 2039 (11.817 per cent)1	73	73
R98 million notes (class B note) repayable 18 November 2039 (12.067 per cent)1	5	5
R76 million notes (class C note) repayable 18 November 2039 (13.317 per cent)1	4	4
104		103

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 31 December 2008	At 31 December 2007
Banking
US$18 million repayable 31 August 2009 (6 month LIBOR less 1.5 %)1	12	9
R1.5 billion repayable 24 April 2016 (7.85 %)2	108	103
R1.8 billion repayable 20 September 2018 (9.84 %)3	135	135
R515 million repayable on 4 December 2008 (13.5 %)4 - Repaid	-	39
R500 million repayable on 30 December 2010 (8.38 %)5	36	34
R650 million repayable 8 February 2017 (9.03 %)6	49	47
R1.7 billion repayable 8 February 2019 (8.9 %)7	125	123
R2.0 billion repayable 6 July 2022 (3 month JIBAR plus 0.47 %)8	150	151
R500 million repayable 15 August 2012 (3 month JIBAR plus 0.45 %)9	37	37
R1.0 billion repayable 17 September 2015 (10.54 %)10	77	77
R500 million repayable 14 December 2017 (3 month JIBAR plus 0.70 %)11	37	37
R120 million repayable 14 December 2017 (10.38 %)12	9	9
R487 million repayable 20 November 2018 (15.05 %)13	40	-
R1,265 million repayable 20 November 2018 (JIBAR plus 4.75 %)14	94	-
R300 million repayable on 4 December 2013 (JIBAR + 2.5%)15	11	-
920		801
Other
R3.0 billion repayable 27 October 2020 (8.9 %)16	219	220
£300 million repayable 21 January 2016 (5.0 %)17	239	291
R250 million preference shares repayable 9 June 201118	18	18
€750 million repayable 18 January 2017 (4.5 %)19	303	519
779		1,048
Less: banking subordinated debt securities held by other Group companies	(65)	(60)
Total subordinated liabilities	1,634	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 R1.5 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.

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 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 on 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 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.

17 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.

18 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.

19 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 year ended 31 December 2008 continued

9 Provisions

	£m
	At 31 December 2008	At 31 December 2007
Surplus property	23	29
Client compensation	27	19
Warranties on sale of business	111	87
Liability for long service leave	38	34
Provision for donations	80	82
Litigation claims	36	64
Other provisions	165	183
	480	498
Post employment benefits	(3)	1
Total	477	499
£m

Year ended 31 December 2008	Surplus property	Client compensation	Warranties on sale of business	Liability for long service leave	Provision for donations	Litigation claims	Other	Total
Balance at beginning of the year	29	19	87	34	82	64	183	498
Unused amounts reversed	(1)	(5)	(5)	-	-	-	(40)	(51)
Unwind of discount	1	-	-	-	-	-	-	1
Charge to income statement	-	8	22	4	-	37	20	91
Utilised during the year	(7)	(14)	(3)	1	(2)	(74)	(24)	(123)
Foreign exchange and other movements	1	19	10	(1)	-	9	26	64
Balance at end of the year	23	27	111	38	80	36	165	480

2008 provisions in relation to surplus property amounted to £23 million (2007: £29 million). These relate to the onerous costs of vacant properties leased by the Group.

Provisions in relation to client compensation were £27 million (2007: £19 million), primarily relating to possible misselling of guarantee contracts in Nordic. 

Provisions in relation to warranties on the sale of businesses amounted to £111 million (2007: £87 million). These principally relate to the sale of American Skandia to Prudential Financial, recognised by the Group on acquisition of Skandia in 2006.

The liability for long service leave of £38 million (2007: £34 million) relates to provision for staff payments for long serving employees.

The provision for donations is held by OMSA. It relates to the payment of charitable donations in future periods to which the Group is committed, out of the funds made available on the closure of the Group's unclaimed shares trusts, which were set up as part of the demutualisation in 1999 and closed in 2006.

At 31 December 2008 provisions in relation to litigation claims amounted to £36 million (2007: £64 million). During the year £74 million of the provision was utilised, principally in respect of payments made in connection with the outcome of the Skandia Liv arbitration. The balance of the provision primarily relates to future amounts payable to Skandia Liv in connection with the arbitration ruling.

Where material, provisions are discounted at discount rates specific to the risks inherent in the liability. The timing and final amounts of payments in respect of some of the provisions, particularly those in respect of litigation claims and similar actions against the Group, are uncertain and could result in adjustments to the amounts recorded. Of the provisions recorded above, £271 million (2007: £420 million) is estimated to be payable after more than one year.

								£m
Year ended 31 December 2007	Surplus property	Client compensation	Warranties on sale of business	Liability for long service leave	Provision for donations	Litigation claims	Other	Total
Balance at beginning of the year	41	8	113	30	115	71	151	529
Unused amounts reversed	(3)	(1)	(11)	-	-	(6)	-	(21)
Unwind of discount	2	-	-	-	-	-	-	2
Charge to income statement	-	20	-	4	-	-	23	47
Utilised during the year	(8)	(8)	(15)	(2)	(33)	-	-	(66)
Foreign exchange and other movements	(3)	-	-	2	-	(1)	9	7
Balance at end of the year	29	19	87	34	82	64	183	498

10 Dividends

Dividends paid were as follows:			£m
		Year ended 31 December 2008	Year ended 31 December 2007
2006 Final dividend paid - 4.15p per 10p share		-	218
2007 Interim dividend paid - 2.3p per 10p share		-	115
2007 Final dividend paid - 4.55p per 10p share		227	-
2008 Interim dividend paid - 2.45p per 10p share		125	-
Dividends to ordinary equity holders		352	333
Dividends declared to holders of perpetual preferred callable securities		43	40
Dividend payments for the year		395	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.

In March and November 2008, £23 million and £20 million respectively were declared and paid to holders of perpetual preferred callable securities (March 2007: £22 million and November 2007: £18 million).

11 Contingent liabilities

£m
	At 31 December 2008	At 31 December 2007
Guarantees and assets pledged as collateral security	1,839	1,489
Irrevocable letters of credit	760	426
Secured lending	383	1,052
Other contingent liabilities	393	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.

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

12 Post balance sheet events

On 2 March 2009 the Group announced the sale, by its Group subsidiary, OM Group (UK) Limited, of the Group's interests in the Old Mutual Australia group. The sale is expected to complete on 6 March 2009.

 

END

 

 

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