Results Announcement

Old Mutual PLC
26 February 2007

Old Mutual plc is incorporated in England and Wales       
under the Companies Act 1985 with registration number
3591559 and is registered in South Africa as an external
company with registration number 1999/004855/10.
ISIN code: GB0007389926          NSX share code: OLM
JSE share code: OML             Issuer code: OLOML
 
Results for the year ended 31 December 2006
 
Financial highlights
 
Adjusted operating profit(IFRS basis):* up 16% to £1,459 million (2005: 
                                        £1,261 million
 
Adjusted operating profit (European     
Embedded Value (EEV) basis):            up 22% to £1,687 million (2005: 
                                        £1,387 million)
 
Profit for the financial year           £836 million (2005: £867 million)
attributable to equity holders of the
parent (IFRS basis):
 
Adjusted operating earnings per         down 18% to 15.1p (2005: 18.5p)
share* (IFRS basis):
 
Adjusted operating earnings per         down 14% to 17.8p (2005: 20.7p)
share (EEV basis):
 
Basic earnings per share (IFRS basis):  17.0p (2005: 25.1p)
 
Net cash flow in relation to funds under management of £24 billion (2005: £13
billion)
 
Funds under management of £239 billion at 31 December 2006 (2005: £182
billion), an increase of 31%
 
Total life assurance sales, on an EEV Annual Premium Equivalent (APE) basis,
of £1,535 million, an increase of 137% (2005: £648 million)
 
Adjusted embedded value per share 
(EEV basis):                            157.2p at 31 December 2006 
                                        (2005: 174.0p)
 
Recommended final dividend up 13.7% to 4.15p (58c)**
 
 
Jim Sutcliffe, Chief Executive, commented:
'This set of results reflects a healthy overall performance from around the
group. Funds under management grew an impressive 31% with operating profits
benefiting both from a better than expected result from the Skandia acquisition
and from investment in our existing businesses. Despite earnings being impacted
by unfavourable currency translation impact, our strong financial position has
enabled us to declare a final dividend increase of 13.7%.
 
The current year has started well. Although exchange rates, the cost of
investing to achieve synergies across Europe, and costs in Sweden and at our
South African life business to put these businesses on a sound basis for the
future will hold back earnings growth for 2007, we have an excellent set of
growing businesses and are clear about the tasks we must complete. We are on
track to achieve over £300 billion of funds under management by the end of
2008, which should provide a solid basis for substantial future earnings
growth.'
                                                              26 February 2007
 
Wherever the items asterisked in the Highlights are used, whether in the
Highlights, the Chief Executive's Statement or the Group Business Review, the
following definitions apply:
 
* 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 all businesses, adjusted
operating profit excludes goodwill impairment, the impact of acquisition
accounting, initial costs of Black Economic Empowerment schemes, the impact of
closure of unclaimed shares trusts, profit / (loss) on disposal of
subsidiaries, associated undertakings and strategic investments and dividends
declared to holders of perpetual preferred callable securities.
 
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.
 
** Indicative only, being the Rand equivalent of 4.15p converted at the 
exchange rate prevailing on 20 February 2007. The actual amount to be paid
by way of final dividend to holders of shares on the South African branch 
register will be calculated by reference to the exchange rate prevailing at 
the close of business on 19 April 2007, as determined by the Company, and will 
be announced on 20 April 2007.
 
For further information on Old Mutual plc, please visit our website at
www.oldmutual.com.
 
 
Enquiries
 
Investor Relations
Malcolm Bell                 UK       [phone]
Deward Serfontein            SA       [phone]
 
Media
James Crampton               UK       [phone]
Nad Pillay                   SA       + 27 (0)21 504 8026
 
College Hill (UK)
Tony Friend                  UK       [phone]
Gareth David                 UK
 
Forward-looking statements
 
This announcement contains forward-looking statements with respect to certain
of Old Mutual plc's plans and its current goals and expectations relating to
its future financial condition, performance and results. By their nature, all
forward-looking statements involve risk and uncertainty because they relate to
future events and circumstances that are beyond Old Mutual plc's control,
including, among other things, UK domestic and global economic and business
conditions, market-related risks such as fluctuations in interest rates and
exchange rates, policies and actions of regulatory authorities, the impact of
competition, inflation, deflation, the timing and impact of other uncertainties
or of future acquisitions or combinations within relevant industries, as well
as the impact of tax and other legislation and other regulations in territories
where Old Mutual plc or its affiliates operate.
 
As a result, Old Mutual plc's actual future financial condition, performance
and results may differ materially from the plans, goals and expectations set
forth in Old Mutual plc's forward-looking statements. Old Mutual plc undertakes
no obligation to update any forward- looking statements contained in this
announcement or any other forward-looking statements that it may make.
 
Notes to Editors:
 
A webcast of the analyst presentation and Q&A will be broadcast live at 9.30
a.m. (UK time), 10.30 a.m. (Swedish time), and 11.30 a.m.
(South African time) today on the Company's website, www.oldmutual.com. Copies
of these results and the associated analyst presentation, together with
high-resolution images (at http://oldmutual.com/vpage.jsp?page_id=2220) and
biographical details of the executive directors of Old Mutual plc, are
available in electronic format to download from the Company's website. An
interview with Jim Sutcliffe, Chief Executive, Old Mutual in video/audio and
text is now available on the Company's website and on http://www.cantos.com.
 
The 2006 preliminary results Financial Disclosure Supplement can be found on
the website. This contains a summary of key financial data for 2006 and 2005.
 
Chief Executive's Statement
 
A year of significant international development
 
2006 was a year of significant international development for the Old Mutual
Group, with the successful completion of our acquisition of Skandia.
Reflecting the increased spread of our business, funds under management grew
substantially, to £239 billion.
 
Our businesses around the Group produced a healthy overall earnings
performance. Operating profit benefited both from a better than expected result
from our Skandia acquisition and good progress at our other businesses. We
ended the year with a capital surplus of over £1 billion on an FGD (Financial
Groups Directive) basis. Our strong financial position has enabled us to
recommend a final dividend of 4.15p per share, which produces a total dividend
for 2006 of 6.25p, an overall increase of 13.6%.
 
Notwithstanding this healthy performance, unfavourable currency movements,
particularly in the Rand's exchange rate to Sterling, reduced our IFRS earnings
per share (EPS) by around 1.2p year-on-year.
 
The transformation of the overall profile of our business is apparent from the
fact that alongside our traditional South African franchise, we now have
approximately 60% of our life sales for the year on an APE basis came in the UK
and the rest of Europe and over three quarters of our funds under management in
the USA and Europe.
 
We have been pleased with what we have found at Skandia and the cultural
integration has progressed well. The synergy targets announced at our market
update in June 2006 are on track, with some associated costs to be incurred
during 2007. Skandia's UK and Europe/Latin American businesses have exceeded
expectations, while the Nordic business is still dealing with a number of
legacy issues.
 
We continued to manage our portfolio of businesses actively during 2006. We
acquired Ashfield (a large cap asset manager in the USA, completed in January
2007), Intech (an Australian asset manager) and Marriott (a property investment
group in South Africa) and disposed of eSecLending, our US securities lending
business, Pacific Financial Advisors, one of our US asset management
businesses, and Skandia Vida, Skandia's traditional life assurance business in
Spain. We have begun restructuring Old Mutual Asset Managers (South Africa)
into twelve boutique businesses under the new name, Old Mutual Investment Group
(South Africa), and received a special dividend from our South African general
insurer, Mutual & Federal Insurance Company Limited.
 
Growth is evident from our net cash flow of £24bn, increase in gross unit trust
sales of 185% and life APE sales of 137% and increase in funds under management
(after discounting businesses disposed of) of 31%.
 
Our 53%-owned South African banking subsidiary, Nedbank Group, continued on its
return to health, with a 38% increase in profit and Return on Equity of 18.6%.
Plans for our South African businesses to cooperate strategically and, where
appropriate, operationally to deliver ever-increasing bancassurance and other
synergy benefits are progressing well.
 
During the year we were pleased to welcome Jonathan Nicholls as Group Finance
Director. Jonathan has already started to make an impact on our financial and
accounting processes.
 
Outlook
 
This set of results reflects a healthy overall performance from around the
group. Funds under management grew an impressive 31% with operating profits
benefiting both from a better than expected result from the Skandia acquisition
and from investment in our existing businesses. Despite earnings being impacted
by the unfavourable currency translation impact, our strong financial position
has enabled us to declare a final dividend increase of 13.7%.
 
The current year has started well. Although exchange rates, the cost of
investing to achieve synergies across Europe, and costs in Sweden and at our
South African life business to put the business on a sound basis for the future
will hold back earnings growth in 2007, we have an excellent set of growing
businesses and are clear about the tasks we must complete. We are on track to
achieve over £300 billion of funds under management by the end of 2008, which
should provide a solid basis for substantial future earnings growth.
 
We are confident that Old Mutual will continue successfully on its journey to
become a premier international savings and wealth management group.
 
Jim Sutcliffe
 
Chief Executive
 
Group Finance Director's Review
 
GROUP RESULTS
 
For Old Mutual, 2006, with the acquisition of Skandia, was a transforming year
during which we were able to produce a healthy set of results, driven by strong
sales and cash earnings and an increased level of funds under management. The
acquisition of Skandia in February resulted in a significantly larger and more
internationally diversified business.
                                                                           
Group Highlights (£m)                            2006       2005     Change
 
Adjusted operating profit (IFRS basis) (pre    
tax)                                            1,459      1,261        16%
 
Adjusted operating profit (EEV basis) (pre tax) 1,687      1,387        22%
 
Profit before tax (IFRS)                        1,714      1,606         7%
 
Adjusted operating earnings per share (IFRS    
basis)                                          15.1p      18.5p      (18%)
 
Adjusted operating earnings per share (EEV     
basis)                                          17.8p      20.7p      (14%)
 
Basic earnings per share (IFRS basis)           17.0p      25.1p      (32%)
 
Embedded Value (£bn)                              8.6        7.1        21%
 
Adjusted Embedded Value per share (EEV basis)  157.2p     174.0p      (10%)
 
Value of new business                             244        113       116%
 
Life assurance sales (APE) (£bn)                1,535        648      137 %
 
Unit trust / mutual funds sales (£bn)           7,961      2,795       185%
 
Net fund inflows (£bn)                             24         13        85%
 
Funds under management (£bn)                      239        182        31%
 
Return on equity (%)*                           12.0%      18.8%           
                                                                           
Return on Embedded Value                        13.8%      16.5%           
                                                                           
Full dividend (p)                               6.25p       5.5p        14%
 
* Return on equity is calculated using adjusted operating profit after tax and
minority interests on an IFRS basis with allowance for accrued coupon payments
on the Group's hybrid capital. The average shareholders' equity used in the
calculation excludes hybrid capital.
 
Strong growth in sales and assets across all regions, including our enlarged  
European operation, contributed  to an encouraging increase in adjusted 
operating profit before tax. This represents a 30% increase in the life result 
and a 17% increase in the asset management, banking and general insurance
result, with all regions improving on a local currency basis.
 
Adjusted operating profit after tax and minority interests increased by 11%
from £710 million in 2005 to £790 million in 2006, resulting in adjusted
operating earnings per share of 15.1p for 2006.
 
The split of the Group by adjusted IFRS earnings (after tax and minority
interests, excluding corporate) is now broadly 58% South Africa, 20% United
States, 20% Europe 2% Asia Pacific and elsewhere, reflecting the greater
diversification of our earnings as a result of the Skandia acquisition.
 
 
Adjusted Embedded Value operating profit up 22%
 
The increase of 22% in the Group's adjusted operating profit on a European
Embedded Value (EEV) basis primarily reflects the significant contribution from
Skandia, strong new business growth, and the increased profit from the
non-covered business in Nedbank and our asset management businesses.
 
The adjusted embedded value operating profit of £981 million for our covered
business was up 40% from £701 million for the year ended 31 December 2005. This
increase was driven by the acquisition of Skandia, which contributed 40% of the
profit. The contribution of the South African and United States businesses were
50% and 10% respectively. The value of new life business grew by 116% to £244
million. The increase on prior year is caused by the contribution from Skandia
- and growth of 16% in South Africa, partially offset by a managed volume
reduction of 12% in the United States.
 
Whilst operating assumptions across all businesses were more conservative, this
impact was largely offset by risk margin recalibration, ranging from 10bps to
30bps. This was driven by the lower risk profile of our business and the impact
of higher markets and interest rates reducing the expected cost of financial
options and guarantees.
 
Dilution reduces Adjusted Embedded Value per share down by 10.0%
 
Adjusted Group Embedded Value (EV) (adjusted primarily to bring listed Group
subsidiaries to market value) increased by 21% to £8.6 billion at 31 December
2006 (31 December 2005: £7.1 billion). The adjusted Group EV per share has
reduced from 174p to 157.2p at 31 December 2006. Return on Group EV was strong
at 13.8%.
 
The movement in the embedded value per share has been driven by the dilution
impact of approximately 22p as a result of acquiring Skandia and depreciation
of the South African Rand and US Dollar over the year by 26% and 14%
respectively, offset by market movements and operating profit growth.
 
Synergies on track
 
The purchase of Skandia, with its leading open architecture technology, builds
out our European operations and provides significant opportunities for organic,
new start-up and acquisitive growth. The integration and synergies benefits of
£70 million per annum (announced in June 2006) are on track to be delivered by
end-2008.
 
Funds under management up 31%
 
We are pleased with the increased level of our sales and assets following the
Skandia acquisition. The Annual Premium Equivalent (APE) of new business
increased 137% and the Value of New Business has also more than doubled. Net
fund inflows were £24 billion representing 11% of FUM when Skandia's opening
FUM are taken into account. Total funds under management is up 31% to £239
billion.
 
 
 
Capital position
                                                                           
Highlights (£m)                                 2006      2005     % Change
Senior debt gearing                             6.0%      6.1%         (2%)
Total gearing                                  21.8%     23.6%         (8%)
 
The Group's gearing level remains comfortably within our target range, with
senior debt gearing(1) at 31 December 2006 of 6.0% (6.1% at 31 December 2005)
and total gearing, including hybrid capital, of 21.8% (23.6% at 31 December
2005) reflecting the funding of Skandia. In January 2006 the Group issued £300
million of Lower Tier 2 Preferred Callable Securities as part of the public
debt raising associated with the Skandia acquisition.
 
The Group continues to develop its economic capital programme. Over the year,
we have observed a strengthening in our overall capital position, with
available financial resources significantly in excess of the economic capital
the Group believes would be required to support its target credit rating.
 
The Group is in compliance with the Financial Groups Directive capital
requirements, which apply to all EU- based financial conglomerates. Our FGD
surplus was £1 billion at 31 December 2006.
 
(1) Senior debt gearing is defined as senior debt over senior debt plus 
adjusted embedded value on an EEV basis. Senior debt excludes debt from banking
activities and is net of cash and short-term investments that are immediately
available to repay debt and derivative assets relating to swaps associated with
senior debt, so as to reflect debt valued on effective currency and interest
rate positions. Total gearing is similarly based, but includes hybrid capital
instruments within debt.
                                                                  
 
Holding company cash flow
 
The table below shows the cash flows of the Old Mutual plc holding company and
its satellite holding companies in South Africa, the United States and, since 1
February, Europe. We believe this provides a clearer picture of the receipts
and payments of available cash within the Old Mutual group than the IFRS
holding company cash flow statement.
                                                               £m        £m
                                                                           
Total debt at 31 December 2005                                        1,982
                                                                           
Opening liquid assets held centrally                          704          
Operational receipts                                          535          
Capital receipts                                              356          
Net debt raised                                               387          
New equity issuance                                            14          
Operational expenses                                        (156)          
Acquisitions, including Skandia                           (1,287)          
FX adjustments and other items                                 18          
Cash available                                                571          
Old Mutual plc dividend paid                                (281)          
Organic investment                                          (214)          
Closing liquid assets held centrally                           76          
Net debt raised                                                         387
Skandia's debt included at 31 December 2006 and other     
adjustments                                                             114
Total debt 31 December 2006                                           2,483
Liquid assets held centrally                                           (76)
Total net debt 31 December 2006                                       2,407
                                                                           
Total available cash within the holding companies at the end of2005 was 
£704m, largely being held in anticipation of financing the purchase of 
Skandia. During 2006, the holding companies received a  total of  £891m of
operational and capital receipts from  business units, plus net debt and
equity proceeds of £401 million.
 
After operational expenses, acquisition payments and adjusting items, there was
£571m in available cash, of which £281m was used to pay the Old Mutual plc
dividend and £214m invested in the businesses.
 
The balance of remaining cash at the end of 2006 was £76m, which is more in
line with normal expectations than the end 2005 balance, as surplus cash is
generally applied to reduce outstanding debt.
 
 
Taxation
 
The Group's effective tax rate(1) for the year ended 31 December 2006 of 26%
increased from 25% for the corresponding period in 2005. The main reasons for
this movement are as follows:
 
• Increased STC (Secondary Tax on Companies) paid on dividends has led to a 1%
increase
• A reduction in the amount of non-taxable income has led to a 4% increase
• Against this, the tax rate has reduced by 3% as a result of additional
profits arising in lower tax jurisdictions.
 
Dividend
 
The directors of Old Mutual plc are recommending a final dividend for the year
ended 31 December 2006 of 4.15p per share, making a total of 6.25p per share
for the year, an increase of 13.6% over 2005. The indicative Rand equivalent of
this final dividend(2) is 58c, making a total of 89c for the year, an increase
of 45%. The Board's policy on dividends is to seek to achieve steadily
increasing returns to shareholders over time, reflecting the underlying rate of
progress and cash flow requirements of Old Mutual's businesses.(3)
 
Jonathan Nicholls
Group Finance Director
26 February 2007
 
(1) Based on the tax charge excluding income tax attributable to policyholder
returns as a proportion of profit before tax but after income tax attributable
to policyholder returns
 
(2) Based on rates at 20 February 2007 (R13.9876 = £1).
 
(3) The record date for this dividend payment is the close of business on
Friday, 11 May 2007 for all the Exchanges where the Company's shares are 
listed. The last day to trade cum-dividend on the JSE and on the Namibian,
Zimbabwe and Malawi Stock Exchanges will be Friday, 4 May 2007 and on the 
London and Stockholm Stock Exchange Tuesday, 8 May 2007. The shares will trade
ex-dividend from the opening of business on Monday, 7 May 2007 on the JSE and
the Namibian, Zimbabwe and Malawi Stock Exchanges, and from the opening of
business on Wednesday, 9 May 2007 on the London and Stockholm Stock Exchanges.
Shareholders on the South African, Zimbabwe and Malawi branch registers and the
Namibian section of the principal register will be paid the local currency
equivalents of the dividend under the dividend access trust arrangements
established in each country. Shareholders who hold their shares through VPC AB,
the Swedish nominee, will be paid the equivalent of the dividend in Swedish
Kronor (SEK). Local currency equivalents of the dividend for all five
territories will be determined by the Company using exchange rates prevailing
at close of business on Thursday, 19 April 2007 and will be announced by the
Company on Friday, 20 April 2007. Share certificates may not be dematerialised
or rematerialised on the South African branch register between Monday, 7 May
and Friday, 11 May 2007, both dates inclusive, and transfers between the
registers may not take place during that period. The final dividend is subject
to approval at the Annual General Meeting of Old Mutual plc, which is to be
held in London on Thursday, 24 May 2007. Subject to being so approved, the
final dividend will be paid on Thursday, 31 May 2007.
 
Business Review
 
AFRICA
 
Satisfactory increase in profits
 
Strong rand growth in funds under management
 
Continued strong recovery at Nedbank
 
Impressive life and non-life sales
 
Highlights (£m)                                2006       2005     % Change
                                                                      
Adjusted operating profit  pre-tax           1,124      1,083           4%
Life assurance sales (APE)                      392        358           9%
Unit trust sales                              1,256      1,226           2%
Funds under management (£bn)                     41         43         (5%)
                                                                           
Highlights (Rm)                                2006       2005     % Change
                                                                     
Adjusted operating profit  pre-tax          13,997     12,539          12%
Life assurance sales (APE)                    4,888      4,141          18%
Unit trust sales                             15,622     14,200          10%
Funds under management (Rbn)                    561        472          19%
 
Our African businesses continue to benefit from an expanding South African
economy with GDP growth of 4.5% and growth of 38% in the JSE All Share Index
over the year. We are well positioned across all key product and market sectors
to benefit from these positive economic conditions.
 
Despite the deterioration of the rand, adjusted operating profit for the
African businesses increased by 4% on a sterling basis, mainly as a result of
the significant increase in Nedbank Group's results as the momentum of the
recovery programme continued. The increase in funds under management 'on a Rand
basis' despite high outflows, reflects the impact of buoyant markets. These
outflows arose principally from the R30 billion withdrawal of Public Investment
Corporation (PIC) assets and the depressed investment performance in the early
part of 2006.
 
Several projects aimed at realising revenue and cost synergies between the
three businesses have progressed well. In particular, the project to leverage
the scale of the data and voice transmission has yielded considerable savings.
Bancassurance life sales between Old Mutual and Nedbank have increased 61%.
 
 
LIFE ASSURANCE & ASSET MANAGEMENT - OLD MUTUAL SOUTH AFRICA (OMSA).
 
Substantial sales growth
 
OMSA delivered another year of impressive sales. This was buoyed by the
expanding South African economy driving the demand for investment and insurance
products. We are also reaping the benefits of the investment in our retail
distribution over the last three years. Our higher sales force numbers and
strong medium term investment performance boosted growth in unit trust sales.
Despite the shift in customer preference to non-life investment products our
Individual Life sales (APE) grew by 19% in our core market.
The introduction of new-era products to capture this trend boosted the sales
growth. Group life sales (APE) were up 11%.
 
Responding to our customers' demands for greater investment flexibility and
focus, we announced in January 2007 the restructuring of Old Mutual Asset
Managers (SA) into twelve autonomous investment houses under the umbrella of
Old Mutual Investment Group South Africa. This new multi-boutique business is
styled on the successful model operated by our US Asset Managers and combines
the benefits of Old Mutual's international reach and strong support
infrastructure. We also acquired Marriott, a property specialist and Umbono,
the black-empowered investment boutique which gives our customers access to the
country's largest index tracking group in South Africa. This restructuring
brings our asset management business in line with emerging trends in the global
investment world.
 
 
Highlights (Rm)                                                             
                                               2006       2005     % Change
Life assurance adjusted operating profit*     3,077      3,819        (19%)
Asset management adjusted operating profit      874        801           9%
Long term investment return (LTIR)            1,773      1,453          22%
IFRS adjusted operating profit - pre-tax      5,724      6,073         (6%)
Return on Allocated Capital                     23%        27%             
Embedded Value adjusted operating profit of  
covered business (pre tax)                    5,752      6,352         (9%)
Embedded Value of the covered business       33,274     30,944           8%
Return on Embedded Value of the covered      
business                                      13.5%      17.6%             
Life assurance sales (APE)                    4,416      3,784          17%
Unit trust sales (Rbn)                       14,833     13,319          11%
Value of new business                           781        614          27%
APE margin (post tax)                           18%        16%             
SA client funds under management (Rbn)          424        362          17%
Net client cash flows (Rbn)                    (29)       (18)             
*Includes income from associated undertakings                              
 
Unit trust sales up 11%
 
Retail unit trust sales grew in both our broker and agency channels, with sales
for the year up to a record R14.8 billion, driven by specific product-level
marketing, our ongoing investment in distribution, sales growth through our
open-architecture platform, client preference toward non-life investment
products and the current positive investment environment in South Africa.
 
Sales growth, although robust, tapered off in the second half of the year as a
result of the volatile market and short-term investment performance slippage
during the first half of the year. Again, we are confident that our new
boutique model will address these concerns.
 
Life sales (APE) up 17%
 
Our investment in our distribution capability has benefited growth in life
sales.  Despite the move to non-life investment products, individual life sales
are up 19% and institutional sales are up 11% on 2005. Good growth was
experienced across all core product categories and distribution channels
despite a shift in consumer preference to unit trust products. The sharp
upsurge in life sales in the fourth quarter, which has continued into the new
year, sets us up well for 2007 as a whole.
 
 
Individual Life sales up 19%
                                                           
Individual APE (Rm)                             2006      2005     % Change
Savings                                        1,279     1,165          10%
Protection                                       897       710          26%
Annuity                                          193       175          10%
Group Schemes                                    887       685          29%
Total                                          3,256     2,735          19%
Single                                           841       706          19%
Recurring                                      2,415     2,029          19%
                                                          
Individual single premiums showed excellent growth, positively impacted by the
bullish investment environment and a strong increase in bancassurance life
sales through the Nedbank Group channel. Bancassurance sales, year-on-year were
up 61% and as a proportion of total life APE grew from 9% last year to 13% this
year. Sales of single premium savings products also showed good growth,
supported by strong demand for our popular Investment Frontiers and MAX product
range.
 
Although we enjoyed strong demand for risk products, life wrapped recurring
premium investment products remain under pressure as a result of negative
publicity around these products. Non-life wrapped sales continue to grow, and
sales of recurring premium life savings products through our Group Schemes
channel have increased by 29% as a result of higher sales force numbers.
 
 
Institutional sales up 11%
                                                                 
Institutional APE (Rm)                          2006      2005     % Change
Savings                                          629       310         103%
Protection                                        99       157        (37%)
Annuity                                          193       162          19%
Healthcare                                       239       420        (43%)
Total                                          1,160     1,049          11%
Single                                           788       425          85%
Recurring                                        372       624        (40%)
                                                                        
Single premium sales (which tend to be lumpy in nature) were 85% above last
year's levels largely as a result of a large Symmetry inflow and several large
schemes in the fourth quarter. Institutional Business life recurring premiums
declined mainly as a result of disappointing Healthcare sales which reflects
the impact of declining membership in our Oxygen scheme following problems with
the approval of new benefit options at the start of 2006. A new 75,000-member
scheme was tendered for and won (coming on stream in 2007) at the end of the
year supporting our efforts to bulk up our healthcare administration. Excluding
Healthcare, Institutional sales (APE) is 46% ahead of 2005.
 
Value of new life business increases as 'value for money' for clients improves
 
Across OMSA, the after-tax value of new life business was R781 million, 27%
higher than in 2005. This increase is pleasing given our continued focus on
initiatives to improve value for money for customers as well as the investments
we have made to increase our distribution capacity during 2006.
 
New business APE margins have increased to 18% overall from 16% in 2005. Within
this result, the Institutional Business margin increased from 18% to 20% and
Individual Business margin increased from 16% to 17%. The margin increased due
to a change in the mix of business sold with increased sales of Group Schemes
and Nedlife in individual business and with-profit annuity business in
Institutional Business. The increase in margin was despite the investment in
growing our sales forces and distribution capability, the switch to lower
charge less capital intensive products, and more competitive pricing of our
products.
 
Growth of 17% in funds under management
 
Funds under management increased by 17% buoyed by higher equity markets and net
fund inflow. Funds under management include R19 billion of funds introduced as
part of the acquisition of Marriott Property and Income Specialists in July
2006.
 
Net fund outflows of R29 billion was disappointing and were severely impacted
by the R30 billion of funds withdrawn by the PIC in December 2006 (R10 billion
withdrawal in 2005) and, in the second half of the year, concerns over
short-term performance slippage. Excluding the PIC withdrawal, net fund inflow
was broadly neutral for the year as a result of management actions taken during
2006 to reduce the outflow of client funds experienced in 2005 and to improve
inflows through our distribution initiatives. The PIC has indicated that it
will place assets with specialists and empowered managers. We believe that with
our new boutique structure, investment record and strong empowerment
credentials, we are favourably positioned to compete for asset management
mandates of all types.
 
Cash flows benefited from strong positive unit trust inflows into the wholesale
and retail market during the first six months of the year. We are very
encouraged by the strong net inflows that were achieved by the Symmetry
multi-manager business during the final quarter.
 
 
Good investment performance continues
 
OMAM (SA) continued to deliver strong investment performance over the
medium-term, maintaining its ranking of third out of the eleven institutional
asset managers in the Alexander Forbes South African Global Manager Watch
(Large) Survey over the three years to 31 December 2006. At 31 December 2006,
81% of funds managed by OMAM (SA) weighted by value outperformed their
benchmarks over three years. Our Asset management earnings include the results
of Marriott Property and Income Specialists (acquired in July), which together
contributed a profit R30 million after integration costs. Excluding the one-off
gains in OMSFIN in 2005, Asset Management profits increased 39%.
 
Earnings depressed
 
Total earnings decreased by 6% partially as a result of adjustments made in the
third quarter in our life assurance and healthcare business. Also impacting on
our earnings was the increased investment in our distribution capability. The
shift to lower margin and less capital-intensive products subdued expectations
for core earnings. IFRS earnings were also negatively affected by the rising
(Rand) share price.
 
Asset Management profits grew by 9% supported by the effects of a higher
market. LTIR, partially offset by a reduction in life assurance profits,
nevertheless rose by 22%, reflecting the growth in assets held in the
shareholders' fund over recent years.
 
Although our return on allocated capital dropped in 2006, this is still
considerably above our hurdle despite being hit by the adjustments mentioned
above.
 
Strong capital position
 
The capital strength of the South African life company remains strong at a 3.7
times coverage of the Statutory Capital Adequacy Requirement (SCAR), after
allowing for statutory limitations on the value of certain assets. This
compares with the coverage of 2.8 times at 31 December 2005.
 
 
BANKING - NEDBANK GROUP (NEDBANK)
 
Growth strategy reflected in performance
 
Headline earnings up 40% to R4,435 million
 
Nedbank has maintained the momentum reported in the interim and third quarter
results, ending the year with a strong performance in the final quarter. All
divisions recorded strong growth and improved return on equity (ROE) over 2005.
                                                                   
Highlights (Rm)                                 2006      2005     % Change
Adjusted operating profit                      6,940     5,047          38%
Headline earnings*                             4,435     3,167          40%
Net interest income*                          10,963     8,529          29%
Non-interest revenue*                          9,468     8,469          12%
Net interest margin*                           3.92%     3.55%            -
Cost to income ratio*                          58.2%     64.8%            -
ROE*                                           18.6%     15.5%            -
ROE* (excluding goodwill)                      22.1%     18.9%            -
*As reported by Nedbank                                                    
                                      
Strong performance 
 
Adjusted operating profit grew as a result of the continued positive banking
environment, increasing growth in both net interest income and non-interest
income, together with disciplined expense management.
 
Average interest-earning  banking advances grew by 16.5%, with strong growth
experienced in retail advances, particularly residential home loans. This
growth contributed to an increase in Total Assets to R425 billion.
 
Nedbank has started to show improvements in market share in a number of asset 
categories particularly retail mortgages and other private sector loans (mainly
corporate lending). This can be attributed to the brand being repositioned as a
bank for all. Southern Africans, increased brand awareness, price reductions in
several retail banking products and the launch of a number of new retail products
together with continued strong performances from Nedbank Capital and Nedbank
Corporate.
 
Net interest income growth of 29%, Net interest margin increases to 3.92%
 
Net interest income (NII) growth was particularly strong. The margin increase
was driven by the increased endowment together with the higher interest rate
environment, positive mix changes from the growth in higher margin retail and
business banking advances, as well as a change in the advances mix within
Nedbank Retail resulting from higher growth in higher margin personal loans.
NII benefited from this increase in the margin together with the growth in
advances of 24%.
 
Nedbank anticipates some margin reduction during 2007 as a result of asset
growth being funded largely by wholesale deposits. This will be partially
offset by the remaining endowment effect from the interest rate increases.
 
 
Impairment losses on loans and advances
 
The impairments charge rose by 25% for the year. The impairments charge to
average advances remained at low levels at 0.52% for the full year. Impairments
were negatively impacted by the mix change in advances, referred to above, with
higher margin retail advances and personal loans attracting appropriately
higher levels of impairments, but with overall and particularly in the
corporate division, our credit experience remained good.
 
Non-interest revenue growth of 12%
 
Growth in non interest revenue (NIR) was mainly attributable to continued
volume growth in Nedbank Corporate and Nedbank Retail, property private equity
revaluations and realisations in Nedbank Corporate, private equity revaluations
and realisations in Nedbank Capital, strong deal flow in Nedbank Capital, and
strong growth in Bond Choice origination fees combined with new business
premium growth in our bancassurance operations.
 
NIR growth has been affected by the price reductions in Nedbank Retail. In July
2006 Nedbank Retail reduced fees for individual current account clients by an
average of 13%.
 
Cost-to-income ratio of 58.2%
 
The improvement in the cost to income ratio is a result of the growth in
operating income and disciplined expense management. As expected, this ratio is
above the level of 57.3% reported in June 2006 due to the planned investment in
distribution and branding in the second half of the year.
 
Strong capital position
 
Nedbank remains well capitalised with a Tier 1 capital adequacy ratio of 8.3%
(9.4% at 31 December 2005) and total capital adequacy ratio of 11.8% (12.9% at
31 December 2005). During the year Nedbank executed a number of initiatives as
part of the group's ongoing long-term capital management programme, which seeks
to achieve an optimal and prudent capital structure including the buy-back of
13.7 million shares.
 
Nedbank's return on equity (ROE) is now comfortably ahead our cost of capital.
While the ROE was ahead of the 2006 target, the planned investment in
distribution makes the 55% cost-to-income ratio more challenging in 2007.
 
Award winning bank
 
Nedbank received the international award for Emerging Markets Corporate Social
Responsibility Bank of the Year' for the second consecutive year and the award
for 'Bank of the Year in South Africa' at the Banker's 2006 Awards in London.
During 2006 Nedbank was also rated first in its category in the JSE Socially
Responsible Investment Index and again included in the Dow Jones World
Sustainability Index.
 
 
GENERAL INSURANCE  MUTUAL & FEDERAL
                                                                           
Highlights (Rm)                                 2006      2005     % Change
Adjusted operating profit                      1,039     1,178        (12%)
Gross premiums*                                8,549     8,004           7%
Earned premiums*                               7,458     6,882           8%
Claims ratio*                                    63%       62%             
Underwriting ratio*                             6.1%      8.4%             
Solvency ratio*                                  49%       74%             
Return on capital* (3 year average)            27.5%     27.4%             
* As reported by Mutual & Federal                                          
                                                                           
Strong  performance in a softening cycle
 
Mutual & Federal delivered another year of solid results, achieving premium
growth in a softening insurance market. The adjusted operating profit was
boosted by a reserve release of R215 million and was delivered despite the
anticipated deterioration in trading conditions in the short-term insurance
market which resulted in a modest decrease in Mutual & Federal's adjusted
operating profit for the year. Although profitability is 12% lower than last
year, Mutual & Federal's continued close management of expenses, premium growth
despite persistent pressure on premium income, and an overall relatively low
level of claims reflects management's focus on the business's profit levers.
 
Solid premium growth at 7%
 
The increase in total gross premiums for the year was broadly in line with
inflation and was achieved despite the intensifying of competition and ongoing
pricing pressure on premium income.
 
Underwriting surplus maintained
 
Mutual & Federal generated an underwriting surplus of R455 million, down 21%
from a surplus of R577 million in 2005. The underwriting ratio (the ratio of
underwriting surplus to net earned premiums) was 6.1% (2005: 8.4%).
 
Claims ratio impacted by increased claims
 
The general level of claims increased over last year, with the claims ratio
increasing to 63% from 62%. The motor account was impacted by a sharp increase
in the incidence of motor accidents and the continuing escalation in repair
costs. In addition, substantial weather related claims were experienced as a
result of hailstorms during the year.
 
Capital Management
 
The solvency ratio at year end was 49%, substantially impacted by the payment
of a special dividend to shareholders following the detailed review of its
capital requirements (31 December 2005: 74%). The capitalisation award, with a
cash alternative of 800 cents per share, was paid in September 2006 and
represented R2.1 billion or 40% of the net asset value of the company. The
current solvency level is considered sufficient to sustain ongoing operations,
as well as support the future development of the business.
 
A final dividend of 135c per share was recommended, making a total of 175c for
the year (2005: 155c).
 
Return on capital remained strong as a result of the payment of the special
dividend and the satisfactory underwriting performance during the year.
 
 
UNITED STATES
 
Excellent Investment performance continues
 
Life sales in target range at good margins
 
Highlights (£m)                                  2006     2005     % Change
Adjusted operating profit (IFRS)                  251      224         12%
Embedded Value adjusted operating profit        
(covered business)                                 98      122        (20%)
Life assurance sales (APE)                        262      290        (10%)
Mutual fund sales                                 743      245         203%
Net fund flows (£bn)                              16*       14          14%
Funds under management (£bn)                      134      132         1.5%
                                                                           
Highlights ($m)                                  2006     2005     % Change
Adjusted operating profit (IFRS)                  465      407         14%
Embedded Value adjusted operating profit        
(covered business)                                181      222        (18%)
Life assurance sales (APE)                        482      528         (9%)
Mutual fund sales                               1,369      445         208%
Net fund flows ($bn)                              30*       26          15%
Funds under management ($bn)                      263      227          16%
* Excluding the impact of eSecLending.                                     
 
Our US business is well placed to achieve strong growth as we enhance our
products and investment styles. We introduced a common management structure
across the Life and Asset Management businesses and aim to implement a
coordinated retail distribution strategy in 2007.
 
IFRS adjusted operating profit for the US businesses was driven by strong funds
inflows, positive equity markets and excellent investment performance in our US
Asset Management business and sustained growth in assets at US Life.
 
The asset management business enjoyed a 16% increase in funds under management
in US $ terms, notwithstanding the sale of eSecLending and First Pacific
Advisors, whilst US Life funds under management grew by 10% to $22 billion. On
a Sterling basis, funds under management reflected the dollar depreciation
during 2006.
 
From 1 January 2007, Old Mutual Asset Managers (UK) (OMAM(UK)), a specialist
asset management boutique firm located in London, will become an affiliate of
US Asset Management.
 
 
US ASSET MANAGEMENT
 
Strong net client cash inflow
                                                                        
 
Highlights ($m)                                                         
                                       2006     2005        % Change
Adjusted operating profit (IFRS)       235       214          10%       
Funds under management ($bn)           261       226          15%       
Net fund flows ($bn)                   30*       26           15%       
Mutual fund sales ($m)                1,369      445         208%       
Operating margin                       28%      26%            -
*Excludes impact of eSecLending                                         
 
Another strong operating result 
 
Operating earnings were strong and benefited from strong transaction and  
performance fees, and strong asset growth resulting from net cash inflows and 
positive market conditions.
 
Earnings were boosted by transaction and performance fees of $112 million
(2005:$106 million) with a sharp increase in performance fees at Acadian. In
addition, we benefited from unrealised gains of $18 million in relation to our
seed capital investments in new funds. New earnings were produced from Copper
Rock and Larch Lane which partially offset a reduction in securities lending
revenue following the sale of eSecLending in May 2006. 
 
The improvement in operating margin came from positive operating leverage,
higher average funds under management and a more favourable mix of transaction
and performance fees on a stable expense base.
 
Record net funds flows and 15% growth in funds under management
 
Record net fund inflows of $40 billion were achieved for the year ($30 billion
excluding eSecLending), as Acadian (international/ emerging markets 'quant'
equity), in particular continued to attract inflows.
 
The strong growth in funds under management was driven by record cash flows,
strong investment performance and positive equity markets. Excluding the
disposals of eSecLending ($25.4 billion) and FPA ($10.4 billion), funds under
management is up 31% from 2005.
 
Excellent fund performance
 
Our affiliates continue to achieve excellent investment performance. At 31
December 2006 90% of assets outperformed their benchmarks over three years.
Over the same period 78% of assets ranked in the first quartile of their peer
group.
 
Building our business
 
Our Old Mutual Capital initiative gathered momentum with gross sales of $2.3
billion, an increase of 77% compared to $1.3 billion last year. Of this, $1.4
billion related to mutual fund sales, up 208% on last year.
 
US Asset Management continues to manage and balance its portfolio, with the
addition of growth specialists; Copper Rock Capital Partners in February 2006,
and Ashfield Capital Partners in February 2007, and of hedge fund of funds
capability at Larch Lane and 2100. We divested eSecLending in May, and in
October, our last remaining revenue sharing firm, First Pacific Advisors,
executed an MBO.
 
A trend of strong net inflows, a track record of excellent investment
performance, and a focus on retail distribution place the business in a
favourable position to increase funds under management and earnings going
forward.
 
 
US LIFE
 
Life assets up $2 billion
 
Continued increase in operating profits
 
EV models improved                                                         
Highlights ($m)                                  2006     2005     % Change
Adjusted operating profit (IFRS)*                 230      193          19%
Return on equity*                                7.1%     6.4%             
Embedded Value adjusted operating profit          181      222        (18%)
Return on embedded value (ROEV)                  6.1%     8.5%            -
Life assurance sales (APE)                        482      528         (9%)
Value of new business                              83       93        (11%)
New business margin                               17%      18%             
Funds under management ($bn)                       22       20          10%
* 2005 restated to exclude amortisation of the present value of  acquired
in-force business
 
Earnings increased in line with assets, with asset growth driven by premiums
Return on embedded value (ROEV) at the planned level. Although positive
earnings growth was achieved, this was slowed by the impact of higher interest
rates, which led us to strengthen ourv capitalised assumptions on our
Multi-Year Guaranteed Annuities (this gave rise to a $24 million reduction in
IFRS earnings in Q3) and poorer than expected mortality experience on Single
Premium Immediate Annuities.
 
EEV assumptions were strengthened for the Single Premium Immediate Annuities
and Multi-Year Guaranteed Annuities, as highlighted at Q3 and the usage of a
penalty-free surrender option. Premiums reached $3.9 billion, in the band
around $4 billion that we were aiming for, but a little lower than last year
when we were at the top of the target range. Together, these resulted in a
reduction in the ROEV to 6.1% from 8.5%.
 
As we have said, we have also been engaged in a substantial upgrade of our
systems and our modelling capability. This has resulted in the EV being reduced
by $107 million. This has been excluded from adjusted EV earnings, and
disclosed separately.
 
ROE increased in line with the improvement in earnings. We maintained our
targeted risk-based capital ratio at 300% and were happy to see statutory
profit appear in Q4.
 
The growth in funds under management benefited from strong net inflows,
particularly from Old Mutual Bermuda which achieved inflows in excess of $1
billion for the first time, and positive market movements.
The business remains on track to return cash in 2007.
 
Life sales volumes in target range at good margins
 
Following a strong performance in the final quarter, total life sales were $3.9
billion on a gross basis and $482 million on an APE basis.
 
Sales of equity-indexed annuities were the single largest APE contributor and
represented 43% of total APE.
 
Offshore sales (APE) through Old Mutual Bermuda increased by 66% to $119
million, maintaining the strong momentum built in the first half of 2006. The
exceptional growth reflects the strength of our relationships and overall
expansion in the bank distribution network, combined with the attractiveness of
our product range, which includes variable annuity, fixed annuity and
equity-indexed products. Offshore annuity sales now represent a quarter of
sales in our US Life business.
 
 
Margin healthy
 
The after tax value of new business was affected by slightly lower margins and
the reduction in new life sales. Margin remains healthy and within our target
range, and reflects strong investment performance and overall improvement in
our pricing disciplines during 2006.
 
Effective financial management and risk control
 
Our migration to a new actuarial and finance system was successfully executed,
with the new system providing enhancements to our internal processes. We
continue to improve the required infrastructure to support this growing
business.
 
 
EUROPE
 
108% surge in operating profit
                                                                           
                                                        Proforma           
Highlights (£m)*                                2006      2005     % change
IFRS adjusted operating profit                   231       111         108%
Embedded Value adjusted operating profit       
(covered business)                               394       328          20%
Life assurance sales (APE)                       881       781          13%
Mutual fund sales                              4,306     2,715          59%
Value of New Business                            127       113          12%
Net fund inflows (£bn)                           6.3                       
Return on Invested Capital                      8.1%                       
Return on Embedded Value (covered business)    13.5%                       
Funds under management (£bn)                      52        44          18%
                                                                           
*All current and prior year numbers reflect 11 months of results and are
adjusted to Old Mutual accounting policies, prior year embedded value numbers
are on a Skandia basis but allow for group expenses.
 
Strong business performance
 
Our European business continued to deliver very pleasing performance on the
back of strong sales, net client inflows and the increasing scale of our
operations in the United Kingdom and ELAM divisions. APE sales and margins in
the fourth quarter improved significantly over the third when volumes were
lower due to seasonal effects. Our European business now forms a very
significant part of the Group's operations and international diversification,
and is on track to achieve the 2008 targets communicated at the Capital Markets
Day on 20 June 2006. In line with our estimates announced on 20 June 2006, £16
million was spent on integration costs realising £12 million of synergies in
2006.
 
Adjusted operating profit for the eleven months to 31 December 2006 increased
to £231 million, building on growth in funds under management and strong sales
volumes which delivered higher fund- and premium- based income growth. Value of
new business grew by 12% driven by an increase in APE. This also contributed
positively to the return on EEV of 13.5%.
 
Our higher than average exposure to baby boomers in our European markets
provides a real opportunity. In the UK, we will capitalise on the market trend
to wrap products with the launch in the summer of the new supermarket platform.
The underlying need for advised pension savings remains and these changes are
receiving the committed attention of senior management. In the ELAM Division we
are expanding distribution capacity further during 2007.
 
 
UNITED KINGDOM AND OFFSHORE                                                
                                                        Proforma
Highlights (£m)*                                2006      2005     % Change
IFRS adjusted operating profit                   128        34         276%
EV adjusted operating profit (covered business)  208       100         108%
Life assurance sales (APE)                       558       480          16%
UK life assurance sales (APE)                    396       261          52%
Unit trust sales                               3,039     1,456         109%
Value of new business                             55        44          25%
New business margin                              10%        9%             
Net fund inflows (£bn)                           4.8                       
Funds under management (£bn)                      35        29          29%
                                                                           
*All current and prior year numbers reflect 11 months of results and are
adjusted to Old Mutual accounting policies, prior year embedded value numbers
are on a Skandia basis but allow for group expenses. 2005 figures include
Selestia
 
2006 was a year of significant achievement for UK Division, characterised by
strong sales, strong net fund inflows and ongoing recognition from our
distributors. Life sales growth was better than average in the UK market with
pension sales, driven by A day, up 65% to £230 November, Skandia UK were
awarded their 26th million and overall life sales, including offshore, up 16%.
In Financial Adviser 5-star award in 16 years, which this year included the
'Company of the Year' award. The financial results also showed significant
improvement over 2005 with strong growth in both the IFRS and Embedded Value
adjusted operating profit for the year.
 
Growing IFRS profits
 
Adjusted operating profit for the UK division was driven by a higher level of
funds under management, the maturity profile of the book and effective
operational leverage. The synergy capture process is under way and expenditure
has commenced, and will increase over the coming months in line with our 20
June disclosure. Involving an extensive outsourcing arrangement, the business
is in the process of extensive reengineering to enable efficient and
cost-effective straight-through processing.
 
The underlying performance of the mutual funds business continued to improve
through the second half of 2006. The integration of the two fund supermarkets
(Skandia MultiFUNDS and Selestia) is progressing in line with expectations.
 
Strong underlying Embedded Value performance
 
Embedded value adjusted operating profit before tax was £208 million, driven by
good growth in new business, strong experience variances and operating
leverage. Our experience variances were positive, driven by higher fee and
favourable surrenders and mortality experience consistent with our
expectations.
 
Strong growth in funds under management and net fund inflows
 
Net fund inflows were £4.9 billion for the year representing 14% of funds under
management. The favourable position was supported by positive market movements
giving rise to significant growth in funds under management during the year.
 
 
Strong new business growth in UK life and mutual fund sales
 
The UK Division's open architecture platform, helped by our strong reputation
in the industry and the favourable economy and equity markets, continued to
deliver strong new business growth, with both life sales on an APE basis and
mutual fund sales up strongly in the eleven months to 31 December 2006. Sales
in the UK were particularly strong boosted by A Day effects and were 52% up at
£396 million APE.
 
Pension sales substantially higher
 
Overall new business levels in the course of 2006 are broadly in line with
management expectations with the UK pensions business where high levels of
activity continued even after 'Pensions A-Day' (6th exception of April 2006,
the date when the UK government significantly simplified the rules for tax
privilege). UK Pensions business grew in the year by over 65% to £230 million
APE.
 
Towards the end of the year there was further growth in the sale of life bonds
mirroring improved investor confidence arising from equity market appreciation.
Offshore business, in line with management expectations remained flat against
2005. UK-sourced offshore sales were muted by uncertainty surrounding the tax
treatment of trusts in the early part of the year but improved towards the
latter part of the year as greater understanding of the implications of the new
legislation became apparent.
 
Unit trust sales up 109% to £3 billion
 
Our Selestia and Skandia MultiFUNDS businesses continue to benefit from the
IFA's shift to open architecture investment platforms as the preferred strategy
for the management of clients' assets. The launch of the Skandia-manufactured
'Best Ideas' funds, including the UK Best Ideas in October, has improved net
fund inflows across the group generating gross direct subscriptions exceeding
£300 million.
 
Margins improved with new business growing significantly
 
Life new business APE margins post-tax at a product level improved by 10% for
the year. The delivery elements of our integration programme are now well
advanced to deliver the synergies required to reduce administrative costs per
policy significantly to achieve our target margin in the 11-12% range from mid
2008.
 
The value of new business improved by 25% to £55 million, due to strong sales
growth across our core products.
 
Bankhall successful turn around
 
2006 has seen Bankhall concentrate on its core services and ensure that its
proposition is meeting fully the needs of the intermediary market. The
refocusing of activity has returned the business to profitable growth whilst
reducing income and expenses, the latter to a greater extent.
 
 
NORDIC                                                                     
                                                        Proforma
Highlights (SEKm)*                                                         
                                                2006      2005     % Change
IFRS adjusted operating profit                   995       971           2%
EV adjusted operating profit (covered business)1,447     1,530         (5%)
Life assurance sales (APE)                     1,769     1,954         (9%)
Mutual funds sales                             2,144     1,986           8%
Value of new business                            479       618        (22%)
New business margin                              27%       32%             
Net fund inflows (SEK bn)                        3.5                       
Funds under management (SEK bn)                  106        95          12%
                                                                           
*All current and prior year numbers reflect 11 months of results and are
adjusted to Old Mutual accounting policies, prior year embedded value numbers
are on a Skandia basis but allow for group expenses.
 
Increased operating profit driven by higher level of funds under management. 
 
The increase in adjusted operating profit for the Nordic business is 
attributable to a higher level of funds under management and positive net
client cash flow in the Swedish unit linked business.
 
Life assurance sales
 
The sales of the 'Kapitalpension' product boosted life sales (APE) temporarily
in 2005 and 2006 saw volumes drop back. New sales of occupational corporate
pension schemes (TPS), our largest product, were constant compared to last
year.
 
Denmark recorded strong growth of 101% in life sales (APE) compared to prior
year following favourable market development in Denmark and an improved product
offering.
 
Sales in 2007 are likely to be lower as the tax effectiveness of the
Kapitalpension product was removed in February this year and we are only on the
panel for the new ITP agreement through Skandia Liv products.
 
Strong growth in funds under management
 
Funds under management increased following an improvement in market conditions
and higher net inflows from customers and benefiting from a strong fourth
quarter after the traditionally slow third quarter holiday season.
 
Margin and EEV
 
Life new business margin was 27%, compared to 32% for the 11 months to 31
December 2005. This in part attributable to the lower new sales of the
Kapitalpension. EV adjusted operating profit declined by 5% to SEK 1,447
million. This decrease in EV adjusted operating profit on a pro-forma basis was
caused by the lower value of new business, and a small negative operating
assumption change in 2006 compared to strong positive assumption changes last
year. The former two effects were partially offset by higher fee income and
surrender experience in line with assumptions.
 
 
Continued growth in banking business
 
Our banking business continues to strengthen, with lending and deposits
achieving good growth during the year. Lending increased to SEK49 billion, up
19% on the prior year, mainly due to strong mortgage lending in Norway.
Skandiabanken continued to attract new customers and create valuable synergies
with the rest of the Nordic business. Operating profit is lower than 2005,
which was impacted by some positive one-offs. This is also in line with 2006
expectations where IT projects and expenditures for the Basel II implementation
were planned.
 
Putting the Business on a sound footing for the future
 
There are a series of factors that will affect the earnings from this business
in 2007. Firstly, we have decided to alter the arrangements between Skandia Liv
and Skandia AB so that there is complete clarity that Liv policyholders'
interests continue to be separated from the shareholder interests. This should
ensure that the longstanding debates about governance of Skandia Liv are
resolved. We have commenced discussions with the Skandia Liv board and hope to
have these completed in the near future. This will result in greater new
business strain borne by our shareholders (SEK 150 million in 2007), and some
additional administration costs (SEK 100 million  SEK 150 million per annum),
but will enable us to grow profitably in 2008 and beyond. Skandia Liv is an
integral part of our strategy, and we believe it is important to ensure that
the highest standards of governance are observed. Secondly, the IT systems of
Skandia require significant improvements both to improve service standards and
to allow us to improve our products, and we will be investing in these over the
next eighteen months. This will cost approximately SEK 100 million in 2007.
This was well understood at the time of acquisition and does not relate to the
synergies, which are being sought at the same time. A new organisational
structure for Sweden is being put in place and we are confident about the
strength of the underlying Skandia brand in Sweden.
 
 
EUROPE AND LATIN AMERICA (ELAM)                                            
                                                            Proforma
Highlights (EURm)*                                                            
                                                2006      2005     % Change
IFRS adjusted operating profit                    48         9         433%
EV adjusted operating profit (covered business)  116       169        (31%)
Life assurance sales (APE)                       282       231          22%
Mutual fund sales                              1,629     1,629           0%
Value of new business                             55        33          66%
New business margin                              19%       14%             
Net fund inflows (EURbn)                         1.7                       
Funds under management (EURbn)                    13        12           8%
 
*All current and prior year numbers reflect 11 months of results and are
adjusted to Old Mutual accounting policies, prior year embedded value numbers
are on a Skandia basis but allow for group expenses.
 
Margins in line with target
 
The year ended  positively, with strong life assurance sales growth recorded
for the nperiod, delivered through expanded distribution, profitable products
and helped by generally positive equity market sentiment.
 
In 2006 we continued our expansion into new market segments, distribution
channels, IFA networks and products. We also continued our drive for greater
efficiency, and used the existing German back office to launch into Hungary and
the Czech Republic.
 
2006 has been another year where our businesses have been recognised in their
local markets as excellent service providers and strong innovators of financial
solutions. Notable growth was experienced in the French, Polish and Mexican
markets. Towards the end of 2006, Austria and France each achieved the landmark
of EUR1 billion funds under management, demonstrating that more and more of 
our young businesses are achieving scale.
 
Strong operating profit result
 
IFRS adjusted operating result reflects the benefits of strong organic growth
in life and mutual fund business, coupled with expense discipline.
 
EEV adjusted operating profit of EUR116 million is 31% below that for 2005. 
The decrease is primarily attributed to significant and positive operating
assumption changes in 2005, which are marginally negative in 2006. The
underlying growth, however, is strong due to the increase in new business
resulting in a significant improvement in the value of new business.
 
 
Life new business sales end on a strong note
 
Particularly strong sales of single premium products in Europe and recurring
premium business in Poland were recorded during the period.
 
Mutual fund sales flat
 
In Latin America, where our pension products are reported as mutual funds
business, we performed strongly during 2006, particularly in the mandatory and
complementary pension segments in Colombia and in institutional mandates
awarded in Mexico. In Europe, sales in 2005 were inflated by exceptionally
successful institutional mutual fund inflows in Spain. As anticipated, these
inflows in Spain decreased notably in 2006 because of the sale of Skandia Vida,
offsetting the growth experienced throughout the rest of the Division.
 
Funds under management up 8%
 
Net fund inflows, 14% of opening funds under management, were experienced
during the year and account for EUR1.7 billion of the increase, with
unfavourable market movements accounting for EUR0.7 billion. The overall
revenue-generating quality of the funds under management improved over the
course of the year.
 
Margin in line with target
 
The value of new business is ahead of last year, reflecting particularly good
growth in sales and market share in a number of countries and the increasing
economies of scale of our operations.
 
The post-tax profit margin of 19% achieved for the eleven-month period is ahead
of our medium-term target range of 16-18%, principally reflecting the good new
business growth in higher margin markets and increased economies of scale in
the sales activities.
 
Sale of Skandia Vida, Spain
 
In December 2006, we announced we have reached an agreement to sell Skandia
Vida, our traditional life business in Spain. The successful completion of this
transaction is in line with Skandia's core European strategy to focus on mutual
fund and unit-linked business.
 
OTHER
                                                                          %
Highlights (£m)                                  2006*      2005     Change
Adjusted operating profit                           18        20      (10%)
Funds under management (£bn)                        12         7        71%
Unit trust / Mutual funds sales                  1,657     1,072        55%
KMOM (India) APE (INRm)**                        5,321     2,659       100%
Skandia:BSAM APE (RMBm)**                         53.8       6.8       691%
                                                                     
* Includes results of Skandia Australia and Skandia BSAM (China) for 11 months
** This represents 100% of the businesses, OM owns 26% of KMOM and 50% of 
Skandia:BSAM 
 
Australia
 
Australian Skandia Limited (ASL) has been operating in the retail Australian
market for five years as a unit linked multi manager principally targeting the
independent sector. Intech, a research operation focusing on the institutional
market, was acquired in late 2006. Both ASL and Intech will benefit from a
larger combined investment research team, providing the enlarged entity with
top-class proprietary research and wider distribution across both retail and
institutional markets.
 
For the first time since incorporation, the business posted a small profit for
the year and is on track to achieve strong profits in 2007. Funds under
management closed at AU$14.2 billion (2005: AU$3.7 billion), consisting of
retail (ASL) AU$5.1 billion and institutional (Intech) AU$9.1 billion.
 
China
 
Our joint venture with the Beijing State-owned Asset Management Company (BSAM)
in China has now been in operation for two years and continues to show strong
sales growth. The business sells unit-linked products and has licences to
operate in Beijing, Shanghai and Jiangsu Province. Plans are underway to apply
for at least two further branch licenses before the end of the year and to open
two sub branches in other major cities in Jiangsu Province.
 
For the year ended 31 December 2006 the venture reported a loss of RMB59
million. Despite its recent entry into the market, of the 25 foreign owned
joint venture insurance companies in China, Skandia BSAM had the 10th largest
gross premium flows.
 
India
 
Our 26% life associate in India, Kotak Mahindra Old Mutual (KMOM) continues to
make robust progress. Old Mutual has an option to increase its shareholding in
the business, when the Indian Government's proposed increase in the foreign
direct investment limit, currently capped at 26%, comes into effect.
 
In line with the Kotak Mahindra Group, KMOM has a 31 March year-end.
 
Net losses for the 9 months ended 31 December 2006 are INR482 million. Gross
premiums for the 9 months totalled INR5,047 million representing a 96% increase
on 2005.
 
 
OMAM (UK)
 
2006 has been a year of investment and of developing the platform for future
growth in OMAM (UK). The business reported adjusted operating profit of
£13.1million (2005: £10 million).
 
Gross sales for the year exceeded £1.6 billion (2005: £1.1 billion)
representing a year-on-year increase of 45%. Full year closing funds under
management increased by 23% to £5.7 billion (2005: £4.6 billion).
 
2006 saw the launch of three single strategy hedge funds and three multi
strategy hedge funds.
 
With effect from 1 January 2007, executive responsibilities for OMAM (UK) will
be transferred to US Asset Management.
 
Other
 
Other businesses include Old Mutual Asset Managers Bermuda and Palladyne Asset
Managers in the Netherlands. Palladyne funds under management increased by 54%
to EUR576 million, (2005: EUR376 million). With effect from 1 January 2007,
executive responsibilities for Palladyne will be transferred to Skandia ELAM.
 
Consolidated Income Statement
for the year ended 31 December 2006
                                                                         £m
                                                 Year ended      Year ended
                                                31 December     31 December
                                      Notes            2006            2005
Revenue                                                                    
Gross earned premiums                3(iii)           4,713           4,473
Outward reinsurance                                   (267)           (197)
Net earned premiums                                   4,446           4,276
Investment income (net of investment 
losses)                                              10,439           6,569
Banking interest and similar income                   2,441           2,018
Fee and commission income, and       
income from service activities                        2,262           1,274
Other income                                            324             215
Share of associated undertakings'    
profit after tax                                          6              17
Total revenues                                       19,918          14,369
                                                                           
Expenses                                                                   
Claims and benefits (including       
change in insurance contract         
provisions)                                         (7,999)         (7,795)
Reinsurance recoveries                                  245             226
Net claims and benefits incurred                    (7,754)         (7,569)
Change in investment contract        
liabilities                                         (4,655)         (1,202)
Losses on loans and advances                          (123)           (103)
Finance costs (including interest    
and similar expenses)                                  (91)            (40)
Banking interest expense                            (1,461)         (1,254)
Fees and commission expense, and     
other acquisition costs                               (714)           (389)
Other operating and administrative   
expenses                                            (2,826)         (2,155)
Change in third party interest in    
consolidated funds                                    (278)            (80)
Goodwill impairment                   4(ii)             (8)             (5)
Amortisation of PVIF and other       
acquired intangibles                                  (379)            (24)
Profit / (loss) on disposal of       
subsidiaries, associated             
undertakings and strategic                                                 
investments                          4(iii)              85              58
Total expenses                                     (18,204)        (12,763)
 
Profit before tax                                     1,714           1,606
 
Income tax expense                     5(i)           (621)           (484)
Profit for the financial year                         1,093           1,122
Profit for the financial year        
attributable to:                                                           
Equity holders of the parent                            836             867
Minority interests                                                         
Ordinary shares                           6             207             203
Preferred securities                      6              50              52
Profit for the financial year                         1,093           1,122
 
                                                                      Pence
                                                 Year ended      Year ended
                                                31 December     31 December
Earnings per share                                     2006            2005
Basic earnings per ordinary share      7(i)            17.0            25.1
Diluted earnings per ordinary share    7(i)            16.1            24.3
Weighted average number of shares     
millions                                              4,705           3,456
 
Adjusted Operating Profit
for the year ended 31 December 2006
Reconciliation of adjusted operating profit to profit after tax
                                                                         £m
                                                 Year ended      Year ended
                                                31 December     31 December
                                      Notes            2006            2005
                                                                           
South Africa                          3(ii)           1,124           1,083
United States                         3(ii)             251             224
Europe                                3(ii)             231             (4)
Other                                 3(ii)              16              20
                                                      1,622           1,323
Finance costs                                         (130)            (37)
Other shareholders' income /          
(expenses)                                             (33)            (25)
Adjusted operating profit*                            1,459           1,261
 
Adjusting items                        4(i)              16             218
Profit for the financial year before  
tax                                                   1,475           1,479
Total income tax expense               5(i)           (621)           (484)
Income tax attributable to            
policyholder returns                                    239             127
Profit for the financial year after   
tax                                                   1,093           1,122
                                                                           
Adjusted operating profit after tax attributable to ordinary equity holders
 
                                                                         £m
                                                 Year ended      Year ended
                                                31 December     31 December
                                      Notes            2006            2005
                                                                           
Adjusted operating profit*                            1,459           1,261
Tax on adjusted operating profit     5(iii)           (395)           (314)
                                                      1,064             947
Minority interest  ordinary shares  6(iii)           (224)           (185)
Minority interest  preferred        
securities                            6(ii)            (50)            (52)
                                                        790             710
 
                                                 Year ended      Year ended
                                                31 December     31 December
                                      Notes            2006            2005
Weighted average number of shares    
(millions)                             7(i)           5,222           3,840
Adjusted operating earnings per       
share**  (pence)                     7(ii)            15.1            18.5
                                                                            
* 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 all businesses, adjusted
operating profit excludes goodwill impairment, the impact of acquisition
accounting, initial costs of Black Economic Empowerment schemes, the impact of
closure of unclaimed shares trusts, profit / (loss) on disposal of
subsidiaries, associated undertakings and strategic investments and dividends
declared to holders of perpetual preferred callable securities.
 
** 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 31 December 2006
                                                                         £m
                                                         At              At
                                                31 December     31 December
                                       Note            2006            2005
                                                                           
Assets                                                                     
Goodwill and other intangible assets                  5,367           1,570
Investments in associated undertakings                   83              93
Investment property                                     804             847
Property, plant and equipment                           499             538
Deferred tax assets                                     511             458
Reinsurers' share of insurance         
contract provisions                                     763             455
Deferred acquisition costs                            1,578           1,089
Current tax receivable                                   60              29
Loans, receivables and advances                      22,804          18,456
Derivative financial instruments      
assets                                                1,238           1,604
Financial assets fair valued through   
income statement                                     73,065          35,378
Other financial assets                               11,568          12,265
Short-term securities                                 1,819           1,764
Other assets                                          3,635           2,373
Assets held-for-sale                                  1,165              36
Cash and balances with central banks                  2,951           3,051
Placements with other banks                             665             568
Total assets                                        128,575          80,574
                                                                          
Liabilities                                                                
Insurance contract provisions                        22,495          23,258
Financial liabilities fair valued      
through income statement                             57,586          21,187
Third party interests in consolidation 
of funds                                              3,041             966
Borrowed funds                                        1,676           1,433
Provisions                                9             542             285
Deferred revenue                                        311             138
Deferred tax liabilities                              1,393             611
Current tax payable                                     283             178
Amounts owed to depositors                           25,052          21,145
Derivative financial instruments      
liabilities                                           1,060           1,634
Liabilities held-for-sale                             1,107               -
Other liabilities                                     5,266           3,320
Total liabilities                                   119,812          74,155
Net assets                                            8,763           6,419
                                                                           
Shareholders' equity                                                       
Equity attributable to equity holders  
of the parent                                         7,237           4,751
Minority interests                                                         
Ordinary shares                                         848           1,012
Preferred securities                                    678             656
Total minority interests                              1,526           1,668
Total equity                                          8,763           6,419
 
Consolidated Cash Flow Statement
for the year ended 31 December 2006
                                                                         £m
                                                 Year ended      Year ended
                                                31 December     31 December
                                                       2006            2005
Cash flows from operating activities                                       
Profit before tax                                     1,714           1,606
Capital gains included in investment income         (4,076)         (4,340)
Loss on disposal of property, plant and         
equipment                                               (1)               8
Depreciation of property, plant and equipment            68              61
Amortisation and impairment of intangible assets        428              75
Impairment of loans and receivables                     143             122
Share based compensation expense                         40              94
Share of associated undertakings profit after   
tax                                                     (6)            (17)
Profit / (loss) arising on disposal of          
subsidiaries, associated undertakings and       
strategic                                                                  
investments                                            (85)            (58)
Other non-cash amounts in profit                         68               9
Non-cash movements in profit before tax             (3,421)         (4,046)
                                                                           
Reinsurancer's share of insurance contract      
provisions                                            (785)            (83)
                                                                           
Deferred acquisition costs                            (632)           (276)
Loans, receivables and advances                     (5,543)         (3,233)
Insurance contract provisions                         2,886           3,307
Financial liabilities fair valued through       
income statement                                      6,594           2,319
Amounts owed to depositors (including bank and  
money market deposits)                                5,251             983
Other operating assets and liabilities                  555             465
Changes in working capital                            8,326           3,482
Taxation paid                                         (317)           (314)
Net cash inflow / (outflow) from operating      
activities                                            6,302             728
                                                                           
Cash flows from investing activities                                       
(Acquisition) / disposal of financial           
investments                                         (4,294)             644
(Acquisition) / disposal of investment          
properties                                              (4)              40
Net acquisition of tangible fixed assets              (120)            (83)
Net acquisition of intangible fixed assets             (39)            (17)
Acquisition of interests in subsidiaries            (1,318)            (56)
Disposal of interests in subsidiaries,          
associated undertakings and strategic           
investments                                              78              33
Net cash (outflow) / inflow from investing      
activities                                          (5,697)             561
                                                                            
 
                                                                         £m
                                                 Year ended      Year ended
                                                31 December     31 December
                                                       2006            2005
Cash flows from financing activities                                       
Dividends paid to:                                                         
Equity holders of the Company                         (281)           (184)
Equity minority interests and preferred         
security interests                                    (200)            (99)
Interest payable (excluding banking interest    
payable)                                               (52)            (40)
Net proceeds from issue of ordinary shares      
(including by subsidiaries to minority                                     
interests)                                               52               2
Repayment of convertible debt                             -           (336)
Issue of subordinated debt                              297             259
Other debt issued / (repaid)                           (96)            (10)
Issue of perpetual preferred callable securities          -             688
Net cash inflow / (outflow) from financing      
activities                                            (280)             280
 
Net (decrease) / increase in cash and cash      
equivalents                                             325           1,569
Effects of exchange rate changes on cash and    
cash equivalents                                      (575)              86
Cash and cash equivalents on acquisition of new 
subsidiaries                                            581               -
Cash and cash equivalents at beginning of the   
period                                                3,303           1,648
Cash and cash equivalents at end of the year          3,634           3,303
                                                                           
Consisting of:                                                             
Coins and bank notes                                    236             196
Money at call and short notice                        2,190           2,268
Balances with central banks (other than         
mandatory reserve deposits)                               9              59
Mandatory reserve deposits with central banks           516             528
Cash and balances with the central banks              2,951           3,051
Placements with other banks                             665             568
Other cash equivalents                                1,101             381
Cash and cash equivalents subject to            
consolidation of funds                              (1,083)           (697)
Total                                                 3,634           3,303
                                                                           
Other supplementary cash flow disclosures
 
Interest income received (including 
banking interest)                                     4,059           3,322
Dividend income received                                513             488
Interest payable (including banking interest)         1,552           1,294
 
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.
 
Statement of Changes in Equity
for the year ended 31 December 2006
                                             Millions                    £m 
                                            Number of       Attributable to
                                        shares issued     equity holders of
Year ended 31 December 2006            and fully paid            the parent
Equity holders' funds at beginning of  
the year                                        4,090                 4,751
Change in equity arising in the year                                       
Fair value gains / (losses):                                               
Property revaluation                                -                    28
Net investment hedge                                -                    75
Available-for-sale investments                      -                  (94)
Shadow accounting                                   -                    28
Currency translation differences /     
exchange differences on translating    
foreign                                                                    
operations                                          -                 (852)
Other movements                                     -                    38
Aggregate tax effect of items taken    
directly to or transferred from equity              -                    14
Net expense recognised directly in     
equity                                              -                 (763)
Profit for the year                                 -                   836
 
Total recognised income and expense    
for the year                                        -                    73
Dividend for the year                               -                 (321)
Net sale of treasury shares                         -                    18
Issue of ordinary share capital by the 
Company                                         1,400                 2,674
Net acquisition of interests in        
subsidiaries                                        -                     -
Exercise of share options                          11                    14
Fair value of equity settled share     
options                                             -                    28
Equity holders' funds at end of the    
year                                            5,501                 7,237
      
                                                                        £m
                                                 Total minority       Total
Year ended 31 December 2006                            interest      equity
Equity holders' funds at beginning of the year            1,668       6,419
Change in equity arising in the year                                       
Fair value gains / (losses):                                               
Property revaluation                                          -          28
Net investment hedge                                          -          75
Available-for-sale investments                                -        (94)
Shadow accounting                                             -          28
Currency translation differences / exchange       
differences on translating foreign                                         
operations                                                (208)     (1,060)
Other movements                                            (42)         (4)
Aggregate tax effect of items taken directly to   
or transferred from equity                                    -          14
Net expense recognised directly in equity               (250)       (1,013)
Profit for the year                                         257       1,093
 
Total recognised income and expense for the year              7          80
Dividend for the year                                     (160)       (481)
Net sale of treasury shares                                   -          18
Issue of ordinary share capital by the Company                -       2,674
Net acquisition of interests in subsidiaries                 11          11
Exercise of share options                                     -          14
Fair value of equity settled share options                    -          28
Equity holders' funds at end of the year                  1,526       8,763
 
 
                                                                         £m
                                                          Share       Share
Year ended 31 December 2006                             capital     premium
                                                                           
Attributable to equity holders of the parent at         
beginning of the year                                       410         730
Changes in equity arising in the year:                                     
Fair value gains / (losses):                                               
Property revaluation                                          -           -
Net investment hedge                                          -           -
Available-for-sale investments                                -           -
Shadow accounting                                             -           -
Currency translation differences / exchange differences 
on                                                                         
translating foreign operations                                -           -
Other movements                                               -           -
Aggregate tax effect of items taken directly to or      
transferred from                                                           
equity                                                        -           -
Net expense recognised directly in equity                     -           -
Profit for the year                                           -           -
 
Total recognised income and expense for the year              -           -
Dividend for the year                                         -           -
Net sale of treasury shares                                   -           -
Issue of ordinary share capital by the Company              139           3
Exercise of share options                                     1          13
Fair value of equity settled share options                    -           -
Attributable to equity holders of the parent at end of  
the year                                                    550         746
 
                                                                         £m
                                                      Other     Translation
Year ended 31 December 2006                        reserves         reserve
                                                                           
Attributable to equity holders of the parent at    
beginning of the year                                   374             357
Changes in equity arising in the year:                                     
Fair value gains / (losses):                                               
Property revaluation                                     28               -
Net investment hedge                                      -              75
Available-for-sale investments                         (94)               -
Shadow accounting                                        28               -
Currency translation differences / exchange        
differences on                                                             
translating foreign operations                            -           (852)
Other movements                                         (6)               -
Aggregate tax effect of items taken directly to or 
transferred from                                                           
equity                                                   11             (1)
Net expense recognised directly in equity              (33)           (778)
Profit for the year                                       -               -
 
Total recognised income and expense for the year       (33)           (778)
Dividend for the year                                     -               -
Net sale of treasury shares                               -               -
Issue of ordinary share capital by the Company        2,532               -
Exercise of share options                                 -               -
Fair value of equity settled share options               28               -
Attributable to equity holders of the parent at    
end of the year                                       2,901           (421)
                                                                            
                                                                         £m
                                                        Perpetual          
                                                        preferred          
                                          Retained       callable          
Year ended 31 December 2006               earnings     securities     Total
                                                                           
Attributable to equity holders of the     
parent at beginning of the year              2,192            688     4,751
Changes in equity arising in the year:                                     
Fair value gains / (losses):                                               
Property revaluation                             -              -        28
Net investment hedge                             -              -        75
Available-for-sale investments                   -              -      (94)
Shadow accounting                                -              -        28
Currency translation differences /        
exchange differences on                                                    
translating foreign operations                   -              -     (852)
Other movements                                 44              -        38
Aggregate tax effect of items taken       
directly to or transferred from                                            
equity                                           4              -        14
Net expense recognised directly in equity       48              -     (763)
Profit for the year                            836              -       836
 
Total recognised income and expense for   
the year                                       884              -        73
Dividend for the year                        (321)              -     (321)
Net sale of treasury shares                     18              -        18
Issue of ordinary share capital by the    
Company                                          -              -     2,674
Exercise of share options                        -              -        14
Fair value of equity settled share options       -              -        28
Attributable to equity holders of the     
parent at end of the year                    2,773            688     7,237
 
                                                                         £m
                                                                         At
                                                                31 December
Other reserves                                                         2006
                                                                           
Merger reserve                                                        2,716
Available-for-sale reserve                                               28
Property revaluation reserve                                             48
Cash flow hedge reserve                                                 (1)
Share based payments reserve                                            110
                                                                           
Attributable to equity holders of the parent at end of the year       2,901
 
Retained earnings have been reduced by £704 million at 31 December 2006 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 £39 million of dividends declared to
holders of perpetual preferred callable securities (see note 11).
 
Included within issue of ordinary share capital by the Company are transaction
costs totalling £2 million deducted from the share premium.
 
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.
 
 
                                             Millions                    £m
                                            Number of       Attributable to
                                        shares issued     equity holders of
Year ended 31 December 2005            and fully paid            the parent
                                                                           
Equity holders' funds at beginning of  
the year                                        3,854                 3,265
                                                                           
Changes in equity arising in the year                                      
Fair value gains / (losses):                                               
Property revaluation                                -                    27
Net investment hedge                                -                  (78)
Available-for-sale investments                      -                 (249)
Shadow accounting                                   -                   117
Currency translation differences /     
exchange differences on translating    
foreign                                                                    
operations                                          -                   263
Cash flow hedge amortisation                        -                  (12)
Redemption of convertible bonds                     -                  (18)
Other movements                                     -                  (21)
Aggregate tax effect of items taken    
directly to or transferred from equity              -                    34
Net income recognised directly in      
equity                                              -                    63
Profit for the year                                 -                   867
                                                                           
Total recognised income and expense    
for the year                                        -                   930
Dividend for the year                               -                 (184)
Net purchase of treasury shares                     -                 (182)
Issue of perpetual preferred callable  
securities                                          -                   679
Issue of share capital by the Company             231                   159
Net disposal of interests in           
subsidiaries                                        -                     -
Exercise of share options                           5                     4
Fair value of equity settled share     
options                                             -                    80
Equity holders' funds at end of the    
year                                            4,090                 4,751
                                                                           
                                                                         £m
                                                  Total minority      Total
Year ended 31 December 2005                             interest     equity
                                                                           
Equity holders' funds at beginning of the year             1,431      4,696
                                                                           
Changes in equity arising in the year                                      
Fair value gains / (losses):                                               
Property revaluation                                           -         27
Net investment hedge                                           -       (78)
Available-for-sale investments                                 -      (249)
Shadow accounting                                              -        117
Currency translation differences / exchange       
differences on translating foreign                                         
operations                                                    12        275
Cash flow hedge amortisation                                   -       (12)
Redemption of convertible bonds                                -       (18)
Other movements                                               23          2
Aggregate tax effect of items taken directly to   
or transferred from equity                                     -         34
Net income recognised directly in equity                      35         98
Profit for the year                                          255      1,122
                                                                           
Total recognised income and expense for the year             290      1,220
Dividend for the year                                       (99)      (283)
Net purchase of treasury shares                                -      (182)
Issue of perpetual preferred callable securities               -        679
Issue of share capital by the Company                          -        159
Net disposal of interests in subsidiaries                     26         26
Exercise of share options                                      -          4
Fair value of equity settled share options                    20        100
Equity holders' funds at end of the year                   1,668      6,419
 
                                        
                                                                         £m
                                                          Share       Share
Year ended 31 December 2005                             capital     premium
                                                                           
Attributable to equity holders of the parent at         
beginning of the year                                       386         600
Changes in equity arising in the year:                                     
Fair value gains / (losses):                                               
Property revaluation                                          -           -
Net investment hedge                                          -           -
Available-for-sale investments                                -           -
Shadow accounting                                             -           -
Currency translation differences / exchange differences 
on                                                                         
translating foreign operations                                -           -
Cash flow hedge amortisation                                  -           -
Redemption of convertible bonds                               -           -
Other movements                                               -           -
Aggregate tax effect of items taken directly to or      
transferred from                                                           
equity                                                        -           -
Net expense recognised directly in equity                     -           -
Profit for the year                                           -           -
                                                                           
Total recognised income and expense for the year              -            
Dividend for the year                                         -           -
Net purchase of treasury shares                               -           -
Issue of perpetual preferred callable securities              -         (9)
Issue of share capital by the Company                        23         136
Exercise of share options                                     1           3
Fair value of equity settled share options                    -           -
Attributable to equity holders of the parent at end of  
the year                                                    410         730
                                                                           
                                                                         £m
                                                      Other     Translation
Year ended 31 December 2005                        reserves         reserve
                                                                           
Attributable to equity holders of the parent at    
beginning of the year                                   445             122
Changes in equity arising in the year:                                     
Fair value gains / (losses):                                               
Property revaluation                                     27               -
Net investment hedge                                   (50)            (28)
Available-for-sale investments                        (249)               -
Shadow accounting                                       117               -
Currency translation differences / exchange        
differences on                                                             
translating foreign operations                            -             263
Cash flow hedge amortisation                           (12)               -
Redemption of convertible bonds                        (18)               -
Other movements                                           -               -
Aggregate tax effect of items taken directly to or 
transferred from                                                           
equity                                                   34               -
Net expense recognised directly in equity             (151)             235
Profit for the year                                       -               -
                                                                           
Total recognised income and expense for the year      (151)             235
Dividend for the year                                     -               -
Net purchase of treasury shares                           -               -
Issue of perpetual preferred callable securities          -               -
Issue of share capital by the Company                     -               -
Exercise of share options                                 -               -
Fair value of equity settled share options               80               -
Attributable to equity holders of the parent at    
end of the year                                         374             357
  
                                                                         £m
                                                        Perpetual          
                                                        preferred          
                                          Retained       callable          
Year ended 31 December 2005               earnings     securities     Total
                                                                           
Attributable to equity holders of the     
parent at beginning of the year              1,712              -     3,265
Changes in equity arising in the year:                                     
Fair value gains / (losses):                                               
Property revaluation                             -              -        27
Net investment hedge                             -              -      (78)
Available-for-sale investments                   -              -     (249)
Shadow accounting                                -              -       117
Currency translation differences /        
exchange differences on                                                    
translating foreign operations                   -              -       263
Cash flow hedge amortisation                     -              -      (12)
Redemption of convertible bonds                  -              -      (18)
Other movements                               (21)              -      (21)
Aggregate tax effect of items taken       
directly to or transferred from                                            
equity                                           -              -        34
Net expense recognised directly in equity     (21)              -        63
Profit for the year                            867              -       867
                                                                           
Total recognised income and expense for   
the year                                       846              -       930
Dividend for the year                        (184)              -     (184)
Net purchase of treasury shares              (182)              -     (182)
Issue of perpetual preferred callable     
securities                                       -            688       679
Issue of share capital by the Company            -              -       159
Exercise of share options                        -              -         4
Fair value of equity settled share options       -              -        80
Attributable to equity holders of the     
parent at end of the year                    2,192            688     4,751
                                                                           
                                                                         £m
                                                                         At
                                                                31 December
Other reserves                                                         2005
                                                                           
Merger reserve                                                          184
Available-for-sale reserve                                               68
Property revaluation reserve                                             39
Cash flow hedge reserve                                                 (3)
Share based payments reserve                                             86
Attributable to equity holders of the parent at end of the year         374
 
Retained earnings were reduced by £712 million at 31 December 2005 in respect
of own shares held in policyholders funds, ESOP trusts, Black Economic
Empowerment trusts and related undertakings.
 
Income tax expense
 
Analysis of total income tax expense
                                                                         £m
                                                 Year ended      Year ended
                                                31 December     31 December
                                                       2006            2005
                                                                           
Current tax                                                                
United Kingdom tax                                                         
Corporation tax                                          61              50
Double tax relief                                      (26)            (45)
Overseas tax                                                               
South Africa                                            282             256
United States                                            16               -
Europe                                                   54               1
Secondary Tax on Companies (STC)                         36              17
Prior year adjustments                                  (3)              27
Total current tax                                       420             306
 
Deferred tax                                                               
Origination of temporary differences                    203             201
Changes in tax rates / bases                              -               6
Write down / (recognition) of deferred tax      
assets                                                  (2)            (29)
Total deferred tax                                      201             178
 
Total income tax expense                                621             484

END 


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