To view the PDF file, sign up for a MySharenet subscription.

OLD MUTUAL PLC - Interim results for the six months ended 30 June 2012

Release Date: 08/08/2012 08:02
Code(s): OML     PDF:  
Wrap Text
Interim results for the six months ended 30 June 2012

Old Mutual 
ISIN CODE: GB00B77J0862 
JSE SHARE CODE: OML 
NSX SHARE CODE: OLM 
ISSURE CODE: OLOML 

Adjusted Group MCEV by line of business 
At 30 June 2012
                                                                                                                                                    GBPm   
                                                                                                                                At        At            At   
                                                                                                                           30 June   30 June   31 December   
                                                                                                                   Notes      2012      2011          2011   
MCEV of the core covered business (Long Term Savings)                                                                 B3     5,875     6,147         5,713   

Adjusted net worth (1)                                                                                                       2,368     2,491         2,204   
Value of in-force business                                                                                                   3,507     3,656         3,509   
MCEV of the non-core covered business (Bermuda)                                                                       B3       141       300            66   
Adjusted net worth                                                                                                             232       407           187   
Value of in-force business                                                                                                    (91)     (107)         (121)   
MCEV of the discontinued covered business (Nordic)(2)                                                                 B3         -     1,501         1,433   
Adjusted net worth                                                                                                               -       200           285   
Value of in-force business                                                                                                       -     1,301         1,148   
Adjusted net worth of asset management and other businesses                                                                  1,847     2,127         1,955   
Emerging Markets                                                                                                               460       483           499   
Wealth Management                                                                                                              215       193           179   
US Asset Management                                                                                                          1,172     1,487         1,270   
Nordic (2)                                                                                                                       -      (36)             7   
Value of the banking business                                                                                                3,517     3,847         3,286   
Nedbank (market value)                                                                                                       3,481     3,484         2,935   
Emerging Markets (adjusted net worth)                                                                                           36        16            29   
Nordic (adjusted net worth) (2)                                                                                                  -       347           322   
Value of the general insurance business                                                                                                                      
Mutual & Federal (adjusted net worth)                                                                                          292       322           294   
Net other business (3)                                                                                                       1,068       379           175   
Adjustment for present value of Black Economic Empowerment                                                                                                   
scheme deferred consideration                                                                                                  273       299           270   
Adjustment for value of own shares in ESOP schemes (4)                                                                         106       113           117   
Market value of perpetual preferred securities                                                                     A2(d)     (481)     (464)         (465)   
Market value of perpetual preferred callable securities                                                            A2(d)     (637)     (690)         (605)   
Market value of subordinated debt                                                                                  A2(d)   (1,341)   (2,041)       (1,445)   
Adjusted Group MCEV (5)                                                                                                     10,660    11,840        10,794   
Adjusted Group MCEV per share (pence)                                                                                        218.1     214.1         194.1   
Number of shares in issue at the end of the financial period less treasury
shares  millions (6)                                                                                                        4,887     5,529         5,562   

(1) Adjusted net worth is after the elimination of inter-company loans.

(2) The sale of the Nordic business unit was completed during the current period.

(3) Includes any other business that is not included within the main lines of business, largely Old Mutual parent company IFRS equity net of Group adjustments,
    consolidation adjustments in respect of intercompany transactions and debt, Bermuda asset management and the proceeds from the sale of the Nordic business unit.
(4)
    Includes adjustment for value of excess own shares in employee share scheme trusts.

(5) The results for the six months ended 30 June 2011 have been restated to reflect the consolidation of the Rest of Africa businesses into the results of the Emerging
    Markets business.

(6) The Group cancelled 239 million treasury shares on 13 January 2012.

As part of the disposal of the Nordic business unit a seven for eight share consolidation was proposed and approved. For adjusted Group MCEV per share, the weighted
average number of shares is effective from 23 April 2012.

Adjusted operating Group MCEV statement of earnings 
For the six months ended 30 June 2012
                                                                                                             GBPm   
                                                                           6 months        6 months    Year ended   
                                                                      ended 30 June   ended 30 June   31 December   
                                                              Notes            2012            2011          2011   
Long Term Savings                                                                                                   
Covered business                                                 B2             264             358           714   
Asset management and other business                                              72              82           123   
Banking                                                                           6               -            15   
                                                                                342             440           852   
Nedbank                                                                                                             
Banking                                                                         406             359           755   
Mutual & Federal                                                                                                    
General insurance                                                                34              47            89   
US Asset Management                                                                                                 
Asset management                                                                 42              39            67   
Other operating segments                                                                                            
Finance costs (1)                                                              (88)            (74)         (155)   
Corporate costs (2)                                                            (18)            (21)          (43)   
Other shareholders' income/(expenses)                                            13               5          (18)   
Adjusted operating Group MCEV earnings before tax from core                                                         
operations                                                                      731             795         1,547   

(1) This includes interest payable from Old Mutual plc to non-core operations of GBP13 million for 6 months ended 30 June 2012 (June 2011: GBP13 million; December
    2011: GBP27 million).

(2) Central costs of GBP7 million are allocated to the covered business and provisioned in the VIF (June 2011: GBP7 million December 2011: GBP14 million). Hence net
    corporate costs under MCEV of GBP18 million (June 2011: GBP21 million; December 2011: GBP43 million) differ from the IFRS amount of GBP25 million (June 2011:
    GBP28 million; December 2011: GBP57 million).

Significant corporate activities and business changes

Disposal of Nordic business
As previously reported the Group had agreed at 31 December 2011 for the disposal of its life assurance operations, asset management and
banking operations in Sweden, Denmark and Norway to Skandia Liv. Following final regulatory approval on 8 March 2012 and subsequent
shareholder approval the sale was completed on 21 March 2012. The MCEV earnings of the Nordic business have been categorised as
discontinued within the MCEV results and the comparative information has been restated where applicable to reflect this. Nordic has been treated
as non-modelled for 2012 reporting purposes with earnings for the period to 21 March 2012 reported on an IFRS basis.

The transaction has resulted in an uplift of GBP202 million to the adjusted Group MCEV, based on the differences between the purchase price of
GBP2,118 million, the removal of the MCEV balances for the Nordic business unit (VIF: GBP1,148 million, ANW: GBP286 million and other non-
covered business: GBP330 million) and further IFRS adjustments of GBP152 million.

Special dividend and share consolidation
On 9 March 2012, the Group declared a special dividend of 18p per 10p ordinary share to all holders of these shares at 20 April 2012 and was paid
on 7 June 2012. The Group also performed a seven-for-eight share consolidation on 23 April 2012.

For MCEV purposes, the weighted average number of shares is effective from 23 April 2012.

Inclusion of other African businesses
As reported in the Group's 2011 Annual Report and Accounts the Group's operations in Zimbabwe, Kenya, Malawi, Swaziland and Nigeria ("the
other African businesses") were consolidated effective from 1 January 2011. The results of the other African businesses were included in the
comparatives for the six months ended 30 June 2011 and for the year ended 31 December 2011. In June 2012 we have also included the
Zimbabwean and Namibian companies as part of the covered business of Emerging Markets.

Reporting of Retail Europe within Wealth Management
On 24 January 2012 the Group announced that it will combine its Wealth Management Continental Europe business (France and Italy) with the
Skandia Retail Europe business unit (Germany, Austria, Poland and Switzerland), for reporting purposes only. As a result the Retail Europe
segment will now be reported within the Wealth Management segment for the six months ended 30 June 2012. Consequently the comparative
information for the six months ended 30 June 2011 and the year ended 31 December 2011 has been reclassified where applicable to reflect this.

Adjusted operating Group MCEV earnings per share 
For the six months ended 30 June 2012
                                                                                                               GBPm   
                                                                           Core     Non-core                          
                                                                     continuing   continuing   Discontinued           
Six months ended 30 June 2012                                Notes   operations   operations     operations   Total   
Adjusted operating Group MCEV earnings before tax                           731           23             28     782   
Covered business                                                B2          264           23             18     305   
Other business                                                              467            -             10     477   
Tax on adjusted operating Group MCEV earnings                             (197)            -            (3)   (200)   
Covered business                                                B2         (60)            -              -    (60)   
Other business                                                            (137)            -            (3)   (140)   
Adjusted operating Group MCEV earnings after tax                            534           23             25     582   
Ordinary shares                                                           (134)            -              -   (134)   
Preferred securities                                                       (30)            -              -    (30)   
Adjusted operating MCEV earnings after tax attributable to                                                            
equity holders                                                              370           23             25     418   
Adjusted operating Group MCEV earnings per share (1)                        7.1          0.4            0.5     8.0   
Adjusted weighted average number of shares  millions                                                         5,231   

                                                                                                              GBPm
                                                                          Core     Non-core
                                                                     continuing   continuing   Discontinued
Six months ended 30 June 2011                                Notes   operations   operations     operations    Total
Adjusted operating Group MCEV earnings before tax                          795           11              88     894
 Covered business                                             B2           358           11              78      447
 Other business                                                            437            -              10      447
Tax on adjusted operating Group MCEV earnings                             (195)          (2)           (17)    (214)
 Covered business                                             B2           (76)          (2)           (15)     (93)
 Other business                                                           (119)           -             (2)    (121)
Adjusted operating Group MCEV earnings after tax                           600            9              71     680
Non-controlling interests
 Ordinary shares                                                          (120)           -              -     (120)
 Preferred securities                                                      (31)           -              -      (31)
Adjusted operating MCEV earnings after tax attributable to
 equity holders                                                            449            9             71      529
Adjusted operating Group MCEV earnings per share (1)                       8.3          0.2            1.3      9.8
Adjusted weighted average number of shares  millions                                                         5,397

                                                                                                               GBPm   
                                                                           Core     Non-core                          
                                                                     continuing   continuing   Discontinued           
Year ended 31 December 2011                                  Notes   operations   operations     operations   Total   
Adjusted operating Group MCEV earnings before tax                         1,547           48            173   1,768   
Covered business                                                B2          714           48            156     918   
Other business                                                              833            -             17     850   
Tax on adjusted operating Group MCEV earnings                             (364)          (1)           (31)   (396)   
Covered business                                                B2        (162)          (1)           (28)   (191)   
Other business                                                            (202)            -            (3)   (205)   
Adjusted operating Group MCEV earnings after tax                          1,183           47            142   1,372   
Non-controlling interests                                                                                             
Ordinary shares                                                           (255)            -              -   (255)   
Preferred securities                                                       (62)            -              -    (62)   
Adjusted operating MCEV earnings after tax attributable to                                                            
equity holders                                                              866           47            142   1,055   
Adjusted operating Group MCEV earnings per share (1)                       15.9          0.9            2.6    19.4   
Adjusted weighted average number of shares  millions                                                         5,435   

(1) Adjusted operating Group MCEV earnings per share is calculated on the same basis as adjusted operating Group MCEV earnings, but is stated after tax and non-
controlling interests. It excludes income attributable to Black Economic Empowerment trusts of listed subsidiaries. The calculation of the adjusted weighted average
number of shares includes own shares held in policyholders' funds and Black Economic Empowerment trusts.

Group market consistent embedded value statement of earnings 
For the six months ended 30 June 2012
                                                                                                                                GBPm   
                                                                                              6 months        6 months    Year ended   
                                                                                         ended 30 June   ended 30 June   31 December   
                                                                                 Notes            2012            2011          2011   
Adjusted operating Group MCEV earnings before tax from core                                                                            
operations                                                                                         731             795         1,547   
Adjusted operating Group MCEV earnings before tax from non-core                                                                        
operations                                                                          B2              23              11            48   
Adjusted operating Group MCEV earnings before tax from continuing operations (1)                   754             806         1,595   
Adjusting items from continuing operations                                          C3             175             161         (437)   
Total Group MCEV earnings before tax from continuing operations                                    929             967         1,158   
Income tax attributable to shareholders                                                          (212)           (181)         (168)   
Total Group MCEV earnings after tax from continuing operations                                     717             786           990   
Total Group MCEV earnings after tax from discontinued operations                                   600             (6)          (15)   
MCEV earnings after tax from discontinued operations (2)                                             6             (6)          (15)   
Adjusted Group MCEV uplift from sale of Nordic                                                     202               -             -   
Other Group adjustments related to the Nordic disposal                                             392               -             -   
Total Group MCEV earnings after tax for the financial period                                     1,317             780           975   
Total Group MCEV earnings for the financial period attributable to:                                                                    
Equity holders of the parent                                                                     1,160             637           674   
Non-controlling interests                                                                                                              
Ordinary shares                                                                                    127             112           239   
Preferred securities                                                                                30              31            62   
Total Group MCEV earnings after tax for the financial period                                     1,317             780           975   
Basic total Group MCEV earnings per ordinary share (pence)                                        23.4            12.5          13.1   
Weighted average number of shares  millions                                                     4,952           5,098         5,136   

(1) For long-term business and general insurance businesses, adjusted operating Group MCEV earnings are based on long-term and short-term investment returns respectively,
include investment returns on life fund investments in Group equity and debt instruments, and are stated net of income tax attributable to policyholder returns. For the US asset
management business it includes compensation costs in respect of certain long-term incentive schemes defined as non-controlling interests in accordance with IFRS. For all
businesses, adjusted operating MCEV earnings exclude goodwill impairment, the impact of acquisition accounting, option revaluations related to long-term incentive schemes,
the impact of closure of unclaimed shares trusts, profit/(loss) on acquisition/disposal of subsidiaries, associated undertakings and strategic investments, dividends declared to
holders of perpetual preferred callable securities, and fair value (profits)/losses on certain Group debt instruments.

(2) For Nordic, these are composed of earnings before tax of GBP28 million (June 2011: GBP88 million; December 2011: GBP173 million), adjusting items of GBP(20) million
(June 2011: GBP(79) million; December 2011: GBP(161) million) and tax of GBP(2) million (June 2011: GBP(15) million; December 2011: GBP(27) million). Further detail
relating to adjusting items can be found in section C3.

Reconciliation of movements in Group and Adjusted Group MCEV (after tax) 

                                                                                                                     GBPm
                                                      6 months ended 30 June 2012          6 months ended 30 June 2011
                                                     Covered Non-covered                Covered  Non-covered
                                                    business    business Total Group   business     business  Total Group
                                          Notes         MCEV        IFRS        MCEV       MCEV         IFRS         MCEV
Opening Group MCEV                                     7,212       2,516       9,728      7,515        2,386        9,901
Adjusted operating MCEV earnings             B4          245         173         418        354          175          529
Non-operating MCEV earnings                              164         578         742       (27)          135          108
Total Group MCEV earnings                                409         751       1,160        327          310          637
Other movements in IFRS net equity           C4      (1,605)       (110)     (1,715)        106        (128)         (22)
Closing Group MCEV                                     6,016       3,157       9,173      7,948        2,568       10,516
Adjustments to bring Group investments to
 market value                                B1            -       1,487       1,487          -        1,324        1,324
Adjusted Group MCEV                                    6,016       4,644      10,660      7,948        3,892       11,840

                                                                               GBPm
                                                     Year ended 31 December 2011
                                                    Covered  Non-covered
                                                   business     business Total Group
                                          Notes        MCEV         IFRS        MCEV
Opening Group MCEV                                    7,515        2,386       9,901
Adjusted operating MCEV earnings             B4         727          328       1,055
Non-operating MCEV earnings                           (331)         (50)       (381)
Total Group MCEV earnings                               396          278         674
Other movements in IFRS net equity           C4       (699)        (148)       (847)
Closing Group MCEV                                    7,212        2,516       9,728
Adjustments to bring Group investments to
  market value                               B1           -        1,066       1,066
Adjusted Group MCEV
                                                      7,212        3,582      10,794

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012

A: MCEV policies
A1: Basis of preparation

The Market Consistent Embedded Value methodology (referred to herein and in the supplementary statements on pages 82 to 117 as MCEV')
adopts the Market Consistent Embedded Value Principles (Copyright Stichting CFO Forum Foundation 2008) issued in June 2008 and updated in
October 2009 by the CFO Forum (the Principles') as the basis for the methodology used in preparing the supplementary information.

The CFO Forum announced changes to the MCEV Principles in October 2009 to reflect inter alia the inclusion of a liquidity premium. These
changes affirm that the risk free reference rate to be applied under MCEV should include both the swap yield curve appropriate to the currency of
the cash flows and a liquidity premium where appropriate. The CFO Forum is undertaking further work to develop more detailed application
guidance.

The Principles have been fully complied with for all businesses at 30 June 2012. The detailed methodology and assumptions made in presenting
this supplementary information are set out in notes A2 and A3.

Throughout the supplementary information the following terminology is used to distinguish between the terms MCEV', Group MCEV' and adjusted
Group MCEV':

-     MCEV is a measure of the consolidated value of shareholders' interests in the covered business and consists of the sum of the shareholders'
      adjusted net worth in respect of the covered business and the value of the in-force covered business.
-     Group MCEV is a measure of the consolidated value of shareholders' interests in covered and non-covered business. Non-covered business
      is valued at the IFRS net asset value detailed in the primary financial statements adjusted to eliminate inter-company loans.
-     The adjusted Group MCEV, a measure used by management to assess the shareholders' interest in the value of the Group, includes the
      impact of marking all debt to market value, the market value of the Group's listed banking subsidiary, marking the value of deferred
      consideration due in respect of Black Economic Empowerment arrangements in South Africa (the BEE schemes') to market, as well as
      including the market value of excess own shares held in ESOP schemes.
 
A2: Methodology
(a) Required capital
Required capital is the market value of assets that is attributed to support the covered business, over and above that required to back statutory
liabilities for covered business, whose distribution to shareholders is restricted. The following capital measures are considered in determining the
required capital held for covered business so that it reflects the level of capital considered by the directors to be appropriate to manage the
business:

-     Economic capital;
-     Regulatory capital (i.e. the level of solvency capital which the local regulators require);
-     Capital required by rating agencies in order to maintain the desired credit rating; and
-     Any other required capital definition to meet internal management objectives.

Economic capital for the covered business is based upon Old Mutual's own internal assessment of risks inherent in the underlying business. It
measures capital requirements on a basis, consistent with a 99.93% confidence level over a one-year time horizon.

For Emerging Markets and Wealth Management capital determined with reference to internal management objectives is the most onerous and is
the capital measure used, whilst for Nordic the regulatory capital requirement was the most onerous in 30 June 2011 and 31 December 2011
comparatives. For Bermuda the required capital is set with reference to internal management objectives, i.e. the adjusted net worth.

The required capital in respect of OMLAC(SA)'s covered business is partially covered by the market value of the Group's investments in banking
and general insurance in South Africa. On consolidation these investments are shown separately.

The Bermuda Monetary Authority (BMA) enacted its new Class E Prudential rules in December 2011. In July 2012, it was agreed with the BMA that
the Bermuda business should now directly hold capital resources comparable to those required under Solvency II, as calculated by the Group's
existing internal capital model, which were previously held centrally.

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012 
   
The table below shows the level of required capital expressed as a percentage of the minimum local regulatory capital requirements

                                                                                                                              GBPm
                                         At 30 June 2012                  At 30 June 2011               At 31 December 2011

                                  Required Regulatory              Required Regulatory             Required Regulatory
                                   capital    capital     Ratio      capital   capital     Ratio     capital   capital       Ratio
                           Notes       (a)        (b)      (a/b)         (a)       (b)     (a/b)         (a)       (b)       (a/b)
                   
Emerging Markets (1)        B3       1,371      1,019       1.3       1,525      1,187       1.3      1,368      1,012         1.4
Wealth Management (2)       B3         310        232       1.3         336        252       1.3        314        241         1.3
Bermuda (3)                 B3         232        136       1.7         407          -       n/a        187         77         2.4
Nordic                      B3         n/a        n/a       n/a         141        140       1.0        127        127         1.0
Total                                1,913      1,387       1.4       2,409      1,579       1.5      1,996      1,457         1.4

(1) The required capital and regulatory capital relating to the other African life businesses is included from 31 December 2011 results for Emerging Markets.

(2) Local regulators within many of the Wealth Management Europe countries allow intangible assets to be included as admissible regulatory capital. In such cases the
required capital reported for MCEV is net of these items, although each of the countries continues to be sufficiently capitalised on the local solvency basis. Skandia Leben
in Germany is permitted under local regulations to include the unallocated policyholder profit sharing liability as admissible capital.

(3) During December 2011, the BMA insurance (Prudential Standards) (Class E Solvency Requirements) Rules 2011 were formally signed into Bermudan law. The
regulations allow for a transition period for the new capital requirement (75% for financial year 2012, 100% for financial year 2013). The required capital calculated on this
statutory basis was approximately GBP136 million at 30 June 2012. As of 30 June 2012, we have determined the required capital as the adjusted net worth held in the
business at that date as this exceeded the transitional capital requirement. However, in July 2012 it was agreed with the BMA that Bermuda business should now
directly hold capital resources of GBP448 million, comparable to those required under Solvency II, as calculated by the Group's existing internal capital model, which were
previously held centrally (this change is not reflected in the table above as it took place after 30 June 2012). The changes to required capital held locally that have taken
place in July 2012 are not expected to have any material impact on the value of in-force business.

(b) Cost of residual non-hedgeable risks
The Cost of residual non-hedgeable risks ("CNHR") is calculated using a cost of capital approach, i.e. it is determined as the present value of capital
charges for all future non-hedgeable risk capital requirements until the liabilities have run off. The capital charge in each year is the product of the
projected expected non-hedgeable risk capital held after allowance for some diversification benefits and the cost of capital charge.

The table below shows the amounts of diversified economic capital held in respect of residual non-hedgeable risks.

Capital held in respect of non-hedgeable risks                              GBPm   
                                                      At        At            At   
                                                 30 June   30 June   31 December   
                                                    2012      2011          2011   
Emerging Markets                                     897       765           808   
Wealth Management                                    833       828           831   
Bermuda                                              275       331           335   
Nordic                                               n/a       325           290   
Total						   2,005     2,249         2,264

During 2011 the methodology used to calculate non-hedgeable risk capital was enhanced and standardised across all insurance business units in
order to align with emerging Solvency II requirements.

A weighted average cost of capital rate of 2.0% has been applied to residual symmetric and asymmetric non-hedgeable capital at a business unit
level over the life of the contracts. This translates into an equivalent cost of capital rate of approximately 2.4% being applied to the Group diversified
capital required in respect of such non-hedgeable risks.
 
(c) Taxation
United Kingdom:

The Emergency Budget that was held in June 2010 stated that the UK's mainstream corporation tax rate would be reduced from its current level of
28% down to 24% in annual 1% steps. Following that, there were further announcements for additional reductions, and accelerations of these
reductions. The reduction to 25%, effective from April 2012, has been allowed for in the FY2011 results.The H1 2012 results allow for an additional
1% reduction to 24%, effective from April 2012 and the further 1% reduction to 23%, effective from April 2013. This additional 2% reduction
amounts to GBP9 million in the H1 2012 results. The impact of the remaining reduction from 23% down to 22%, applicable from April 2014, is
expected to be GBP4 million.

 
South Africa:

A new dividend withholding tax system (replacing the current Secondary Tax on Companies (STC) system) was introduced in South Africa effective
from 1 April 2012. This was reflected in the results at 31 December 2011, i.e. no allowance was made in future for the impact of the new dividend
withholding tax in the MCEV, except for an allowance for withholding tax on the remittance of dividends to Old Mutual plc, as the actual level of
taxation would depend on the legal nature of each shareholder. The Emerging Markets MCEV increased by approximately R1,221 million (GBP105
million) while the value of new business for the year ended 31 December 2011 increased by approximately R104 million (GBP9 million).

Allowance has now been made for dividend withholding tax on dividends earned in the policyholder funds as well as allowing for the increase in
capital gains tax in policyholder funds. These were the main contributors to MCEV reducing by GBP21 million (R270 million). The average effective
tax rate remains unchanged at 28%.

(d) Value of debt
Senior and subordinated debt securities are marked to market (for IFRS reporting, debt is valued at either book value or fair value). The table below
shows the comparison of debt on an IFRS and MCEV basis.

                                                                          At 30 June 2012       At 30 June 2011        At 31 December 2011
                                                           Notes to the
                                                          Consolidated
                                                             Financial      Book                  Book                     Book
Debt securities                                            Statements      value     MCEV        value      MCEV          value     MCEV
GBP350 million perpetual preferred callable securities        E1             350      282          350       299            350      263
500 million perpetual preferred callable securities          E1             338      355          338       391            338      342
US$750 million cumulative preference securities               E1             458      481          458       464            458      465
R3.0 billion repayable 27 October 2015 (8.9%)               E1 (e)           234      248          276       277            239      249
2 million fixed rate note repayable December 2013                             -        -            2         2              2        2
US$16.5 million secured senior debt repayable August
2014 (5.23%)                                                E1 (b)            11       11           10        10             11       11
200 million (2010: 750 million) (4.5% to January 2012
and 6 month EURIBOR plus 0.96% thereafter)(1)               E1 (e)             -        -          671       670            166      166
 GBP500 million repayable 3 June 2021 (8.0%)(2)             E1 (e)           513      513          500       500            471      471
 GBP500 million euro bond repayable October 2016
(7.125%)(3)                                                 E1 (b)           504      569          503       551            504      546
US$50 million floating rate note repayable September
2011 (3 month LIBOR plus 0.35%)  repaid                    E1 (a)             -        -           31        31              -        -
Value of debt                                                              2,408    2,459        3,139     3,195          2,539    2,515


(1) The principal and coupon on the bond were swapped at issue equally into Sterling and US dollars with coupons of six month GBP LIBOR plus 0.34% and six month
USD LIBOR plus 0.31% respectively. During 2011 a 550 million partial repayment, together with settlements of associated currency swaps, was made. On 18 January
2012 the remaining 200 million was repaid on the first call date.

(2) The principal and coupon on the bond were initially swapped into floating rate Swedish Kroner, at three month STIBOR plus 5.46%. Following the Nordic sale, GBP375
million of the coupon is now swapped into floating rate sterling at six month GBP LIBOR plus 4.15% and GBP125 million of principal and coupon is swapped into US
dollars at six month USD LIBOR plus 5.49%.

(3) This differs from the value in the Borrowed Funds note E1 (b) by the accrued interest at the end of the year, which is included within the book value of the debt in
determining the MCEV market value uplift to maintain consistency and comparability with the market value.
Where either the principal or the coupon of the debt security has been swapped into an alternate currency, the mark to market value of these
derivative instruments of GBP79 million (30 June 2011: GBP104 million; 31 December 2011: GBP86 million) has not been included in the value of
debt above; however, it is included in the Net Other Business value of GBP1,068 million (30 June 2011: GBP379 million; 31 December 2011:
GBP175 million) (Adjusted Group MCEV presented per business line). Further information relating to the debt securities can be found in Note E1 in
the Notes to the Consolidated Financial Statements.

A3: Assumptions
Non-economic assumptions

The management expenses attributable to life assurance business have been analysed between expenses relating to the acquisition of new
business, maintenance of in-force business (including investment management expenses) and development projects.

-    All expected maintenance expense overruns affecting the covered business are allowed for in the calculations.
-    The MCEV makes provision for future development costs and one-off expenses (such as those incurred on the integration of businesses
     following an acquisition, restructuring costs and costs related to Solvency II implementation) that relate to covered business to the extent that
     such project costs are known with sufficient certainty, based on three year business plans.
-    Unallocated Group holding company expenses have been included to the extent that they are allocated to the covered business. The table
     below shows the proportion of future expenses attributable to the long-term business. The allocation of these expenses aligns to the
     proportion that the management expenses incurred by the covered businesses to the total management expenses incurred in the Group.

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012 

Group holding Company expenses attributable to long-term business                                 %   
                                                                         At        At            At   
                                                                    30 June   30 June   31 December   
                                                                       2012      2011          2011   
Emerging Markets                                                         18        17            17   
Wealth Management                                                         9         8             8   
Nordic                                                                    -         4             3   
Total                                                                    27        29            28   

Economic assumptions
(a) Risk free reference rates and inflation

At 30 June 2012, no adjustments are made to swap yields to allow for liquidity premiums or credit risk premiums, apart from a liquidity premium
adjustment to OMLAC(SA)'s Immediate Annuity business and Fixed Bond business. A liquidity premium adjustment is applied to OMLAC(SA)'s
Fixed Bond business as OMLAC(SA) holds a portfolio of non-government bonds which have a market yield in excess of the risk free rate and the
duration of the asset portfolio and the liability duration are a good match (meaning the asset portfolio is held to maturity). Cash flows on this product
are also predictable and the company has adequate liquidity to withstand a substantial increase in lapses at all durations without having to sell
bonds which further strengthens the case for applying a liquidity premium.

It is the directors' view that a proportion of non-government bond spreads at 30 June 2012 is attributable to a liquidity premium rather than only to
credit and default allowances and that returns in excess of swap rates can be achieved, rather than entire spreads being lost to worsening default
experience. For OMLAC(SA)'s Immediate Annuity business the currency, credit quality and duration of the actual bond portfolios were considered
and adjusted risk free reference rates were derived at 30 June 2012 by adding 50bps of liquidity premium for this business (30 June 2011: 55bps;
31 December 2011: 50bps) to the swap rates used for setting investment return and discounting assumptions. For OMLAC(SA)'s Fixed Bond
products 55 bps of liquidity premium was added to the swap rates (30 June 2011: 60bps; 31 December 2011: 50bps).These adjustments reflect the
liquidity premium component in non-government bond spreads over swap rates that is expected to be earned on the portfolios. In deriving the
liquidity premia at 30 June 2012, we have reviewed emerging Solvency II matching premium guidance and a comparison of the yields of similar
durations on South African government bonds and bonds issues by state-owned enterprises. At those durations where swap yields are not
available, e.g. due to lack of a sufficiently liquid or deep swap market, the swap curve is extended using appropriate interpolation or extrapolation
techniques.

The risk free reference spot yields (excluding any applicable liquidity adjustments) and expense inflation rates at various terms for each of the
significant regions are provided in the table below. The risk free reference spot yield curve has been derived from mid swap rates at the reporting
date.

Risk free reference spot yields (excluding any applicable liquidity adjustments)

                                                %   
                      GBP   EUR   USD   ZAR   SEK   
At 30 June 2012                                     
1 year                1.0   0.9   0.5   5.5     -   
5 years               1.4   1.3   1.0   6.5     -   
10 years              2.2   2.0   1.8   7.6     -   
20 years              3.0   2.4   2.5   7.8     -   
At 30 June 2011                                     
1 year                0.9   2.0   0.4   6.2   2.8   
5 years               2.4   2.8   2.1   8.0   3.3   
10 years              3.5   3.4   3.5   8.6   3.6   
20 years              4.0   3.9   4.3   8.2   3.8   
At 31 December 2011                                 
1 year                1.4   1.4   0.7   5.7   2.1   
5 years               1.6   1.7   1.2   7.1   2.3   
10 years              2.4   2.4   2.1   8.1   2.5   
20 years              3.0   2.7   2.6   8.1   2.1   
Expense inflation                                   
                                                %   
                      GBP   EUR   USD   ZAR   SEK   
At 30 June 2012                                     
1 year                3.0   2.5   3.0   5.9     -   
5 years               3.2   2.5   3.0   6.3     -   
10 years              3.5   2.5   3.0   7.1     -   
20 years              4.1   2.5   3.0   7.1     -   
At 30 June 2011                                     
1 year                3.0   2.5   3.0   5.7   2.3   
5 years               3.9   2.5   3.0   7.0   2.9   
10 years              4.3   2.5   3.0   7.5   3.2   
20 years              4.8   2.5   3.0   7.1   3.1   
At 31 December 2011                                 
1 year                3.0   2.5   3.0   6.1   1.3   
5 years               3.4   2.5   3.0   7.0   2.2   
10 years              3.8   2.5   3.0   7.7   2.5   
20 years              4.3   2.5   3.0   7.5   2.6   

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012 

(b) Volatilities and correlations

The at-the-money annualised asset volatility assumptions of the asset classes incorporated in the stochastic models are detailed below.

ZAR volatilities (1)                                                                                    
                                                                                                   %   
                                                                                Equity (total return   
Option term           1 year swap   5 year swap   10 year swap   20 year swap              index)(2)   
At 30 June 2012                                                                                        
1 year                       31.9          26.0           23.1           22.9                   23.3   
5 years                      22.0          21.3           21.5           22.3                   28.2   
10 years                     21.0          22.2           23.1           23.0                   26.8   
20 years                     25.1          24.9           24.7           23.6                   28.9   
At 30 June 2011                                                                                        
1 year                       18.3          16.8           15.9           15.5                   23.0   
5 years                      16.7          16.0           15.6           15.2                   26.0   
10 years                     16.2          15.8           15.4           14.7                   27.4   
20 years                     14.5          14.1           13.5           12.5                   28.3   
At 31 December 2011                                                                                    
1 year                       30.6          25.0           23.1           23.3                   26.2   
5 years                      21.9          21.5           22.4           23.0                   28.4   
10 years                     22.9          23.8           24.0           23.5                   26.8   
20 years                     25.8          25.7           25.1           23.7                   29.0   

(1) Due to limited liquidity in the ZAR swaption market, the market consistent asset model has been calibrated by extrapolating swaption and equity implied volatility data
beyond a term of one year and 5 years respectively for assumptions at 30 June 2012 and 31 December 2011 June 2011: (2 year and 3 years respectively).

(2) December 2011 Equity implied volatilities were restated for comparability following ESG enhancements.

USD volatilities                                                                
                                                                            %   
Option term           1 year swap   5 year swap   10 year swap   20 year swap   
At 30 June 2012                                                                 
1 year                       60.0          48.9           43.1           37.1   
5 years                      42.3          34.8           31.7           30.4   
10 years                     30.0          27.9           27.7           26.8   
20 years                     26.0          25.8           25.0           24.3   
At 30 June 2011                                                                 
1 year                       72.3          43.3           33.8           26.4   
5 years                      25.0          23.4           21.4           18.0   
10 years                     20.1          20.3           18.7           15.5   
20 years                     17.2          17.8           16.1           14.1   
At 31 December 2011                                                             
1 year                       71.8          49.1           45.1           41.8   
5 years                      42.1          36.8           34.6           33.8   
10 years                     32.7          31.2           31.1           29.9   
20 years                     29.8          29.3           27.9           27.5   
                                                      
International equity volatilities (applicable to Bermuda)(1)

                                                                                     %   
Option term            SPX    EWZ    TPX   HSCEI    TWY   KOSP12   NIFTY   SX5E    UKX   
At 30 June 2012                                                                          
1 year                22.9   31.7   25.9    26.5   21.4     21.9    20.4   24.7   22.0   
5 years               26.0   31.5   27.0    28.8   23.3     22.8    26.0   24.3   24.6   
10 years              26.0   31.5   27.0    28.8   23.3     22.8    26.0   24.3   24.6   
At 30 June 2011                                                                          
1 year                20.8   27.6   25.8    24.8   20.3     21.4    21.1   23.0   20.6   
5 years               23.4   28.0   26.7    27.2   23.2     22.7    25.1   23.7   23.2   
10 years              23.4   28.0   26.7    27.2   23.2     22.7    25.1   23.7   23.2   
At 31 December 2011                                                                      
1 year                25.0   35.9   26.7    31.5   26.1     25.1    25.6   27.2   23.9   
5 years               27.8   34.8   28.0    32.3   25.0     24.6    25.2   25.3   25.0   
10 years              27.8   34.8   28.0    32.3   25.0     24.6    25.2   25.3   25.0   

International equity volatilities (applicable to Bermuda)(1)                                  
                                                                                         %   
Option term                                                    EEM   USAgg   EUAgg   APAgg   
At 30 June 2012                                                                              
1 year                                                        29.4     5.5    13.0    12.3   
5 years                                                       30.5     5.5    13.0    12.3   
10 years                                                      30.5     5.5    13.0    12.3   
At 30 June 2011                                                                              
1 year                                                        26.4     5.4    12.9    12.5   
5 years                                                       28.0     5.4    12.9    12.5   
10 years                                                      28.0     5.4    12.9    12.5   
At 31 December 2011                                                                          
1 year                                                        33.9     5.5    13.0    12.3   
5 years                                                       33.0     5.5    13.0    12.3   
10 years                                                      33.0     5.5    13.0    12.3   

(1) Long-term option implied volatility has been calibrated assuming a flat volatility term structure beyond 5 years due to limited data availability for some indices. The
assumptions are shown as the annualised volatilities applicable over the entire option term specified, consistent with the disclosure of volatilities for other regions. These
volatilities, as represented by their Bloomberg codes, refer to the price indices.

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012 

(c) Exchange rates
All MCEV figures are calculated in local currency and translated to GBP using the appropriate exchange rates as detailed in Note C2 of the
Consolidated Financial Statements.

(d) Expected asset returns in excess of the risk free reference rates
The expected asset returns in excess of the risk free reference rates have no bearing on the calculated MCEV other than the calculation of the
expected existing business contribution in the analysis of MCEV earnings. Real-world economic assumptions are determined with reference to one-
year forward risk free reference rates applicable to the currency of the liabilities at the start of the reporting period. All other economic assumptions,
for example future bonus or crediting rates, are set at levels consistent with the real-world investment return assumptions.

Equity and property risk premiums incorporate both historical relationships and the directors' view of future projected returns in each region over the
analysis period. Pre-tax real-world economic assumptions are determined as follows:

-     The equity risk premium is 3.5% for Africa and 3% for Europe.
-     The cash return equals the one year risk free reference rate for all regions.
-     The corporate bond return is based on actual corporate bond spreads on the reporting date less an allowance for defaults.
-     The property risk premium is 1.5% in Africa and 2% in Europe.

(e) Tax 
The weighted average effective tax rates that apply to the cash flow projections at 30 June 2012 are set out below:

Weighted average effective tax rates                                 %   
                                            At        At            At   
                                       30 June   30 June   31 December   
                                          2012      2011          2011   

OMLAC(SA)(1)                                28        33            28   
Wealth Management                           12        15            13   
Bermuda                                      -         -             -   
Nordic                                     n/a         4             4
(1) The reduction in weighted average effective tax rate for OMLAC(SA) from 30 June 2011 to 30 June 2012 is as a result of the new dividend withholding tax effective from
1 April 2012 as detailed in Note A2 (c).

B: Segment information                                                                                                                               
B1: Components of Group MCEV and Adjusted Group MCEV                                                                                                 
                                                                                                                                              GBPm   
                                                                                                                        At        At            At   
                                                                                                                   30 June   30 June   31 December   
                                                                                                           Notes      2012      2011          2011   
Adjusted net worth attributable to ordinary equity holders of the parent                                             5,757     5,666         5,193   
Equity                                                                                                               7,965     9,266         8,488   
Adjustment to IFRS net asset value                                                                            C5   (1,520)   (2,912)       (2,607)   
Adjustment to remove perpetual preferred callable securities                                                         (688)     (688)         (688)   
Value of in-force business                                                                                           3,416     4,850         4,535   
Present value of future profits                                                                                      4,042     5,602         5,248   
Additional time value of financial options and guarantees                                                            (100)     (163)         (136)   
Frictional costs                                                                                                     (245)     (268)         (243)   
Cost of residual non-hedgeable risks                                                                                 (281)     (321)         (334)   
Group MCEV                                                                                                           9,173    10,516         9,728   
Adjustments to bring Group investments to market value                                                                                               
Adjustment to bring listed subsidiary (Nedbank) to market value                                                      1,159       969           655   
Adjustment for value of own shares in ESOP schemes (1)                                                                 106       113           117   
Adjustment for present value of Black Economic Empowerment scheme deferred
consideration (1)                                                                                                      273       299           270   
Adjustment to bring external debt to market value                                                                     (51)      (57)            24   
Adjusted Group MCEV                                                                                                 10,660    11,840        10,794   
Group MCEV value per share (pence)                                                                                   187.7     190.2         174.9   
Adjusted Group MCEV per share (pence)                                                                                218.1     214.1         194.1   
Number of shares in issue at the end of the financial period less                                                                                    
treasury shares  millions                                                                                           4,887     5,529         5,562   
Return on Group MCEV (ROEV) per annum from core operations                                                            8.0%      9.2%          8.8%   
Return on Group MCEV (ROEV) per annum from continuing non-core                                                                                       
operations                                                                                                            0.5%      0.3%          0.5%   
Return on Group MCEV (ROEV) per annum from discontinued operations                                                    0.5%      1.5%          1.4%   
Return on Group MCEV (ROEV(2)) per annum                                                                              9.0%     11.0%         10.7%   

(1) Includes adjustment for value of excess own shares in employee share scheme trusts. The movement in value between 31 December 2011 and 30 June 2012 is the net
effect of the increase in the Old Mutual plc share price, the reduction in excess own shares following employee share grants in March 2011 and the reduction in overall
shares held due to exercises of rights to take delivery of, or net settle, share grants during the financial period.

(2) The ROEV is calculated as the adjusted operating Group MCEV earnings after tax and non-controlling interests of GBP418 million (June 2011:GBP529 million;
December 2011: GBP1,055 million) divided by the opening Group MCEV.

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012 
 
B: Segment information continued 
B2: Adjusted operating MCEV earnings for the covered business

                                                                                                             GBPm   
                                                       Total      Long                                              
                                                     covered      Term   Emerging       Wealth                      
Six months ended 30 June 2012                       business   Savings    Markets   Management   Bermuda   Nordic   
Adjusted operating Group MCEV earnings before tax        305       264        198           66        23       18   
Tax on adjusted operating Group MCEV earnings           (60)      (60)       (54)          (6)         -        -   
Adjusted operating Group MCEV earnings after tax         245       204        144           60        23       18
   
                                                                                                             GBPm   
                                                       Total      Long                                              
                                                     covered      Term   Emerging       Wealth                      
Six months ended 30 June 2011                       business   Savings    Markets   Management   Bermuda   Nordic   
Adjusted operating Group MCEV earnings before tax        447       358        241          117        11       78   
Tax on adjusted operating Group MCEV earnings           (93)      (76)       (53)         (23)       (2)     (15)   
Adjusted operating Group MCEV earnings after tax         354       282        188           94         9       63
   
                                                                                                             GBPm   
                                                       Total      Long                                              
                                                     covered      Term   Emerging       Wealth                      
Year ended 31 December 2011                         business   Savings    Markets   Management   Bermuda   Nordic   
Adjusted operating Group MCEV earnings before tax        918       714        468          246        48      156   
Tax on adjusted operating Group MCEV earnings          (191)     (162)      (119)         (43)       (1)     (28)   
Adjusted operating Group MCEV earnings after tax         727       552        349          203        47      128   

B3: Components of MCEV of the covered business                                                                     
                                                                                                            GBPm   
                                                    Total                                                          
                                                  covered   Long Term   Emerging       Wealth                      
At 30 June 2012                                  business     Savings    Markets   Management   Bermuda   Nordic   
Adjusted net worth                                  2,600       2,368      1,891          477       232        -   
Free surplus                                          687         687        520          167         -        -   
Required capital                                    1,913       1,681      1,371          310       232        -   
Value of in-force                                   3,416       3,507      1,440        2,067      (91)        -   
Present value of future profits                     4,042       4,020      1,799        2,221        22        -   
guarantees                                          (100)        (15)          -         (15)      (85)        -   
Frictional costs                                    (245)       (243)      (227)         (16)       (2)        -   
Cost of residual non-hedgeable risks                (281)       (255)      (132)        (123)      (26)        -   
MCEV                                                6,016       5,875      3,331        2,544       141        -   


                                                                                                            GBPm   
                                                    Total                                                          
                                                  covered   Long Term   Emerging       Wealth                      
At 30 June 2011                                  business     Savings    Markets   Management   Bermuda   Nordic   
Adjusted net worth                                  3,098       2,491      1,995          496       407      200   
Free surplus                                          689         630        470          160         -       59   
Required capital                                    2,409       1,861      1,525          336       407      141   
Value of in-force                                   4,850       3,656      1,440        2,216     (107)    1,301   
Present value of future profits                     5,602       4,146      1,778        2,368        79    1,377   
Additional time value of financial options and                                                                     
guarantees                                          (163)         (8)          -          (8)     (155)        -   
Frictional costs                                    (268)       (260)      (238)         (22)       (2)      (6)   
Cost of residual non-hedgeable risks                (321)       (222)      (100)        (122)      (29)     (70)   
MCEV                                                7,948       6,147      3,435        2,712       300    1,501   


                                                                                                            GBPm
                                                    Total
                                                  covered Long Term   Emerging         Wealth
At 31 December 2011                              business   Savings  Markets (1)    Management  Bermuda   Nordic
Adjusted net worth                                  2,676     2,204       1,768            436      187      285
 Free surplus                                         680       522         400            122        -      158
 Required capital                                   1,996     1,682       1,368            314      187      127
Value of in-force                                   4,536     3,509       1,399          2,110    (121)    1,148
 Present value of future profits                    5,248     4,001       1,740          2,261       36    1,211
 Additional time value of financial options and
 guarantees                                          (136)      (14)          -           (14)    (122)       -
 Frictional costs                                    (243)     (236)       (218)          (18)      (2)      (5)
 Cost of residual non-hedgeable risks                (333)     (242)       (123)         (119)     (33)     (58)
MCEV                                                 7,212     5,713       3,167         2,546       66    1,433

(1) The required capital in respect of Emerging Markets is partially covered by the market value of the Group's investments in banking and general insurance in South Africa.
On consolidation these investments are shown separately.

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012 
 
B: Segment information continued 
B4: Analysis of covered business MCEV earnings (after tax)

                                                                                                                      GBPm
Total covered business                                                            6 months ended 30 June 2012
                                                                          Free    Required    Adjusted   Value of
                                                                       surplus     capital   net worth   in-force     MCEV
Opening MCEV                                                               680       1,996       2,676      4,536    7,212
New business value                                                       (154)          74         (80)       154       74
Expected existing business contribution (reference rate)                    11          36          47         79      126
Expected existing business contribution (in excess of reference rate)        2          18          20         24       44
Transfers from VIF and required capital to free surplus                    379       (113)         266      (266)        -
Experience variances                                                         8          17          25         13       38
Assumption changes                                                         (5)           -          (5)         -      (5)
Other operating variance                                                  (44)          48           4       (36)     (32)
Operating MCEV earnings                                                    197          80         277       (32)      245
Economic variances                                                          86           5          91        108      199
Other non-operating variance                                              (32)           -         (32)       (3)     (35)
Total MCEV earnings                                                        251          85         336         73      409
Closing adjustments                                                      (244)       (168)       (412)    (1,193)  (1,605)
 Capital and dividend flows                                               (70)         (1)        (71)         -      (71)
 Foreign exchange variance                                                (15)        (40)        (55)       (45)    (100)
 MCEV of acquired/sold business                                          (159)       (127)       (286)    (1,148)  (1,434)
Closing MCEV                                                               687       1,913       2,600      3,416    6,016
Return on MCEV (RoEV)% per annum                                                                                      7.3%

Return on MCEV for total covered business is calculated as the operating MCEV earnings after tax divided by opening MCEV in sterling. The
operating assumption changes and other operating variances are not annualised.

                                                                                                                              GBPm
                                           6 months ended 30 June 2011                       Year ended 31 December 2011

                                   Free    Required  Adjusted  Value of              Free    Required  Adjusted  Value of
                                surplus     capital net worth  in-force    MCEV   surplus     capital net worth  in-force     MCEV
Opening MCEV                        507       2,844     3,351     4,164   7,515       507       2,844     3,351     4,164    7,515
New business value                (231)          82     (149)       257     108     (444)         187     (257)       490      233
Expected existing business
 contribution (reference rate)        7          36        43        92     135        17          65       82        179      261
Expected existing business
 contribution (in excess of
 reference rate)                      3          18        21        44      65         7          34       41         87      128
Transfers from VIF and required
 capital to free surplus            496       (119)       377     (377)       -       943       (236)      707      (707)        -
Experience variances                 19          13        32        48      80        10          30       40        111      151
Assumption changes                    2           -         2       (6)     (4)        23           4       27          1       28
Other operating variance           (21)          24         3      (33)    (30)       188       (205)     (17)       (57)     (74)
Operating MCEV earnings             275          54       329        25     354       744       (121)      623        104      727
Economic variances                   38         (8)        30      (63)    (33)     (221)        (22)    (243)      (214)    (457)
Other non-operating variance          -           -         -         6       6        32           1       33         93      126
Total MCEV earnings                 313          46       359      (32)     327       555       (142)      413       (17)      396
Closing adjustments                (131)      (481)     (612)       718     106     (382)       (706)  (1,088)        389    (699)
Capital and dividend flows          (56)         69        13         -      13     (243)         55     (188)          -    (188)
Foreign exchange variance           (11)      (101)     (112)        23    (89)      (75)       (312)    (387)      (306)    (693)
MCEV of acquired/sold business      (64)      (449)     (513)       695     182      (64)       (449)    (513)        695     182
Closing MCEV                        689       2,409     3,098     4,850   7,948       680       1,996    2,676      4,536    7,212
Return on MCEV (RoEV)%
 per annum                                                                  9.9%                                              9.7%

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012 
 
B: Segment Information continued
B4: Analysis of covered business MCEV earnings (after tax) continued

The Long Term Savings segment consists of Emerging Markets and Wealth Management.

Long Term Savings (LTS)                                                            6 months ended 30 June 2012
                                                                           Free    Required     Adjusted    Value of
                                                                        surplus     capital    net worth    in-force     MCEV
Opening MCEV                                                                522       1,682        2,204       3,509    5,713
New business value                                                        (154)          74         (80)         154       74
Expected existing business contribution (reference rate)                     11          35           46          76      122
Expected existing business contribution (in excess of reference rate)         2           6            8          19       27
Transfers from VIF and required capital to free surplus                     386        (97)          289       (289)        -
Experience variances                                                       (27)          17         (10)          23       13
Assumption changes                                                            -           -            -           -        -
Other operating variance                                                      8          (1)           7        (39)     (32)
Operating MCEV earnings                                                     226          34          260        (56)      204
Economic variances                                                           39           5           44         102      146
Other non-operating variance                                               (14)           -         (14)         (3)     (17)
Total MCEV earnings                                                         251          39          290          43      333
Closing adjustments                                                        (86)         (40)       (126)        (45)     (171)
  Capital and dividend flows                                               (70)          (1)        (71)          -       (71)
  Foreign exchange variance                                                (16)         (39)        (55)        (45)     (100)
  MCEV of acquired/sold business                                             -            -            -           -         -
Closing MCEV                                                                687       1,681        2,368       3,507     5,875
Return on MCEV (RoEV)% per annum                                                                                          7.7%

Return on MCEV is calculated as the operating MCEV earnings after tax divided by opening MCEV in sterling. The operating assumption changes
and other operating variances are not annualised.

                                                                                                                                   GBPm
                                             6 months ended 30 June 2011                           Year ended 31 December 2011

                                     Free   Required    Adjusted   Value of              Free   Required    Adjusted   Value of           
                                  surplus    capital   net worth   in-force    MCEV   surplus    capital   net worth   in-force    MCEV   
Opening MCEV                          390      1,838       2,228      3,685   5,913       390      1,838       2,228      3,685   5,913   
New business value                  (202)         78       (124)        204      80     (390)        179       (211)        388     177   
Expected existing business                                                                                                                
contribution (reference rate)           5         34          39         71     110        14         60          74        137     211   
Expected existing business                                                                                                                
contribution (in excess of                                                                                                                
reference rate)                         3          6           9         20      29         7         10          17         40      57   
Transfers from VIF and required                                                                                                           
capital to free surplus               397       (91)         306      (306)       -       748      (179)         569      (569)       -   
Experience variances                   17         10          27         61      88       (5)         32          27        103     130   
Assumption changes                      1          -           1        (3)     (2)         9          4          13         27      40   
Other operating variance               11        (8)           3       (26)    (23)        33       (28)           5       (68)    (63)   
Operating MCEV earnings               232         29         261         21     282       416         78         494         58     552   
Economic variances                     39        (2)          37       (13)      24        23        (6)          17       (24)     (7)   
Other non-operating variance            4          -           4          6      10       (7)          -         (7)         96      89   
Total MCEV earnings                   275         27         302         14     316       432         72         504        130     634   
Closing adjustments                  (35)        (4)        (39)       (43)    (82)     (300)      (228)       (528)      (306)   (834)   
Capital and dividend flows           (25)         69          44          -      44     (232)         55       (177)          -   (177)   
Foreign exchange variance            (10)       (73)        (83)       (43)   (126)      (68)      (283)       (351)      (306)   (657)   
MCEV of acquired/sold business          -          -           -          -       -         -          -           -          -       -   
Closing MCEV                          630      1,861       2,491      3,656   6,147       522      1,682       2,204      3,509   5,713   
Return on MCEV (RoEV)%                                                                                                                    
per annum                                                                     10.0%                                                9.3%   

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012 
 
B: Segment Information continued
B4: Analysis of covered business MCEV earnings (after tax) continued 

Emerging Markets(1)                                                                6 months ended 30 June 2012

                                                                           Free   Required    Adjusted   Value of           
                                                                        surplus    capital   net worth   in-force    MCEV   
Opening MCEV                                                                400      1,368       1,768      1,399   3,167   
New business value                                                         (84)         63        (21)         73      52   
Expected existing business contribution (reference rate)                      9         34          43         56      99   
Expected existing business contribution (in excess of reference rate)         2          6           8          7      15   
Transfers from VIF and required capital to free surplus                     196       (76)         120      (120)       -   
Experience variances                                                        (2)          7           5          8      13   
Assumption changes                                                            -          -           -          -       -   
Other operating variance                                                      5          -           5       (40)    (35)   
Operating MCEV earnings                                                     126         34         160       (16)     144   
Economic variances                                                           24          3          27         94     121   
Other non-operating variance                                               (14)          -        (14)        (7)    (21)   
Total MCEV earnings                                                         136         37         173         71     244   
Closing adjustments                                                        (16)       (34)        (50)       (30)    (80)   
Capital and dividend flows                                                  (1)          -         (1)          -     (1)   
Foreign exchange variance                                                  (15)       (34)        (49)       (30)    (79)   
MCEV of acquired/sold business                                                -          -           -          -       -   
Closing MCEV                                                                520      1,371       1,891      1,440   3,331   
Return on MCEV (RoEV)% per annum                                                                                    10.2%   


(1) The MCEV for Emerging Markets is presented after the adjustment for market value of life fund investments in Group equity and debt instruments.

Return on MCEV is calculated as the operating MCEV earnings after tax divided by opening MCEV in rand. The operating assumption changes and
other operating variances are not annualised.
 
Overview
New Business: The new business value increased (compared to H1 2011) largely driven by an improvement in new business margins, with higher
recurring premium sales, particularly in the Mass Foundation cluster. This is mostly offset by lower single premium sales in Retail Affluent and
Corporate.

Operating earnings: Operating profits on the in-force book decreased (compared to H1 2011) largely due to lower experience variances in
aggregate following assumption changes at 31 December 2011.

Non-operating earnings and closing adjustments: The most material impacts were a positive contribution from favourable market conditions and
foreign exchange losses due to the depreciation of the rand against sterling.

GBPm
                                            6 months ended 30 June 2011                          Year ended 31 December 2011

                                     Free   Required    Adjusted   Value of              Free   Required    Adjusted   Value of           
                                  surplus    capital   net worth   in-force    MCEV   surplus    capital   net worth   in-force    MCEV   
Opening MCEV                          306      1,498       1,804      1,509   3,313       306      1,498       1,804      1,509   3,313   
New business value                   (93)         66        (27)         65      38     (189)        155        (34)        133      99   
Expected existing business                                                                                                                
contribution (reference rate)           6         31          37         54      91        11         58          69        105     174   
Expected existing business                                                                                                                
contribution (in excess of                                                                                                                
reference rate)                         1          6           7          9      16         2         10          12         18      30   
Transfers from VIF and required                                                                                                           
capital to free surplus               193       (75)         118      (118)       -       359      (150)         209      (209)       -   
Experience variances                   35          6          41         33      74        28         24          52         50     102   
Assumption changes                      -          -           -          -       -         1          4           5          1       6   
Other operating variance             (21)        (2)        (23)        (8)    (31)       (7)       (11)        (18)       (44)    (62)   
Operating MCEV earnings               121         32         153         35     188       205         90         295         54     349   
Economic variances                     29          4          33       (25)       8         1          8           9         23      32   
Other non-operating variance            4          -           4          -       4       (7)          -         (7)        100      93   
Total MCEV earnings                   154         36         190         10     200       199         98         297        177     474   
Closing adjustments                    10        (9)           1       (79)    (78)     (105)      (228)       (333)      (287)   (620)   
Capital and dividend flows             25         69          94          -      94      (39)         51          12          -      12   
Foreign exchange variance            (15)       (78)        (93)       (79)   (172)      (66)      (279)       (345)      (287)   (632)   
MCEV of acquired/sold business          -          -           -          -       -         -          -           -          -       -   
Closing MCEV                          470      1,525       1,995      1,440   3,435       400      1,368       1,768      1,399   3,167   
Return on MCEV (RoEV)%                                                                                                                    
per annum                                                                     13.3%                                               11.9%   

New Business 
New business margins were positively impacted by operating assumption changes at 31 December 2011 (mainly those relating to persistency), a
more favourable economic basis, the effect of moving to a dividend withholding tax regime, as well as a shift in mix of sales towards higher margin
recurring premium products.

Expected existing business contribution
The unwind of returns on the in-force business over H1 2012 was slightly higher than H1 2011. The higher unwind was the combined effect of
higher 1-year risk-free rates and a higher opening MCEV balance on which the unwind is based.

Experience variances 
Experience variances were less positive (compared to H1 2011) following the operating assumption changes made in December 2011. Mortality
and morbidity variances were consistent with 2011 as a result of continued good experience in Retail Affluent and Mass Foundation Cluster, as well
as an improvement on the Corporate Group Assurance business. Experience variances were also impacted by higher than expected taxation and
central costs, partially offset by the release of provisions held in respect of legacy products.

Other operating variances
The negative other operating variance consists of miscellaneous modelling and methodology changes, including an increase in the CNHR resulting
from the recalculation of the non-hedgeable risk capital.

Economic variances
Favourable economic variances in 2012 were a result of positive market performance, including a 7% rise in the JSE SWIX price index, and a
reduction in the level of the South African swap curve.

Other non-operating variances
Other non-operating variances consist mainly of modelling changes to incorporate the new South African dividend withholding tax regime and
higher capital gains tax in the calculation of policyholder investment returns in MCEV models.

Capital and dividend flows
This includes the net impact of dividends, partially offset by the proceeds from the net sale of the plc loan note in Bahamas, and the transfer of the
Zimbabwean and Namibian holding companies from the non-covered to the covered business.

Foreign exchange effects
The negative foreign exchange result was due to a 2% depreciation in the rand against sterling over H1 2012.

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012 

B: Segment Information continued
B4: Analysis of covered business MCEV earnings (after tax) continued
  
Wealth Management                                                                  6 months ended 30 June 2012

                                                                           Free   Required    Adjusted   Value of           
                                                                        surplus    capital   net worth   in-force    MCEV   
Opening MCEV                                                                122        314         436      2,110   2,546   
New business value                                                         (70)         11        (59)         81      22   
Expected existing business contribution (reference rate)                      2          1           3         20      23   
Expected existing business contribution (in excess of reference rate)         -          -           -         12      12   
Transfers from VIF and required capital to free surplus                     190       (21)         169      (169)       -   
Experience variances                                                       (25)         10        (15)         15       -   
Assumption changes                                                            -          -           -          -       -   
Other operating variance                                                      3        (1)           2          1       3   
Operating MCEV earnings                                                     100          -         100       (40)      60   
Economic variances                                                           15          2          17          8      25   
Other non-operating variance                                                  -          -           -          4       4   
Total MCEV earnings                                                         115          2         117       (28)      89   
Closing adjustments                                                        (70)        (6)        (76)       (15)    (91)   
Capital and dividend flows                                                 (69)        (1)        (70)          -    (70)   
Foreign exchange variance                                                   (1)        (5)         (6)       (15)    (21)   
MCEV of acquired/sold business                                                -          -           -          -       -   
Closing MCEV                                                                167        310         477      2,067   2,544   
Return on MCEV (RoEV)% per annum                                                                                     4.6%   

Return on MCEV is calculated as the operating MCEV earnings after tax divided by opening MCEV in sterling. The operating assumption changes
and other operating variances are not annualised.
 
Overview

New business: The new business value decreased (compared to H1 2011), driven by lower volumes and lower new business margins. UK Legacy
sales were impacted by the managed reduction in available product range, whereas offshore international market sales decreased largely due to
concerns relating to the eurozone and uncertainty surrounding the Qualifying Recognised Overseas Pensions Scheme (QROPS) proposition given
changes in qualifying criteria published by the HMRC.

Operating earnings: Operating profits on the in-force book decreased (compared to H1 2011) due to a reduced new business value and lower
experience variances following the release of prudence margins at 31 December 2011.

Non-operating earnings and closing adjustments: The most material impacts were from capital returned to Group in the year, a positive
contribution from favourable market conditions, and foreign exchange losses due to the depreciation of the euro against sterling.

                                              6 months ended 30 June 2011                        Year ended 31 December 2011

                                     Free   Required    Adjusted   Value of              Free   Required    Adjusted   Value of           
                                  surplus    capital   net worth   in-force    MCEV   surplus    capital   net worth   in-force    MCEV   
Opening MCEV                           84        340         424      2,176   2,600        84        340         424      2,176   2,600   
New business value                  (109)         12        (97)        139      42     (201)         24       (177)        255      78   
Expected existing business                                                                                                                
contribution (reference rate)         (1)          3           2         17      19         3          2           5         32      37   
Expected existing business                                                                                                                
contribution (in excess of                                                                                                                
reference rate)                         2          -           2         11      13         5          -           5         22      27   
Transfers from VIF and required                                                                                                           
capital to free surplus               204       (16)         188      (188)       -       389       (29)         360      (360)       -   
Experience variances                 (18)          4        (14)         28      14      (33)          8        (25)         53      28   
Assumption changes                      1          -           1        (3)     (2)         8          -           8         26      34   
Other operating variance               32        (6)          26       (18)       8        40       (17)          23       (24)     (1)   
Operating MCEV earnings               111        (3)         108       (14)      94       211       (12)         199          4     203   
Economic variances                     10        (6)           4         12      16        22       (14)           8       (47)    (39)   
Other non-operating variance            -          -           -          6       6         -          -           -        (4)     (4)   
Total MCEV earnings                   121        (9)         112          4     116       233       (26)         207       (47)     160   
Closing adjustments                  (45)          5        (40)         36     (4)     (195)          -       (195)       (19)   (214)   
Capital and dividend flows           (50)          -        (50)          -    (50)     (193)          4       (189)          -   (189)   
Foreign exchange variance               5          5          10         36      46       (2)        (4)         (6)       (19)    (25)   
MCEV of acquired/sold business          -          -           -          -       -         -          -           -          -       -   
Closing MCEV                          160        336         496      2,216   2,712       122        314         436      2,110   2,546   
Return on MCEV (RoEV)%                                                                                                                    
per annum                                                                      7.0%                                                7.8%   

New Business
New business margins were negatively affected by a reduction in sales volumes and the shift to a less profitable product mix in the offshore
international market, partially offset a more favourable economic basis and favourable UK corporation tax changes.

Experience variances
Experience variances reduced (compared to H1 2011) following the release of prudence margins at 31 December 2011. A positive persistency
variance emerged as assumptions made to anticipate the effects of the Retail Distribution Review (RDR) have yet to emerge on the legacy
business in the UK. This was offset by maintenance expense losses due to expense over-runs in Wealth Management Europe.

Economic variances
Favourable economic variances in 2012 were a result of positive market performance and a reduction in the level of the UK and euro swap curves.

Other non-operating variances
Other non-operating variances include the benefit of reductions in headline UK corporation tax from 25% to 23% of GBP9m.

Capital and dividend flows and Foreign exchange effects
Transfers from covered business mainly relate to dividend payments to Group, namely a GBP27m dividend from International and a GBP36m
dividend from Wealth Management Europe.

Foreign exchange effects
The foreign exchange variance is mainly due to unfavourable exchange rate movements on translation as a result of a 4% depreciation of the euro
against sterling over H1 2011.

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012 

B: Segment Information continued
B4: Analysis of covered business MCEV earnings (after tax) continued
 
 
Bermuda                                                                            6 months ended 30 June 2012

                                                                           Free   Required    Adjusted   Value of           
                                                                        surplus    capital   net worth   in-force    MCEV   
Opening MCEV                                                                  -        187         187      (121)      66   
New business value                                                            -          -           -          -       -   
Expected existing business contribution (reference rate)                      -          1           1          3       4   
Expected existing business contribution (in excess of reference rate)         -         12          12          5      17   
Transfers from VIF and required capital to free surplus                     (7)       (16)        (23)         23       -   
Experience variances                                                         17          -          17       (10)       7   
Assumption changes                                                          (5)          -         (5)          -     (5)   
Other operating variance                                                   (52)         49         (3)          3       -   
Operating MCEV earnings                                                    (47)         46         (1)         24      23   
Economic variances                                                           47          -          47          6      53   
Other non-operating variance                                                  -          -           -          -       -   
Total MCEV earnings                                                           -         46          46         30      76   
Closing adjustments                                                           -        (1)         (1)          -     (1)   
Capital and dividend flows                                                    -          -           -          -       -   
Foreign exchange variance                                                     -        (1)         (1)          -     (1)   
MCEV of acquired/sold business                                                -          -           -          -       -   
Closing MCEV                                                                  -        232         232       (91)     141   
Return on MCEV (RoEV)% per annum                                                                                    76.5%   

Return on MCEV is calculated as the operating MCEV earnings after tax divided by opening MCEV in US dollars. The operating assumption
changes and other operating variances are not annualised.
 
Bermuda
Overview 

Operating earnings: Operating profits increased (compared to H1 2011) mainly due to positive persistency variances on Variable Annuity products
mainly due to the release of reserves for guaranteed benefits and the impact of one-off modelling changes in 2011 that were not repeated.

Non-operating earnings and closing adjustments: The most material impact was the reduction in Variable Annuity Guaranteed Minimum
Accumulation Benefit (GMAB) reserves, largely due to positive capital market conditions in H1 2011.

                                                                                                                                  GBPm
                                              6 months ended 30 June 2011                         Year ended 31 December 2011

                                     Free   Required    Adjusted   Value of             Free   Required    Adjusted   Value of           
                                  surplus    capital   net worth   in-force   MCEV   surplus    capital   net worth   in-force    MCEV   
Opening MCEV                            -        403         403      (116)    287         -        403         403      (116)     287   
New business value                      -          -           -          -      -         -          -           -          -       -   
Expected existing business                                                                                                               
contribution (reference rate)           -          1           1          3      4         -          2           2          6       8   
Expected existing business                                                                                                               
contribution (in excess of                                                                                                               
reference rate)                         -         12          12          8     20         -         24          24         14      38   
Transfers from VIF and required                                                                                                          
capital to free surplus                34       (28)           6        (6)      -        66       (57)           9        (9)       -   
Experience variances                    1          -           1        (9)    (8)        16        (1)          15          9      24   
Assumption changes                      1          -           1        (3)    (2)        14          -          14       (22)     (8)   
Other operating variance             (32)         32           -        (5)    (5)       155      (177)        (22)          7    (15)   
Operating MCEV earnings                 4         17          21       (12)      9       251      (209)          42          5      47   
Economic variances                    (4)          -         (4)         18     14     (251)          -       (251)       (10)   (261)   
Other non-operating variance            -          -           -          -      -         -          -           -          -       -   
Total MCEV earnings                     -         17          17          6     23         -      (209)       (209)        (5)   (214)   
Closing adjustments                     -       (13)        (13)          3   (10)         -        (7)         (7)          -     (7)   
Capital and dividend flows              -          -           -          -      -         -          -           -          -       -   
Foreign exchange variance               -       (13)        (13)          3   (10)         -        (7)         (7)          -     (7)   
MCEV of acquired/sold business          -          -           -          -      -         -          -           -          -       -   
Closing MCEV                            -        407         407      (107)    300         -        187         187      (121)      66   
Return on MCEV (RoEV)%                                                                                                                   
per annum                                                                     9.4%                                               17.0%   

Experience variances
The positive experience variance in 2012 was mainly driven by higher than expected surrenders of Variable Annuity contracts with Universal
Guarantee Option (UGO) benefits. Both non-Hong-Kong UGO and Hong-Kong UGO contracts had better than anticipated experience following 5th
anniversary top-up dates. The improved persistency experience resulted in an ANW increase of GBP17 million (due to the release of reserves for
guaranteed benefits), partially offset by a reduction in the VIF of GBP9 million (due to the lower expected fee income).

Operating assumption changes
The negative variance of GBP5 million is primarily due to updates to assumed global index exposure used in the valuation of Variable Annuity
guarantees.

Other operating variances
The movement between free surplus and required capital is mainly due to the current policy of calculating required capital as the ANW held in the
business.

Economic variances
Favourable economic variances were largely due to positive capital market conditions reducing the value of Variable Annuity GMAB reserves.

Nordic                                                                              6 months ended 30 June 2012

                                                                           Free   Required    Adjusted   Value of             
                                                                        surplus    capital   net worth   in-force      MCEV   
Opening MCEV                                                                158        127         285      1,148     1,433   
New business value                                                            -          -           -          -         -   
Expected existing business contribution (reference rate)                      -          -           -          -         -   
Expected existing business contribution (in excess of reference rate)         -          -           -          -         -   
Transfers from VIF and required capital to free surplus                       -          -           -          -         -   
Experience variances                                                         18          -          18          -        18   
Assumption changes                                                            -          -           -          -         -   
Other operating variance                                                      -          -           -          -         -   
Operating MCEV earnings                                                      18          -          18          -        18   
Economic variances                                                            -          -           -          -         -   
Other non-operating variance                                               (18)          -        (18)          -      (18)   
Total MCEV earnings                                                           -          -           -          -         -   
Closing adjustments                                                       (158)      (127)       (285)    (1,148)   (1,433)   
Capital and dividend flows                                                    -          -           -          -         -   
Foreign exchange variance                                                     1          -           1          -         1   
MCEV of acquired/sold business                                            (159)      (127)       (286)    (1,148)   (1,434)   
Closing MCEV                                                                  -          -           -          -         -   
Return on MCEV (RoEV)% per annum                                                                                       2.6%   

Return on MCEV for total covered business is calculated as the operating MCEV earnings after tax divided by opening MCEV in Krona.

Following the sale of the Nordic business unit, the MCEV earnings of the business unit have been categorised as discontinued within the MCEV
results and the comparative information has been reclassified where applicable to reflect this. Nordic has been treated as non-modelled for 2012
reporting purposes with earnings for the period to 21 March 2012 reported on an IFRS basis.

                                                                                                                                   GBPm
                                              6 months ended 30 June 2011                          Year ended 31 December 2011

                                     Free   Required    Adjusted   Value of              Free   Required    Adjusted   Value of           
                                  surplus    capital   net worth   in-force    MCEV   surplus    capital   net worth   in-force    MCEV   
Opening MCEV                           51        135         186      1,318   1,504        51        135         186      1,318   1,504   
New business value                   (29)          4        (25)         53      28      (54)          8        (46)        102      56   
Expected existing business                                                                                                                
contribution (reference rate)           2          1           3         18      21         3          3           6         36      42   
Expected existing business                                                                                                                
contribution (in excess of                                                                                                                
reference rate)                         -          -           -         16      16         -          -           -         33      33   
Transfers from VIF and required                                                                                                           
capital to free surplus                65          -          65       (65)       -       129          -         129      (129)       -   
Experience variances                    1          3           4        (4)       -       (1)        (1)         (2)        (1)     (3)   
Assumption changes                      -          -           -          -       -         -          -           -        (4)     (4)   
Other operating variance                -          -           -        (2)     (2)         -          -           -          4       4   
Operating MCEV earnings                39          8          47         16      63        77         10          87         41     128   
Economic variances                      3        (6)         (3)       (68)    (71)         7       (16)         (9)      (180)   (189)   
Other non-operating variance          (4)          -         (4)          -     (4)        39          1          40        (3)      37   
Total MCEV earnings                    38          2          40       (52)    (12)       123        (5)         118      (142)    (24)   
Closing adjustments                  (30)          4        (26)         35       9      (16)        (3)        (19)       (28)    (47)   
Capital and dividend flows           (31)          -        (31)          -    (31)      (11)          -        (11)          -    (11)   
Foreign exchange variance               1          4           5         35      40       (5)        (3)         (8)       (28)    (36)   
MCEV of acquired/sold business          -          -           -          -       -         -          -           -          -       -   
Closing MCEV                           59        141         200      1,301   1,501       158        127         285      1,148   1,433   
Return on MCEV (RoEV)%                                                                                                                    
per annum                                                                      8.4%                                                8.5%   


                                                                                                                                   GBPm
US Life                                    Six months ended 30 June 2011                          Year ended 31 December 2011

                                     Free   Required    Adjusted   Value of              Free   Required    Adjusted   Value of           
                                  surplus    capital   net worth   in-force    MCEV   surplus    capital   net worth   in-force    MCEV   
Opening MCEV                           66        468         534      (723)   (189)        66        468         534      (723)   (189)   
New business value                      -          -           -          -       -         -          -           -          -       -   
Expected existing business                                                                                                                
contribution (reference rate)           -          -           -          -       -         -          -           -          -       -   
Expected existing business                                                                                                                
contribution (in excess of                                                                                                                
reference rate)                         -          -           -          -       -         -          -           -          -       -   
Transfers from VIF and required                                                                                                           
capital to free surplus                 -          -           -          -       -         -          -           -          -       -   
Experience variances                    -          -           -          -       -         -          -           -          -       -   
Assumption changes                      -          -           -          -       -         -          -           -          -       -   
Other operating variance                -          -           -          -       -         -          -           -          -       -   
Operating MCEV earnings                 -          -           -          -       -         -          -           -          -       -   
Economic variances                      -          -           -          -       -         -          -           -          -       -   
Other non-operating variance            -          -           -          -       -         -          -           -          -       -   
Total MCEV earnings                     -          -           -          -       -         -          -           -          -       -   
Closing adjustments                  (66)      (468)       (534)        723     189      (66)      (468)       (534)        723     189   
Capital and dividend flows              -          -           -          -       -         -          -           -          -       -   
Foreign exchange variance             (2)       (19)        (21)         28       7       (2)       (19)        (21)         28       7   
MCEV of acquired/sold business       (64)      (449)       (513)        695     182      (64)      (449)       (513)        695     182   
Closing MCEV                            -          -           -          -       -         -          -           -          -       -   
Return on MCEV (RoEV)%                                                                                                                    
per annum                                                                         -                                                   -   

 
For the year ended 31 December 2011, Old Mutual Reassurance (Ireland) Limited (OMRe), which provides reinsurance to the United States Life
Companies, is included within the Old Mutual plc results. For all comparative periods, the results for US Life include allowance for OMRe.

The sale of the US Life insurance business to Harbinger Capital Partners was completed, following regulatory approval, on 7 April 2011. This
transaction has resulted in an uplift of GBP451 million to the adjusted Group MCEV, based on the 31 December 2010 value for US Life.

C: Other key performance information
C1: Value of new business (after tax)
The tables below set out the regional analysis of the value of new business (VNB) after tax. New business profitability is measured by both the ratio
of the VNB to the present value of new business premiums (PVNBP) as well as to the annual premium equivalent (APE), and shown under PVNBP
margin and APE margin below. APE is calculated as recurring premiums plus 10% of single premiums. Bermuda is excluded from the tables below
as it is closed to new business.

Six months ended 30 June 2012                                                                    GBPm

                         Annualised                               PVNBP                                 
                          recurring     Single           capitalisation                PVNBP      APE   
                           premiums   premiums   PVNBP      factors (1)   APE   VNB   margin   margin   
Long Term Savings               259      2,836   4,122              5.0   542    74     1.8%      14%   
Emerging Markets                177        593   1,498              5.1   235    52     3.5%      22%   
Wealth Management                82      2,243   2,624              4.6   307    22     0.8%       7%   
Nordic                            -          -       -                -     -     -        -        -   
Total covered business          259      2,836   4,122              5.0   542    74     1.8%      14%   


Six months ended 30 June 2011                                                                            GBPm
                               Annualised                                PVNBP
                                recurring       Single          capitalisation                  PVNBP     APE
                                 premiums     premiums    PVNBP    factors (1)      APE   VNB  margin   margin
Long Term Savings                     292        3,455    4,909            5.0      637    80    1.6%      13%
 Emerging Markets                     176          797    1,656            4.9      255    38    2.3%      15%
 Wealth Management                    116        2,658    3,253            5.1      382    42    1.3%      11%
Nordic                                 83          420      736            3.8      126    28    3.9%      23%
Total covered business                375        3,875    5,645            4.7      763   108    1.9%      14%

Year ended 31 December 2011                                                                                GBPm
                             Annualised                                 PVNBP
                              recurring       Single           capitalisation                    PVNBP      APE
                               premiums     premiums     PVNBP    factors (1)        APE   VNB  margin   margin
Long Term Savings                   569        6,211     9,113            5.1      1,189   177    1.9%      15%
 Emerging Markets                   363        1,441     3,295            5.1        506    99    3.0%      20%
 Wealth Management                  206        4,770     5,818            5.1        683    78    1.3%      11%
Nordic                              153          753     1,347            3.9        229    56    4.2%      25%
Total covered business              722        6,964    10,460            4.8      1,418   233    2.2%      16%

(1) The PVNBP capitalisation factors are calculated as follows: (PVNBP  single premiums)/annualised recurring premiums.
 
The value of new individual unit trust linked retirement annuities and pension fund asset management business written by the Emerging Markets
long-term business of GBP518 million (30 June 2011: GBP465 million; 31 December 2011: GBP884 million) is excluded as the profits on this
business arise in the asset management business. The value of new business also excludes premium increases arising from indexation
arrangements in respect of existing business, as these are already included in the value of in-force business.

The value of new institutional investment platform pensions business written in Wealth Management of GBP322 million (30 June 2011: GBP229
million; 31 December 2011: GBP704 million) is excluded as this is more appropriately classified as unit trust business.

New business single premiums of GBP16 million (31 December 2011: GBP31 million), annualised recurring premiums of GBP9 million (31
December 2011: GBP14 million), and APE of GBP11 million (31 December 2011: GBP17 million), in respect of the life business in Kenya, Malawi,
Nigeria, Swaziland, and Zimbabwe have been excluded from the above tables, as no value of new business and PVNBP calculations have been
performed for these businesses.

New business recurring premiums of GBP8 million in relation to credit life sales in Emerging Markets have been excluded in APE figures and
annualised recurring premium.

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012 

C: Other key performance information continued
                                                                        
C2: Drivers of new business value for covered business (PVNBP margin) (1)

                                                                                            Total      Long                                    
                                                                                          covered      Term   Emerging       Wealth            
12 months ended 30 June 2012                                                             business   Savings    Markets   Management   Nordic   
Margin at the end of comparative period                                                       1.6       1.6        2.3          1.3        -   
Change in volume                                                                            (0.4)     (0.4)          -        (0.6)        -   
Change in country and product mix                                                             0.2       0.2        0.2            -        -   
Change in operating assumptions                                                               0.2       0.2        0.6            -        -   
Change in economic assumptions                                                                0.1       0.1        0.2          0.1        -   
Change in tax/regulation                                                                      0.1       0.1        0.2            -        -   
Exchange rate movements                                                                         -         -          -            -        -   
Margin at the end of the period                                                               1.8       1.8        3.5          0.8        -   

(1) The PVNBP margin changes are calculated in the business unit reporting currency.                                                         

                                                                                            %   
                                             Total      Long                                    
                                           covered      Term   Emerging       Wealth            
12 months ended 31 December 2011          business   Savings    Markets   Management   Nordic   
Margin at the end of comparative period        1.8       1.6        2.6          1.1      3.7   
Change in volume                               0.2       0.1        0.3            -      0.1   
Change in country and product mix            (0.2)     (0.2)      (0.6)        (0.1)      0.4   
Change in operating assumptions                0.2       0.2        0.4          0.1    (0.1)   
Change in economic assumptions                 0.2       0.2        0.4          0.1      0.1   
Change in tax/regulation                         -         -      (0.1)          0.1        -   
Margin at the end of the period                2.2       1.9        3.0          1.3      4.2   

C3: Adjustments applied in determining total Group MCEV earnings before tax

                                                                6 months ended 30 June 2012   6 months ended 30 June 2011

                                                                               Non-                          Non-           
                                                                 Covered    covered   Total    Covered    covered   Total   
                                                                business   business   Group   business   business   Group   
                                                                    MCEV       IFRS    MCEV       MCEV       IFRS    MCEV   
Income/(expense)                                                                                                            
Goodwill impairment and amortisation of non-covered                                                                         
business acquired intangible assets and impact of                                                                           
acquisition accounting                                                 -        (5)     (5)          -       (11)    (11)   
Economic variances                                                   214        (5)     209       (49)       (11)    (60)   
Other non-operating variances                                       (54)          -    (54)          1          -       1   
Acquired/divested business                                             -         20      20          -        180     180   
Other Group adjustments related to Nordic disposal                     -        392     392          -          -       -   
Adjusted Group MCEV uplift from sale of Nordic                         -        202     202          -          -       -   
Dividends declared to holders of perpetual preferred callable                                                               
securities                                                             -         21      21          -         22      22   
Adjusting items relating to US Asset Management equity                                                                      
plans and non-controlling interests                                    -          -       -          -          -       -   
Fair value gains on Group debt instruments                             -       (36)    (36)          -       (50)    (50)   
Adjusting items                                                      160        589     749       (48)        130      82   
Adjusting items from continuing operations                           178        (3)     175         28        133     161   
Adjusting items from discontinued operations                        (18)        592     574       (76)        (3)    (79)   
Total MCEV adjusting items                                           160        589     749       (48)        130      82   


                                                                                       GBPm
                                                                Year ended 31 December 2011

                                                                               Non-           
                                                                 Covered    covered   Total   
                                                                business   business   Group   
                                                                    MCEV       IFRS    MCEV   
Income/(expense)                                                                              
Goodwill impairment and amortisation of non-covered                                           
business acquired intangible assets and impact of                                             
acquisition accounting                                                 -      (283)   (283)   
Economic variances                                                 (554)       (28)   (582)   
Other non-operating variances                                         22          -      22   
Acquired/divested business (1)                                         -        182     182   
Dividends declared to holders of perpetual preferred callable                                 
securities                                                             -         44      44   
Adjusting items relating to US Asset Management equity                                        
plans and non-controlling interests                                    -        (3)     (3)   
Fair value gains on Group debt instruments                             -         22      22   
Adjusting items                                                    (532)       (66)   (598)   
Adjusting items from continuing operations                         (378)       (59)   (437)   
Adjusting items from discontinued operations                       (154)        (7)   (161)   
Total MCEV adjusting items                                         (532)       (66)   (598)   

(1) This relates to the non-covered businesses in Kenya, Malawi, Nigeria, Swaziland, and Zimbabwe that were included for the first time during 2011.

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012 
 
C: Other key performance information continued

C4: Other movements in IFRS net equity impacting Group MCEV

                                                                                                                         GBPm
                                                                    6 months ended 30 June 2012   6 months ended 30 June 2011

                                                                                 Non-                            Non-           
                                                                   Covered    covered     Total    Covered    covered   Total   
                                                                  business   business     Group   business   business   Group   
                                                                      MCEV       IFRS      MCEV       MCEV       IFRS    MCEV   

Fair value movements (1)                                                 -      (347)     (347)          -          1       1   
Net investment hedge                                                     -        123       123          -       (25)    (25)   
Currency translation/ exchange differences and                                                                                  
other movements                                                      (100)      (326)     (426)       (89)      (207)   (296)   
Aggregate tax effects of items taken directly to or transferred                                                                 
from equity                                                              -          4         4          -          6       6   
Other movements (2)                                                (1,434)      1,434         -        182         18     200   
Net income recognised directly into equity                         (1,534)        888     (646)         93      (207)   (114)   
Capital and dividend flows for the year                               (71)    (1,044)   (1,115)       (56)       (19)    (75)   
Inclusion of other African life businesses                               -          -         -         69          -      69   
Net purchase of treasury shares                                          -        (2)       (2)          -       (18)    (18)   
Shares issued in lieu of cash dividends                                  -          -         -          -         91      91   
Other shares issued                                                      -         25        25          -          4       4   
Change in share based payment reserve                                    -         23        23          -         21      21   
Other movements in net equity                                      (1,605)      (110)   (1,715)        106      (128)    (22)   


                                                                                           GBPm
                                                                   Year ended 31 December 2011

                                                                                 Non-             
                                                                   Covered    covered     Total   
                                                                  business   business     Group   
                                                                      MCEV       IFRS      MCEV   
Fair value gains                                                         -         24        24   
Net investment hedge                                                     -         28        28   
Currency translation/ exchange differences and                                                    
other movements                                                      (693)      (498)   (1,191)   
Aggregate tax effects of items taken directly to or transferred                                   
from equity                                                              -         11        11   
Other movements                                                        182        128       310   
Net income recognised directly into equity                           (511)      (307)     (818)   
Capital and dividend flows for the year                              (257)        (8)     (265)   
Inclusion of other African life businesses                              69          -        69   
Net purchase of treasury shares                                          -       (17)      (17)   
Shares issued in lieu of cash dividends                                  -        124       124   
Other shares issued                                                      -         10        10   
Change in share based payment reserve                                    -         50        50   
Other movements in net equity                                        (699)      (148)     (847)   

(1) Fair value movements include realisation of foreign exchange reserve on disposal of GBP(350) million and a fair value movement of GBP3 million
(2) The June 2012 amount relates to the transfer of Nordic covered MCEV balance on disposal. June 2011 reflects movements in respect of the disposal of US Life.

C5: Reconciliation of MCEV adjusted net worth to IFRS net asset value for the covered business 

The table below provides a reconciliation of the MCEV adjusted net worth (ANW) to the IFRS net asset value (NAV) for the covered business.

                                                                                                           GBPm
                                                    Total      Long
                                                  covered      Term    Emerging       Wealth
At 30 June 2012                                  business   Savings     Markets   Management   Bermuda   Nordic
                       
IFRS net asset value (1)                            4,062     3,813       1,355        2,458       249        -
Adjustment to include long-term business on a
 statutory solvency basis                         (1,024)   (1,007)         187      (1,194)       (17)       -
Inclusion of Group equity and debt instruments
 held in life funds (2)                               353       353         356          (3)         -        -
Goodwill                                            (791)     (791)         (7)        (784)         -        -
Adjusted net worth attributable to ordinary
 equity holders of the parent                       2,600     2,368       1,891         477        232        -

(1) IFRS net asset value is after elimination of inter-company loans.
(2) A further GBP(58) million (June 2011: GBP(82) million; December 2011: GBP(69) million) relates to the non-covered business.

                                                                                                                                                     GBPm   
                                                                                              Total      Long                                               
                                                                                            covered      Term   Emerging       Wealth                       
At 30 June 2011                                                                            business   Savings    Markets   Management   Bermuda    Nordic   

IFRS net asset value (1)                                                                      5,859     3,995      1,339        2,656       441     1,423   
Adjustment to include long-term business on a                                                                                                               
statutory solvency basis                                                                    (2,201)   (1,155)        199      (1,354)      (34)   (1,012)   
Inclusion of Group equity and debt instruments
 held in life funds (2)                                                                         396       396        396            -         -         -   
Goodwill                                                                                    (1,025)     (814)        (8)        (806)         -     (211)   
Adjusted net worth attributable to ordinary                                                                                                                 
equity holders of the parent                                                                  3,029     2,422      1,926          496       407       200   
                                                                                                                                                     GBPm   
                                                                                              Total      Long                                               
                                                                                            covered      Term   Emerging       Wealth                       
At 31 December 2011                                                                        business   Savings    Markets   Management   Bermuda    Nordic   

IFRS net asset value (1)                                                                      5,214     3,744      1,230        2,514       201     1,269   
Adjustment to include long-term business on a                                                                                                               
statutory solvency basis                                                                    (1,905)   (1,108)        182      (1,290)      (14)     (783)   
Inclusion of Group equity and debt instruments
 held in life funds (2)                                                                         365       365        365            -         -         -   
Goodwill                                                                                      (998)     (797)        (9)        (788)         -     (201)   
Adjusted net worth attributable to ordinary                                                                                                                 
equity holders of the parent                                                                  2,676     2,204      1,768          436       187       285   
 
The adjustments to include long-term business on a statutory solvency basis reflect the difference between the net worth of each business on the
statutory basis (as required by the local regulator) and their portion of the Group's consolidated equity shareholder funds. In South Africa, these
values exclude items that are eliminated or shown separately on consolidation (such as Nedbank and inter-company loans). For some European
countries the value reflected in the adjustment to include long-term business on a statutory solvency basis includes the value of the deferred
acquisition cost asset, which is part of the equity.

The adjustment to include long-term business on a statutory solvency basis includes the following:

-     The excess of the IFRS amount of the deferred acquisition cost (DAC) and value of business acquired (VOBA) assets over the statutory
      levels included in the VIF with the exception of the Bermuda business where DAC is an admissible asset under local statutory basis.
-     When projecting future profits on a statutory basis, the VIF includes the shareholders' value of unrealised capital gains. To the extent that
      assets in IFRS are valued at market and the market value is higher than the statutory book value, these profits have already been taken into
      account in the IFRS equity. For Bermuda business, VIF reflects the impact of amortizing DAC allowed under the ANW.

Notes to the MCEV basis supplementary information
For the six months ended 30 June 2012 

D1: Sensitivity tests
The tables below show the sensitivity of the MCEV, value of in-force business at 30 June 2012 and the value of new business for the six months
ended 30 June 2012 to changes in key assumptions.

-   Economic assumptions 1% increase: Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount
    rates changing commensurately
-   Economic assumptions 1% decrease: Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount
    rates changing commensurately
-   10bps increase of liquidity spreads: Recognising the present value of an additional 10bps of liquidity spreads assumed on corporate bonds
    over the lifetime of the liabilities, with credited rates and discount rates changing commensurately ( for Emerging Markets only).

For each sensitivity illustrated all other assumptions have been left unchanged except where they are directly affected by the revised conditions.
Sensitivity scenarios therefore include consistent changes in cash flows directly affected by the changed assumption(s), for example future bonus
participation in changed economic scenarios.

Sensitivity tests: MCEV                                                                                                    
                                                                       Total      Long                                     
                                                                     covered      Term   Emerging       Wealth             
At 30 June 2012                                                     business   Savings    Markets   Management   Bermuda   
Central assumptions                                                    6,016     5,875      3,331        2,544       141   
Effect on MCEV of:                                                                                                         
Increasing all pre-tax investment and economic assumptions by 1%,                                                          
with credited rates and discount rates changing commensurately         5,881     5,688      3,226        2,462       193   
1%, with credited rates and discount rates changing                                                                        
commensurately                                                         6,135     6,042      3,419        2,623        93   
spreads assumed on corporate bonds over the lifetime of the                                                                
liabilities, with credited rates and discount rates changing                                                               
commensurately                                                         6,025     5,884      3,340        2,544       141   

Sensitivity tests: Value of in-force business                                                                               
                                                                       Total      Long                                      
                                                                     covered      Term    Emerging       Wealth             
At 30 June 2012                                                     business   Savings     Markets   Management   Bermuda   
Central assumptions                                                    3,416     3,507       1,440        2,067      (91)   
Effect on value of in-force business of:                                                                                    
Increasing all pre-tax investment and economic assumptions by 1%,                                                           
with credited rates and discount rates changing commensurately         3,299     3,397       1,392        2,005      (98)   
1%, with credited rates and discount rates changing                                                                         
commensurately                                                         3,513     3,597       1,475        2,122      (84)   
spreads assumed on corporate bonds over the lifetime of the                                                                 
liabilities, with credited rates and discount rates changing                                                                
commensurately                                                         3,425     3,516       1,449        2,067      (91)   

Sensitivity tests: Value of new business                                                                                   
                                                                       Total      Long                                     
                                                                     covered      Term   Emerging       Wealth             
At 30 June 2012                                                     business   Savings    Markets   Management   Bermuda   
Central assumptions                                                       74        74         52           22         -   
Effect on value of new business of:                                                                                        
Increasing all pre-tax investment and economic assumptions by 1%,                                                          
with credited rates and discount rates changing commensurately            67        67         48           19         -   
1%, with credited rates and discount rates changing                                                                        
commensurately                                                            82        82         56           26         -   
spreads assumed on corporate bonds over the lifetime of the                                                                
liabilities, with credited rates and discount rates changing                                                               
commensurately                                                            74        74         52           22         -   

Sponsor: Merrill Lynch South Africa Proprietary Limited 



Date: 08/08/2012 08:02:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story