Notes to the consolidated financial statements

For the year ended 31 December 2009

A: Accounting policies

Basis of preparation

The consolidated financial information contained herein has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards adopted by the EU. The Group's results for the year ended 31 December 2009 and the position at that date have been prepared using accounting policies consistent with those applied in the preparation of the Group's 2008 Annual Report and Accounts, except for the revised IAS 1 set out below.

The consolidated financial statements have been prepared on the going concern basis which the directors believe to be appropriate.

The 31 December 2008 financial position has been restated to reduce both derivative financial assets and liabilities by an amount of £1,405 million and to increase both cash and cash equivalents and other liabilities by £305 million on a consistent basis to 31 December 2009, with a corresponding restatement made to the cash flows where applicable. In addition certain comparative information including segmentation has been revised in accordance with changes to presentation made in the current year. There was no impact on the consolidated net assets at 31 December 2008 as a result of the restatement. The 31 December 2007 statement of financial position has not been presented on the basis that there were no changes required to that statement as a consequence of the 2008 restatements.

The financial information set out herein does not constitute the Company's statutory accounts for the years ended 31 December 2009 or 2008. Statutory accounts for 2008 have been delivered to the Registrar of Companies, and those for 2009 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports, and (iii) did not contain statements under section 498(2) or (3) of the Companies Act 2006.

Implementation of revised IAS 1 'Presentation of Financial Statements'

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

Segment presentation

The Group's results are analysed and reported consistent with the way that management and the Board of Directors considers information when making operating decisions and the basis on which resources are allocated and performance assessed by management and the Board of Directors. The operating segments are Emerging Markets, Nordic, Retail Europe, Wealth Management and US Life (collectively being the newly formed Long Term Savings) plus Nedbank, Mutual & Federal (M&F), US Asset Management and Other operating segments (comprising the Group head office functions). The Bermuda segment is treated as a non-core operation. The above reported segments have been revised during the year to reflect the change in the way that management and the Board of Directors consider information, with the comparative information having been revised to report on a consistent basis to the amended structure.

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

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

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

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