Chief Executive's Statement

The first half of 2006 has been a period of strong growth for the Old Mutual Group. Our clients around the world entrusted us with significantly more money to manage on their behalf, while underlying growth in both funds under management, up 19%, and adjusted operating profit, up 36%, was encouraging. We have increased the interim dividend by 13.5% to 2.1p, or an indicative 27.8c at the period-end exchange rate for Rand shareholders.

We are pleased with the progress at Skandia under Julian Roberts' management since he became CEO in February. Skandia has exceeded our expectations and this important acquisition has transformed both the geographic and business profile of Old Mutual. We expect funds under management in this business to double within the next five years and Skandia, which is also generating sufficient cash to fund its own growth, is expected to provide a significant enhancement in EEV earnings from 2007 onwards. The synergies of £70 million, highlighted at the time of acquisition, have also been confirmed and are on track for full delivery from 2008. We believe there are significant opportunities to leverage Skandia's skill set to maximise growth.

South Africa

In South Africa, our businesses have continued to make good progress, with individual life sales well ahead at Old Mutual Life Assurance Company and a strong increase in profits at Nedbank. Unit trust sales have also continued to grow substantially. Healthcare sales disappointed and impacted an otherwise encouraging picture. A clear strategy to address this has been initiated by Paul Hanratty, who became Chief Executive of OMSA in July. We have also announced plans to build on the success of Old Mutual Asset Managers (South Africa) by establishing within it a number of investment boutiques that will be able to offer specialised investment management services. Return on Equity (RoE) of 23% and cash generation by this business were both excellent and Return on Embedded Value (RoEV) of 13% was in line with expectations.

Bancassurance has continued to grow, with a 21% increase in sales at Nedbank over the equivalent period in 2005, and we are making progress with our plans to extract synergies through the life business working more closely with its sister businesses in South Africa. Our general insurer, Mutual & Federal, has maintained underwriting disciplines during a period of increased competition and reduced underwriting margins, and has again underlined its sound financial footing by announcing a significant return of excess capital to shareholders through a special dividend. Nedbank continues to deliver improved financial results, with performance for the period reflecting the benefits of an increasing focus on client service and organic growth, coupled with the operating efficiencies achieved over the last two years. Adjusted operating profit rose by 54% in the first half and the group remains on track to deliver 20% RoE in 2007.

United States

In the US, overall net client cash flow remained strongly positive at our asset management business. Underlying funds under management also grew despite a lacklustre market performance. Excluding the effects of the disposal of the low margin eSecLending business, underlying funds under management grew by 10%. Our retail sales initiative, OMCAP, continued to make progress, with an increase of 473% in sales compared to the equivalent period in 2005.

US Life had a satisfactory half year. We are continuing to aim for total sales of around $4 billion for the year, with a view to managing the business's capital requirements and fulfilling our stated goal of US Life returning cash from 2007. Continued growth in variable annuity sales out of our operation in Bermuda were particularly strong, and are running at a rate of about $100 million per month - ten times the rate of sale when we bought the business in 2003. Profit increased 11% as a result of underlying asset growth, although embedded value profit was affected by lower value of new business and operating assumption changes.

During the half, we announced that Scott Powers, previously CEO of the US asset management business, would take charge of the whole of our US operations. We anticipate that benefits will emerge as our businesses there work more closely together in the future to address the changing demands of the baby-boomer generation.

Europe

In the UK, sales grew at Skandia by 16% against the favourable background of A-day and strong mutual fund inflows. Progress is being made to restructure the UK business to deliver improved efficiencies. This includes the integration of Selestia and Skandia MultiFUNDS, which is proceeding well.

In Sweden, sales were flat, but our net cash flow was positive and we were pleased with the loyalty shown to Skandia by both customers and staff despite the distractions of the prolonged bid process. The adjusted operating profit result came through strongly, reaching SEK572 million before tax, and embedded value profit was SEK755 million before tax.

In the European and Latin American (ELAM) business unit, strong growth in sales and market share was achieved in a number of countries, especially in unit trust lines. We continue to see plenty of opportunities for expansion in existing operations and new markets. It was also pleasing to see the business start to generate cash.

Other

Our other businesses also had a good half, with continued growth in sales, profit and funds under management. Old Mutual Asset Managers (UK) has maintained its profile as a very capable unit trust and hedge fund manager despite the less favourable conditions for hedge funds during the period. Our 26%-owned Indian life associate has achieved significant sales growth and now has over 4,000 sales agents. Our Chinese joint venture, which operates out of offices in Shanghai and Beijing, continued its rapid growth. Total sales in India and China now approach 8% of our total life sales and will soon rival some of our more established businesses. In Australia, we also produced continued growth in sales, profit and market share.

Outlook

We are developing our strategy to take the Group forward as the integration phase of Skandia moves on to business as usual. We have a powerful set of engines with plenty of opportunities to grow organically through our mature, cash-generative franchises in southern Africa and Sweden, our comprehensive suite of asset management and life product skills in the USA, and our strong and expanding presence in the UK and Europe, as well as the new businesses we have established in the Asia-Pacific region. We see excellent opportunities to build further on our position as a leading international provider of innovative, client-focused, open architecture financial services products.

Our businesses are in good shape and are well positioned to take on current and future challenges. We expect the progress seen in the first half to continue as our businesses mature and we remain on track for the full year.

Jim Sutcliffe
Chief Executive

14 September 2006