Changes in Accounting Presentation

Consistent with the Statement of Recommended Practice, the basis of recognition of investment returns within operating profits (as disclosed in the profit and loss account and segmental analysis) has been altered. Investment returns credited to operating results, for investments attributable to shareholders, are now determined using the longer term rate of return (see note on investment return). Previously, investment gains were recognised in operating profits on a five year averaged basis.

The effect of the change of presentation is explained in note 3.

In addition, the balance on the long-term business and general business technical accounts now incorporates longer term investment returns. Previously the balances on the technical accounts included investment returns arising in the year.

The changes of presentation have no effect on total profit before or after tax.

Profit before tax includes actual investment returns and exceptional items. The Company believes that operating profit (and related earnings per share) which as described above, includes longer term investment returns but excludes exceptional items, better reflects the Group’s underlying performance.