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Mutual & Federal trading update

21 January 2009 Mutual & Federal

In its trading update for the year ended 31 December 2008,Mutual & Federal advises that it expects basic and headline earnings per share for the period to be 100% to 120% lower than those of the prior period.

This decline is in part attributable to substantial falls in the value of listed equities in the group’s investment portfolio, with investment incomes for 2008 reducing by more than 120% when compared to 2007.

Mutual & Federal CEO Keith Kennedy (pictured) says thatfalling equity values and persistent volatility have been evident in financial markets across the globe, with South Africa being no exception. "A significant portion of the investment losses for 2008 are unrealised, relating to equity stocks that we still hold, and the company would thus benefit from any recovery in prices. Also, these investments are in solid and reputable blue-chip stocks."

Retrenchment and restructuring costs also impacted negatively on earnings, as did certain one-off expenses associated with a strategic initiative. "These are nonrecurring costs and a number of them represent an investment in our future. Staff structures are now streamlined and the move to a less decentralised operating model positions us well going forward.”

Kennedy says that a notable positive in the second half of the year was the significantly improved underwriting results. "As indicated at interim stage, which recorded an underwriting deficit of R23 million, we have implemented several corrective measures such as better risk selection and the elimination of poorly performing lines.”

“Our ongoing financial strength has recently been confirmed by our continued domestic ZAR currency rating of AA+ (double AA plus), accorded by Global Credit Rating Co. Parent company Old Mutual recently announced the cancellation of the Mutual & Federal sale and we remain firmly within the Old Mutual group of companies."

The results for the year ended 31 December 2008 are expected to be published on or about 6 February 2009.

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