M & F - offer to purchase

Mutual & Federal SENS announcement which was released this morning at 09:00

Mutual & Federal Insurance Company Limited

(Incorporated in the Republic of South Africa)

(Registration number: 1970/006619/06)

("Mutual & Federal" or "the Company")

Share code JSE: MAF & ISIN: ZAE000010823

Share code NSX: MTF

OPERATIONAL UPDATE, SPECIAL CAPITALISATION AWARD AND FURTHER CAUTIONARY ANNOUNCEMENT

1. OPERATIONAL UPDATE

Trading conditions within the short-term insurance industry remain highly competitive. In spite of this, satisfactory growth in premiums and improved risk selection combined with generally lower levels of claims, resulted in a significant improvement in the underwriting result for the Company in the third quarter from the results reported at half year.

The year to date underwriting surplus is accordingly satisfactory despite the sharp increase in the frequency of commercial fire claims in the second quarter, and the underperformance of the motor account due to high levels of accidents and escalating repair costs. The underwriting surplus was influenced positively by a release of R72 million (September 2006: R62 million) from technical reserves following further refinements of estimation methods. The consistently strong performance of shares listed on the JSE Limited (“JSE”) has caused the Company to change its internal long term rate of return for attributing investment income from 11,1% to 15,6% and this added R189 million to operating profits.

The Board of Directors of Mutual & Federal (“the Board”) advises that short-term insurance results fluctuate and the results for the first nine months are not necessarily indicative of expectations for the full year. Results for the full year will be published in the second week of February 2008.

RESULTS SUMMARY AT 30 SEPTEMBER 2007

2. POTENTIAL OFFER FOR THE SHARES OF THE COMPANY

Shareholders are referred to the cautionary announcement issued by the Company on 5November2007.

The Board has been informed that the Company’s controlling shareholder, Old Mutual plc ("Old Mutual”), is in discussions with a community investment company, Royal Bafokeng Holdings (Proprietary) Limited (“RBH”), which may result in an offer being extended to all shareholders (“the potential offer”) as a result of which RBH would acquire a majority interest in the Company.

Subject to the satisfaction of certain conditions, it is expected that these discussions will result in RBH submitting to the Company a “Firm Intention to Make an Offer” to all shareholders in mid-December 2007. The offer documents are expected to be posted to shareholders by mid-January 2008. If this offer is successful, RBH would become the majority shareholder. The potential offer will be in the form of a tender offer extended by RBH to all shareholders to acquire their shares in the Company. Shareholders will not be obliged to dispose of their shares in the Company. It is anticipated that the Company will, subject to the listing requirements of the JSE and the Namibian Stock Exchange, remain listed on the respective stock exchanges.

Based on the indicative terms presented by RBH to Old Mutual in the potential offer, the indicative cash offer for this transaction is:

- R27,50 per share (“the base offer price”); less

- any distributions paid to shareholders (including the distribution referred to in paragraph [4] below) and resultant tax charges; plus

- a price escalation calculated at a rate of 7% per annum from 8November2007 until the settlement date of the offer consideration.

The base offer price is approximately 5% above the 30 day volume weighted average market price (“VWAP”) to 2 November 2007 (being the last trading day immediately preceding the issue of the first cautionary announcement).

3. BACKGROUND TO RBH

RBH is the primary investment vehicle of the Royal Bafokeng Nation, a community of approximately 300 000 Tswana-speaking people with substantial holdings of mineral rich land in the North West province.

RBH has significant capital derived from the leasing of mining rights to the largest platinum mining companies in South Africa. RBH intends to diversify its income stream by investing in assets such as property, industrial and financial services companies.

The intended acquisition of a majority stake in Mutual & Federal represents an opportunity to develop this strategy.

4. CAPITALISATION AWARD AND SPECIAL DIVIDEND

The solvency level in the Company has increased to 49% due to positive trading results and strong investment markets. In order to enhance the efficiency of its capital structure, the Board has resolved to return excess capital to its shareholders by way of a special capitalisation award with a special cash dividend alternative. This will accrue to shareholders on the record date irrespective of whether or not the potential offer is successfully implemented.

The value in aggregate of the award is R580 million, which translates to 200 cents per share.

After this award the solvency ratio on an international basis will be approximately 44%, which in the opinion of the Board more than adequate to fund expansion and growth.

Ordinary shareholders will be entitled, in respect of all or part of their shareholding, to elect to receive new fully paid ordinary shares which shares will be issued only to those ordinary shareholders who elect in respect of all or part of their shareholding, on or before 12h00 on Friday, 14 December 2007 to receive the capitalisation award shares (“capitalisation award election”). The number of capitalisation shares to which shareholders are entitled will be determined in the ratio that 200 cents per ordinary share bears to the 30 day VWAP for the Company’s share, calculated up to and including 29 November 2007. Shareholders not electing to receive new fully paid ordinary shares in respect of all or part of their shareholding will be entitled to receive a special cash dividend alternative of 200 cents per ordinary share ("cash dividend alternative").

5. SALIENT DATES

In accordance with the provisions of Strate, the electronic settlement and custody system used by JSE Limited, the relevant dates for the capitalisation award election and the cash dividend alternative are as follows:

Note:

5.1 Share certificates may not be dematerialised or rematerialised between Monday, 10 December 2007 and Friday, 14 December 2007, both days inclusive.

5.2 The above dates are subject to change. Any such changes will be published on the Securities Exchange News Service of the JSE ("SENS") and in the press.

5.3 Details of the ratio will be published on SENS not later than 11:00 on 30 November 2007 and in the press the following business day.

5.4 Trading in the Strate environment does not permit fractions and fractional entitlements. Accordingly, where a shareholder’s entitlement to new ordinary shares calculated in accordance with the above formula gives rise to a fraction of a new ordinary share, such fraction will be rounded up to the nearest whole number where the fraction is greater than or equal to 0,5 and rounded down to the nearest whole number where the fraction is less than 0,5.

A circular relating to the capitalisation award election and the cash dividend alternative will be posted to shareholders on or about 23 November 2007.

6. FURTHER CAUTIONARY ANNOUNCEMENT

Shareholders are advised to continue to exercise caution when dealing in the Company’s shares until further announcements have been made in regard to the potential offer.

Johannesburg

8 November 2007

Co-sponsors

Merrill Lynch South Africa (Proprietary) Limited

Nedbank Capital

Merchant Bank and lead sponsor

RAND MERCHANT BANK (A division of FirstRand Bank Limited)