8 Variation from longer term investment return.

1.

The 2009 Risk and Savings covered business variation from longer term investment return improved significantly during the second half of 2009 as a result of the investment actions taken within the non profit annuity credit portfolios and the general improvements in all investment markets. The reported adverse variance of £(513)m is primarily due to the £(335)m [EEV] impact of swap transactions undertaken in the first half of 2009 to improve the [IFRS] matching of annuity business which reduced the assumed future yield on the annuity assets for EEV purposes, £(77)m is due to an increased cost of capital arising from de-risking activity to reduce the equity ratio for assets backing solvency capital and £(50)m is the EEV impact of holding additional cash balances, largely to back the short term default provision. These effects were all reported in the half-year 2009 results.