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Notes to the annual financial statements
for the year ended 31 December 2008

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1. General information 2. Summary of significant accounting policies 3. Critical accounting judgements and estimates 4. Segment information - Group 5. Basic and diluted earnings and dividend per share 6. Property and equipment 7. Management of financial risks 8. Investments 9. Financial assets 10. Employee benefit obligations 11. Insurance risk management 12. Insurance liabilities and reinsurance assets 13. Intangible assets 14. Current taxation asset and current taxation liability 15. Cash and cash equivalents 16. Share capital 17. Share premium 18. Revaluation reserves (non-distributable reserves) 19. Share-based payment reserve 20. Deferred taxation 21. Accounts payable and accrued expenses 22. Provisions 23. Deferred reinsurance commission 24. Investment income 25. Net fair value losses on assets held at fair value through income 26. Net realised gains 27. Administrative and other operating expenses 28. Income tax expense 29. Cash generated from operations 30. Taxation paid 31. Related-party transactions 32. Directors' emoluments 33. Post balance sheet events 34. Contingency

19.	Share-based payment reserve
19.1	Transaction with Royal Bafokeng Nation
	In 2005 an agreement was entered into between SA Fire House Limited (SAFH), the Group’s holding company, and RoyalBafokeng Holdings, a black economic empowerment (BEE) partner, whereby SAFH sold 10% of its shareholding in ZurichInsurance Company South Africa Limited (ZICSA). The agreement provided for the sale of options at R96 (market priceofR195 on grant date). IFRIC 11 requires the application of IFRS 2 to granted options. The impact on the Group issummarised below:
	(a)	Put option granted to the BEE partner
		The BEE partner was granted an option to repurchase all of the 10% shareholding in ZICSA. This option was exercisablethrough a written notice to the company over a three-year period from grant date 13 April 2005 and expired during 2008.
		The sale of shares and the put option are treated as a compound instrument (with an equity and liability portion) as theBEE partner had the option on settlement. An independent professional was engaged to determine the fair value of thiscompound instrument, with a residual equity component of R76 million.
		As the benefits of the transaction, being BEE credentials, are enjoyed by ZICSA, IFRS 2 required the recognition of the R76million in equity with a corresponding debit to expense in profit and loss. As this interpretation is appliedretrospectively, the expense has been recognised as a restatement of opening retained earnings at 1 January 2007.
	(b)	Call option granted to the BEE partner to purchase further shares
		The BEE partner was also granted an option to purchase a further 14.9% of the shareholding in ZICSA. An independentprofessional was engaged to determine the fair value of this option, estimated at R69 million.
		As the benefits of the transaction, being BEE credentials, are enjoyed by ZICSA, the R69 million has been recognised inequity with a corresponding debit to expense in profit and loss. As this interpretation is applied retrospectively, theexpense has been recognised as a restatement of opening retained earnings at 1 January 2007.

			Group		Company
			2008	2007	2008	2007
			R’000	R’000	R’000	R’000
		Share-based payment reserve
		Put option granted to BEE partner on 10% shares sold	76,226	76,226	76,226	76,226
		Call option granted to BEE partner on 14.9% shares	69,001	69,001	69,001	69,001
			145,227	145,227	145,227	145,227

19.2	Long-term performance share plan
	Zurich Financial Services (ZFS) operates long-term incentive plans for selected executives. These plans comprise the allocation of a target number of share grants and/or share option grants with the vesting of these share and option grants being subject to the achievement of specific financial performance goals. The liability is accounted for in accounts payable and accrued expenses.
		Number
		of ZFS	Share	Exchange	Value
		shares vested	price (CHF)	rate	R’000
	The following shares vested during 2007: 3 April 2007	1,179	355.8	1ZAR: 0.5868CHF	2,461
	The following shares vested during 2008: 3 April 2008	1,428	302.4	1ZAR: 0.1266CHF	3,411
	Total outstanding shares at 31 December 2007	6,885
	Total outstanding shares at 31 December 2008	8,313