Insurer Old Mutual has posted a bigger than expected hit from troubles at its US arm after markets deteriorated beyond its forecasts and warned that sales there could dip as a result in 2008, sending its shares lower.
News of the US problems, which follow separate US provisions taken last year, pushed Old Mutual shares down over 9 percent in early trade, despite a higher-than-expected 3 percent rise in its first-half operating profit. At 0943 GMT, Old Mutual shares were changing hands at 99.4 pence in London, down 6.6 percent.
South Africa's largest insurer, which made around 20 percent of its life sales in the United States, has increased US offshore sales in the past 18 months, but it warned in June that volatile markets could force it to strengthen reserves.Problems escalated, however, and the group said on Wednesday it had made a 107 million pound ($209 million) provision to back minimum return guarantees - three times initial indications. Old Mutual said the hit would shave 63 million pounds off its half-year operating profit and warned it could be followed by additional provisions of 10 million to 15 million in the second half.