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Old Mutual, provider of life insurance in both the UK and South Africa, has posted a 12 per cent drop in half-year operating profits.

The insurer said pre-tax operating profit on a European embedded value basis reached £782 million in the six months to June 30th, down from £885 million for the same period a year earlier.

Company bosses said the weakness of the South African rand and US dollar had hurt profits, which came in below analyst expectations.

The completion of an actuarial review affecting Old Mutual's US unit, which led the company to raise death rate forecasts for its life insurance business there, also affected performance.

Old Mutual chief executive Jim Sutcliffe explained that group earnings had been "muted by the strengthening of sterling against the rand and the US dollar and the provisions following the completion of the actuarial review in the USA".

Nonetheless the insurer reported a ten per cent increase in life assurance sales over the first-half to £859 million, compared to the same period a year ago, while the value of total funds under the group's management also climbed 11 per cent to £263 billion.

The company also stressed that it was "on track" to deliver growth and synergy targets stemming from its acquisition of Skandia, the Swedish insurer bought by Old Mutual last year in an apparent attempt to reduce its reliance on the South African market and boost sales in the UK and Nordic regions.

Operating profit for the insurer's UK business also rose by a healthy £7 million to £80 million, with a 32 per cent increase in pension sales helping to drive performance. Old Mutual revealed that total pension sales in the UK climbed to £249 million in the first six months of the year, with demand following the relaxation of pension investment regulations post 'A-Day' continuing to benefit the business.

Looking to Old Mutual's future prospects Mr Sutcliffe stressed: "Our strong capital position and powerful set of international businesses will allow us to grow even if economic conditions continue to be turbulent."