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Shares in Old Mutual fell this morning after the insurer issued a profit warning in response to a "difficult economic operating environment".

South Africa's largest insurer told investors underlying profits in the first half will be around 75 per cent of the 2007 rate and will be in the range of $130-$140 million.

Although its US asset management unit had positive net client cashflow, adjusted operating profits are running at a little over ten per cent below the 2007 rate. Last year, the division made profits of $324 million (£164.7 million) for the full year.

Old Mutual has been posting sharp profit falls in the US following the credit crisis and said it will strengthen its reserves by $60-$70 million in the first half to meet guarantees made in policies.

"In the US Life business, sales have continued at roughly the same rate as we achieved for the full year last year and margins have been comparable.

"However, due to the difficult economic operating environment, additional credit impairments are required and the cost associated with guarantees has risen," Old Mutual said in a statement.

The insurer will outline its plans to investors later today in a presentation, including the appointment of Tom Turpin and Bruce Parker as chief executive officers of the asset management and Life businesses respectively.

Shares in the insurer fell 1.83 per cent on the London Stock Exchange by 11:15 BST, to 96.5p.