South Africa's largest insurer, Old Mutual, met forecasts with a 36 percent increase in first half profit, helped by Sweden's Skandia and a turnaround at subsidiary Nedbank, and boosted its dividend.

London listed Old Mutual, which included Skandia in its earnings for the first time since the January takeover, said Skandia profits beat expectations and South Africa benefited from strong banking profits, while the United States was on track to release cash from next year.

We expect the progress seen in the first half to continue as our businesses mature and we remain on track for the full year, Old Mutual Chief Executive Jim Sutcliffe said.

The group's adjusted operating profit rose to 771 million pounds under IFRS standards.

Our IFRS earnings were strong and we think they have the potential to grow further in future, Sutcliffe told analysts.

On the alternative, European embedded value (EEV) basis, the insurer said its adjusted operating profit rose to 39 percent to 885 million pounds. EEV is a benchmark based on the worth of an insurer's assets and future profitability of its policies.

The median forecast in a Reuters poll of seven analysts was for operating profit of 771 million pounds under IFRS and 913 million under EEV. The company's own consensus IFRS forecast was for 756 million pounds.

Skandia has undoubtedly performed better than we'd expected, Sutcliffe said.

Old Mutual boosted its interim dividend by 13.5 percent to 2.1 pence per share, above expectations, helped by an extraordinary dividend announced last month by its insurance subsidiary Mutual & Federal.

When we declared a dividend at the end of last year, we were a little bit cautious. We hadn't had the opportunity to have a good look at Skandia, so there's a little bit of catch up here, Sutcliffe told reporters in a conference call.

We're confident that we'll continue to deliver good dividend growth in the future.

SHARES EASE

Old Mutual shares were down 2.1 percent at 167 pence at 10:29 a.m., however, with some traders citing confusion over the company's first integrated results statement.

The market probably needed more than was in the statement this morning, one trader said. The results were fine but there maybe wasn't enough positive forward looking comment.

The stock, which typically trades at a discount to its listed peers because of its exposure to the rand, has slipped around 9 percent since it sealed the Skandia deal in January, compared with an almost 6 percent rise in the DJ Stoxx European insurance index.

The rand is battering local earnings and will probably continue to do so, so the forthcoming months are going to be a tougher challenge, Celent analyst Catherine Stagg Macey said.

Old Mutual's South African business saw underlying operating profit up 25 percent at 595 million pounds, driven by the recovery at Nedbank, with lower life insurance earnings offsetting strong asset management.

Its European business, boosted by Skandia, tripled to 120 million pounds from a proforma 39 million last year, driven by higher sales volumes and higher funds under management.

Old Mutual said its adjusted embedded value per share came in at 143.2 pence, down from the first quarter, hit by the weak rand, and just shy of a consensus forecast of 147 pence.

Group funds under management rose 38 percent to 218 billion pounds.

(Additional reporting by Simon Challis, Anshuman Daga and Paul Marriott)