Old Mutual, the insurance group, today reported higher first-half profits on the back of a strong performance from its South African banking business but declined to update the market on its proposed takeover of Swedish rival Skandia.

"We are continuing to have discussions and when we have something to say, we’ll say it," chief executive Jim Sutcliffe said.

"All of our businesses have shown strong organic growth during the first half of 2005 ... Our strategy has delivered good earnings growth and we are well placed to take market opportunities as they arise," he added.

Old Mutual reported operating profits for the six months to June 30 of £554 million, 29 per cent up on the same period last year and in-line with forecasts.

"Today’s results look quite good, with all the businesses on a growth path, said Mikir Shar, an equity analyst for Fox-Pitt, Kelton, the investment bank.

"Old Mutual hasn’t said anything to analysts today about Skandia, bar that discussions are ongoing. It has long discussed an expansion strategy - whether in the UK or in Europe. But everything here, including any potential Skandia deal, should depend on price," he added.

Other analysts said today's results highlighted the successful turn-around of the group’s previously acquired US businesses.

Profits at the group’s US life insurance business climbed 27 per cent to $93 million (£52 million), a trend which augured well for further potential acquisitions, Merrill Lynch analysts said.

The stronger first-half results also reflected a successful restructuring exercise at majority-owned South African bank Nedbank, where operating profits jumped 135 per cent on the year to 2.112 billion rand (£182 million).

The London-listed insurer, which generates nearly half of its earnings in South Africa, announced in May that it was in talks to acquire Skandia to build a diversified international business.

Stockholm-listed Skandia had revenues of £7.2 billion last year through sales in Scandinavia, the UK, and continental Europe.

However, analysts have raised concerns that Old Mutual, which has a market capitalisation of around £5.3 billion, would have to issue new equity and take on more debt to fund a takeover of Skandia, which has a market value of about £3 billion.

It has been estimated that Old Mutual has cash and available credit facilities of about £1.3 billion.

Old Mutual said it was on track to deliver further growth from its existing businesses in the second half of the year.

"Each of our businesses is now on a positive trajectory and well placed to seize opportunities for growth in our marketplaces. I believe we are well set to maintain the strong performance of the first half during the rest of 2005," Mr Sutcliffe said.

The interim dividend was set at 1.85 pence per share, a 5.7 per cent increase on the same period last year.

Old Mutual shares were up 6.25p at 137p in mid-morning trade.

For more detailed data on Old Mutual click here.

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