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Higher tax suppresses Old Mutual profits

London-based insurance group Old Mutual has seen its profits in the first six months of 2006 decrease by around 2% compared to 2005 levels due to higher income tax.

The company revealed profit for the period to be GBP380 million, GBP7 million less than last year. However, the insurer said that operating profit, which does not factor in the influence of income tax, rose 36% to GBP771 million from GBP566 million in H1 2005.

Meanwhile, speculation has suggested that Old Mutual will sell off Skandiabanken, the banking unit of recently-acquired Skandia, in order to mitigate the cost of the GBP4 billion takeover. However, Old Mutual’s chief executive Jim Sutcliffe told reporters that the company had no plans to divest Skandiabanken.

It has been a good first half, with encouraging growth across our business and we have been able to declare a significant increase in the dividend. Skandia’s results are ahead of our expectations and the integration is progressing well. Currency movements always affect our results, but Old Mutual is now a significantly bigger and more diverse organization than in the past and we are well placed in some very attractive markets, commented Mr Sutcliffe.

Old Mutual’s tax effected first half results come hard on the heals of Lloyds of London insurer Hiscox’ announcement that it is relocating its main business to Bermuda in order, in part, to escape the 30% corporate take rate in the UK.