UPDATE 1-M&F Q3 premiums down 2 pct as trading remains tough

* Q3 gross written premiums down 8 pct

* Trading conditions tough as consumer spending remains slow (Adds details)

JOHANNESBURG, Nov 5 (Reuters) - South African insurer Mutual & Federal (M&F) (MAFJ.J) reported a two percent decline in premiums in its for the third quarter on Thursday as trading conditions remained tough due to a drop in consumer spending.

M&F, majority-owned by South Africa's largest insurer Old Mutual (OML.L) (OMLJ.J), said gross written premiums for the nine months to end-September fell 8 percent to 6.454 billion rand ($831.5 million), compared to 7.029 billion rand in the year-ago period.

Premiums within its personal group schemes portfolio dropped 40 percent year-to-date due a the cancellation of a number of unprofitable schemes during 2008.

However, the insurer said returns for the third-quarter had been satisfactory.

M&F posted a 17 percent fall in first-half headline earnings per share in July, following a number of large commercial and industrial claims in its first quarter.

The firm swung to a full-year headline loss per share last year due to volatile market conditions.

Its shares were flat at 0718 GMT. (Reporting by Serena Chaudhry)