Old Mutual says U.S. troubles will hit 2008 sales

LONDON (Reuters) - Insurer Old Mutual's (OML.L) decision to withdraw a string of U.S. guaranteed products after hedging troubles could mean a 15 to 20 percent drop in its U.S. life sales this year, Chief Executive Jim Sutcliffe said.

The insurer, which had warned of U.S. troubles in June, said earlier on Wednesday that it was forced to take a 107 million pound hit to strengthen reserves backing guarantees for products sold by its Bermuda business after hedging policies proved inadequate.

"If we lose the Bermuda business, the sales would be 15-20 percent lower," Sutcliffe told reporters on a conference call.

He said that drop could worsen to 35 percent in 2009 if the products, which account for the bulk of its variable annuity sales and 70 percent of its Bermuda business, are not replaced.

Old Mutual has made a string of management changes as a result of the troubles, ousting the chief operating officer of the U.S. life business, appointing a new chief executive and strengthening the local hedging committee.

(Reporting by Clara Ferreira-Marques)