LONDON (Bloomberg) — Old Mutual Plc, Britain's third-biggest insurer, said nine-month profit missed estimates because of currency movements and one-time charges in the US, South Africa and Sweden. The stock dropped the most in more than three years.Operating profit was $1.06 billion ($2.06 billion) in the nine months through September, the London-based company said today, without providing a year-earlier figure. That fell short of the $1.13 billion analysts' estimate provided by the company.

"Taking one-offs into consideration Old Mutual has still fallen short of key financial metrics in the third quarter," said James Pearce, a London-based analyst at JPMorgan Cazenove Ltd., who has an "in-line" rating on the stock. "Further historic adjustments raise questions as to whether financial controls have been adequate."

Chief executive Officer Jim Sutcliffe, 50, paid 56 billion kronor ($8.13 billion) in February to buy Stockholm-based Skandia AB, with operations in the UK and Nordic regions, to counter sluggish sales in the US and South Africa.

Shares of Old Mutual dropped 10.25 pence, or 5.8 percent, to close at 166 pence in London, their biggest decline since March 24, 2003. The stock has gained 0.8 percent this year, making it the second-worst performer in the eight-member FTSE 350 Life Insurance Index, which rose 12 percent.

The "slight misses" are pushing the shares lower, said Mikir Shah, a London-based analyst at Fox-Pitt, Kelton, who rates the stock "outperform" and expected operating profit of $1.1 billion. "The operational performance seems reasonable."

Life insurance sales advanced to $1.15 billion, from $1.08 billion in the year-earlier period, the company said in a statement. Old Mutual posted net income of $506 million in the nine month period, and didn't provide a year-earlier figure.

Third-quarter net income was lower in the period compared with the first two quarters, Sutcliffe said. The company incurred a charge of as much as $25 million to offer more attractive annuity products to US customers, administrative charges at its South African fund unit and accounting charges in Sweden, he added.

"We're a little light today," said Sutcliffe, referring to third-quarter profit, which the company didn't disclose. "But we're not here for quarterly performance. We are here for the long term building of the business. Cash flow is very positive. That underpins our future profit growth."

Third-quarter life insurance sales stood at 266 million pounds as a result of the Skandia acquisition. Life insurance sales in South Africa fell 11 percent in the period to 89 million pounds and life sales in the US fell 23 percent to $65 million.

Total funds under management rose 27 percent to $222 billion, missing the analysts' estimate of $228 billion. Old Mutual's embedded value, a measure of its worth, was 140.7 pence a share at September 30, also lower than its analysts' estimate of 141.5 pence per share.

"I don't think the prospects of the business are being fully reflected in the share price," said Shah of Fox-Pitt, Kelton. "I think it is a business in turnaround and the purchase of Skandia is still to come through."

The company predicted in June that Skandia's contributions to earnings will triple by 2008 and has said it will make cost savings from the acquisition of $70 million per year. "Skandia is on track to deliver its targets for 2008," Sutcliffe said today.

Mutual fund sales jumped 60 percent to $5.22 billion from $3.26 billion, the company said.