The disposal is the first step in a strategic overhaul to slim down Old Mutual, an insurer, bank and fund manager operating in 35 countries, amid investor concerns the group's complexity has held back its share price.

Old Mutual is selling the US unit to hedge fund Harbinger Capital Partners for $350 million, and the proceeds will be used to repay debt, it said on Friday.

Old Mutual's shares rose as much as 5.3 percent, but by 1400 GMT had fallen back to stand 1 percent higher at 124.8 pence, still outperforming a flat FTSE 100 share index.

"We believe the market will like the announced sale of US life," J.P. Morgan Cazenove analysts wrote in a note.

"We like that management is simplifying and focusing Old Mutual."

Chief Executive Julian Roberts declined to comment on whether the restructuring will also include a sale of Old Mutual's flagship asset, its majority stake in Nedbank, South Africa's fourth-biggest lender.

Emerging markets lender Standard Chartered wants to buy a stake in Nedbank, a source told Reuters in May, while Europe's biggest lender, HSBC, is also interested in bidding, according to a report last month.

Old Mutual said in March it would sell its US life unit and list its US fund management business as part of the strategic revamp, which it aims to complete by the end of 2012.

It also signaled it would exit some markets to refocus on its most profitable operations, but did not provide further detail.

The company has previously faced calls to concentrate on insurance and asset management by selling its Nedbank holding, a move which analysts say would also boost its capital position outside South Africa.

Old Mutual finance chief Philip Broadley told reporters the US disposal was the biggest life insurance deal there in two years, and had been done at a better than average price.

"Bear in mind there have been very few deals at all in the US industry in the last couple of years, and those deals have been done at a lower ratio of embedded value, so we are pleased with the transaction," he said.

The company is on track to float its US funds business next year, Roberts added.

Old Mutual's half-year profit jumped 43 percent to 735 million pounds ($1.17 billion), outstripping the 681 million pounds penciled in by analysts, according to the company's calculation of consensus expectations.

The improvement was driven in part by cost cuts as Old Mutual took out 42 million pounds in expenses from a total target of 100 million.

The company also benefited from currency fluctuations and a pick-up in revenues, with life sales climbing 28 percent to 814 million pounds.

European insurers reporting first-half results in the last two weeks have mostly benefited from stronger life sales, reversing a decline a year ago as economic woes deterred consumers from saving and investing.

Old Mutual is paying a half-year dividend of 1.1 pence, having suspended the payout in the first half of 2009 to preserve cash.