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.
