LONDON (Bloomberg) - Old Mutual plc., the biggest insurer in Africa, rose to the highest in seven months in London trading after saying it had no defaults in the US in the first quarter and its capital position improved.

CEO Julian Roberts said the "significant" increase in capital, after the surplus grew 29 percent to £900 million ($1.4 billion), was mostly due to accrued profit and the issue of bonds by its Johannesburg-based banking subsidiary, Nedbank. Old Mutual also scrapped its dividend.

"Investors seem to like what Roberts is doing - it's a cautious approach to cleaning up a difficult situation," Chris Gilmour, an analyst at Absa Asset Management Private Clients in Johannesburg said in an e-mail. "Notwithstanding Nedbank's poor trading update, Old Mutual is still a very quality asset, but from a valuation perspective, it seems to be fully priced."

Old Mutual, the only one of South Africa's three largest insurers that is listed in London, has expanded its business into the UK, Europe, the US and Asia Pacific in the past 10 years. The company makes the bulk of its profit from selling life insurance with South Africa contributing the largest share of revenue.

The insurer rose 4.8 pence, or 7.2 percent, 71.9 pence as at 10.37 a.m., the highest since October 14. The gains pushed Old Mutual's market cap to £4 billion. Old Mutual has climbed 74 percent since saying on March 18 it was closing its Bermuda-based US life-insurance unit. The business offered guaranteed investor returns on annuities and only partially hedged against the risk of market declines, leading to $474 million of writedowns in 2008.

London-based Old Mutual said in its statement to the stock exchange yesterday that life-insurance sales fell a more-than- estimated 25 percent to £316 million ($479 million) from £423 million a year earlier in the first quarter as revenue from the UK, the US and Asia Pacific declined.

"Sales were affected by a shift in consumer sentiment, the closure of Bermuda to new business and the deliberate downsizing of our US Life business," CMr. Roberts said in the statement.

More than half of Old Mutual's US Life staff were fired, which amounted to about 200 people, according to finance director, Philip Broadley, who spoke on a conference call from London. Old Mutual's Atlanta office is closed and all life operations have relocated to Baltimore. The asset-management office in Boston remains open. Operations in Hong Kong and Australia are closing, Mr. Roberts said.

Mr. Roberts said there had been "good" inflows into funds in Europe but the overall decline of six percent to £245 billion was due to the withdrawal of £1.5 billion by the Public Investment Corporation, the largest government employee pension fund manager in South Africa.