Insurer Old Mutual Plc plans to buy back 350 million pounds ($714 million) of its shares, roughly 4 percent of its capital, as part of a programme to improve capital efficiency, it said on Wednesday.

South Africa's largest insurer had said earlier this year it was not considering major acquisitions and could hand excess cash back to shareholders. The group's first ever buyback was widely expected after rating agency Moody's in August lifted its outlook to stable.

But the news on Wednesday -- following regulatory approval in South Africa, where most of the excess capital sits -- boosted Old Mutual's shares in London. The stock closed up 4.7 percent at 168 pence, beating a 0.5 percent rise in the blue chip FTSE 100 index.

The current trading level is attractive and we believe that the share buyback will send a positive signal to the market, analyst Marius Strydom at Barnard Jacobs Mellet said in a note.

Old Mutual said the buyback in Johannesburg and London would be done out of internal resources but gave no detail on whether there could be further moves with any outstanding cash.

Analysts, however, said further buybacks with excess capital from the cash generating South African business were possible. Old Mutual has said migrating to less capital intensive products in South Africa could free up cash.

At the end of June, the London-listed group had a surplus under the financial groups directive requirements -- which apply to all EU-based financial groups -- of 1.6 billion pounds. It has since said it will maintain a buffer of between 750 million pounds and 1 billion.

In a question-and-answer release for shareholders, Old Mutual confirmed it was focused on growth within the group in the aftermath of the acquisition of Sweden's Skandia last year, but said it would still consider other options.

We continue to evaluate a number of opportunities to deploy capital, investment as well as acquisition, as you would expect, it said. We believe we have the capacity to do a buyback and to maintain our investment plans.

In a separate presentation to investors at Merrill Lynch on Wednesday, Old Mutual concentrated on its asset management business. It aims to have 300 billion pounds of funds under management by the end of December 2008.