Insurer Old Mutual plans to buy back £350-million of its shares, roughly 4% 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. A move was widely expected after rating agency Moody’s in August lifted its outlook to ”stable”.
But the news boosted Old Mutual’s shares on the London market, with the stock trading up 3,1% at 9.29am GMT at 165,4 pence, outperforming a 0,4% 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 brokerage Barnard Jacobs Mellet said in a note.
Old Mutual, which said the buyback would be done out of internal resources, gave no detail on whether there could be further moves with any outstanding cash.
At the end of June, the London-listed group had a surplus under the financial groups directive (FGD) requirements — which apply to all European Union-based financial groups — of £1,6-billion. It has since said it will maintain a buffer of between £750-million 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.” – Reuters