LONDON (AP) - British insurance group Friends Provident plc. rejected a $6.9 billion takeover bid from JC Flowers, sending its shares higher amid hopes the US private equity business would swiftly improve its offer.

Friends said in a statement that the proposal "significantly undervalues" its business and refused to negotiate around that figure. It was Flowers' third approach.

At £1.50 ($2.97) per share, the offer values Friends at £3.48 billion ($6.91 billion), based on its 2.323 billion shares outstanding. Under the terms of the proposal the offer price would be reduced if Friends paid out its 2007 final dividend of 5.3 pence (10 cents) a share.

Friends shares were 3.4 percent higher, outperforming other major insurers in Britain, which were were mostly down. Shore Capital analyst Eamonn Flanagan said Friends was likely to be looking for an offer worth around 165-170 pence, or $3.27-3.37 at yesterday's exchange rate.

Mr. Flanagan also said Flowers should not wait too long before improving its terms. "They should move properly in the next month or two before a new chief executive for Friends is appointed," he said.

Mr. Flanagan raised his rating to a buy from a hold.

"We'll wait and see if JC Flowers raises its bid. The market is thinking there may be more to come," Mr. Flanagan said.

Flowers had no immediate comment.

Flowers has built up a 2.7 percent stake in the insurer.

"The board of Friends Provident said it has informed JC Flowers & Co UK Ltd. that its proposal significantly undervalues Friends Provident plc. and its prospects and does not represent a basis for discussion," Friends said in a statement yesterday.

It said that instead it will continue to focus on its recently announced strategic overhaul.

Friends launched a business review after it was jilted by prospective merger partner Resolution plc. The two were combining because Friends needed cash to support its new business.