LONDON/ZURICH (Reuters) – Phoenix Group Holdings (PHNX.L) has agreed to purchase the British enterprise of Swiss Re (SRENH.S) for 3.2 billion kilos ($4.1 billion) in money and shares, the UK insurer’s greatest deal so far, driving the 2 firms’ shares increased.

The brand of Swiss insurer Swiss Re is seen in entrance of its headquarters in Zurich, Switzerland, September 23, 2015. REUTERS/Arnd Wiegmann

The deal is the {latest} in a quickly consolidating business as many insurance coverage firms, hit by more durable capital guidelines for the reason that monetary disaster, search to promote legacy books of enterprise to unlock capital to spend money on high-growth areas.

By consolidating the legacy books of enterprise collectively, Phoenix goals to run them extra effectively. Its robust progress helped to propel it into Britain’s blue-chip FTSE 100 .FTSE this 12 months.

“There are too many insurance coverage firms in a market which is consolidating and we’re the pure beneficiaries,” outgoing Phoenix Chief Government Clive Bannister instructed a media name on Friday.

Aviva (AV.L) and M&G (MNG.L) are amongst insurers with substantial legacy books of insurance coverage enterprise that analysts have speculated may very well be on the market. The pipeline for giant bulk annuity offers – insuring firm outlined profit, or last wage pension schemes – can be robust.

The deal will take Phoenix’s whole property to 329 billion kilos and is anticipated to generate 800 million kilos of value and capital synergies, Phoenix mentioned. It is because of full subsequent 12 months.

Phoenix’s shares have been up 1% at 747 pence at 0902 GMT, barely outperforming the FTSE 100, with analysts highlighting the promise of a 3% enhance within the insurer’s 2020 last dividend.

Swiss Re was up 2.6% at 108.55 Swiss francs, on the {top} of the STOXX Europe 600 index .

Phoenix Group, Europe’s largest proprietor of life assurance funds closed to new prospects, mentioned buying ReAssure was anticipated to usher in extra money flows of about 7 billion kilos over time.

Swiss Re mentioned it might get a money cost of 1.2 billion kilos and a stake in Phoenix of 13% to 17%. ReAssure’s minority shareholder, MS&AD Insurance coverage Group Holdings Inc (8725.T), will obtain shares in Phoenix representing an 11% to 15% stake.

The Swiss Re deal follows Phoenix’s 2.9 billion kilos deal for Normal Life Assurance in 2018, by which Normal Life Aberdeen (SLA.L) additionally retained a stake within the mixed group.

Swiss Re Group CEO Christian Mumenthaler mentioned the deal secured “a powerful purchaser” for the enterprise.

Swiss Re, the world’s second-largest reinsurer, estimated the transaction, anticipated to shut in mid-2020, would have a constructive affect on its Group Swiss Solvency Check (SST) ratio and financial revenue and a adverse affect on its US GAAP leads to the fourth quarter of 2019.

The Swiss firm mentioned it might take an estimated pretax cost of about $300 million within the fourth quarter, primarily to replicate the upper consolidated ebook worth of ReAssure, pushed by traditionally low rates of interest.

The Zurich-based firm in July shelved its plans for a $4.1 billion flotation of ReAssure, citing weak demand from institutional traders.

Extra reporting by Samantha Machado in Bengaluru; Modifying by Stephen Coates/Edmund Blair/Jane Merriman

Supply hyperlink