** Shares in life insurer Phoenix Group rise asmuch as 3.7 pct to a year-high after industry heavyweight Aviva said it could gobble up one of Phoenix's main rivals,Friends Life, at a 15 pct premium to its share price.
** Deal valuation gives Phoenix a lift.
** Canaccord Genuity analyst Ming Zhu raises Phoenix GroupPT to 850p from 800p, saying Aviva deal may increase thewillingness of market participants to consider M&A.
** Merger reflects need to consolidate and cut costs inBritain's insurance industry, fund managers said.
** Ed Shing, global equity portfolio manager at BCS AssetManagement said funds that invested in Friends Life may preferhigher dividend paying insurers like Phoenix, Chesnara or Catlin.
** Chesnara up 1 pct, Catlin flat.
** Meanwhile, Aviva's shares fall as much as 4.5 pct inearly trading on Monday, while Friends Life jumps as much as 8.2pct, stock's largest percentage rise since 2009. (rm://richa.naidu.thomsonreuters.com@reuters.net)