UPDATE 5-Britain's Phoenix to buy Swiss Re's ReAssure business for $4.1 bln

* Latest deal in rapidly consolidating sector

* Follows aborted attempt to list ReAssure in July

* Biggest deal for Phoenix
(Updates share move, adds analysts, advisers)

By Michael Shields, Simon Jessop and Carolyn Cohn

LONDON/ZURICH, Dec 6 (Reuters) - Phoenix Group Holdings
has agreed to buy the British ReAssure business of
Swiss Re for 3.2 billion pounds ($4.1 billion) in cash
and shares, the UK insurer's biggest deal to date as it bulks up
on policies closed to new customers.

The deal comes after ReAssure, which like Phoenix
specialises in closed life insurance books, shelved a planned
initial public offering (IPO) earlier this year.

Many insurance companies, hit by tougher capital rules
since the financial crisis, want to sell legacy books of
business to free up capital to invest in high-growth areas.

By consolidating the closed books of business, Phoenix aims
to run them more efficiently.

"There are too many insurance companies in a market which is
consolidating and we are the natural beneficiaries," outgoing
Phoenix Chief Executive Clive Bannister told a media call on
Friday.

Aviva and M&G are among insurers with
substantial legacy books of insurance business that analysts
have speculated could be for sale. Phoenix said the deal would
also enable it to grow in bulk annuity deals - insuring company
defined benefit, or final salary pension schemes.

The deal will take Phoenix's total assets to 329 billion
pounds and is expected to generate 800 million pounds of cost
and capital synergies, Phoenix said.

Swiss Re, the world's second-largest reinsurer, estimated
the transaction, expected to close in mid-2020, would have a
positive impact on its Group Swiss Solvency Test (SST) ratio and
economic profit and a negative impact on its U.S. GAAP results
in the fourth quarter of 2019.

The Swiss company said it would take an estimated pretax
charge of about $300 million in the fourth quarter, mainly to
reflect the higher consolidated book value of ReAssure, driven
by historically low interest rates.

SHARES MIXED

Swiss Re shares were up 2.5% at 108.45 Swiss francs at 1225
GMT, one of the biggest gainers on the STOXX Europe 600 index
.

Phoenix's shares reversed earlier gains after analysts at
Peel Hunt downgraded their rating on the stock to "reduce",
highlighting concentration risk from the firm's legacy UK life
books.

Phoenix was down 1.2% at 730 pence, compared with a 0.8%
rise in the FTSE 100.

Phoenix, Europe's largest owner of closed life assurance
funds closed, said acquiring ReAssure was expected to bring in
additional cash flows of about 7 billion pounds over time.

Swiss Re said it would get a cash payment of 1.2 billion
pounds and a stake in Phoenix of 13% to 17%. ReAssure's minority
shareholder, MS&AD Insurance Group Holdings Inc, will
receive shares in Phoenix representing an 11% to 15% stake.

The Swiss Re deal follows Phoenix's 2.9 billion pound deal
for Standard Life Assurance in 2018, in which Standard Life
Aberdeen also retained a stake in the combined group.

The Zurich-based company in July shelved an IPO of ReAssure
with a price range of 2.8-3.3 billion pounds, citing weak demand
from institutional investors.

Swiss Re was advised by Morgan Stanley, Fenchurch and
Clifford Chance, a spokeswoman said.

Phoenix said its financial advisers were BofA Securities,
Citigroup and HSBC.

($1 = 0.7794 pounds)
(Additional reporting by Samantha Machado in Bengaluru; Editing
by Jane Merriman, Kirsten Donovan)