Swiss Re buys Barclays life arm

By Sam Cage and Paul Arnold

ZURICH (Reuters) - Swiss Re (RUKN.VX), the world's largest reinsurer, agreed to buy Barclays' (BARC.L) life assurance portfolio for 753 million pounds in cash, even as it wrote down more credit assets.

Swiss Re said on Tuesday it would acquire about 760,000 life insurance and pension policies and annuity contracts, for which Barclays had stopped writing new business since 2001, representing 6.8 billion pounds in invested assets.

The deal, boosting its Admin Re unit, which buys life insurance portfolios after other firms have stopped writing new business, showed that Swiss Re was strong enough to take advantage of tough markets, Chief Executive Jacques Aigrain said.

"The difficult market environment also creates new opportunities," he said. "Swiss Re has the execution capability and capital strength to seize these opportunities."

The strategy of adding top-line growth through the Admin Re unit is one of the reasons why Swiss Re says it will grow faster than other reinsurers as markets stall. It also said the acquisition would not impact its share buyback programme.

"The acquisition and the price paid fits into the strategy and is good news," said Lanksbanki Kepler analyst Fabrizio Croce.

Swiss Re, which also reported second-quarter net profit below expectations, said it made a mark-to-market loss on structured credit default swaps (CDS) of 362 million Swiss francs (176 million pounds) in the second quarter.

Swiss Re shares rose 0.9 percent to 66 francs by 10:05 a.m., lagging a 3.5 percent gain in the DJ Stoxx European insurance sector .SXIP. Barclays shares gained 6.1 percent to 360 pence, rising faster than the banks sector .SX7P.