Swiss Re joined those circling 5 billion pound ($10 billion) takeover target Resolution on Monday, confirming it may back potential bidder Standard Life by taking on some Resolution assets.
Rival insurers have been eyeing Resolution Plc -- which has focused on consolidating life funds that no longer write new business -- since it announced plans for an all-share merger deal with competitor Friends Provident Plc in July.
The Swiss reinsurance giant is the latest name to express an interest, with statements from both Swiss Re and Standard Life Plc on Monday confirming talks over a deal that would hand Swiss Re some of Resolution's closed books in the event of a takeover.
It would buy the assets for a fixed price -- and in cash -- should a deal take place.
These discussions are consistent with Swiss Re's strategy to seek attractive opportunities to expand its Admin Re business, Swiss Re said in a statement.
Standard Life, Britain's fifth-largest life insurer, said last month it was considering a cash-and-shares bid for smaller rival Resolution.
But sources familiar with the matter had said the former mutual -- interested in Resolution's protection business, distribution reach and asset management unit -- would seek a partner for the closed life books.
The sources said then that Standard Life hoped to pair up with unlisted closed life specialist Pearl. But the two failed to reach a deal, and Pearl teamed up with mutual insurer Royal London instead, making an unsuccessful 4.5 billion pound, or 660 pence per share, bid last week.
A deal between Standard Life and Swiss Re would help the Scottish insurer raise its price well above Pearl's. Standard Life indicated on Monday any bid would be mostly in cash and that it would seek the approval of Resolution's board.
Resolution reiterated on Monday it was open to offers that add more value than the Friends merger but also said: Our focus is entirely on completing the merger. We will not be distracted ... unless a very compelling offer is made for Resolution.
Unconfirmed reports have put the value of a Standard Life bid backed by Swiss Re at up to 750 pence per share -- well above the closing share price of 705 pence, and valuing Resolution at 5.1 billion pounds.
We think Standard Life/Swiss Re is a likely combination -- they can make it work. They will seek to propose a level that will get them board approval -- they won't go the hostile Pearl route, one industry analyst said.
I think Standard Life could get to 750 pence and it could be attractive to both them and Swiss Re at those levels -- and attractive to Resolution.
Swiss Re said in August it would continue to make acquisitions for its Admin Re unit, which buys life insurance portfolios after other companies have stopped writing new business, and then administers them.
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, amidst stalling markets.
But Swiss Re dropped on the news, ending 1.5 percent lower.
You can see for yourself, the market is taking this negatively. There will obviously be cost synergies, but I think shareholders would rather see a return of capital, said Roger Degen, an insurance analyst at Julius Baer.
Swiss Re and Standard Life have until next week to make a firm bid, after the Takeover Panel confirmed an expected October 25 deadline for Resolution suitors to either declare a firm interest or say they are not interested.
Resolution shareholders are due to vote on the Friends merger -- still the only bid on the table -- on November 5.
(Additional reporting by Douwe Miedema)