Swiss Re Ltd., the world’s second- biggest reinsurer, said it’s in preliminary talks about combining its Admin Re business with Phoenix Group Holdings.

“There is no certainty that these discussions will lead to any transaction,” the Zurich-based reinsurer said in a statement today. Swiss Re said it was reacting to media speculation over Admin Re and will make further statements “if and when appropriate.”

Swiss Re said in February that it had “work to do” in relation to Admin Re, a unit that manages so-called closed life insurance funds mainly in the U.K. and no longer sells new contracts. Fabrizio Croce, a Zurich-based analyst with Kepler Cheuvreux with a buy rating, said in a note today that “capital consumption by this unit is substantial,” making a sale to the U.K.’s biggest manager of such funds “beneficial.”

“This is good news for Swiss Re,” said Stefan Schuermann, a Zurich-based analyst with Vontobel Holding AG, with a buy rating on Swiss firm’s shares. “The more capital they can take out of Admin Re, the better.”

Swiss Re rose 0.9 percent to 72.55 francs at 10:08 a.m. in Zurich trading, valuing the company at 26.9 billion francs ($28 billion). Phoenix Group jumped as much as 5.7 percent in London.

‘No Certainty’

Phoenix Group said today that if talks are successful, it would result in Swiss Re taking a minority shareholding as payment. Still, there is “no certainty” on “the terms on which any such transaction might proceed,” it said.

Sky News reported on the talks late yesterday, saying it would be a 3 billion-pound ($4.6 billion) merger, adding that it would create a business with more than 100 billion pounds under management and close to 10 million policy holders.

Phoenix Group, which buys life-insurance policies and profits by releasing capital from them as they mature, said in January it plans to raise 250 million pounds in a share sale to lower its debt burden. The company last year ended takeover talks with CVC Capital Partners Ltd., saying the private-equity firm’s valuation of the company was too low.

Swiss Re booked a $1 billion loss in the second quarter of last year after agreeing to sell its U.S. Admin Re holding company to Prudential Plc for 398 million pounds. At the time, the insurer said the transaction unlocked capital for use across the group, boosting return on equity, earnings per share and economic net worth growth targets.

The reinsurer split up its business units and formed a new holding company in 2011 that overarches its reinsurance operations, which accounts for about 80 percent of revenue, plus the smaller corporate solutions and the Admin Re units.

Editors: Simone Meier, Dylan Griffiths