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REINSURERS CONSOLIDATE

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NEW YORK -- Consolidation in the global reinsurance industry is continuing, as two European reinsurers buy U.S. companies.

Gerling Global Reinsurance Corp.'s purchase of Constitution Re Corp. for $700 million will significantly increase the capital of the Cologne, Germany-based re-insurer's U.S. operations.

The increase in size and the compatibility between the two reinsurers will greatly boost Gerling's position in the United States, said Charles D. Troiano, president and chief executive officer of Gerling Global Reinsurance Corp. of America.

Meanwhile, Swiss Reinsurance Corp.'s $1.8 billion purchase of Life Re Corp. in Stamford, Conn., will add to the Zurich, Switzerland-based reinsurer's already substantial life reinsurance business.

"It's all part of the consolidation that is going on in reinsurance," said Gloria L. Vogel, an analyst at Advest in New York.

Constitution Re will make Gerling a more substantial reinsurer in a market that emphasizes size, and Life Re will give Swiss Re a solid U.S. life reinsurer to add to its existing life portfolio, Ms. Vogel said.

Gerling's U.S. operations now will have $700 million in capital, said Mr. Troiano. Its 1998 combined gross premium income will increase to about $800 million, with $600 million derived from Constitution Re and $200 million from Gerling, he said.

The two reinsurers write similar business, and both strive to lead the programs they participate in, Mr. Troiano said. "And there certainly is a marketing advantage to having financial flexibility," he said.

Constitution Re and Gerling will merge their operations in the United States, though the Constitution name will be retained for some business areas, Mr. Troiano said. Bard Bunaes, chairman of Constitution Re, will become vice chairman of the combined operations.

The purchase of Life Re will increase Swiss Re's North American life and health reinsurance gross premiums to $2.7 billion. Its worldwide life and health gross premiums will increase to $4.9 billion.

Swiss Re already writes a substantial amount of life reinsurance. In August 1996, it bought Mercantile & General Reinsurance Co. P.L.C. in London for $2.7 billion.

Last week A.M. Best Co. in Oldwick, N.J. put Constitution Re's A+ rating under review with negative implications. It also put the A rating of Gerling under review with developing implications.