MetLife Inc. said last week that it plans to divest its 52% share of Reinsurance Group of America Inc.

MetLife, New York, would trade its stake in RGA, St. Louis, for its own stock.

RGA, a global provider of life reinsurance, has about $2.2 trillion of life reinsurance in force.

Under the planned deal, RGA would recapitalize its common stock into Class A and Class B shares. MetLife would take RGA Class B common stock in exchange for its existing RGA stock, then trade those shares for its own common stock.

Andrew Kligerman, an analyst for UBS Investment Services, New York, says the structuring of the split-off of RGA would contain significant tax advantages for MetLife. The transaction would “mimic a tax-free share repurchase,” he notes. “Instead of financing buybacks by selling RGA and incurring taxes on the proceeds, Met will allow its shareholders to tender Met shares in exchange for RGA shares (at a discount, in essence, passing on some of the tax savings).”

Kligerman said he understood the split-off had been in the works for the past 15 to 18 months and was not the result of any specific event.

According to a joint statement from MetLife and RGA, the deal should give both companies increased flexibility and ease the way for growing their “core businesses.”

RGA has a market capitalization of about $3.2 billion, which would appear to give the proposed stock swap a value of about $1.6 billion.

The companies hope to complete the deal by Sept. 30. The proposal would need the approval of holders of most of RGA’s common stock that is not owned by MetLife. In addition, existing MetLife stockholders would have to trade enough shares to make the deal work, the companies point out. The companies also need regulatory approvals.

In related news, RGA announced it is seeking to change its articles of incorporation and to ratify a Section 382 shareholder rights plan.

The basic purpose of the changes is to constrain other parties from owning more than 5% of its shares. That would serve to safeguard the company’s existing tax write-offs under Internal Revenue Service rules, RGA said.

RGA also said its board appointed a committee of independent directors to appraise the recapitalization and governance proposals. That committee and the full RGA board have approved the split from MetLife and the shareholder rights proposals, the companies say.

Fitch Ratings, Chicago, reacted to the announcement by placing RGA and its subsidiaries on credit watch with “negative” implications. Fitch said, however, it expected it would downgrade RGA’s ratings by “no more than 2 notches.”

The agency said a continuing concern for RGA “continues to be the potential volatility in quarterly results due to mortality experience and the company’s reliance on the continuing availability of affordable retrocession.”

Another rating service, Standard & Poor’s, New York, said it would not change its ratings of RGA or its affiliates because “our ratings on RGA receive no uplift from MetLife’s majority ownership interest and reflect only RGA’s stand-alone characteristics.” RGA “is not strategic to MetLife,” it added.