UK insurer Phoenix is to buy Axa Wealth's pension and protection business Sun Life in a deal worth £375m - less than the £500m figure that had been touted previously.
Axa said the deal, which is expected to complete in the second half of this year, would generate a loss of €400m. It is part of the French group's decision to exit the UK's life assurance market.
The move will see £12.3bn of assets under management and more than 910,000 policies transferred over to the rival company, which said it expects to be able to find £250m of "synergies" within six months of completion.
Phoenix - which had been the frontrunner in the bid to buy the division out - said the acquisition should boost cashflow by around £300m between 2016 and 2020, and £200m from 2021 onwards.
The deal will be funded from an equity placing, expected to represent 9.99 per cent of existing shares, and a new short-term debt facility, which Phoenix said it would be able to repay within six months of completion.
Phoenix is proposing to increase the final 2016 dividend per share by five per cent to 28p. This would increase the dividend per share to 56p on an annualised basis.
Phoenix’s group chief executive Clive Bannister said: “The acquisition of the Embassy and SunLife businesses represents another important step forward in Phoenix’s growth strategy.
"The transaction meets our acquisition criteria and will generate additional cash for the group which supports the proposed increase in Phoenix’s dividend. The group has extensive integration experience and expertise and we believe that both the Embassy and SunLife businesses are a strong fit, benefitting both shareholders and policyholders alike.
"We will invest heavily to ensure a smooth transition of the two businesses from Axa to Phoenix and we are committed to delivering the highest level of service to both direct and IFA customers, as we do for our existing customers. Looking ahead, we believe there will be further consolidation in the UK life industry and we will continue to explore further opportunities as they arise.”