Standard Life Aberdeen has sold its insurance arm to specialist insurer Phoenix in a deal worth £3.24bn.
Phoenix will pay £2bn in cash and issue Standard Life Aberdeen with a 19.99 per cent shareholding.
A dividend of £300m will also be paid to the FTSE 100 giant upon deal completion.
The deal sees most of Standard Life's legacy insurance business handed over to Phoenix, allowing the merged company to focus on asset management.
Standard Life Aberdeen was the leading gainer on the FTSE 100, rising around four per cent as markets opened.
“With today’s news of the proposed sale of the capital-intensive insurance business and an enhanced long-term strategic partnership with Phoenix Group, Standard Life Aberdeen has completed its transformation to a fee-based capital-light investment company," said co-CEOs Martin Gilbert and Keith Skeoch.
Chairman Sir Gerry Grimstone said:
This transaction completes our transformation to a capital light investment business, a process started in 2010 with the sale of Standard Life Bank, continuing with the sale of our Canadian business and the merger last year between Standard Life and Aberdeen Asset Management.
Asset manager Aberdeen completed its £11bn merger with Standard Life – which was originally founded as an insurance company – last August. Today's deal will cap a second bumper payday for boutique investment bank Fenchurch Advisory, which has supported Standard Life Aberdeen on both deals.
The deal comes just days after Lloyds Bank shunned Standard Life Aberdeen by withdrawing £109bn of assets it manages on behalf of subsidiary Scottish Widows.
FTSE 250 firm Phoenix specialises in buying up unwanted legacy insurance businesses. It has landed a number of big deals in recent years, including buying Abbey Life from Deutsche Bank and Sun Life from Axa.
Boss Clive Bannister said today's deal was a "compelling transaction for Phoenix"
He said: "The proposed acquisition establishes Phoenix as the pre-eminent closed life fund consolidator in Europe with more than 10m policyholders and supports a significant increase in Phoenix's cash generation.
"We are delighted that Standard Life Aberdeen recognises the value that Phoenix's ownership of these businesses can deliver and has chosen to become our largest shareholder."
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Standard Life Aberdeen also reported its annual results this morning. Excluding the Scottish Widows withdrawal, the firm revealed another year of net withdrawals from its funds.
Net flows out of Standard Life Aberdeen totalled £31bn, following £36.8bn of withdrawals in 2016.
Fee based revenue edged up from £2.7bn to £2.8bn. Profit before tax was broadly flat at £1bn.
Gilbert and Skeoch said: “Over the past year, as our teams come together with a sense of energy and purpose, we have continued to deliver for our clients, growing assets, revenues and dividends.
At the same time, the merger integration is progressing well and we are now targeting at least £250m of annualised cost synergies. While market conditions remain tough, particularly within the institutional channel, the momentum in our business is good demonstrated by the £80bn of gross inflows attracted during the year.
Although we have seen net outflows, these have reduced year on year and continue to improve as our investment and distribution teams begin to leverage the full breadth of our capabilities, global reach and scale.