Standard Life Aberdeen has agreed to sell the bulk of its insurance business to Phoenix Group for 3.24 billion pounds ($4.51 billion), as it posted broadly in-line full-year results, sending its shares higher.
The deal will see SLA receive 2.3 billion pounds in cash and a 19.9 percent stake in Phoenix, which becomes Europe's largest company focused on buying books of mature business from insurance companies.
SLA said the deal was for 158 billion pounds in assets in its Standard Life Assurance Limited unit, founded in 1825 and one of the Britain's oldest life and pensions businesses, although it would retain its UK retail platforms and financial advice business.
The assurance business is primarily based in Britain, with operations in Ireland and Germany, and serves about 4.5 million customers and clients, it said.
As part of the transaction, SLA said it would expand the companies' existing strategic partnership and look to be "the asset manager of choice" for Phoenix as it seeks more of the UK market for closed, mature business of around 300 billion pounds.
"We are selling capital-heavy UK and European insurance businesses, moving us out of the Solvency 2 environment," co-chief executive Keith Skeoch told a media call.
Insurers say stringent European Solvency 2 capital rules have crimped their business.
The company also reported its first set of annual results since it formed last year through the 11 billion pound merger of Standard Life and Aberdeen Asset Management.
SLA said pro-forma adjusted pretax profit in the year to the end of December was 1.04 billion pounds, down 0.5 percent from 1.05 billion pounds in 2016 but in line with a company-supplied consensus forecast of 1 billion pounds.
Assets under management and administration rose 1 percent over the period to 654.9 billion pounds, although the company said it continued to see outflows from its asset management as market conditions remained "tough".
Net outflows over the period were 22.1 billion pounds, it said, albeit an improvement on the prior year outflows of 26.1 billion pounds and beating a company supplied analyst forecast for 37.5 billion pounds in outflows.
SLA said it would pay a full-year dividend of 21.3 pence a share, up 7.5 percent on the prior year. In a separate statement, SLA said Gerry Grimstone would stand down as chairman at the end of 2019.
At 0814 GMT, shares in SLA were up 3.8 percent at 400.2 pence a share, the second-top gainer on the FTSE 100 index. Phoenix shares were up 3.7 percent, the top gainer among the mid-caps.