Deutsche Bank has today announced a deal to sell its UK insurance business Abbey Life to Phoenix Group Holdings.
The German bank is shedding its non-core assets and reducing its balance sheet in an effort to reassure anxious investors and meet regulators' demands.
Phoenix, Britain's largest owner of life insurance funds closed to new customers, is paying £935m for the unit which manages assets worth £10 billion and has 735,000 policyholders.
Although the deal will result in a pre-tax loss of some €800m in the first quarter, mainly from writedowns for Deutsche Bank, it will lift the German lender's capital ratio by 10 basis points.
The sale was a rare piece of good news for Deutsche Bank investors and the bank's shares had risen over 3% this morning.
It recovered from a record low yesterday when the stock was hit by continuing concerns about the health of the financial industry in Europe's largest economy.
Deutsche's chief executive John Cryan told Germany's Bild that he had not asked for state aid following a report that the bank had asked Berlin for help to deal with a $14 billion demand from the US Department of Justice.
Regulatory changes and rock bottom interest rates have ramped up pressure on banks to deal with their legacy books, leading many to consider putting them up for sale.
The interest rate cut that followed Britain's vote to leave the European Union has squeezed returns on investments for companies that manage closed life insurers.
Germany's largest bank, which is in the midst of a deep overhaul, is trying to cut its balance sheet dramatically as it seeks to comply with stricter rules demanding lenders hold more capital against any assets.
Deutsche Bank has been working on the sale of Abbey Life, which it had bought for £977m in 2007, since last year, sources had told Reuters.
Run-off specialist Phoenix said it would raise £735m via a rights issue and use £250m from a new bank facility to fund the purchase.
Phoenix Group's CEO Clive Bannister had told Reuters in August that it was scouting for acquisitions to help gain scale in a challenging, low interest rate environment.
Phoenix was particularly interested in buying profit-making UK businesses as acquisitions would help realise savings by managing a larger number of policies more efficiently.
Earlier, French insurer AXA sold its UK investment and pensions business to Phoenix for £375m, completing a well-flagged exit from a mature life assurance market to focus on faster-growing emerging economies.
In March, the Financial Conduct Authority launched an investigation into Abbey Life's treatment of long-time life insurance customers which could result in compensation payments to policyholders or fines for the British insurer.
