As part of the deal Allianz is taking a 49% stake in LV='s general insurance business for £500 million.
The second stage of the deal will see Allianz pay £213 million for a further 20.9% stake in LV= GI through an agreed, forward purchase based on a total valuation of £1.02bn for 100% of LV= GI. The deal values the business overall at £1.02bn.
The tie-up will see the two companies forge a joint venture - LV= GI - with around six million customers and gross written premiums in excess of £1.7 billion.
"I am thrilled to join forces with LV=, one of UK's most respected and loved brands".
Richard Rowney, LV='s chief executive, said the deal will allow the insurer to maintain a strong presence in the pensions and personal insurance market.
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"The combination of LV's strong brand, longstanding reputation in personal insurance and excellent customer service with the financial strength, digital expertise and data analytics of Allianz, the world's largest P&C insurer, will allow us to further develop and expand the products and services that our customers demand".
The transaction is expected to create the third largest personal insurer in the United Kingdom, and enables Allianz to take a leading role in the United Kingdom retail sector, and provides LV= with additional financial strength and expertise to expand its business operations. "The strategic partnership with Allianz will allow us to continue to benefit from a growing personal insurance business while also enabling us to strengthen our capital position, leaving us well placed to continue to expand our Life and Pensions business and pursue new digital opportunities".
Bournemouth-based LV= has almost six million British customers and offers a range of products from vehicle, home, travel and life insurance to investment and retirement solutions.
LV='s current Managing Director of General Insurance Steve Treloar will run the joint venture, reporting to a board drawn from Allianz and LV=.