Aegon has reached an agreement to sell its Dutch business to smaller rival a.s.r. in a cash and stock deal valued at €4.6bn.

The transaction includes pension, life and non-life insurance, banking, and mortgage origination businesses of AEGON.

The deal is part of Aegon’s strategy to free up capital from mature markets and accelerate growth in businesses outside the Netherlands.

As per the agreement, Aegon will receive €2.5bn in cash and a 29.99% stake worth €2.4bn in a.s.r. along with associated governance rights.

Aegon plans to use the proceeds from the transaction to return €1.5bn to shareholders and reduce its gross financial leverage by up to €700m.

The combined entity, which will operate under the a.s.r. brand, is expected to have a leading position in the Dutch pension, life, and non-life insurance space.

Aegon CEO Lard Friese said: “This transaction provides a unique opportunity to accelerate both the return of capital to shareholders and our strategy of investing in markets where we are well positioned for growth.

“Our priority continues to be to further improve our operational performance and grow profitably. The increased focus and resources resulting from this transaction will place us in a better position for the future growth of the company.”

a.s.r. CEO Jos Baeten said: “Together we will form a sustainable, leading insurer and strengthen our market position as the number two insurer in the market. Given the joined strength of both companies, the company will provide a good home for all Aegon the Netherlands employees, customers, and relations.”

The business combination is anticipated to close in the second half of 2023.

In May this year, Aegon announced plans to divest its shareholding in a Spanish insurance joint venture with Liberbank.