Saga has said it is in “exclusive negotiations” with Ageas over a tie-up for its insurance arm and has agreed to sell its underwriting business to the Belgian firm.
Shares in Saga shot higher on Friday morning as a result.
It came after the companies confirmed last week they were holding talks over a potential deal, which would help Saga to reduce its debt burden.
On Friday, Saga told its shareholders it is now in exclusive negotiations with Ageas to establish a 20-year partnership for motor and home insurance.
Ageas UK would run Saga’s motor and home products, which consisted of gross written premiums in excess of £479 million for the year to July.
Ageas will pay £80 million up front as part of the deal, with this potentially increasing if certain targets are met.
The firms also confirmed that Ageas will buy Saga’s Acromas insurance underwriting business. Ageas UK will pay £67.5 million for the business in a deal expected to complete in the second quarter of next year.
Mike Hazell, chief executive of Saga, said: “We are hugely excited at the opportunity to grow our home and motor insurance business through this proposed partnership with Ageas.
“The coming-together of Saga’s fantastic brand and Ageas’s unrivalled expertise in operating successful affinity insurance partnerships would create a winning combination.”
Ant Middle, chief executive of Ageas UK, said: “This proposed deal with Saga aligns perfectly with our strategy to profitably grow in UK personal lines and in creating powerful partnerships to the benefit of our customers.”
In March, European insurance giant Ageas abandoned an attempt to buy Direct Line Group after its proposals were repeatedly rebuffed, with the last approach worth £3.2 billion.
Saga’s insurance division has been struggling amid cost pressures while the wider business is being weighed down by large debts.
On Friday, Saga also revealed that losses widened over the past six months after it was impacted by an impairment in its insurance broking business.
It saw pre-tax losses grow to £104 million for the half-year to July, compared with a £77.8 million loss over the same period a year earlier.
Meanwhile, revenues grew by 13% to £404.8 million for the half-year amid “strong momentum” in its cruise and travel division.
The company also said it reduced its net debts by 7% to £614.6 million at the end of the period.
Shares in Saga rose by 9% to 136.2p on Friday.
