The insurance arm ceased underwriting new business in 2015 but still offers life insurance in Germany under different brands.
Generali Deutschland will sell an 89.9% stake to Viridium Gruppe, which is owned by London-based private equity firm Cinven (80%) and German reinsurer Hannover Re (20%).
The Italian insurance group will retain 10.1% in Generali Leben and a seat on the supervisory board.
Generali Leben represents around 36% of Generali Deutschland’s life reserves and is mainly focused on the guaranteed traditional policy business.
Prolonged interest rates have made it very difficult for life insurers to meet guaranteed returns payments, which has seen a number of closed book insurer look to sell to consolidators.
Leben, which means ‘life’, manages four million policies.
The deal is “in line with [Generali] Group’s strategic ambition of rebalancing its portfolio, significantly reducing exposure to interest rate risk and improving return on risk capital,” the insurer said.
After it closes, Generali Deutschland will remain a leader in the unit-linked, hybrid and protection business and will maintain its position as the second largest German insurer, the company said.
Under the terms of the agreement, Generali will manage the assets under management of Leben for a five-year period through Generali Investments Europe.
The deal will be a considerable boost to Viridium, which currently manages a portfolio of almost one million insurance contracts and has assets of around €16bn.
Subject to the completion of due diligence, Generali will have an opportunity to invest in a minority stake in Viridium.
Generali Group chief executive Philippe Donnet said: “Germany is a core market for Generali. The management team and all of our colleagues are working relentlessly to strengthen our position as a leader in the insurance industry. This commitment makes us confident about our future in the market.”
The chief executive of Generali Deutschland, Giovanni Liverani, added: “This is the final step in the strategic turnaround of Generali in Germany, which allows us to grow and be stronger in this market.”