The insurer sold the bulk of its life and pensions business to PPP lifetime care, its newly- acquired subsidiary, for pounds 220m, after injecting pounds 300m into PPP to develop its business.
The move allows GRE to distribute all the profits from critical illness and term assurance business to shareholders. PPP will now write nearly all of Guardian's health and protection business.
Before the restructuring, shareholders received only 90 per cent of profits because the business was written into an old-style with-profits fund, with 10 per cent going to policyholders. The fund, first set up in 1720, will now close to new business.
The City has been pressuring GRE to do something to boost its life insurance business because it was failing to compete effectively. But analysts feared GRE might pay a big premium to buy another life insurer.
Shares rose by 2 per cent yesterday as it emerged GRE had escaped from this dilemma by transferring its life business to PPP. Analysts welcomed the move.
John Robins, group chief executive, said: "Today's announcement is the culmination of many months' work, including liaison with HM Treasury. We have been determined to improve the returns from our life business for both shareholders and policyholders. Our acquisition of PPP healthcare group gave us the ideal opportunity."
GRE has already conducted three restructurings in the last two years and has cut its costs by 50 per cent over four years, concentrating on health, protection and general insurance.
The announcement failed to quell speculation that GRE remains a prime candidate for a takeover. Yesterday the company said its overall operations remained under pressure.
In a separate trading statement, Mr Robins said: "Market trading conditions of other companies are consistent with our own experience, particularly in UK motor."
GRE said it should achieve savings of pounds 25m from the integration of PPP, plus a further pounds 30m from the integration of two US insurers, Peerless and Indiana, bought earlier this year.Reuse content