London based underwriter Aviva has entered into a settlement agreement to transfer its entire holding in Spanish joint venture (JV) Aseval to lender Bankia for €608m (£494m) in cash, which will be held in trust.

Pending receipt of regulatory approval and satisfying customary closing conditions, the transfer of JV to the Spanish bank is likely to complete by 30 April 2013.

Under terms of the settlement, both firms have requested to the Arbitration Court in Madrid, Spain, to terminate the case.

The UK insurer said the cash earnings will boost its central group liquidity, whereas economic capital surplus will be increased by £0.5bn, and be utilized for general corporate purposes.

The settlement amount, which represents nearly 1.8 times Aseval’s international financial reporting standards (IFRS) net asset value, as on 30 June 2012, will also increase Aviva´s IGD capital surplus by about £400m.

In 2000, Aviva purchased 50% stake in Aseval from Bancaja, which later became a JV under Aviva’s management control.

Aseval inked an exclusive agreement with Bancaja to distribute life insurance and pension products and following which Aviva initiated a legal proceeding against Bancaja in June 2011, alleging that the firm had violated the terms of its shareholder agreement.

Other Spanish operations of Aviva have not been affected by the settlement and will remain serving more than 1.2 million customers in the country through bancassurance partnerships with NCG Banco, BMN, Caja España Duero and Unicaja.