Life assurance consolidator Phoenix has agreed to transfer a £5bn annuity book to Guardian Financial Services, a private equity-backed competitor.

Established by Hugh Osmond, Phoenix is debt-laden known as Pearl to fund the £5bn acquisition in 2007 of Clive Cowdery’s original Resolution group, as reported by the Financial Times.

As per the deal inked between the firms, almost 40% of Phoenix’s total annuity liabilities, which represents 300,000 retirement policies, will be transferred by Phoenix to Guardian in two phases.

The terms of the agreement underlines that, the deal will go ahead as a reinsurance deal in the first phase, transferring longevity and investment risk from Phoenix to Guardian, which may be followed by an absolute acquisition phase and is pending for court approval, expected to receive next year.

Phoenix was quoted by Financial Times as saying, "Any move the group makes like this to strengthen its balance sheet and reduce risk should have a positive impact on those ongoing discussions [with banks]."

With the successful completion of the transaction, Guardian’s policyholders will double and its assets under management will touch £13bn, while it will also increase cash generation this year by about £200m "by releasing capital which would otherwise emerge over time, the underwriter added.

Phoenix chief executive Clive Bannister said the transaction "significantly reduces the group’s risk profile by transferring these long-term policies to Guardian".