The tie-up will see the two companies forge a joint venture – LV= GI – with around six million customers and gross written premiums in excess of £1.7 billion.
LV chief executive Richard Rowney said the firms will take “a leading role in the growing UK retail sector” by creating a strong player in personal home and motor insurance.
He said: “The strategic partnership with Allianz will allow us to continue to benefit from a growing personal insurance business while also enabling us to strengthen our capital position, leaving us well placed to continue to expand our life and pensions business and pursue new digital opportunities.”
The deal, which has a transaction value of £1.02 billion, will be sealed in two stages, with Allianz initially paying £500 million for a 49% stake in LV.
Allianz will take a further 20.9% stake in the joint venture through a second payment of £213 million by 2019.
Once complete, Allianz will have a total holding in LV= GI of 69.9%, subject to regulatory approval.
Allianz chief executive Oliver Bate said: “I am thrilled to join forces with LV=, one of UK’s most respected and loved brands.
“This partnership will first and foremost benefit our customers who will have access to an expanded range of products backed by the financial strength of Allianz. We value LV=’s strong brand and market positioning.”
Steve Treloar, the managing director of LV’s general insurance business, will spearhead the joint venture and report to a board of directors from both LV and Allianz.
He said: “Our joint venture will be a leading personal insurer with a diversified distribution base across direct, broker and corporate partner channels.
“The combination of LV=’s strong brand, longstanding reputation in personal insurance and excellent customer service with the financial strength, digital expertise and data analytics of Allianz, the world’s largest P&C insurer, will allow us to further develop and expand the products and services that our customers demand.”