Insurance giant AEGON has announced plans to intertwine its business with Merrill Lynch in a two-pronged link-up.

Firstly, it will work more closely with the wealth management and advisory company in the areas of insurance and investment products.

Secondly, it is also completing the purchase of Merrill Lynch Life Insurance Company and ML Life Insurance Company of New York for $1.25 billion in cash.

The acquisition cost includes excess surplus of around £425 million.

Both AEGON and Merrill Lynch expect clients to benefit from a wider choice of products.

Pat Baird, president and chief executive office of AEGON USA, commenting on the acquisition of the two life companies, said that it was a "significant opportunity" to increase sales of one of the most popular products, the Merrill Lynch Investor Choice Variable Annuity.

Robert J McCann, president of Merrill Lynch's Global Wealth Management business, said: "Insurance if a prominent part of our wealth management business at Merrill Lynch.

"This transaction will allow us to focus on product distribution."

AEGON, which has its headquarters in the Netherlands, employs around 30,000 people worldwide.

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