The deal creates a general insurance business with more than 6m customers and gross premiums written in excess of £1.7bn.
The second stage of the transaction will take place in 2019 and will see Allianz pay £213m for a further 20.9 per cent stake in LV.
As part if the deal the joint venture will acquire Allianz’s personal home and motor insurer’s renewal rights while AIlianz will obtain LV GI’s commercial insurer’s renewal rights.
Richard Rowney, chief executive of LV, said the deal would create the third largest personal insurance business in the UK.
He said: “With this deal, LV has a positive future in both general insurance and life and pensions.
“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 values LV’s general insurance business at £1.02bn and the mutual has a put option under which it can sell all or part of its remaining shares to Allianz.
Oliver Bäte, chief executive of Allianz Group, 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.”
The joint venture will be run by Steve Treloar, LV’s managing director of general insurance, reporting to a board of directors drawn from LV and Allianz.