NAB Wealth has reinsured 21% of its inforce retail life insurance book, which will release about $500 million of capital.

The deal with an unnamed global reinsurer has been approved by the Australian Prudential Regulation Authority.

It is expected to be completed by the fourth quarter of this year, NAB says.

The arrangement represents about 15% of NAB Wealth’s life insurance embedded value. It will reduce the business’ cash earnings by about $25 million.

The bank says the reinsurance deal will reduce its exposure to retail life insurance, while maintaining distribution of products.

NAB CEO Andrew Thorburn says steps to improve the wealth division’s financial performance led to cash earnings growing 28% in the six months to March 31.

He says the bank is committed to continuing with the wealth business – which includes MLC and its insurance operations – but recent regulatory changes are forcing it to seek ways of improving its overall returns.

In a separate move, NAB has announced it is undertaking a $5.5 billion capital raising to help sell its UK banking business.