First Active is to sell 60 per cent of its UK business, First Active Financial, to a Birmingham-based UK insurance company, Britannic plc.

The bank's share price rose on foot of the news it may be leaving the UK market and the price it achieved for the stake. After hitting an all-time low of €1.70 (£1.34) on Tuesday, the share closed at €2.03 yesterday, up 15 cents on the day.

Under the deal with Britannic, the British company will invest €120.9 million in First Active Financial, €48.4 million when the deal is complete, and the balance as business requires. No funds will flow to First Active as a result of the deal.

First Active will retain the rights to the profits from the existing First Active Financial mortgage portfolio. All new business, whether from existing or new customers, will be jointly owned business.

The bank will be entitled to sell its remaining 40 per cent shareholding to Britannic up to December 31st, 2004, at the current valuation, taking into account future capital injections.

First Active Financial is based in Epsom and is a leader in the UK flexible mortgage market. It introduced current account mortgages to the UK market, a product where customers operate a single account which operates as both a current account and a mortgage account. Over the past 18 months it has been developing its Internet banking services.

For the financial year ended December 31st, 1999, First Active Financial had total mortgage assets under management of €2.8 billion and made a pre-tax profit of €4.3 million. It had approximately 30,000 customers.

Britannic made most of its money in the past from door-to-door life assurance sales, but is currently transforming itself into a broader financial services group. It announced a 15 per cent rise in first-half operating profits yesterday, to £96.4 million sterling (€157.2 million).

First Active's business in the UK comprises First Active Financial and The Mortgage Corporation and is valued at €197 million. The value of The Mortgage Corporation and the income stream due from First Active Financial after the Britannic deal, is €86.1 million.

First Active started to develop its UK business in the mid-1990s. The bank's chief executive, Mr Cormac McCarthy, said the UK market was the most competitive in the world and "scale is everything". The deal with Britannic addressed the questions about where the bank was going strategically in the UK market, he said.

"This affords us the opportunity to focus very clearly on the Irish business," he said, though the bank will still have a significant involvement in First Active Financial.

"The involvement of Britannic at this juncture in First Active Financial's development secures the capital investment, product diversity and customer access necessary to fulfil its potential."

"The structure of the transaction ensures that we shall be able to retain a significant stake in the value of the business as it grows as well as safeguarding our income and our investment."

The First Active Financial purchase caps a year of growth for Britannic, which last year effectively doubled its customer base by buying a majority stake in Britannia Asset Management and all of Britannia Life.

After its move into asset management, the only remaining hole in the company's business portfolio was mortgages, company officials said.