NEW YORK (Bloomberg) ? JPMorgan Chase & Co., the third-biggest US bank, agreed to sell Chase Insurance Group to Protective Life Corp. for $1.2 billion in cash, following rival Citigroup Inc. out of underwriting life insurance. The sale frees JPMorgan chief executive officer Jamie Dimon from dedicating capital to a division the bank gained in its 2004 purchase of Bank One Corp. Dimon, 49, is trying to cut $3 billion of costs and boost returns that lag behind Citigroup and Bank of America Corp., the two biggest US banks.

JPMorgan has been seeking a buyer for Chase Insurance Group, which underwrites life insurance and annuities, since November. The transaction values the unit at 15 times its 2005 profit, more than the 13 times Citigroup got when it sold Travelers Life & Annuity to MetLife Inc. for $11.7 billion in July.

?JPM will continue to distribute insurance products through its branches, but will not take on the risk of underwriting,? Gimme Credit analyst Kathleen Bochman said in a note to clients yesterday. ?The transaction is not a surprise given the company?s stated intentions to exit the life business.?

Protective Life shares rose $3.46, or 7.6 percent, to a record close of $49.01 in composite trading on the New York Stock Exchange. New York-based JPMorgan Chase rose 34 cents to $39.60. Protective, based in Birmingham, Alabama, and JPMorgan plan to complete the transaction by September, they said in statements late on Tuesday. The five subsidiaries that make up Elgin, Illinois-based Chase Insurance have about 1.2 million life insurance and annuity policies, Protective said. ?The life insurance-underwriting businesses didn?t have the same scale as our core banking businesses,? Thomas Kelly, a spokesman for New York-based JPMorgan, said.

Protective said Allmerica Financial Life Insurance and Annuity Co., a subsidiary of Goldman Sachs Group Inc., will assume the risk for Chase Insurance Group?s variable annuities through a reinsurance contract. Annuities are retirement savings products with insurance benefits. Wilton Re Holdings Ltd., a Hamilton, Bermuda-based reinsurer funded by buyout firms including Stone Point Capital LLC, will reinsure half of Chase Insurance Group?s business, Protective said. New York-based Goldman is the world?s number two securities firm by market value.