SYDNEY (Bloomberg) — AMP Limited, Australia's biggest life insurer, sold its Cobalt-Gordian reinsurance businesses to Enstar Group for A$585 million ($518 million).

AMP will book a A$83 million profit from the sale, the Sydney-based company said in a statement to the Australian stock exchange yesterday.

The sale will increase the company's capital reserves by A$157 million, allowing it to raise its next four dividend payments by two cents a share, it said.

AMP decided to retain Cobalt-Gordian in 2003 following an 11-month review of the unit.

"Enstar Group, as a specialist run-off business owning and managing run-off portfolios, is a more natural long-term owner of Cobalt-Gordian than AMP," AMP's outgoing chief executive officer Andrew Mohl said.

About 70 percent of the funding for the acquisition is being provided by a "major Australian bank," about 7.5 percent by New York-based buyout firm J.C. Flowers & Co., and the remainder from cash, Bermuda-based Enstar said in a PRNewswire statement yesterday. The deal is planned to be completed in the first quarter of next year, Enstar also said.

Run-off insurance covers business owners, after selling the business, for claims arising during the time they owned and operated the business.