LONDON -- Abbey National PLC said Wednesday it has agreed to pay the equivalent of $484.5 million in cash for the Scottish Mutual Assurance Co. in Britain's biggest financial services merger in several years.

Abbey is following the lead of other British and European banking groups into insurance and investment management.

Abbey already has diversified from its original building-society charter to become the country's sixth-largest bank, with $85 billion in assets.

Glasgow-based Scottish Mutual offers pensions and related investment products in addition to life insurance.

With commercial banks in Europe generally free to underwrite equities and debt securities, the added insurance capability gives them a virtually complete range of financial services, from originating products to the final sale to consumer banking customers. They are thus much further along toward becoming "one-step" financial shops than U.S. banks.

In a statement, Abbey said the acquisition is consistent with its plans to "focus on the personal financial services industry."

The bank said it will establish a subsidiary, Abbey National Life PLC, to sell insurance products directly to customers.

Britain's last comparable financial services combination was in 1988 when Lloyds Bank PLC absorbed the Abbey Life Co., another insurance provider not related to Abbey National. The transaction was an exchange of stock and assets worth $1.8 billion.

Good Marks from Analyst

Graham Jenks, an analyst at Barclays de Zoete Wedd said the Abbey National-Scottish Mutual merger made strategic sense for the bank.

Abbey has "long had plans for such a purchase," he said. Though "basically a single-product company, centered on mortgages," Abbey has "a good customer base to provide the outlet for a broader range of services."

Completion of the Abbey National acquisition is expected about Jan. 1.

The former Abbey National Building Society, a thrift-like institution, gained regulatory authority in 1989 to transform itself into a broad-based banking company.

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