The acquiring company said it has reached agreement with Abbey Life’s owners, Deutsche Bank.
The total consideration is £935 million in cash, payable on completion, subject to adjustments.
The firms involved include Abbey Life Assurance Company, Abbey Life Trustee Services and Abbey Life Trust Securities.
The acquisition adds £10 billion of assets under management and approximately 735,000 policyholders and is expected to generate about £0.5 billion of aggregate cashflows between 2016 and 2020 and £1.1 billion in aggregate from 2021 onwards, Phoenix stated in a report.
Phoenix Group's CEO, Clive Bannister, said: "This is a pivotal deal for Phoenix, giving us the platform and scale to continue as a leader in the consolidation of the UK life industry.
"The dynamics of this industry offer a number of value-accretive opportunities, as evidenced by the announcement of our acquisition of AXA Wealth's pensions and protection business earlier this year.
"This attractively-priced deal meets precisely Phoenix's areas of strategic focus and stated acquisition criteria, whilst significantly increasing our cash generation and supporting a further increase in our proposed dividend.
"The business models of AXA and Abbey Life are complementary and will allow the Group to gain from economies of scale. Furthermore, Abbey Life policyholders will benefit from stable ownership, improved service levels and a robust governance framework."