Prudential Financial Inc. has agreed to buy Allstate Corp.’s $16 billion variable annuity business through a reinsurance arrangement, the companies announced.

Prudential, Newark, N.J., will pay $580.5 million for the transaction, subject to changes in market prices by the closing date, expected to take place by the end of the second quarter. The deal must be approved by regulators, the companies note.

The agreement enables Allstate to exit an end of the financial services business it says has contributed minimally to profits, while for Prudential, it offers an important inroad into previously underserved investment market channels.

Under the arrangement, agents for Allstate, Northbrook, Ill., will still sell VAs under Allstate’s name, but they will be manufactured by Prudential.

The VAs, with about $16 billion in account values, are currently manufactured by Allstate Financial, a business unit that sells life insurance, retirement and investment products. Under the agreement, Prudential would become the exclusive provider of VAs through Allstate’s exclusive agency channel and would take on distribution responsibilities in the broker-dealer channel.

Allstate Financial would continue to market VAs through banks under its brand name, but designed by Prudential.

The deal would enable Allstate to devote more resources and capital to life insurance, fixed annuities and equity indexed annuity products, “where we have scale and significant market presence,” said Casey Sylla, chairman and president, Allstate Financial.

The deal calls for Pru-manufactured VA products to continue to be sold through Allstate’s proprietary distribution force, which consists of more than 12,000 exclusive agency owners in the U.S. (8,000 of whom are licensed to sell securities) and 1,300 exclusive financial service representatives for the next 3 years. After that, Prudential would be a nonexclusive preferred provider for another 2 years.

In its announcement, Prudential pointed out the transaction would help it build relationships in Allstate’s nonproprietary distribution channels, including Morgan Stanley.

“This acquisition greatly increases Prudential’s scale in the variable annuity marketplace,” said David Odenath, president of Prudential Annuities. “We significantly expand our distribution reach in the wirehouse channel while presenting almost no overlaps with our existing independent financial advisors channel.”

Not included in the deal: Allstate VA operations and systems, most operating personnel, and certain other assets and liabilities.