The Dutch insurer will acquire Merrill Lynch Life Insurance and ML Life Insurance Co. of New York, although Merrill will continue to offer insurance products via its network of financial advisers.
Bob McCann, head of Merrill's private client arm , said that the sale would enable the bank to focus its attention on the distribution of insurance products.
He added: "Not only will our clients benefit from Transamerica's scale and risk management expertise, but this strategic relationship will also allow us to jointly develop innovative insurance and investment products as well as pursue new business and distribution opportunities."
Pending regulatory approval, the transaction is expected to be concluded during the fourth quarter of 2007.
The sale is perceived as a continuation of moves from US brokers to pare down their insurance business in order to concentrate on distribution.
In 2005, Citigroup sold its Travelers life and annuity division to MetLife for $11.5 billion.