Irish Life is to be sold to Canada Life by the Department of Finance for €1.3bn.
The sale of largest life insurance company in the State, with more than a million customers and €37bn of assets under management, is expected to close in July.
The money will be used to offset the bailout of Permanent TSB.
"This transaction reflects a major vote of confidence in Ireland and Irish Life," said Kevin Murphy, Chief Executive of Irish Life.
"It is very good for the Irish economy, our clients, brokers and employees. Canada Life is a well respected and long standing business in Ireland. Combining our businesses will help ensure that Irish Life remains the leading brand in the Irish financial services market."