Ameriprise Financial Inc. said Tuesday that it would sell its auto and home insurance business to American Family Insurance for $1.05 billion, one in a series of steps to free up capital for other purposes.

The Minneapolis-based financial services firm is reshaping its offerings to be more in line with demands of clients in its main investment advisory business. The company is also going through the final regulatory stages to launch a bank, chiefly to offer wealth management products.

"This transaction is consistent with our strategy to grow our less capital-intensive businesses and is expected to reduce our risk profile and increase capital flexibility," Ameriprise CEO Jim Cracchiolo said in a statement.

For Madison, Wis.-based American Family, the purchase of the Ameriprise auto and home insurance unit is the latest and biggest step to grow from a regional provider of insurance to a national one. Ameriprise Auto & Home, based in De Pere, Wis., near Green Bay, has a geographic reach well beyond American Family's base in the Midwest and makes products available in nontraditional channels, such as through Costco.

"With this acquisition, we expand our efforts to reach customers who prefer to acquire insurance through relationships they have with other entities," American Family CEO Jack Salzwedel said in a statement.

Shares in Ameriprise rose about 2.6 percent on Tuesday's news. American Family is a mutual holding company owned by its members.

Both companies said they would work toward a smooth transition on behalf of policyholders, employees and other business partners. American Family said it would retain the Ameriprise workforce in De Pere. Salzwedel noted that American Family has hired former Ameriprise workers and vice versa over many years. "We know each other very well," he said.

Current Ameriprise policyholders will retain coverage with no changes.

But the Ameriprise business will be renamed in coming months, a spokesman for American Family said. It will remain distinct from American Family, whose products are sold through a network of exclusive agents. American Family products will not join the rebranded Ameriprise products in Costco, for instance.

Ameriprise told investors in late February that it was reviewing options for its auto and home business, which formed in 1986 when its predecessor IDS purchased Wisconsin Employers Casualty Co. of Green Bay.

The firm for the past several years has worked to trim its businesses that require a lot of capital. In one such action, the company's RiverSource life insurance struck a deal with Commonwealth Annuity and Life Insurance Co. to reinsure about $1.7 billion in fixed annuity policies sold through third parties.

By freeing up capital that had been dedicated to backing up its insurance offerings, Ameriprise is positioning itself to move into other financial services. Top executives for more than a year have signaled plans to provide banking services. Last year, Ameriprise applied to convert a national trust bank that it owns into a federal savings bank that could offer retail products.

"It would really be around wealth management product," Cracchiolo told investors last year in describing the plan for a bank. "We're not looking to do commercial lending. ... We really want this to be more around supporting our clients' activities."

For Ameriprise's network of approximately 10,000 financial advisers, the ability to connect to a bank could allow them to offer clients mortgages and other loans. The company does not plan to open bank branches.