Exeter Family Friendly has agreed terms to buy Engage Mutual Health's policy book from OneFamily.
The deal, subject to regulatory approval, was signed on 9 July 2015, and will see Exeter Family Friendly acquire over 28,000 policyholders in individual and corporate schemes.
Engage Mutual and Family Investments completed their merger earlier this year to become OneFamily.
Policyholders will not be affected by the move, and will be informed of new contact details accordingly.
Simon Markey, chief executive of OneFamily, said: "Following the merger of Engage Mutual with Family Investments to become OneFamily, it makes sense for us, at this time, to dispose of this small part of our business.
"We believe it is the right decision for our members and we are confident that our existing health customers will continue to be well served by Exeter Family."
Andy Chapman, chief executive of Exeter Family Friendly, said: "We have ambitious growth plans and as a mutual, we share OneFamily's dedication to customers.
"We're committed to delivering real value whilst continuing to distribute new policies and develop new products".