Insurance giant Aviva is to buy rival Friends Life in a deal worth £5.2bn.
The two companies confirmed details of the merger a week after disclosing that they were in advanced talks about creating the UK’s leading insurance, savings and asset management business by number of customers.
The addition of Friends Life will extend Aviva’s customer base from 11 million to 16 million and is “financially and strategically compelling”, according to Aviva chief executive Mark Wilson.
He added: “It is one of those rare transactions where the two organisations fit with surgical precision, building on each other’s strengths and addressing the challenges.”
Mr Wilson warned that the tie-up, which is expected to generate annual cost savings of £225m by the end of 2017, will result in headcount reductions. There has been speculation that the merger will mean 2,000 jobs being axed.
Aviva employs around 28,000 staff worldwide including 12,000 in the UK, while Friends Life employs 3,500 staff largely in offices in London, Manchester, Bristol and Salisbury. Aviva employs its UK staff in York, Norwich, Sheffield and Glasgow.
Friends Life was created in 2011 following the amalgamation of Friends Provident, the majority of Axa UK Life and Bupa Health Assurance.
The businesses were rebranded to form Friends Life Group, providing pensions, investments and insurance and retirement income products.
The group can trace its roots back to the 1800s as the Sun Life Assurance Society formed in 1810 and Friends Provident, which was formed in Yorkshire in 1832.