Insurance organisations Aviva and Friends Life have finalised the terms of a £5.6 billion merger.
The merger will create the UK’s largest insurance and savings business with more than 16 million customers.
It is expected the merger will generate £225 million of run-rate annual cost synergies by the end of 2017, which Aviva has valued at around £1.8 billion.
The merger will also aim to help better Aviva’s position to invest and innovate under incoming pension freedoms next year.
John McFarlane, chairman of Aviva, said: “Aviva’s recent success, sound growth and return prospects already present a compelling investment proposition and enable us to advance our strategy through acquisition as well as organic growth.
“The proposed acquisition not only consolidates Aviva’s leading position, which it has established in the UK, it is expected to enable a much stronger dividend flow and balance sheet position than would otherwise have been possible. It also offers Friends Life shareholders an attractive outcome.
“This move enhances, and is consistent with, our investment proposition of ‘cash flow plus growth’, and I commend it to shareholders.”
Andy Briggs, group chief executive of Friends Life, added: “Friends Life has always been about maximising value for shareholders and delivering strongly for customers.
“The combination of Friends Life and Aviva provides an opportunity to accelerate our existing strategy and growth, generating value for shareholders faster.
“The enlarged group brings together complementary strengths and a commitment to delivering the very best propositions, service and expertise for customers.
“Together, we will have scale leadership positions across our chosen growth markets, ensuring that the new group is well placed to take advantage of the opportunities presented by the rapidly evolving UK life insurance market.”