Aviva is in talks to buy fellow insurer Friends Life in a deal worth almost £5 billion.
The merger would create the UK’s largest insurance and savings business with more than 16 million customers.
It would also lead to a substantial increase in profits and assets under management at Aviva Investors.
he merger will also aim to help better Aviva’s position to invest and innovate under incoming pension freedoms next year.
A joint statement from the providers said: “The boards of Aviva and Friends Life note the recent press speculation and confirm that they have reached agreement on the key financial terms of a possible all-share combination of Aviva and Friends Life.
“The board of Friends Life has indicated to Aviva that it is willing to recommend the key financial terms of the possible offer to Friends Life shareholders, subject to reaching agreement on the other terms and conditions of any offer and the completion of mutual due diligence.
“Any transaction would be subject to regulatory approval. A combination of Aviva and Friends Life would create the UK’s leading insurance, savings and asset management business by number of customers, with a stronger balance sheet and significantly higher cash flows, enhanced by substantial synergies, from which to accelerate dividend growth.
“The transaction would lead to a substantial increase in Aviva’s protection value of new business, more than double Aviva’s corporate pension assets under administration and create new opportunities by serving Friends Life’s £2 billion of annual pension vestings.”