Aviva and pensions company Friends Life are to merge in a £5.2 billion deal that casts uncertainty over hundreds of UK insurance jobs.
Mark Wilson, chief executive of Aviva, admitted there will be job cuts as a result of his company's takeover of Friends Life but refused to confirm recent speculation that as many as 2,000 could go.
The deal with Friends is the biggest in the industry since the merger of CGU and Norwich Union created the company now known as Aviva in 2000.
If the takeover is backed by shareholders and goes ahead as planned by next spring, Aviva will become the UK's leading insurance, savings and asset management business by number of customers.
Aviva employs around 28,000 staff worldwide including 12,000 in the UK, while Friends Life has 3,500 staff largely in offices in London, Manchester, Bristol and Salisbury.
Aviva's UK staff are in York, Norwich, Sheffield and Glasgow, although there is no overlap between Friends and Aviva's general insurance arm.
Mr Wilson said the deal will give his company an extra five million customers and generate annual cost savings of £225 million by the end of 2017.
He added: "When you do an integration, of course there may be some job losses, but there are also a lot of areas that aren't related to jobs where you can get some of this cost out."
Friends Life was created in 2011 following the amalgamation of Friends Provident, the majority of Axa UK Life and Bupa Health Assurance.
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.
The Friends name is likely to be lost through a rebrand under Aviva.
The two companies confirmed details of the merger a week after surprising the City with the disclosure that they were in advanced talks.
Mr Wilson said the partnership was "financially and strategically compelling".
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."
The deal provides Aviva with £600 million of additional cash flow from the Friends business, which should enable it to accelerate growth of its dividend.
The new company will be the biggest player in corporate pensions in the UK, a market that is expected to triple in size over the next decade.
There will also be opportunities for Aviva to cross-sell its household and car insurance products to Friends Life customers.
Under the terms of the proposed all-share offer, Friends Life shareholders will own about 26% of the enlarged group.
Friends Life's UK division manages corporate pensions with more than £20 billion of assets under administration, while also selling retirement income products and individual and group protection policies.
Its heritage division looks after customers with products which are no longer actively marketed for new business, while the company's international division provides savings, investment and protection products for expatriates and local nationals in Asia and the Middle East.
The move by Aviva, which has 11 million UK customers, comes after a resurgence in its fortunes under Mr Wilson, who took charge nearly two years ago after predecessor Andrew Moss was ousted in the wake of a humiliating shareholder revolt over his pay and the faltering pace of the business.
Since then Mr Wilson has cut hundreds of jobs and disposed of several businesses as part of his turnaround strategy.
The company said customers in the combined group would benefit from being part of a stronger and more diversified business.
However, Shore Capital analyst Eamonn Flanagan said the deal looked like ''a rights issue (a cash call on investors) in disguise", with Aviva buying access to the £2 billion a year Friends Life generates from its UK pensions business.
He is concerned the deal will increase Aviva's exposure to a UK market that is already the subject of uncertainty due to Budget changes to pensions annuity rules.
Reiterating his sell rating, Mr Flanagan said: "We remain puzzled why Aviva felt the need to do it now. Is it a camouflage for issues within its own internal restructuring and turnaround story?"
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