LONDON: Aviva British insurer agreed terms on Tuesday for a 5.6 billion pound ($8.8 billion) all share takeover of rival Friends Life, responding to pressures caused by pension industry reform.
The Aviva said the merger creates a market leader with 16 million life insurance customers. It is expected to generate 600 million pounds in excess cash flow a year and about 225 million pounds in annual cost savings by the end of 2017.
Further Andy Briggs, current group chief executive of Friends Life, will become CEO of Aviva UK Life, with Mark Wilson continuing as CEO of the enlarged Aviva Group.
The Pension providers are rushing to revise their product ranges after the government in March surprisingly removed obligations for people to buy an annuity, or income for life, at retirement, hurting sales.
Friends Life’s corporate pension business is skewed to larger firms, while Aviva focused on smaller ones, alleviating any concerns about a reduction in competition. Briggs told reporters that the two businesses worked well together.
In March After the changes announced by the government insurers have focused on alternative products such as pension’s drawdown which allow savers more freedom over the amount of money they withdraw each year, or bulk annuities taking on the risk of company defined benefit pension schemes.