Insurance companies Friends Provident and Resolution have announced that they are in "advanced discussions" regarding the merger of the two businesses.
The proposed move would lead to the creation of a company worth £8 billion.
A joint statement said that the "merger would create significant value for both sets of shareholders by combining Friends Provident's new business growth opportunities with Resolution's strong cash flow generation".
An all-share combination of the two groups would see Resolution shareholders owning 50.9 per cent of the new company. The remaining 49.1 per cent of shares will be held by Friends Provident shareholders
News of the merger gave a boost to both company's shares in early trading in London. Friends Provident shares rose by 7.3 per cent while Resolution shares gained 6.9 per cent.
The firms expect the merger to result in synergies on account of Friends Provident's strong administrative network and Resolution's recent outsourcing agreements with Capita, according to the statement.
Friends Provident sells insurance policies, pensions and investment products to individuals and businesses in the UK. Resolution is the UK's largest closed life insurance fund.
Previously Resolution purchased Abbey's closed life funds business for £3.6 billion.