Aviva and Friends Life are in advanced talks about a merger deal, the two insurance companies confirmed tonight.
The potential combination would create the UK's leading insurance, savings and asset management business by number of customers.
Friends said it was prepared to recommend the terms of Aviva's offer, which values it at more than £5.5 billion, to its shareholders.
Friends Life was created in 2011 following the amalgamation of Friends Provident, the majority of Axa UK Life and Bupa Health Assurance.
The businesses were rebranded to form Friends Life Group, providing pensions, investments and insurance and retirement income products.
The group can trace its roots back to the 1800s as the S un Life Assurance Society formed in 1810 and Friends Provident, which was formed in Yorkshire in 1832.
Today the company has more than five million customers, around 4,000 staff worldwide and manages funds worth in excess of £117 billion.
A combination with Aviva creates a business with 16 million UK customers.
Under the terms of the proposed offer, Friends Life shareholders would own about 26% of the enlarged group.
The board of Friends Life said it is willing to recommend the key financial terms of the proposal to its shareholders, subject to reaching agreement on the other terms and the completion of due diligence.
The move by Aviva comes after a resurgence in its fortunes under chief executive Mark Wilson.
He took charge in January last year after the departure of predecessor Andrew Moss in the wake of a humiliating shareholder revolt over his pay and the faltering pace of the business.
Since then he has cut hundreds of jobs and has disposed of several businesses as part of his turnaround strategy.
The group, which has 31 million customers in 15 countries, recently reported a 4% rise in half-year operating profits to £1.05 billion.
In Aviva's UK life and pensions division, the value of new business was down 21% to £177 million as Budget reforms removed the need for people to buy an annuity in order to draw their pensions.
Aviva said access to Friends Life's strong level of cash generation was a key motivation for the deal as this should help accelerate growth of its dividend.
The company said customers in the combined group would benefit from being part of a stronger and more diversified group with a wider product range.
Aviva predicted a doubling in corporate pension assets under administration.