A proposed merger between Aviva and Friends Life will could lead to thousands of job losses, analysts have said.
Aviva confirmed on Friday it was in advanced talks with its rival for a £5.6bn deal.
It would create the UK’s leading insurance, savings and asset management business by customer numbers with a combined market capitalisation of more than £20bn.
Analysts were “shocked and surprised” by the proposals, which have been labelled as “desperately light on details”.
Eamonn Flanagan, insurance analyst at Shore Capital, called the merger “a rights issue in disguise”.
Aviva is one of Yorkshire’s largest employers, with 2,000 staff at its York head office and a further 1,500 employees in Sheffield.
While Aviva said it was “far too soon” to comment on job losses, analysts have said it is simply a question of how many.
Eamonn Flanagan, insurance analyst at Shore Capital, said job losses were “inevitable”.
He said: “The reality is they’re pushing together two very big UK based companies. A big element of the cost base of those companies and operations are staff, premises, systems.
“An element of the financial logic behind the deal has to be taking costs out.”
Panmure Gordon insurance analyst Barrie Cornes said it was not yet known where the “synergies” between Aviva and Friends Life’s operations could lie.
“Cost reduction in a life company predominantly come from the people side of things, rather than IT or offices,” he said.
Mr Cornes said the UK life operations of Aviva and Friends Life are of a similar size and noted Aviva managed to cut £100m from costs in recent years.
He said: “It wouldn’t be too hard a stretch to think of £100m again in Friends Life.”
Aviva chief executive Mark Wilson has been architect of a strict cost-cutting regime since joining the beleaguered insurer after a 2012 shareholder revolt.
In 2013, Aviva axed 2,000 from its global operations. The UK life business, which is headquartered in York and led by David Barral, has shrunk from 12,500 employees in 2006 to 5,500 staff in 2014.