Royal London has signed a deal agreeing terms for the potential takeover of Royal Liver.
The two companies have signed a transfer agreement setting out the terms and conditions of the potential transfer of Royal Liver's assets and liabilities.
The transfer is subject to regulatory approvals and the go-ahead of 75% of Royal Liver's delegates, the elected representatives of Royal Liver's members, at its annual meeting in early May.
If the deal is approved Royal London says it hopes a transaction would be completed by June or July.
If the merger comes to fruition, the enlarged group would have assets of more than £33bn and almost six million customers.
Royal Liver was hit hard by the recession and has been undergoing a restructure since 2009 as it bids to cut losses.
It is closed to new business and is running down its closed books.
Royal London spokesperson Alasdair Buchanan says Royal Liver policyholders will get more attractive terms as a result of the deal.
He says: "As the books are closed the cost would otherwise be on an increasing scale as policies become claims and the cost of administering those claims is spread across a smaller number of policyholders."
No money would be exchanged in a deal, but Royal London would benefit from receiving the administration charges instead of the Royal Liver.
Royal London and Royal Liver first held takeover talks four years ago but Royal Liver ended discussions after a months, having opted to retain its independence.
Park Row, the IFA arm of the Royal Liver Group, was wound up and closed in November 2009 after the company posted a turnover of £4.3m to the end of June that year, less than 70% of its anticipated budget.
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