Aviva has said it expects its acquisition of rival Friends Life to generate extra revenue of £600m over the next two years, including cost savings for the company of £225m.
The life company agreed to buy Friends in December 2014 in a £5.6bn deal that will create the UK's largest insurance, savings and asset management firm.
In its full year 2014 results, Aviva said the financial rationale behind the transaction is to add around £600m to cash flow by the end of 2017, including £225m of cost savings, and eliminate any need to de-lever.
Aviva also said it hoped the deal would secure its position in its home market of the UK, and add up to £70bn of funds to its investment arm Aviva Investors.
A shareholder vote on the takeover is due to take place on 26 March, with completion expected on 13 April.
Friends' Sesame problem
Friends, which also reported its 2014 results today, said operating - before costs - profit had risen to £570m up from £427m during the year.
The figures are dwarfed by Aviva's, where group operating profit increased by 6% to £2.1bn last year, up from £2bn in 2013, helped by the UK business.
Friends also cast further doubt on the future of its adviser network business, Sesame Bankhall.
It said a strategic review of the network, started in February 2013 and which has so far cost the insurer £25m, is ongoing and poses the risk of further financial and reputational damage to Friends, due to the ongoing trading performance of Sesame, the potential future liabilities of the Sesame business and the outcomes of the strategic review.
Due to potential liabilities from future advice related claims, Sesame is reliant on the continued financial support of Friends to be able to continue to trade, the life company said.
Aviva has already stated it will not continue Friends' habit of pumping money into Sesame when it buys the insurer, and that if it can't become profitable it will close.
Aviva UK profits up
Elsewhere in its results, Aviva said UK life operating profit increased by 9% to £1bn, up from £930m.
In UK Life, the value of new business was roughly constant at £473m, despite the major change to annuity legislation in the Budget which saw the value of Aviva's annuity business tumble 16%.
Protection new business was 27% higher at £95m, mostly as a result of the strength in Aviva's group risk proposition, strong intermediary sales and improved bancassurance sales.
Aviva also reported an 88% increase in platform assets under administration to £5.2bn.
Aviva Investors' fund management operating profit increased 16% to £79m, mainly due to a £12m contribution from the UK retail fund management business which has transferred from UK Life, as well as higher performance fees, the group said.
However Aviva said this profit level remains "inadequate" relative to assets under management of £246bn.
Fines and compensation
Aviva Investors has paid out nearly £150m in fines and compensation for systems failures that prevented it managing conflicts of interest fairly.
The figure included a £17.6m fine from the Financial Conduct Authority (FCA) which was discounted by 30% by the FCA because Aviva co-operated with it in an "exceptionally" open manner.
The other £132m was to ensure investors were not left out of pocket.
The FCA said the fine covered failings spanning eight years to June 2013.
