Simplyhealth has agreed to buy Groupama Healthcare.
The health insurance provider said it would take approximately three to six months for the full details of the deal to be worked out, subject to regulatory approval.
Simplyhealth has both private medical insurance (PMI) and cash plan products, while Groupama specialises in the group PMI market.
The insurer believes the move will take it into the top five PMI providers in the UK market.
A statement from Simplyhealth said that it had "reached agreement to purchase the UK healthcare business of Groupama Insurances, subject to the required regulatory approvals.
"Groupama Healthcare will be rebranded to Simplyhealth following completion of the necessary legal business transfer. It is anticipated that this will take between three to six months."
Des Benjamin, CEO at Simplyhealth, said acquisition had been part of the provider's strategy for some time.
"For the past ten years, Simplyhealth has been looking to add more value and choice to customers through growing a diverse range of products and services.
"An essential element of this strategy has been achieved through mergers and acquisitions with health providers that share similar values to us.
"By acquiring Groupama Healthcare we have the opportunity to build greater presence in the small to medium business sector and grow market share," he added.
François-Xavier Boisseau, CEO at Groupama Insurances explained the reasons for selling its healthcare arm after spending five years building the business.
"However, despite our best efforts we have been unable to achieve the critical mass required to ensure that our business consistently delivers the levels of profitability necessary to ensure its long term success.
"We concluded that it would be beneficial to identify a new owner with the scale and resources necessary to offer the support required to build on the progress we have made," he added.
Boisseau concluded that Groupama's future focus would be on developing its general insurance business.
Rumours had circulated the market that Simplyhealth was considering purchasing Standard Life Healthcare last year but the insurer never confirmed its interest.
Standard Life was eventually bought by South Africa-based Discovery and absorbed into the PruHealth brand.
Simplyhealth was formed in 2009 with the merger of HSA, BCWA, LHF, HealthSure and Totally Active and at the moment has 1.2 million customers providing cover for around 2 million lives.
