British insurer Aviva said on Friday it had agreed terms on a possible deal to buy rival Friends Life for £5.6 billion [$8.76 billion], as British pension reform puts pressure on insurance companies to find new business.

Pension providers are rushing to reinvent themselves after the government in March unexpectedly removed obligations for people to buy an annuity, or income for life, at retirement, sharply cutting annuity sales.

Aviva’s all-share offer of 0.74 shares for every Friends Life share implies a 15 percent premium to the closing price on Friday. The board of Friends has indicated it will recommend the offer, which equates to 399 pence [$6.24] per Friends share, the companies said in a statement.

Mark Wilson, former boss at Asian rival AIA, joined Aviva as chief executive two years ago and has pushed a restructuring agenda across the group, selling off businesses, cutting costs and improving profitability.

Created in 2008 by entrepreneur Clive Cowdery as Resolution, Friends Life was known for buying up closed books of business from other insurers and using its scale to make cost savings in managing them as they gradually expire, or “run off,” rather than writing new business itself.

The deal would strengthen Aviva’s balance sheet and reduce its leverage, as well as boosting its assets under management, the statement said.

Friends Life has a stronger presence in the growing “bulk annuity” market, in which insurers take on the risk of part or all of a company’s pension scheme.

“The transaction would…more than double Aviva’s corporate pension assets under administration and create new opportunities,” the statement said.

Friends Life posted a 7 percent drop in operating profit in the first half, while Aviva saw a 4 percent rise.

The two companies combined would have a stock market valuation at Friday’s London market close of around £20.5 billion [$32.08 billion].

Under the terms of the offer, Friends Life shareholders would own around 26 percent of the combined group. They would also receive an amount in cash equal to any Friends Life final dividend for the 2014 financial year.

Friends Life shares are down 2 percent this year, while Aviva has gained 20 percent.