Aviva has warned investors that Friends Life’s holdings in Sesame could put it at risk.
Shareholders will be asked to ratify the £5.6bn takeover at a meeting in London on 26 March.
If approved Aviva says the takeover - which would become effective on 10 April - would allow the insurance company to make £225m in cuts by the end of 2017 and the loss of 1,500 jobs.
In a prospectus issued to shareholders, Aviva said: “Sesame, a subsidiary of Sesame Bankhall Group Limited, made losses of approximately £19m for the financial year ended 31 December 2013 and Aviva understands that it is, in its current form, expected to continue to make losses in the future.
“In addition, the Sesame business has potential liabilities arising from claims relating to advice or services provided to retail customers by appointed representatives of Sesame.
“Sesame is, therefore, reliant on the continued financial support of its ultimate parent, Friends Life, to be able to continue to trade.”
A strategic review of Sesame, which Friends Life launched in February 2013, is still ongoing.
Mark Wilson will remain Aviva’s chief executive while Friend Life boss Andy Briggs will become chief executive of Aviva UK and Ireland Life, joining the company’s board as an executive director.
The merger is the largest insurance deal in the UK since Aviva was formed by the merger of CGU and Norwich Union in 2000.
Background
Last November Sesame agreed to pay a £1.5m fine after the FCA found it promoted its own commercial interests over those of its clients.
The FCA said the network’s “pay-to-play” scheme meant the range of products recommended to its clients under its restricted advice service was influenced by the amount of services Sesame had sold to product providers.
In 2013 there was speculation about a break-up of Sesame Bankhall Group and Standard Life-owned Threesixty Services was among those who expressed an interest in buying its adviser support arm, after parent Friends Life employed Barclays Capital to review SBG.
Sesame was also fined £6m in June 2013 for failing to ensure the advice given to customers was suitable.
