Two more insurance companies have announced merger plans in the wake of Monday's deal creating the UK's largest group.

Life and pensions mutual Royal London said it would buy United Assurance Group for �1.5bn ($2.4bn) in an attempt to create economies of scale.

The announcement comes the day after Norwich Union and CGU agreed a �19bn merger.

Royal London chairman Hubert Reid said: "The combined group will be better placed to take advantage of the opportunities that exist to distribute life, pension and other investment products through new distribution channels."

Rivals might bid

United Assurance Group (UAG) sells its insurance policies door-to-door.

If the deal goes ahead, it will be UK's largest takeover of a firm listed on the stock market by a mutual society.

UAG shares surged on the news of the bid, up 45 pence to 465.

The takeover is not a done deal, though. Other rivals might move in and trump Royal London's offer.

Industry insiders say it is unlikely that Britannic will try again after its failure to agree a friendly takeover of UAG in November.

Job cuts possible

Royal London and United Assurance plan to merge their sales forces, their life funds, their investment management operations and their head offices.

The new HQ will be at Royal London's Colchester base but the two firms said United's Wilmslow head office in Cheshire would remain a key operational centre.

Neither company was able to rule out job cuts. Mike Yardley, chief executive of Royal London, said: "It's too soon to say. Right now we are having a good long look at the two businesses and we certainly think there will be the potential for cost savings."

Royal London employs 3,100 staff and 3,000 work at United Assurance.

Progress 'difficult'

UAG's chairman Andrew Longhurst said: "It has been difficult to make substantial progress against a tough regulatory and market background.

"We therefore welcome Royal London's offer, believing that the combined group will have the scale to compete more effectively in its chosen market."

New channels of distribution, such as call centres and websites, were being tried out, but traditional door-to-door home sales would continue to play a major part in their plans.

Mike Yardley said: "We will be one of the top four firms in the home service sector of the insurance business, with 3m customers and �20bn funds under management."