Financial services provider Friends Provident has agreed to merge with UK life insurer Resolution, to create Friends Financial Group.

Under the terms of the deal, Friends Provident will hold a 49.1% shareholding of the merged company, while Resolution will hold the remaining 50.9% stake, media releases have revealed.

The companies believe that the merger will create a significant new force in the UK life and pensions market, through the combination of Friends Provident’s new business growth opportunities and Resolution’s strong cashflow generation.

According to the Financial Times, the combined entity will have a market value of GBP8.6 billion, making it the fifth largest life insurer in the UK. The life and pensions products of the newly created company will be sold under the Friends Provident brand.

The merger is forecast to generate a minimum of GBP100 million in annual savings by the end of 2010, and is anticipated to generate additional earnings by 2009, the BBC reported.