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Friends Provident and Resolution have agreed to join forces in a merger between two of the UK's most prominent life insurers.

The all-share deal between the two groups will create a new insurance firm with a market value of some £8.6 billion, the companies have claimed.

Friends Financial, the name that has been bestowed on the planned new company, will have a combined customer base of around 9.5 million.

Under the merger deal, which has yet to be approved by shareholders, Friends Provident investors will receive 49.1 per cent of stock in the new company, while Resolution investors will hold 50.9 per cent.

The tie-up, which is planned to be completed during the fourth quarter of the year, is expected to generate annual pre-tax cost savings and synergies of at least £100 million by the end of 2010.

In a joint statement Resolution and Friends Provident also stressed that "significant revenue benefits" would be realised by taking advantage of the increased scale and financial strength of the new company and through the "complimentary product and distribution capabilities" both firms would bring to it.

Resolution chairman Clive Cowdery claimed that the planned merger marked a "turning point in the restructuring of the UK life industry".

"The next period will focus on sustainable earnings growth and cash returns to shareholders," he said.

Friends Provident chief executive Philip Moore added that both his company and its merger partner had the "vision" to create a "powerful" new player in the life and pensions market.

"The opportunity exists to provide products and services which will attract significant demand from customers and generate value for shareholders," Mr Moore said.

"Friends Financial will have all the capabilities in place to deliver on this opportunity," he added.