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Friends Provident and Resolution today revealed plans which analysts say are designed to maximise support from shareholders for their proposed merger.

In separate statements today both companies confirmed that they will return £1 billion to investors in the planned new venture in 2008, with the payout to be funded from "existing and internally generated cash resources and where appropriate new debt".

Plans are also in place to make another payout to those with a stake in the new company in 2009, with the subsequent return of capital to be financed from the disposal of "certain existing lower return assets" currently held by Resolution.

The assets in question are said to have a combined embedded value of around £1 billion.

Confirmation of the proposed payouts comes amid speculation that the planned tie-up between Friends Provident and Resolution could be derailed by a possible counter-bid for the latter company by rival insurance firm Standard Life.

Standard Life, which previously revealed that it was considering making a bid for Resolution, has until tomorrow to make public any offer for the company.

With Friends Provident and Resolution investors both set to vote on the proposed merger between their two companies on November 5th, commentators believe that the move announced by the firms today is designed to drum up support for the deal.

Commenting on the decision Clive Cowdery, Resolution chairman and chairman designate of the proposed new group Friends Financial, said: "With less than two weeks until the merger votes, our focus remains on the compelling value for shareholders offered by Friends Financial.

"These financial targets demonstrate the merged group's focus on delivering shareholder value and releasing cash through the active management of the Friends Financial portfolio of businesses."

In addition to a potential threat to the deal from Standard Life, Resolution's largest shareholder has also attempted to block the merger with Friends Provident with its own bid.

Last Friday Resolution rejected a 691p-a-share offer made by Pearl Assurance, which has a 16.5 per cent stake in the insurance group, stressing that the bid "significantly" undervalued its business.

Meanwhile Friends Provident, which last week denied reports that it had been planning a share issue to boost its finances if the Resolution deal failed, today reported that its life and pensions sales increased by 35 per cent over the third-quarter.

An impressive international performance and a strong group pensions result in the UK saw the value of Friends Provident's new business climb to £2.15 billion over the period, up from the £1.6 billion reported a year earlier.