British Life Insurers Friends Provident and Resolution Agree on Merger

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The board of Friends Provident PLC and Resolution PLC announced that they have agreed on terms to combine two of Britain’s largest life insurers through a stock swap.

The new company, Friends Financial Group PLC, would be valued at 8.6 billion pounds (euro12.8 billion; US$17.7 billion), with 9.5 million customers and managing assets of 165 billion pounds (euro246 billion; US$340 billion).

The two companies had said on Monday that they were in advanced discussions about a deal.

The agreement calls for Resolution shareholders to hold 50.9 of the combined company and Friends Provident shareholders 49.1 percent.

Friends Provident shareholders will received one new Friends Financial shares for each share, and Resolution shareholders will receive 3.25 new Friends Financial shares per share.

The companies said they expect to complete the deal in the fourth quarter.

Resolution, Britain’s biggest administrator of closed life-insurance funds, said in November that it was engaged in talks about a wide range of possible deals, which might include selling the business.

It reported net profit on continuing operations of 276.2 million pounds (euro411 million; US$568 million) in 2006, up 71 percent from 161.8 million pounds in 2005. Those figures didn’t include the impact of Resolution’s acquisition of Abbey National PLC’s life insurance business in 2006.

Friends Provident reported in March that its full-year profit fell 26 percent as the amount of money injected into the company’s funds declined. Net income slipped to 297 million pounds (US$611 million; euro442 million) in the full year through Dec. 31, from 404 million pounds in the previous year.