Terms of the merger, subject to regulatory approval, propose Resolution Asset Management will be acquired by F&C Asset Management, creating combined assets under management of £165bn.
F&C will remain separately listed and majority owned by the combined group.
Friends Provident will be the primary brand in UK life and pensions after a transitional period and it is confirmed the Scottish Provident name will be retained and will run as a separate protection business in parallel with Friends Provident.
Friends Financial will be a UK-based life assurer valued at approximately £8.6bn with approximately 9.5m combined customers and a combined embedded value of £7.9bn.
The merged group will have a combined operating pre-tax profit of £860m and IFRS based combined profits before tax total £973m.
It says it is well placed to participate in future consolidation in UK life and pensions sectors over time.
The boards of Friends and Resolution, advised respectively by JPMorgan Cazenove and Lazard and Citi intend unanimously to recommend the merger to their shareholders, with Resolution holding 50.9 per cent and Friends Provident to hold 49.1 per cent.
The merger is expected to generate at least £100m in annualised pre-tax cost savings and financial synergies by the end of 2010.
The new board of directors will comprise Clive Cowdery as chairman, Sir Adrian Montague as deputy chairman. Mike Biggs will be chief executive and Philip Moore will be deputy chief executive.
Resolution chairman Clive Cowdery says: “Today’s transaction marks 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. Friends Financial is exceptionally well positioned to prosper in this new environment.”
Friends Provident chief executive Philip Moore says: “The two groups share a single strategic vision and a conviction that we can create a powerful new player in the life and pensions industry.
“The opportunity exists to provide products and services which will attract significant demand from customers
and generate value for shareholders. Friends Financial will have all the capabilities in place to deliver on this opportunity.”