LONDON, July 21: British insurers Resolution Life and Friends Provident are in early merger talks that could lead to the creation of a group worth over 8 billion pounds ($16.4bn), sources familiar with the matter said on Saturday.

One source said discussions were at a “very early stage”, but the sources also said the two insurers were aiming to hammer out the outline of a deal in the next fortnight -- in time for Friends Provident’s interim results on August 8.

Two of the sources said on Saturday that the aim was for a “merger of equals” -- given the roughly equal size of the two insurers and their complementary businesses -- with top management roles split between them.

Resolution and Friends Provident, Britain’s two smallest blue chip life insurers, declined to comment.

If the merger succeeds, the resulting group would be the UK’s fourth life insurer, behind Legal & General.

Takeover speculation pushed up shares in former mutual Friends Provident on Friday to close over 4 per cent higher, valuing the company at just over £4b.

Friends has frequently been the object of takeover rumours, with private equity bidders and French giant AXA named as possible suitors. But its new chief executive, Philip Moore, said just months after he took the helm earlier this year that he felt under no pressure to do deals -- despite fast growth in group pensions, an area which consumes cash, against the background of a slowdown in the cash-generative protection insurance market.

Resolution has a market value of 4.3 billion pounds after growing rapidly from consolidating closed life funds -- funds no longer writing new business -- but since buying mortgage bank Abbey’s life insurance business in May 2006, it has shown interest in buying active life insurance companies.

It was also linked with Standard Life before the Scottish company’s float last year. Sources said at the time that it made an approach but was rebuffed.

Resolution, which has quadrupled in size in the past two years through acquisitions, said last November it was in talks with unnamed parties over its future and was considering options including a bid for the firm.—Reuters