Friends Provident and Resolution have agreed a merger that will create a combined company worth £8.6bn, and have spelt out how they plan to handle the IT integration challenge posed.

Cost savings arising through IT consolidation are at the heart of the merger, and the life insurers said that they wanted to integrate IT and HR in the new business, to be called Friends Financial, within 100 days.

They said there would initially be limited integration of service platforms to minimise disruption but all new business would transition to the Friends Provident platform over time.

Under the plan, there will be no material outsourcing of Friends Provident business and no material changes to Resolution’s recently signed £580m outsourcing agreement with Capita, which is due to commence on 1 August.

The insurers have forecast implementation costs of around £120m to integrate IT and finance and asset management, including redundancy costs and policyholder communications.

Resolution was established in 2003 and is the UK’s biggest manager of closed life insurance – also known as zombie funds. In the past two years it has quadrupled in size by acquisition, particularly by buying Abbey’s life business last year.

Friends Provident has also grown organically and through acquisition in recent years, and has gained a reputation for effectively consolidating the IT systems of companies it has bought in the past.