Resolution promises £2bn payout

Friends announced its Resolution merger plans last month

Friends Provident and Resolution have moved to bolster shareholder backing for their planned merger, promising to return around £2bn to investors.

Shareholders of the two insurers are due to vote on whether to back the merger plans on 5 November.

The cash return announcement comes ahead of a Thursday deadline for rival suitors to table bids for Resolution.

Rival insurers Pearl and Standard Life have both said they are considering making a formal bid.

Pearl, which already owns shares in Resolution, has raised its stake in the business since the merger plans with Friends Provident were first announced back in July.

UK's fifth largest

A combined Friends Provident and Resolution would become the UK's fifth largest UK-listed insurer.

With less than two weeks until the merger votes, our focus remains on the compelling value for shareholders offered by Friends Financial Clive Cowdery, Resolution chairman Resolutions's share price Friends Provident's stock

The two firms plan to name the joint group Friends Financial.

They say they would return £1bn to shareholders next year, and around the same amount in 2009.

The funds will come from profits over the next year, sales of Resolution assets and possibly from increased debt.

The rival suitors for Resolution have until 1600 GMT on Thursday to table formal bids.

Friends Provident also announced on Wednesday that its UK new business sales rose 13% to £3.42bn in the first nine months of this year, compared with the same period in 2006.

"With less than two weeks until the merger votes, our focus remains on the compelling value for shareholders offered by Friends Financial," said Clive Cowdery, Resolution's chairman.