AXA, the big insurance group based in France, is to merge its subsidiaries, Sun Life & Provincial and Axa Equity & Law. The deal ends months of speculation over the future of the two companies and creates Britain's third biggest life assurer.

Sun Life, 60 per cent owned by Axa following the French group's acquisition of rival UAP last year, is to pay its parent Pounds 690 million sterling for Equity & Law's life and investment management businesses.