LONDON, July 22 — Resolution and Friends Provident, two British insurance companies, were in discussions on Sunday to combine and create a company with a market value of about ￡8.3 billion, or $17.1 billion, a person with knowledge of the talks said.

The discussions are still at an early stage and may not lead to a combination, this person said, but the companies were expected to give more details about the talks on Monday.

Resolution specializes in life insurance funds that are closed to new policyholders. By collecting premiums on policies until they expire, the company is able to generate cash that Friends Provident can use to finance new businesses. Friends Provident warned in April that it might miss a profit target on new business for 2008 and said it faced aggressive competition in the mortgage insurance market.

Friends Provident, whose shares are down 14 percent this year, has been seen as a takeover target by some investors, and Resolution as a possible buyer. Resolution has quadrupled in size in the last two years after a string of acquisitions that included the purchase of the British life insurance units of Abbey National, a division of Santander Central Hispano, for ￡3.6 billion.

Speculation about Resolution’s future has been rife after the company said in March that it had ended talks that might have led to the sale of the company to an unidentified buyer. Also in March, the company’s chief executive, Paul Thompson, unexpectedly resigned.

Any announcement about merger discussions may also bring forward other bidders. Some analysts have said that AXA of France and private equity companies like J. C. Flowers & Company could be interested in Friends Provident.