Two of this country's largest mutual insurance companies said yesterday that they will merge in an attempt to strengthen their position in a troubled marketplace while they still can.

Bill Wallace, chairman and chief executive officer of Home Life Insurance Co., said the move to merge with Phoenix Mutual Life Insurance Co. began last February, well before the recent failure of another mutual company, Mutual Benefit Life of Newark, N.J.

Calling it "an important step for our two companies," Phoenix Mutual's chairman and CEO, John Gummere, said the merger would create a company that would be based in upstate New York and have assets of almost $11 billion and capital of almost $600 million.