Norwich Union is to buy London & Edinburgh for £315m in a bid to become the UK's biggest general insurer in the intermediary market.
The takeover will create the third biggest general insurer in the IFA market. But Norwich Union aims to become the top player within five years.
The London & Edinburgh name is expected to be ditched when the general and life insurance arms are merged into Norwich Union in late 1998.
In 1997 London & Edinburgh's general insurance arm wrote net premiums of £673m. Its life business, which writes accident, sickness and unemployment cover, wrote net premiums of £82m in 1997.
The deal will lead to cost savings of £30m a year from 2000. But this will cost Norwich Union a one-off hit of £35m.
The majority of the cost savings will come from job losses and a restructure of London & Edinburgh's branch network. Savings are also expected to come from an integration of IT systems.
Norwich Union press officer Liz Maw says: "This will give us a significant presence in the UK. It is our intention to be a major player in the market and this deal fits our objective."