Capita Insurance Services will merge its existing London markets division with outsourcing provider CMGL, which it acquired for £32m this week.

CIS executive director Dermot Joyce said the existing management teams would be "unified". The merger should take 100 days to complete.

Capita bought the business from its owner, Sovereign Capital Partners.

Joyce said the group had "stayed out of the core claims market in Lloyd's and the London market because of Xchanging's dominance".

But now Capita "don't find it that difficult to compete in this market and we have pitched out our support for the reforms taking place in Lloyd's", Joyce said.

CMGL managing director Jerry McArthur said: "We welcome this deal and see it as a marriage of two very complementary businesses. Being an integral part of a FTSE100 company allows us to offer a wider portfolio of bespoke services and solutions.

"It also fundamentally enhances our capacity to support the London market and all our clients with large scale business transformation."

CMGL employs over 440 staff in London, Chelt-enham, Birmingham and internationally.

The company provides professional claims and insurance management services to a wide range of insurance and corporate clients, including Zurich, Shell and the run-off of Australian insurer HIH.

CMGL posted a turnover of £41.49m and operating profit of £1.23m for the year ended 31 December 2005. Its net assets are £12m.