Folgate is in "advanced negotiations" to acquire three books of business with total commission income of £2m from Heath Lambert, according to sources.

It is understood that each of the books of small commercial business has commission income of about £650,000.

They service different areas of the country with one based in London, one in the North and one in the South.

Folgate, which is aiming to increase its premium income to £1bn by 2005, declined to comment. But chief operating officer Kenny Maciver recently said Folgate was in negotiations over five major acquisitions, three of which could be completed by the year's end. This deal would increase Folgate's premium income by about £15m.

A spokesman for Heath Lambert said the company did not comment on market speculation.