The Edgar Hamilton Group has agreed to merge with fellow Lloyd's broker FE Wright following the latters acquisition by Sterling Insurance, EHG's parent group.

A new broking group with 250 staff will be formed on January 1, 2001 as a result of the partnership completed two weeks ago. EHG is the larger partner with a turnover of £6.5m, compared to FE Wright's £4m.

The merger will mean EHG shifting away from its backbone business of wholesale broking to grow its international and corporate business.

David Hughes, chief executive of EHG, said both companies had been forced to review their approaches to the insurance market.

"We are both traditional Lloyd's brokers. But gone are the days of being all things to all men. We therefore decided to look at the businesses and decide which markets we ought to be in," he said.

Hughes admitted that EHG had suffered recently in the insurance market from the incorrect image that it was solely a wholesale broker. Although he agreed that this had been partly due to how EHG had marketed itself.

Hughes stressed that wholesale broking and motor guaranteeing formed only 60% of EHG's business. The remaining 40% of its operations relate to international and corporate business in which it deals direct with brokers.

Hughes added that its merger partner FE Wright had complementary strengths in its financial services and in its book of motor trade business.

Ray Antell, chairman of FE Wright, said: "A while ago we were given the blessing to seek out a suitable business partner and we know that we have found that in EHG."

The two traditional-style Lloyd's brokers have similar origins. EHG was founded in 1914 and attained Lloyd's broker status four years later. FE Wright was founded by insurance clerk Frank Wright in 1929.

The Sterling Insurance Group acquired EHG from Singer & Friedlander in 1996, and FE Wright from Lonmin. Sterling's other interests include, Albion Insurance which specialises in high net worth, commercial and credit cover.

Hughes said that Sterling's owner Nicholas Cooper wanted to build a group that has a broad base of financial services.