Direct Line is desperately trying to finalise its takeover of Churchill Insurance, according to sources close to the deal.

The direct insurer has agreed a period of exclusivity on its negotiations with Churchill which will come to an end shortly.

Under consideration is the integration of the two companies, but more importantly the final price which the Churchill management team and its parent, Swiss group Winterthur, are hoping to push through the £1bn barrier.

A source close to the deal said: "The nuts and bolts of the deal have been done already. The due diligence is the only thing holding up proceedings. But the period of exclusivity is coming to an end and the door will then be open for other bidders circling the company."

Also the future of the Churchill brand and its charismatic founder Martin Long may be under discussion, said the source.

"Martin will walk away a very rich man. But Direct Line will want some continuity and he is very much the brand, so discussions must be going on to find a place on the board for him and keep him tied to the company for some years."

Direct Line's owner Royal Bank of Scotland is bankrolling the acquisition. It is understood that around 18 months ago Direct Line began talks with Norwich Union, but these failed to materialise into a concrete deal due to the complications wrought by the Commercial Union merger.

Churchill and Direct Line refused to comment on the rumours.

The combination of Churchill Group and Direct Line would topple Aviva as Britain's biggest motor insurer with annual sales of well over two million per year. The combined force would also be Britain's third largest property insurer behind R&SA, Aviva and Zurich.

A sale of Churchill and Winterthur was first mooted last October after the parent company, Credit Suisse First Boston, posted poor results and announced a new strategy to cut more than a thousand jobs worldwide.

Insurance Times was the first to report that Royal Bank of Scotland had been in talks to buy Churchill on 27 February. Two weeks later Churchill chief executive Martin Long confirmed that a number of suitors had been in touch.

In 2002, Churchill Group's premium income grew 15% to £2.14bn and profits rose 48% to £83.3m. Over the same period, Direct Line's premium income rose by 38% to £1.89bn and total income topped £2bn. Profits rose by 36% to £355m over 2002. The combination would produce Britain's third largest composite insurer with a premium income of over £4bn.