Prompt, the UK's second biggest premium finance company, has acquired Tifco, the third biggest, in a deal that should put them neck-and-neck with the market leader Premium Credit, Insurance Times understands.

An inside source said that due diligence had been successfully completed and the deal would be formally announced shortly.

Tifco has been rumoured to be for sale since its US parent company was acquired by Dutch insurer Aegon last January.

At the time, the insurer issued a statement saying it had decided to divest itself of the non-insurance businesses of Transamercia following a strategic review.

Prompt, which is owned by Close Brothers, has almost doubled its premium financing to nearly £1bn over the past year.

The acquisition of Tifco, which is thought to premium finance about £200m of insurance policies, will leave them just trailing Premium Credit which finances £1.25bn.

Tifco managing director Ian Jerrum said he would not comment on market rumours.

Tifco has had a troubled life in the UK. Jerrum was brought in from CNA Insurance to relaunch the company three years ago after its first UK launch was botched leading to its being pulled.

Prompt chief executive Bob Golden was not available for comment.