Derek Plummer, Norwich Union's marketing manager, explains how the L&E deal was successfully completed.

When Norwich Union acquired ITT London & Edinburgh twelve months ago, the City was less than enthusiastic. Some analysts thought the deal was done more in desperation than through business acumen.

The Financial Times wrote on October 28: "Analysts criticise £315m purchase of general insurer."

But ten months later the City had changed its tune: "Buying London & Edinburgh looks more shrewd by the day," an analyst wrote in the FT on August 4 this year.

"This change in tune reflects the financial sense in buying another general insurer with a £750m premium book which brings economies-of-scale as well as lines of business, such as creditor, commercial property and packages, that Norwich Union was keen to build," says Derek Plummer, Norwich Union's marketing manager.

But, while the deal looked good on paper to the boardroom, the practicalities of integrating two workforces was always going to be hard work.

About 600 jobs, a third of the L&E staff, had to be cut, and branch operations around the country had to be closed if Norwich Union was to achieve its target of making savings of £30m.

Handled badly, staff morale would plummett and service standards deteriorate.

"We learnt from other mergers and acquisitions, and adopted an up front and honest approach," Plummer says.

"There were some areas where there was straightforward duplication, such as the finance department, which was easy to identify but others where we needed to see things in operation before making a decision."

Half of these job cuts fell at the L&E head office in Worthing, where the insurer was a major employer.

Staff felt as attached to the town as Norwich Union is to its birthplace, and there was difficulty in persuading some to relocate to East Anglia.

Relatively small things like the L&E social club, which was next door to the head office and had a swimming pool (both lacking at Norwich Union's club) proved a stumbling point.

Norwich Union's public relations department went on the offensive to reassure the burghers that it was committed to the town. Today, there are still 900 staff in Worthing.

But the greatest obstacle was the cultural difference between the two insurers.

"L&E staff perceived us as only being interested in the bottom line while they thought they were more service orientated," Plummer says. "And there were different ways of conducting business.

"But we found the bottom rung of the L&E staff were in the dark about strategy, which is not part of Norwich Union's philosophy.

"So part of the integration was making sure that everyone in the new company knew exactly what we wanted to achieve and how we were going about it."

Bridget McIntyre was appointed managing director of the Worthing operation with a new management team consisting of both Norwich Union and L&E staff.

And a task force was set up to oversee the integration.

Away from head office, decisions regarding branch offices were easier because there was little duplication except in the Home Counties.

Gradually, the two operations merged. The information technology was migrated into Norwich Union over the Easter weekend, and much of the L&E product range phased out except in commercial business.

The majority of L&E's book, 70%, came from affinity deals with clients such as Nationwide, while brokers held the rest. But all of them already had agencies with Norwich Union.

The rationale for the acquisition was straightforward. Following the mega-mergers which created Royal SunAlliance and then Commercial General Union, Norwich Union was slipping into the middle ground.

Big enough to be in the top ten. But too small to benefit from the economies of scale enjoyed by the top three, and too big to benefit from the focus of a specialist.

Computer models identified another top ten general insurer ITT L&E as a good fit. "Where our lines of business were too short, theirs were long, and vice versa" explains Plummer.

More importantly, the US parent company, Hertford, was looking for buyers. The motor book, predominately non-comprehensive, was in dire straits. Today, the L&E motor book has shrank from £100m to £50m.

Other unwanted lines of business, such as the professional indemnity book, were sold to avoid having conflicting interests.

The insurer admits it was lucky that it was an acquisition rather than a merger so that it could call the shots.

"When a pig and an chicken get together to make bacon and eggs, it is always better to be the chicken," says Plummer.