NFU Mutual was forced to sell Country Mutual Insurance Brokers (CMIB) to the Towergate Partnership after the distribution network "failed to reach its full potential", sources close to the company said.
The multi-million pound deal, which has yet to be completed, is understood to be Towergate's largest broking acquisition to date, and is set to push it further up the top 10 brokers table (see box).
Sources said the sale signalled a major shift in NFU Mutual's intermediary distribution model.
The deal comes just two years after NFU Mutual publicly committed to investing and growing CMIB.
Sources said NFU Mutual's decision to sell the broker came after an internal review of the company's structure.
One source said: "The model hasn't worked and it can't afford to grow it. NFU didn't bother to integrate properly the business when it was acquired. It is a real shame. Undoubtedly it won't be getting back what it originally paid for it."
A further source added that NFU Mutual could look to move away from an intermediary-based distribution network and would opt to use its own agents.
"It has bought it and grown it without ever really giving brokers the common structure needed after an acquisition," the source said.
"Basically it left brokers to run their businesses without ever really leveraging its potential power."
An NFU spokeswoman denied the allegations. She said: "In 2005 we carried out a strategic review of CMIB and we found it didn't really fit in with our long-term growth model.
"There have been no problems and we are confident about the financial prospects of CMIB."
Towergate and NFU Mutual confirmed they were in exclusive talks.
Going up the Top 50
Towergate's purchase of Country Mutual Insurance Brokers is likely to catapult it higher into the Insurance Times list of top 10 brokers. Currently at No 10, Towergate looks set to overtake the AA (at No 8) and HSBC Insurance Brokers (No 9).
According to the figures used to compile the table last year, CMIB will add in excess of £24m GWP.
