Aviva says no to RSA approach for insurance arm

It is understood that the approach was immediately rejected by the Aviva board and there are no ongoing discussions between the two companies.

Aviva and RSA both declined to comment.

RSA is thought to be interested in buying Aviva's British and Canadian general insurance businesses.

Oriel Securities analyst Tom Dorner said RSA could struggle to finance a takeover of that size.

"It would be a very ambitious move from RSA against the backdrop of Prudential's failed bid for AIA," he said.

"RSA would have to raise more than its market cap to get the deal done, and they have a stated strategy of making small bolt-on acquisitions. It's going to be a tough sell to investors."

Aviva, the UK's second-biggest insurer by market value, regards its general insurance arm as a key source of cash to fund growth in its life insurance division.

The company is Britain's only major composite insurer, running both life and general insurance businesses.

Aviva's general insurance business employs 600 people in Yorkshire, based in Leeds, Sheffield and York.

The region is mostly concentrated on the life business which employs 2,325 in York, 1,454 in Sheffield and 22 in Leeds.

RSA is interested in Aviva's Norwich-based operation – the UK's leading general insurer with an estimated 13 per cent market share.

Both Aviva and RSA announced results that were well-received in the City, although they both highlighted the soaring cost of motor insurance cover for consumers.

Aviva also sells life and pensions products and says that its model of offering both general and life insurance is still the right strategy.

Aviva recently reported record results in the UK life and pensions arm.

The group, which employs around 5,000 people at operations in York, Leeds and Sheffield, reported a better-than-expected 21 per cent rise in operating profits to 1.3bn in the first six months of 2010.

Aviva's UK chief executive Mark Hodges was upbeat about the group's prospects.

"We are confident about the future," he said. "We have a very diversified business in terms of global diversification, between life and general insurance and also product diversification."