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UK insurance company Aviva has agreed to buy its US rival Amerus in a deal worth £1.6 billion.

The country's largest insurance company, created in 2000 following a merger between Norwich Union and CGU, said that the deal would be financed through debt and a £900 million share issue.

Richard Harvey, Aviva group's chief executive, said that the acquisition of Iowa-based Amerus was an "important strategic move" designed to "transform" the insurer's US business.

Commentators say that the Aviva boss has been looking to expand the company's presence in the US market after forecasting that growth within the European life insurance industry was likely to slow later in the year.

Amerus, claimed by Aviva to be the top seller of equity-index linked life insurance in the US, reported total revenues of $1.6 billion (£0.87 billion) and pre-tax operating income of $327 (£178 million) million in 2005.

Welcoming the deal, Mr Harvey said: "This acquisition establishes a leadership position within a key segment of the world's largest long-term savings market.

"In a single move the combination of Amerus' national distribution networks and the resources and expertise of Aviva, provides the platform for significant profitable growth in the US," he added.

Amerus' chief executive, Thomas Godlasky, added that his company was "looking forward to joining forces with one of the world's leading insurers".

"With the support and financial strength of Aviva, we will be able to further enhance the growth opportunities of our combined operations and take the new business to the next level," he said.

In a trading statement, Aviva also reported today that it expected operating profits for the six months to June 30th to be not less £1.65 billion, up from £1.32 billion in the same period last year.