LONDON (Bloomberg)—RSA Insurance Group P.L.C., the United Kingdom's biggest nonlife insurer, made a £5 billion ($7.98 billion) bid for Aviva P.L.C.'s general insurance business, according to two people with knowledge of the situation.

The bid was rejected by Aviva, and there are no current negotiations between the two companies, said the people, declining to be identified because the matter is private. Officials at Aviva and RSA declined to comment.

“RSA are very ambitious, and I don't doubt for a minute they would be interested in Aviva's general insurance business,” said Eamonn Flanagan, a Liverpool, England-based insurance analyst at Shore Capital P.L.C., who has a “buy” rating on Aviva and RSA. “It would give them huge scale in the U.K. and widen their footprint across a number of territories.”

The acquisition would be RSA CEO Andy Haste's biggest in his seven years at the insurer and would add to the company's focus on home and car insurance. A purchase would surpass RSA's £4.4 billion ($7.03 billion) market capitalization and would leave Aviva to concentrate on life insurance in the U.K and Europe.

Aviva profit

Pretax profit at Aviva’s general insurance and health insurance division declined 3.7% to £525 million ($838.2 million) in the first half of the year, compared with the same period a year earlier. The unit represented more than 24% of the company’s pretax operating profit in the first half.

Aviva and RSA beat analysts’ estimates and raised their dividends when they reported first-half results this month. The insurers benefited from the economic recovery, which pushed clients to spend more protecting their retirement and property.

RSA, which insures homes, cars and ships in 130 countries, had been increasing revenue through small acquisitions outside its slower-growing home market. Haste said in February he would consider more acquisitions after completing 30 transactions since 2003.

The approach was made by RSA Chairman John Napier in a letter to Aviva Chairman Colin Sharman, according to Sky News, which reported the offer earlier Friday.

RSA may have difficulty raising the money to fund a takeover because the amount needed would be larger than its market value, said Marcus Barnard, an analyst at Oriel Securities Ltd. in London. Prudential P.L.C. pulled out of an attempted takeover of American International Group Inc.’s main Asian unit after investors questioned the size of the rights offering needed to fund the deal.

“If you are going to raise a load of cash and spend it, investors need to be pretty certain it is a good use of cash,” said Mr. Barnard, who has a “buy” rating on Aviva. “We had Prudential trying to raise more than their market cap in a rights issue and that did not go down well with investors.”

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