Aviva, Britain's biggest insurance company that operates as Norwich Union in the UK, raised £900 million in a share placing yesterday to help pay for the acquisition of AmerUs, a US insurance and investment company noted for its equity-indexed life policies and annuities.

Aviva has agreed to pay $2.9 billion (£1.57 billion) for AmerUS, which will make it a leading player in the fast-growing US market for stock market-linked savings packages where the original capital, or a minimum income derived from it, is guaranteed.

AmerUS's chief executive, Tom Godlasky, will take charge of all Aviva's operations in the US.

The agreed price of $69 a share, represents a ten per cent premium over AmerUs's closing market price on July 6, the day before the two companies confirmed they were in talks.

Apart from the £900 million Aviva raised yesterday in a fully underwritten placing of 129 million new shares at 700p, the price will be met by borrowings and internal funds.

The acquisition fulfils Aviva's objectives in the US long-term savings market, said chief executive Richard Harvey.

At the same time Aviva reported strong trading in the first half of 2006, with operating profit on a European embedded value basis up to at least £1.65 billion from

£1.32 billion in the first six months of last year.

The shares finished with a loss of 23p at 6971/2p. They have fallen 21.5 per cent from their recent peak.

City analysts questioned both the price tag and whether AmerUs will give Aviva a big enough profile in the world's largest long-term savings market.

Kevin Ryan, at ING Financial Markets, said Aviva was spending a lot for a second-choice deal. It is paying 1.9 times AmerUS's forecast embedded value, while the French bought Winterthur last month for a multiple of 1.6 times its 2005 total.

But Mr Harvey said: "We think it is an attractive price for such a high-quality franchise."

It should boost earnings on an international financial reporting basis by 2007 and by 2008 in terms of embedded value.

Mr Harvey said the price would be partly offset by pretax cost savings of about $45 million (£24.4 million) from combining the two businesses. He indicated there could be further cost savings as the deal unfolds.

Aviva played down fears it was embarking on a wider spending spree in the US.

"AmerUs gets us there in one bound," Mr Harvey said.

"We are very comfortable that this is a business that will continue to grow strongly and will fulfil our ambitions in the US."

He also sought to ease fears AmerUs could become embroiled in a regulatory probe. "It is something we have discussed and are very comfortable with," he said.