The RAC is the UK's second biggest vehicle breakdown service

The deal, which brings together the UK's biggest insurer and a well-known motoring brand, will lead to about 1,700 job losses at the two businesses.

Aviva said it would cut 900 head office jobs and move 800 administration and processing jobs outside the UK.

Combining the two businesses would help it achieve cost savings of at least �80m a year by 2006, it said.

Aviva did not give details as to where the jobs would go, but a spokesperson said it was "reasonable to assume" that they may be relocated to India or Sri Lanka, where Norwich Union has four operations.

It said buying the RAC would boost its Norwich Union insurance business "creating a powerful new combination in insurance and motoring services".

'Revenue opportunities'

In addition to its roadside recovery service, the RAC also operates BSM driving schools and insurance services.

We will help our customers learn how to drive it, buy it, insure it and, if things go wrong, get them back on the road fast Patrick Snowball, NU chief executive Check the RAC share price Check the Aviva share price

It has about 6.7 million roadside assistance customers, and about 275,000 motor and home policyholders under the RAC Insure brand. Its business services unit included Lex vehicle leasing.

The RAC was a private members' club for nearly a century until it was taken over by Lex for �437m in 1999.

It makes 54% of its profits through selling consumer services such as driving lessons through its BSM school, traffic information, insurance and legal services.

Additionally, the company provides claims management, accident and leasing services.

"We are excited about the revenue opportunities from this combination," said Norwich Union chief executive Patrick Snowball.

"When it comes to their car, we will help our customers learn how to drive it, buy it, insure it and, if things go wrong, get them back on the road fast."

'Strong results'

The deal was announced as Aviva unveiled a 25% rise in worldwide operating profits to �2.34bn in 2004, slightly above expectations.

RAC HISTORY 1897 - RAC founded as the Automobile Club of Great Britain 1901 - Roadside recovery services developed and the introduction of uniformed patrols 1912 - Roadside emergency phone boxes introduced 1998 - RAC buys the British School of Motoring 1999 - Lex buys the RAC's motoring services arm for �427m, resulting in windfalls for RAC members 2005 - RAC agrees �1.1bn Aviva takeover

Aviva is the world's fifth-largest insurer with its Norwich Union business holding a 14% share of the UK general insurance market.

It is also the first European insurer to report operating profits under European "embedded value", which is a new standard way of financial reporting designed to offer a clearer picture of insurers' profit and financial strength.

"Aviva is thriving. This is a strong set of results, delivered by managing our business for value for customers and shareholders," said Aviva's chief executive Richard Harvey.

Aviva said it would consider selling RAC's motor support services when the takeover is completed.

"We would not naturally be an owner of it, but it makes good money ... and we are in no rush to sell it. We would want to sit down with management to see how we can extract best value from it," said Patrick Snowball.