Aviva has big plans for the RAC business it bought this year

From 2008 the group said it hoped to save a further �130m a year, leading to a �40m rise in profits annually.

Most of the savings - �100m a year - will be squeezed from the RAC by 2008.

Over the same period, Aviva aims to boost membership of RAC Rescue by 800,000 to three million and RAC Insurance by 600,000 to 900,000.

Shares in Aviva, which trades as Norwich Union in the UK, jumped 3.38%, or 21 pence, to 643p on the news in late morning trade.

We have announced ambitious growth plans for the RAC and will more than double profits from the acquisition by the end of 2006 Patrick Snowball, Aviva Check Aviva's shares

"What the market is impressed with this morning is the benefits coming through from RAC," said Colin Morton, fund manager with Rensburg, which holds shares in Aviva, told Reuters.

"When they first announced the deal it looked expensive but now with the cost savings and the revenue gains it looks like they got it for a good price."

Growth boost

Aviva became the UK's biggest provider of motoring services when it took over the RAC for �1.1bn in May this year - the move also gave it a wide base of RAC customers it could sell its own insurance and financial products to.

As well as making the most of its new purchase, Aviva - which has a 14% share of the UK insurance market - said it aimed to increase profits from its worldwide business.

To that end, the group said it was now aiming for a combined ratio (COR) - the amount of money spent paying out on claims and in costs for every �1 of premiums taken in - of 98% or below from its worldwide insurance services.

This compares to its original target of 100% for 2004-6.

"The commitment to meet or beat a new COR of 98% demonstrates the confidence we have in sustaining our excellent general insurance results," Aviva general insurance executive director Patrick Snowball said.

"We have announced ambitious growth plans for the RAC and will more than double profits from the acquisition by the end of 2006, with more to come in later years."