Prudential shares rose 7% on Friday

Newspaper reports claim the offer was made on Thursday, and expect Aviva to return with a higher bid.

The bid could also encourage approaches from other major insurers such as France's Axa or Germany's Allianz.

A combined Aviva and Prudential would have 50m customers, 80,000 staff and �350bn of funds under management.

Share price surge

"The board, which has taken independent financial advice, does not consider that the proposal is in the best interests of its shareholders and has rejected it," Prudential said in a statement issued on Saturday.

"The board confirms that it is not in discussions with any party and reaffirms its confidence in Prudential's future as an independent company."

Prudential shares rose 7% to 672p by the close of market on Friday, their biggest increase for three years.

On the same day, the Financial Services Authority issued a study claiming that almost a third of UK takeover deals showed signs of insider trading.

Last week Prudential announced a 33% increase in operating profits, which came in well above market estimates at �1.7bn.