Aviva, owner of Norwich Union, has been looking to expand in the US

Aviva will finance the deal through debt and a �900m share issue. It will pay $69 for each Amerus share, 10% more than the closing price on 6 July.

Buying Iowa-based Amerus will enable Aviva to increase its presence in the US, where it has previously admitted that it is under-represented.

The world's fifth-largest insurer, Aviva also reported "strong" trading.

It said operating profit for the six months to 30 June was expected to be at least �1.65bn, up from �1.32bn in the same period a year ago

The acquisition of Amerus will transform Aviva's US business Aviva statement See Aviva's share price

"The strength of the trading statement today has understandably been completely overshadowed by the announcement of the US acquisition," said Richard Hunter, an analyst at Hargreaves Lansdown Stockbrokers.

Mr Hunter said that despite concerns Aviva may be overpaying for Amerus, the deal will help boost earnings and may protect it from a slowdown in European demand.

"The news, on the whole, has been favourably received and the shares remain very positively viewed by the market," Mr Hunter said.

Aviva's shares dropped 23 pence, or 3.2%, to 690p by the end of Thursday trading.

'Leading position'

One of the main drivers of profit growth in recent quarters has been Aviva's international business and the company is looking to build on that success.

"This acquisition establishes a leadership position within a key segment of the world's largest long-term savings market," said Richard Harvey, Aviva's chief executive.

"Amerus is a well-managed, innovative and fast-growing business," he added.

Aviva said that Amerus was the number one seller of equity-index linked life insurance in the US, with total revenues of $1.6bn and pre-tax operating income of $327m in 2005.