Aviva, Britain's biggest insurer, will only proceed with a spurned all-share offer worth more than £17 billion for Prudential if it is recommended by its target, Aviva said yesterday.

Aviva wants to create a UK insurance titan by adding its closest rival's fast-growing US and Asian businesses to its own strong European foothold, and said it was offering 82 Aviva shares for every 100 Prudential shares.

Prudential rejected the proposal on Saturday, saying it was not in investors' best interests.

Aviva said when it made its approach on Thursday the offer equated to about 708 pence a share and a 10 per cent premium for Prudential shareholders at that time.

Aviva shares added 2.2 per cent to 870 pence in early trading yesterday, making the deal worth 713 pence in shares plus 11 pencep for Pru's final dividend, or 724 pence in total, equating to £17.4 billion.

But Pru shares jumped 10 per cent to 740 pence, signalling the prospect that Aviva will raise its offer or more predators could be flushed out. France's AXA and US giant AIG have long been rumoured as potential predators. AXA declined to comment, while AIG could not be reached immediately.

Aviva said its offer would create the world's fifth-biggest insurer with a market value of £36 billion, and it expected to make around £320 million of cost savings a year from the deal, before tax.

"The combination of Prudential and Aviva has a compelling strategic, financial and operational logic. This is a real opportunity to create a leading player in the global savings, investments and insurance market," Aviva Chief Executive Richard Harvey said in a statement.

Aviva has consistently been seen as the most likely predator for Prudential. The company said Mr Harvey would be chief executive of the combined group, but it would have a balanced board and a management team drawn from both companies.

The two sides have discussed a merger in the past, but banking sources have told Reuters that one of the previous sticking points was the management structure.

Aviva said the combined group would be diverse geographically and in terms of products. It said two-thirds of profits would come from life insurance, with general insurance contributing 29 per cent and fund management four per cent. It said 42 per cent of profits would come from Britain, although analysts doubt such a deal would have competition issues in what is a fragmented life insurance industry.

Aviva said 28 per cent of profits would come from Continental Europe, 17 per cent from North America and 10 per cent from Asia.