Insurer RSA's offer to buy rival Aviva's general insurance operations in the UK and elsewhere for 5 billion pounds ($7.8 billion), has been rejected by the Aviva board, and there are no ongoing discussions between the two, Sky News said.

Aviva and RSA both declined to comment. Aviva shares were up 4.3 per cent at 383.2 pence by 9:20 a.m., while RSA was down 1.9 percent at 126.1 pence.

RSA and Aviva both have general insurance operations in Britain, Ireland and Canada, and RSA was reported last year to be mulling bigger takeovers than the small-scale acquisitions it has traditionally pursued.

A banking source familiar with the insurance sector said RSA was working on its own, and had been interested in Aviva's British and Canadian businesses.

'The price being talked about wasn't attractive. RSA made the approach, but it was several weeks back and this isn't going anywhere now,' the source said.

Oriel Securities analyst Tom Dorner said RSA could struggle to finance a takeover of that size. 'It'd be a very ambitious move from RSA against the backdrop of Prudential's failed bid for AIA,' he said.

'RSA would have to raise more than its market cap to get the deal done, and they have a stated strategy of making small bolt on acquisitions. It's going to be a tough sell to investors.'

Aviva, Britain's second-biggest insurer by market value, regards its general insurance arm as a key source of cash to fund growth in its more capital-intensive life insurance division.

The company is Britain's only major composite insurer, running both life and general insurance businesses.

RSA in June completed a round of cost cuts in the UK aimed at saving 70 million pounds a year.-Reuters