Aviva buys Canadian RBC's general insurance business for $400 mln

(Adds background, Aviva CEO comment, shares)

LONDON, Jan 21 (Reuters) - British insurer Aviva (Other OTC: AIVAF - news) said on Thursday it was buying Canadian bank RBC (Other OTC: RBCI - news) 's general insurance arm for C$582 million ($403 million) and had agreed a distribution deal, to diversify its business in Canada.

Aviva Chief Executive Mark Wilson has said the life and general insurer was interested in "bolt-on" acquisitions, after it bought rival UK life insurer Friends Life (Other OTC: RSLLF - news) for 5.6 billion pounds ($7.9 billion) last year.

Canada is the group's second biggest general insurance market after the UK.

Around 575 RBC Insurance employees will become part of Aviva (Amsterdam: AW8.AS - news) Canada's operations as a result of the acquisition of RBC General Insurance, Aviva said in a statement.

Aviva Canada has also entered a 15-year agreement with RBC Insurance which enables RBC Insurance customers to buy Aviva Canada's property and casualty (P&C) insurance products, Aviva added.

"This new partnership extends Aviva's presence in general insurance, brings additional diversification benefits to the group and presents excellent opportunities for revenue and earnings growth in the attractive Canadian market," Wilson (Oslo: WILS.OL - news) said.

Aviva said it will make an estimated net after-tax gain of C$200 million on the deal, which it said would increase Aviva Canada's annual gross written premiums by around 20 percent.

Aviva posted first-half pre-tax operating profits of 1.17 billion pounds ($1.65 billion), including 131 million pounds from Canada.

Aviva's shares were up 2 percent at 459 pence at 1412 GMT. ($1 = 1.4457 Canadian dollars) ($1 = 0.7088 pounds) (Reporting by Carolyn Cohn; editing by Simon Jessop and Elaine Hardcastle)