Direct Line, the motors-to-homes insurance group, has rejected a £3.3 billion takeover proposal from Aviva.

The cash-and-shares proposal valued Direct Line at 250p a share, comprising 112.5p per share in cash and 0.282 new Aviva shares.

This is a 59.7% premium to the closing prices of Direct Line shares on 18 November, which was the day before the proposal was submitted.

Direct Line dismissed the offer as “highly opportunistic”, saying that it “substantially undervalued the company”. The proposal was unanimously rejected by the board.

It added: “The board has considerable conviction in the capabilities of our newly established leadership team and stands firmly behind their delivery of our strategy.

“Under this strategy, the company continues to make early progress towards our financial targets, and expects to deliver attractive growth in profitability, capital generation and shareholder returns.”

Aviva indicated in a statement to the stock exchange after the market closed tonight that it was still interested in a deal. It said Direct Line had “declined to engage further”.

It said: “Aviva believes that an acquisition of Direct Line would be consistent with its strategy to accelerate growth in its UK businesses and further pivot the group towards capital-light business lines.”

Direct Line has been left vulnerable to since a series of profit warnings in 2022 and 2023, when the company was caught out by claims inflation in the motor insurance market.

After the company unsettled nvestors by shelving its dividend, CEO Penny James left, to be replaced by Adam Wimslow who was poached from Aviva.

He has set out a strategy to cut costs, which includes a plan losing 550 jobs, or about 5% of the FTSE 250 company’s workforce.

He is overseeing its move on to price comparison sites and and has reinstated its dividend, but now looks like being forced into a battle with his former employer.

In March, Belgium’s Ageas announced it would not be making an offer for the insurer following two failed attempts at engaging with the board.

Under City rules, Aviva has until Christmas Day to make a firm offer or walk away.