Royal & Sun Alliance (R&SA) has become the target of fresh takeover speculation after it completed the sale of its US operation.

R&SA's share price rose by 4% after it announced the disposal of its US legacy business to Arrowpoint Capital, a vehicle set up by the unit's management team, for £158m.

According to analysts, the deal is now expected to spark renewed interest in the insurer with a number of US and European insurers lined up as a potential match.

Greig Paterson, of investment bank Keefe, Bruyette and Woods, said: "We believe that R&SA would be an attractive target at its current price to a number of providers, for example, Aviva."

Following the initial sale announcement, he said: "Given the large cost savings associated with an in-market merger and the resultant strong cash flow position, we believe a tie-up between Aviva and R&SA makes a lot of sense."

Allianz and Fortis have also been mooted over recent months as potential bidders, along with Dutch insurer Aegon and Finnish insurance giant Sampo.

The sale of the US division has also meant a ratings upgrade for R&SA. Fitch upgraded the company's insurer financial strength rating to A minus from BBB+.