Insurer Royal & Sun Alliance distanced itself yesterday from reports that it might be in the frame to buy parts of Royal Bank of Scotland' s £5bn insurance business.

Royal & Sun's international business has been boosted by a number of recent bolt-on acquisitions, and chief executive Andy Haste said more small purchases were likely across the group.

"There is still potential for this year and next year on the bolt-ons," Haste told analysts. But he went on: "I certainly wouldn't call RBS a bolt-on (acquisition). By those I mean the kind of deals you've seen us do up to now, funded out of our own resources."

The auction for the Royal Bank's insurance business is set to kick off in the next few days, according to a report yesterday. A banking source was quoted as saying that information memorandums on the business, which includes the Direct Line, Churchill, Privilege, Green Flag and NIG brands, are "probably going out this week".

Meanwhile, Royal & Sun was reporting a 15% rise in premiums in the first quarter of 2008. The UK's second-largest commercial insurer said in a trading update that net written premiums for the three months were £1.72 bn, with a 24% rise in its international operations offsetting a 3% uplift in the UK.

That included an 8% rise in personal insurance premiums to £265m as the group, which will change its name to RSA this month and is best known for its More Than brand, drove through premium increases of 5% for motor and 4% for household insurance cover.

Royal & Sun said it had managed a customer retention rate of over 80% despite the rises. It added that partnerships with corporate clients to provide "white label" insurance products had also contributed to the growth.

Haste described market conditions as challenging, but said: "We remain confident of achieving a strong result in 2008 and beyond."

Royal & Sun is expected to post a 2008 operating profit of £825m, up 1%, according to a Reuters Estimates poll.

Merrill Lynch said in a note that though revenue growth was surprisingly strong, the difficult rating environment meant underlying premium growth was barely keeping track with claims inflation.

The group, however, said its finances were strong and had benefited from retained profits and favourable currency and investment market movements so far this year. It repeated its target of delivering a combined ratio of around 95% in 2008 (which is 5% above break-even).

Tim Young, insurance analyst at Collins Stewart, said the year "looks promising so far", but added: "The shape of the group has little industrial logic and should really be broken up. We are positive on the basis that break-up is ultimately quite likely."