RSA may trim dividends to fund £2bn expansion

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Royal & Sunalliance, the UK's largest general insurance group, yesterday reassured investors it would not resort to a rights issue to fund future expansion, although it was likely to cut its dividend.

The company indicated it needed to raise about £800m to fund a £2bn-plus expansion programme, a requirement that could be met by disposing of non-core assets and trimming the dividend.

A review of the possible sale of RSA's life assurance unit, slated for completion next month, was being extended into next year in the wake of the stock market impact of the 11 September terrorist attacks.

Bob Mendelsohn, the chief executive, said investors had been wrong to assume the absence of a sale of the life unit necessitated an equity-based fund raising. "We can fund a good level of growth without doing anything dramatic," he added.

The comments came as RSA reported a third-quarter operating loss of £54m after taking a £200m charge for claims relating to the terrorist atrocities. Mr Mendelsohn said the company had not been forced to sell equities to maintain its asset base when global stock markets went into freefall 10 days after the attacks.

RSA shares rose 21p to 403p.