RSA plans disposals instead of a rights issue

Royal & SunAlliance, the troubled insurance group, is to embark on a programme of sell-offs instead of looking to the financial markets to raise much-needed cash, according to company sources.

Royal & SunAlliance, the troubled insurance group, is to embark on a programme of sell-offs instead of looking to the financial markets to raise much-needed cash, according to company sources.

The insurer is expected to use its financial results presentation on Thursday to confirm it has no plans to mount a rights issue to raise up to £1bn.

The company said back in August that it was considering "raising external capital", triggering speculation over the likely size of a rights issue.

But according to reports over the weekend the company has abandoned any plans for a rights issue in the face of hostility from existing shareholders.

A spokesman for RSA said: "This is speculation. All we ever said is that we will look at a range of means of raising external capital."

Now RSA is expected to focus on the other two key options outlined in August: moving capital away from unprofitable lines of business and selling off underperforming operations.

The company had originally set a target to raise £800m but is now looking to raise more capital because of the sharp falls in world stock markets that have left the balance sheets of many life assurers looking fragile.

According to reports, RSA is looking at selling its Australian operation in a move that could raise as much as £700m.

Sources said Bob Gunn, RSA's acting chief executive, has been encouraged by the £651m price achieved by Aviva from the disposal of its Australian and New Zealand general insurance business.

Investors in Royal & Sun have seen their shares fall 74 per cent this year – the worst performance of any FTSE 100 stock – and will be anxiously awaiting Mr Gunn's statement.

RSA is likely to give further details of its exposure to claims arising from its asbestos liabilities. On Friday its shares sank 10 per cent after it disclosed it was being sued by an engineering firm.

Investors are expected to receive some cheer from the news that RSA has carried out a thorough investigation of its business that has not uncovered any further black holes.