CGNU's stock is still sliding after revealing plans to slash its dividend for shareholders yesterday.
The share price had fallen 12% by lunchtime today, after falling 10% yesterday.
And further downward pressure came when Morgan Stanley downgraded its stance on the stock.
Dealers reported the stockbroker changed CGNU to 'neutral' from 'underperform'.
It discussed whether the UK's biggest insurer needed to raise more capital.
It raised the topic earlier this month after publishing research saying: "We think the capital base of the company appears stretched."
Analyst Chris Rathbone of Williams de Broë told Insurance Times: "There are signs that CGNU is going to have to address the same sort of capital issues as Royal & SunAlliance.
"To grow at the sort of rates they are talking, yes the capital is there but it isn't overwhelming.
"I¹m firmly of the belief that you can't have too much capital.
"Particularly with the reduction in the equity markets, this is something that could affect the whole of the insurance sector in the UK, life and non-life."
Morgan Stanley put a new appraisal value on CGNU's stock, at 660p down from 867p.
CGNU yesterday shocked the stock market by unveiling
plans to slash its dividend for 2002 by 40%.
The cash saved would be used to expand the business and build its new international brand name, Aviva.
CGNU shares were trading at 705p at noon.
