Royal & Sun Alliance's plans to raise new funds have prompted investors to doubt that the insurer will now opt for a rights issue.

Royal & Sun Alliance's (R&SA) plans to raise new funds have prompted investors to doubt that the insurer will now opt for a rights issue.

Analysts say the firm needs at least £750m to repair its balance sheet and improve earnings, to avoid a credit downgrade.

Having delayed over a rights issue, R&SA has now fallen behind other insurers, making it difficult for the firm to rally investors, analysts said.

Royal & Sun is now rumoured to be examining other ways of raising cash.

Measures could include disposals in life insurance operations. The Sydney Morning Herald reported today that it is in talks with and an Australasian firm to sell its Pacific life operation.

"There are no sacred cows," said the source. He added that the group would be "absolutely candid" about the dire state of its capital. "It's not going to be a pretty picture," he claimed.

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