Royal & SunAlliance (R&SA) has launched a £960m rights issue and said it will cut 1,000 jobs.

The cuts will come over the next 12 months but no further details were available as Insurance Times went to press.

The announcement comes on top of last year's decision to slash 1,200 posts as the beleaguered group raised its cost cutting target to £270m a year. It hopes to achieve its total cost cutting target by 2006.

A heavily discounted one-for-one rights issue at 70p a share would help to pay £500m towards US losses and £150m of asbestos and environmental claims on both sides of the Atlantic.

The price is less than half the 154p closing price reached on Wednesday, the day before R&SA announced the news. The share price fell 13% the following morning to 133p.

The rights issue is at the upper end of expectations and is fully underwritten. It echoes similar plans late last year that were ditched due to shareholder opposition.

Finance chief Julian Hance is to step down when the rights issue is away. If he leaves early next year as expected, he will collect a £250,000 bonus on top of his £400,000 pay package.

R&SA is also to pull out of the US where it lost £79m in the first six months. It is selling The Travelers Indemnity Company as well as the renewal rights to its personal lines business and most of its commercial business. These disposals will raise no more than £57m.

The group will also sell its remaining US businesses or their renewal rights.

These moves will leave R&SA focused on the UK, Scandinavia and Canada.

Its commercial business will be focused on property with personal lines focused on direct distribution and selected intermediated channels. It plans to try to drive down delivery costs on personal business.

Some cash from the rights issue will be used to buy R&SA out of its 10% quota share arrangement with Munich Re.

News of the rights issue overshadowed an improvement in first half profits, up by 17% to £351m from £301m in the same period last year. The combined ratio was 99.3%.

The general business net premiums written fell to £3.654bn from £4.268bn in the same period last year.

UK commercial produced an operating ratio of 94.4%, improved from 98.3% in the first half of last year while UK personal stood at 100.3% as compared with 106.1%.

The latest moves in brief

  • £960m rights issue
  • 1,000 jobs to go
  • Reserves may be boosted by up to £800m
  • Finance chief Julian Hance to leave
  • Intermediated personal lines business being cut back
  • More outsourcing and businesses being moved to 'lower cost centres'
  • Share price falls 13% on news