RSA silent on rights issue

ROYAL & Sun Alliance Insurance is expected to post a 17% rise in first-half operating profit this week, but the run-up to Thursday's results announcement has been dominated by rights issue talk.

Shares in Britain's second-biggest general insurer on Friday closed 4% lower at 138-1/2 pence, falling from 154p at the beginning of the week, on rekindled speculation that it would announce a rights issue, possibly with the half-year figures.

Sunday newspapers speculated that the insurer could tap the markets for up to a billion pounds, with one reporting that chief executive Andy Haste would use the money to expand RSA's underwriting business and to shore up its capital position.

Markets last week were abuzz with talk that RSA was mulling a two-for-three rights issue at 100 pence a share.

RSA declined to comment.

Craig Bourke, an analyst at BNP Paribas, was sceptical that an RSA cash call was in the offing this week, saying on Friday that investors and analysts would want to hear the company's plans for improving its British business.

Royal & Sun has suffered a series of dismal results and dividend cuts that forced the departure last year of former chief executive Bob Mendelsohn, who was replaced in April by Andy Haste.

A consensus analysts' forecast for interim operating profit last week was £353m, up from £301m a year earlier. Forecasts were between £327m and £386m.

In May, the company gave investors encouragement with a first-quarter pre-tax profit of £175m pounds, at the top end of expectations.

Its shares have revived, outperforming the benchmark FTSE 100 index by about 15% in the past year, but its price of 138-1/2 pence on Friday was still well below the 550 pence of July 2001.

Insurers worldwide have struggled in recent years as the worst bear market since World War II hit the investments they rely on to make a profit.