Royal & Sun dumps chief executive

LONDON, England -- UK insurer Royal & Sun Alliance fired its embattled chief executive on Thursday and said it would make a quick decision on whether to seek a cash infusion from shareholders.

The departure of Bob Mendelsohn comes as Royal & Sun faces growing pressure to improve profits and halt the slide in its share price. The group is also under fire for its handling of a planned multi-million pound rights issue.

In August, Mendelsohn said the group may have to issue new shares to raise cash after a plunge in equities -- in which Royal & Sun and other insurer has invested heavily -- eroded the value of their investments and put a squeeze on its ability to underwrite new business.

However, he has been criticised for not acting quickly enough on the new share issue, allowing its rivals -- like the UK's Legal & General and Switzerland's Zurich Financial -- to get a jump on Royal & Sun.

Legal & General (LGEN) plans to raise £786 million ($1.2 billion) through the issuance of new shares, while Zurich Financial hopes to raise as much as $2.5 billion.

Analysts believe the group fired Mendelsohn in order to win shareholder support for the rights issue.

"This looks like step one... I think in this market, with other companies showing the lead like Zurich (Financial), a rights issue is almost inevitable,'' Roman Cizdyn, an analyst at Commerzbank, told Reuters.

Royal & Sun said on Thursday it was reviewing its financing requirements and the performance of some of it businesses.

The company promised to announce a decision on a rights issue by November 7, when it reports its third quarter results.

Mendelsohn, 56, will receive about £1.04 million in compensation from the company, the equivalent of 18 months of his £693,000 annual salary. Chief Operator Officer Bob Gunn will serve as CEO until a permanent replacement is found.

"It is the board's view that the interests of the group will be best served by a change in the top management,'' Royal & Sun said in a statement.

Royal & Sun (RSA) shares, which have fallen about 70 percent this year, were down 0.8 percent to 120 pence in mid-morning London trading on Thursday.

The group's profits have been hurt by rising asbestos and flood claims. Last month, it was hit with a £1.35 million fine for failing to identify thousands of people who were wrongly sold pension policies.

Its profit fell 18 percent in the first half of this year. In response, the group slashed its dividend and cut 1,200 jobs. It also launched a £800 million asset sale programme.