Insurance giant Royal & Sun Alliance, hit by asbestos, flood and 11 September-related claims, is to axe 1,200 staff.

Royal & Sun is to cut 970 staff at Bristol, Liverpool and Horsham, with a further 230 shed from its UK sales force.

Where the jobs are going

Bristol 520 Liverpool 250 Horsham 200 230 to go from sales team

The announcement came as the insurer announced an 18% fall in operating profits, and raised by �66m its provision for claims resulting from September's terror strikes on the US.

The earnings figure was well below City expectations, and saw Royal & Sun shares slide by more than 40% in morning trade, wiping more than �500m off the firm's stock market value.

But Royal & Sun said the job cuts related to a shake-up at its life and pensions business.

The group is shifting its focus towards the general insurance market - covering items such as cars and houses - and away from life insurance.

New focus

Over the past three years RSA has stopped selling endowment policies, closing its with-profits fund to new money and disposing of some businesses.

It has now said it is closing its remaining UK life funds to new business.

RSA said the restructuring measures, together with the sale of businesses, would bring it close to its target of raising �800m to use in its general insurance business.

Speculation had risen that the company would be forced into a rights issue to raise the cash.

And RSA said it was "actively considering" raising new money from the stock market.

"The probability of a rights issue is quite high," said UBS Warburg analyst Roger Hill.

"But the share price is telling you that the market doesn't want this to happen."

Royal & Sun shares slipped 40% to 99.75p in morning trade before recovering some ground to close down 30.75p, or 21.5%, at 112p.

Profits hit

RSA said it had raised the amount set aside to pay out to 11 September victims by a further �66m, to add to its previous provisions of �215m.

The increase in the 11 September charge cut the company's operating profit to a worse-than-expected �301m for the first half of the year, down from �367m for the same period in 2001.

The company reported a pre-tax loss on ordinary activities before one-off items of �319m.

The firm cut its dividend to shareholders as part of a plan to save cash.

But the cut was larger than expected - it has more than halved the payout to 4 pence a share from 8.8p last year.