Royal & SunAlliance CEO Bob Mendelsohn has had a tough job keeping the company ahead of an ailing stock price and disappointing returns over the past couple of years. Now developments in the UK show just how the company decided to reshape its strategy and concentrate on general insurance.

The reason is simple: the company needs the cash.

R&SA has agreed to a recovery strategy imposed by the major UK regulator, the Financial Services Authority. According to the London Daily Telegraph, R&SA has been ordered to raise $2.05 billion in extra capital through disposals and a possible rights issue to deal with its “fragile” balance sheet.

Included in the program is the sale of R&SA’s Australian and NZ life and funds management businesses. Its UK offshore funds management company is also being sold.

According to the newspaper, the FSA has been “all over the company like a rash”. The company and the authority are working together to effect a recovery to a more actuarially suitable position, with rising general insurance rates expected to assist. If it can recover sufficient capital equilibrium – and no one is suggesting the company is going to fall over – a rights issue is seen as the best option to completing a restructure of R&SA.