The insurer said it would be forced to consider job losses as its first nine-monthly results showed that operating profits had more than halved from £738m to £342m.

The group reported pre-tax profits of £636m for the first nine months, down from £832m in the same period last year.

News of the losses caused shares in the group to tumble 38p to 508p.

Job losses feared at Royal & Sun Alliance

The interim dividend, which had already been declared, was set at 7.8p, up from 7.15p.

Redundancies on the agenda

Commenting on the operating result, group chief executive Bob Mendelsohn said the results were disappointing.

"During the balance of this year and throughout 1999, we will be aggressively addressing both the underwriting and expense components of all our operations," he said.

"We can't rule out job losses. The economic climate and business realities are now quite different than at the time of the merger back in 1995."

Hurricane Georges produced net losses of almost £60m in the quarter and contributed to a £164m increase in weather losses for the nine-month period over the amount incurred last year.

Another factor was a large gas explosion in Victoria, Australia, which led to losses of some £16m.