Embattled insurance giant Royal & Sun Alliance (R&SA) has freed up £540 million from the flotation of Promina, its Australian and New Zealand business.

Shares in Promina began trading on the Sydney stock exchange yesterday after R&SA successfully completed the biggest initial public offering (IPO) in the world so far this year.

Britain's second biggest general insurer, which is based in Horsham, said demand for the shares had been strong with shareholders paying 1.80 Australian dollars a share - equivalent to 72p.

R&SA has been under pressure to plug a £700 million shortfall in its capital reserves required to pay claims and fund new business.

The IPO goes some way to filling that gap.

Chief executive Andy Haste said: "The IPO will deliver a major component of the actions we are taking to reshape the group and to strengthen our capital position."

Promina owns Australia's third-biggest car and home insurer, New Zealand's biggest combined general and life insurer and the Tyndall fund management business. It insures more than two million cars and almost one million homes.

The £540 million released from the flotation will be used by R&SA to bolster its battered balance sheet.

The insurer has been forced to sell parts of its business after heavy losses from the September 11 terrorist attacks and the impact of flagging world stock markets.

R&SA has also cut 12,000 jobs from its 50,000-strong world workforce, closed its UK life and pensions operation to new business and announced the sale of some divisions.