S&P Affirms R&SA ‘A-‘ Ratings

Standard & Poor’s Ratings Services announced that it has affirmed its “A-” long-term counterparty credit and insurer financial strength ratings on the main operating entities of the U.K.’s Royal & Sun Alliance Insurance Group PLC with a stable outlook.

“The ratings reflect the group’s track record of successful execution of strategy, strong competitive position, and strong overall prospective operating performance,” said S&P. However, it noted: “These positive factors are partially offset by the group’s poor historical operating performance and good, but not strong, capitalization and financial flexibility (defined as the ability to source capital relative to capital requirements).

“Combined ratios for the continuing business on an accident-year basis are expected to be about 96 percent in 2005 and 2006. ROE is expected to be near 10 percent in 2005 and 2006. These returns are before any reserve strengthening, reorganization costs, or investment fluctuations (including unrealized gains/losses). Capitalization is expected to remain good, and adverse loss-reserve development is not expected to exceed 240 million pounds ($420 million).”

“Failure to meet these expectations may lead to a negative outlook,” indicated S&P credit analyst Simon Marshall. “The outlook may be revised to positive, however, if these expectations are met, if the potential for a material negative impact from the adverse development of the loss reserves of the group’s U.S. operations is removed, and if this is achieved without materially damaging the group’s financial strength,” he added.