S&P affirms ‘A-‘ rating for Royal & SunAlliance

Standard & Poor’s has affirmed its ‘A-‘ long-term counter-party credit and insurer financial strength ratings on the main operating entities of Royal & SunAlliance Insurance Group PLC.
The ratings agency described Royal & SunAlliance’s outlook as stable, reflecting “the group’s track record of successful execution of strategy, strong competitive position, and strong overall prospective operating performance.”
It went on to note that “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 continuing business on an accident-year basis are expected to be about 96% in 2005 and 2006, Standard & Poor’s predicted. “ROE is expected to be near 10% in 2005 and 2006. These returns are before any reserve strengthening, reorganization costs, or investment fluctuations (including unrealized gains/losses).”
The capitalization of Royal & SunAlliance “is expected to remain good, and adverse loss-reserve development is not expected to exceed 240 million ($420 million),” the agency says.
“Failure to meet these expectations may lead to a negative outlook,” said Standard & Poor’s 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.”