CONTACTS:
FOR IMMEDIATE RELEASE
LONDON - JANUARY 19, 2011 12:00 AM (EST)
A.M. Best Europe – Rating Services Limited has affirmed the financial strength ratings (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of the main UK operating subsidiaries of RSA Insurance Group plc (RSA) (United Kingdom). At the same time, A.M. Best has affirmed the ICR of "bbb" of RSA, the non-operating holding company of the RSA group of companies. A.M. Best also has affirmed the ratings on RSA's debt instruments, which are guaranteed by Royal & Sun Alliance Insurance plc (United Kingdom), and the preferred stock issued by RSA. The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)
RSA's consolidated risk-adjusted capitalisation is likely to remain good in spite of a relatively high dividend payout ratio to shareholders, with internal capital generation continuing to support the group's organic growth plans. As at year-end 2010, a modest rise in reported shareholders' funds is expected from the GBP 3,491 million reported at year-end 2009, reflecting solid operating performance during the year.
Reported 2010 pre-tax profit is expected to be higher than the GBP 554 million reported in 2009, despite the losses arising from the Chilean earthquake, which reinsurance has reduced to approximately GBP 30 million on a net basis. A.M. Best expects the combined ratio for the group in 2010 to be similar to the 98% achieved in 2009, although improvement is anticipated in 2011, helped by lower operating costs. Recent acquisitions in Ireland, Canada and the Middle East, together with targeted growth in profitable business in Scandinavia, Canada and Latin America, are likely to support solid underwriting performance in 2010, assisted by favourable prior year loss reserve development. Challenging market conditions continue in the UK, but a good increase in UK net written premiums in 2010 of approximately 10% is anticipated, driven by strong rate increases in personal motor and household business and some growth in commercial motor and specialty lines. Overall performance is expected to be supported by a good investment return from the group's conservative investment portfolio.
RSA has an excellent business profile, reflecting its well-diversified portfolio of commercial risks, personal motor and household business. The UK continues to be RSA's largest market, representing 39% of the group's consolidated net written premiums in 2009, although this proportion is expected to have reduced slightly in 2010. Internationally, RSA maintains a strong position in Scandinavia (largely Denmark and Sweden) and in Canada, where its presence has been bolstered through acquisition. Additionally, RSA continues to build up its business in the emerging markets, particularly Latin America, Asia and the Middle East.
The FSRs of A (Excellent) and ICRs of "a" have been affirmed for the following subsidiaries of RSA Insurance Group plc:
-Royal & Sun Alliance Insurance plc
-The Globe Insurance Company Limited
-Sun Insurance Office Limited
-The London Assurance
-Royal & Sun Alliance Reinsurance Limited
-Sun Alliance and London Insurance plc
The following debt ratings have been affirmed:
RSA Insurance Group plc (guaranteed by Royal & Sun Alliance Insurance plc)—
- "bbb+" on GBP 500 million 9.375% subordinated notes, due 20 May 2039
- "bbb+" on USD 23,679,000 8.95% subordinated notes, due 15 October 2029
- "bbb+" on GBP 450 million 8.5% perpetual subordinated notes
- "bbb+" on GBP 375 million 6.701% perpetual subordinated notes
The following rating on preferred stock has been affirmed:
RSA Insurance Group plc—
- "bb+" on GBP 125 million 7.375% preferred stock
The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilised include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "Understanding Universal BCAR"; "Rating Members of Insurance Groups"; and "A.M. Best's Ratings & the Treatment of Debt". Methodologies can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.