Moody’s Places R&SA on Review for Possible Downgrade

Moody’s Investors Service announced that it has “placed the ratings of the Royal & Sun Alliance Insurance Group under review for possible downgrade.”

R&SA has been selling off a number of assets in an effort to raise around £800 million ($1.23 billion) as part of its restructuring to concentrate on its property/casualty business. But the rating agency expressed “concerns over the ability of the Group to maintain its capital position such that it can continue to benefit from strongly improving general insurance markets.”

Moody’s bulletin explained that,”like many of its peers, RSA has been affected by the recent downturn in equity markets, such that further capital is likely to be required to offset market-related losses. Furthermore, RSA expects to benefit from the continued strong non-life markets by writing higher levels of premium next year, which also requires further capital. Consequently, Moody’s expects the Group to require additional capital in the short-term to ensure business growth.

It went on to state that the review would explore the possible necessity of finding additional capital, and the cost of doing so. Any lowering of the company’s ratings would significantly increase those costs, further reducing R&SA’s profitability, which has already been seriously affected by losses from the Sept. 11 attacks and rising asbestos claims.