S&P Indicates No Rating Changes After R&SA Earnings Report

March 10, 2003

Standard & Poor’s Ratings Services issued a statement that Royal & Sun Alliance Insurance PLC’s recent earnings announcement, which stated that its operating companies’ statutory surplus has fallen below the 2x regulatory requirement, will not affect the counterparty credit and financial strength ratings on RSA USA.

The U.K. parent company is currently rated A- Developing and A-2); RSA USA is rated BBB+/Developing/. A.M. Best made a similar announcement last week. (See IJ Website March 6)

“The shortfall itself ($20 million in aggregate) is located in three separate operating subsidiaries within RSA USA, and is being addressed by management with the Connecticut State Insurance Department through the immediate sale of fixed-income holdings. The consolidated statutory surplus of RSA USA was $1.38 billion at year-end 2002,” said S&P.

“Related to this announcement, Standard & Poor’s will continue to separately monitor RSA USA’s financial strength, capital adequacy, and ability to reduce its stand-alone exposure to any potential prospective adverse financial conditions. Standard & Poor’s lowered its ratings on RSA USA (as well the parent) in November 2002 based on the expectation that capital and earnings targets for 2002 would not be achieved; the earnings announcement supports that rating action,” the rating agency concluded.

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