Best Affirms/Withdraws Ratings of RSA’s Main UK Operating Subs

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of the main UK operating subsidiaries of the UK-based RSA Insurance Group plc.

Best also affirmed the ICR of “bbb” of RSA, the non-operating holding company of the RSA group of companies, as well as the debt ratings of RSA, which are guaranteed by the UK’s Royal & Sun Alliance Insurance plc, and the preferred stock issued by RSA. The outlook for all ratings is stable.

Best then announced that it has withdrawn the ratings “as the company has requested to no longer participate in Best’s interactive rating process.”

Best said the affirmation of the ratings of RSA’s operating subsidiaries “reflects the group’s consistently profitable operating performance and excellent business profile in its core markets.”

As an offsetting factor Best cited “the level of consolidated risk-adjusted capitalization, which although likely to remain good, has been reduced in recent years by a relatively high dividend payout ratio to shareholders and reducing bond yields. Moreover, the group’s organic growth plans and acquisitions in recent years have been supported only by internal capital generation, which also has reduced its risk-adjusted capital position, particularly through purchased goodwill.”

Best also indicated that “further material deterioration in consolidated risk-adjusted capitalization is not considered likely, as the group’s good operating performance in 2011 led to a modest rise in shareholders’ funds, and the half-year financial report to 30 June 2012 shows a good operating performance, with strong performances in Scandinavia and Canada, which are partially offset by the impact of adverse weather in the United Kingdom and earthquakes in Italy.

“Additionally, the proposed dividend reflects a revised policy that will help to preserve the group’s risk-adjusted capitalization.”

Best summarized the ratings affected by its actions as follows:
The FSR of ‘A’ (Excellent) and ICRs of “a” have been affirmed and withdrawn for the following subsidiaries of RSA Insurance Group plc:
— Royal & Sun Alliance Insurance plc
— Royal & Sun Alliance Reinsurance Limited
— Sun Insurance Office Limited

The following debt ratings have been affirmed and withdrawn:
RSA Insurance Group plc (guaranteed by Royal & Sun Alliance Insurance plc)—
— “bbb+” on £500 million [$811.43 million] 9.375 percent subordinated notes, due 20 May 2039
— “bbb+” on $23,679,000 8.95 percent subordinated notes, due 15 October 2029
— “bbb+” on £450 million [$730 million] 8.5 percent perpetual subordinated notes
— “bbb+” on £375 million [$608.57 million] 6.701 percent perpetual subordinated notes

The following debt rating has been affirmed and withdrawn:

RSA Insurance Group plc—
— “bb+” on £125 million [$202.856 million] 7.375 percent preferred stock

Source: A.M. Best