Moody's Investors Service said it has cut the ratings of
Royal & Sun Alliance Insurance Group PLC and its subsidiaries, and that the ratings remain on review for further possible downgrade.

The Insurance Financial Strength Rating (IFSR) of Royal & Sun Alliance Insurance was downgraded by two notches to A3 from A1, and Commercial Paper by one notch to P-2 from P-1.

At the same time, the subordinated debt of Royal
Insurance Holdings was downgraded by two notches to Baa3 from Baa1, and subordinated debt of Royal & Sun Alliance Insurance Group to Baa2 from A3.

Moody's said the downgrades reflect a number of issues, particularly the losses (including unrealised losses on investments) sustained in 2001 and the first half of 2002, which have considerably eroded the group's capital base.

The ratings agency noted the positive action taken in 2002, with planned asset sales and release of capital from the life businesses being on track.

However, Moody's added that "some uncertainty surrounds the amount and accessibility of some of these options due to the current volatile investment environment which has reduced both the value of insurance businesses and the
number of potential purchasers for these businesses."

Irrespective of any capital bolstering that may take place, Moody's said it remains concerned about the ongoing earnings capacity of the group and its ability to achieve target returns quickly and return to statutory profits.

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