Moody's has placed the European ratings of the Royal & Sun Alliance Group on review for possible upgrade following the group's announcement that it intends to sell its US operations to Arrowpoint Capital for a deferred consideration of £158m.
Ratings affected are the Baa1 insurance financial strength ratings of Royal & Sun Alliance Insurance plc and the group's Scandinavian subsidiaries as well as all of the debt ratings of Royal & Sun Alliance Insurance Group plc (Baa3 guaranteed subordinated debt, Ba1 perpetual guaranteed subordinated capital securities).
The sale is likely to result in an estimated loss on disposal of around £443m, reflecting a capital contribution of £151m to the US regulated entities, the write-off of the US net assets and other related costs.
Moody's said that the review for possible upgrade reflects its view that, whilst the disposal will result in a significant loss for the group, it will also largely eliminate any future exposure to the US operations, which have produced significant underwriting losses in recent years and have weighed on the group's ratings.
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