Standard & Poor's (S&P) has assigned a BBB long term junior subordinated debt rating to the proposed fixed-rate, undated, subordinated notes to be issued by Royal & SunAlliance Insurance Group (R&SA Group).
At the same time S&P affirmed the A- counterparty credit and insurer financial strength ratings on Royal & SunAlliance Insurance (R&SA), the group's main operating entity.
The rating outlook is negative, said S&P.
It said the rating on the notes reflected their hybrid equity characteristics, including subordination, interest-deferral features, and perpetual tenor, said S&P. The issue benefitd from a subordinated guarantee from the main operating company of the group, R&SA.
”The ratings on R&SA reflect its strong competitive position, adequate capitalisation, poor but improving operating performance, and adequate financial flexibility,” said S&P credit analyst Ashley Gill.
“The negative outlook continues to reflect the execution risks in restructuring US operations, and the possibility that US-related losses may prevent R&SA from meeting Standard & Poor's expectations,” added Gill.
S&P said it expected earnings at R&SA to improve substantially in 2004, with ROE at or above 7% in 2004 and 10% in 2005.
S&P said it also expected R&SA to rebuild capital adequacy to a strong level in 2004, and the planned sale of its U.K. life operations should help to achieve this.
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