Rating agency notes ‘number of positive financial developments’ since December downgrade
Rating agency Standard & Poor’s (S&P) has upgraded RSA’s financial strength rating to A from A-.
S&P downgraded RSA to A- on 16 December after the insurer discovered accounting and reserving issues at its Irish business, which left RSA needing to shore up its capital base.
However, the rating agency said it had noted “a number of positive financial developments” since the downgrade.
When releasing its full-year results last week, RSA announced a number of measures to strengthen its capital base. These included a £775m rights issue and plans to raise £300m from selling businesses.
The insurer has also bought adverse development cover from global reinsurance powerhouse Berkshire Hathaway to protect itself against any further reserve deficiency.
S&P said: “The rating actions reflect our expectation of a material improvement in RSA’s prospective balance sheet strength following the announcement of its intention to launch a £775m underwritten rights issue.
This planned increase in capital, combined with actions undertaken since December 2013 to reduce risk, improves our assessment of the group’s prospective capital and earnings to ‘moderately strong’ from ‘lower adequate’.”