Moody's RSA upgrade reflects significant progress

Moody's Investors Service has upgraded the European ratings of Royal & SunAlliance Group (Baa2 Insurance Financial Strength Ratings at RSA Insurance and Scandinavian subsidiaries) to Baa1 from Baa2.

Moody's said the upgrade reflected the significant progress made in restructuring and repositioning the business, and in improving the underlying operating performance of the group's core operations. Moody's said that, in addition to the improving operating profitability, RSA had significantly strengthened its capital position and continues to have moderate levels of financial leverage.

These positives were offset by ongoing concerns about the winding-down of the US business, and the challenge the group is likely to face in maintaining underwriting discipline in a softening rate environment.

Moody's added that RSA's combined operating ratio for ongoing operations had improved by nearly three points to 94.0% at the end of 2004, with all other ongoing businesses (UK, Scandinavia and international) achieving combined operating ratios of less than 100%.

The combined operating ratio improvements were driven by restructuring actions, cost-cutting inititatives and a strict focus on underwriting and claims management, but also reflected the generally favourable operating environment. The group operating result was £456m, up from £140m in 2003.