Analysts impressed with 2007 results
Moody's Investors Service today assigned a positive outlook to the A3 Insurance Financial Strength Rating (IFSR) of Royal & Sun Alliance Insurance.
The Prime-2 CP rating was affirmed with a stable outlook. The ratings were previously upgraded to their current levels in March 2007.
The outlook change reflects Moody's view of the potential for the Group to sustain its good core underlying profitability, as well as improved financial flexibility and capitalisation. The rating agency noted that, notwithstanding the 2007 summer floods in the UK, which cost RSA GBP 120 million (net of reinsurance), RSA reported a post tax and discontinued items profit of GBP 628 million (2006: GBP -20 million).
This improvement reflects continued strong operating performance (reported combined ratio at 94.9% for 2007), together with a strong run-off result on prior year claims reserves and a healthy investment result of GBP 629 million (2006: GBP 556 million).
2006 was also impacted by the presence of a GBP 499 million charge for the US disposal. Capitalisation of the Group remained strong at 2.5 times (IGD coverage) and financial flexibility remained relatively modest for the rating level (financial leverage at around 30% at end 07).
The rating agency said that, in terms of resolving the positive outlook, it would evaluate the Group's performance through 2008, focussing on the sustainability of the improved credit qualities referred to above.
Commenting on what could lead to further positive rating action, David
Masters, Analyst in Moody's European Insurance Group, said: "Key positive rating drivers for the group include maintenance of a combined ratio at, or below, 95%, achieving a cross cycle ROE target of 12%, and earnings coverage remaining above 6x."
The following ratings were assigned a positive outlook:
Royal & Sun Alliance Insurance plc: A3 IFSR
Sun Alliance & London Insurance plc: A3 IFSR
Codan Forsikring A/S: A3 IFSR
Trygg-Hansa Forsakrings AB: A3 IFSR
Baa2 subordinated debt guaranteed by Royal & Sun Alliance Insurance plc
Baa3 perpetual subordinated capital securities guaranteed by Royal & Sun
Alliance Insurance plc
The following rating was affirmed with a stable outlook:
Royal & Sun Alliance Insurance plc: Prime-2 guaranteed by Royal & Sun Alliance Insurance plc
