RSA’s ‘strong position’ prompts S&P upgrade to A+

Standard & Poor’s (S&P) has upgraded RSA Group’s financial strength rating one notch to A+ from A.

The outlook on the rating is stable.

The rating agency warned, however, that deterioration in RSA’s capital or large acquisitions could trigger a reversal of the upgrade.

S&P said the upgrade reflects RSA’s strong competitive position, capitalisation and operating performance, underpinned by solid enterprise risk management.

However, S&P added that RSA’s capitalisation, while strong, is a relative weakness at its new rating level.

S&P also praised RSA’s diversification by geography, business line and distribution channel, as well as its leading or significant market share in most of its largest markets and its growth, which has averaged 7.8% over the past five years.

“As the result of this well-balanced diversity, we consider that, despite the recent economic downturn, RSA has displayed resilience,” S&P said in a statement.

RSA chief executive Simon Lee said: “We’re pleased that Standard & Poor’s has recognised RSA’s resilience, underlying strengths, competitive position and strong capitalisation by upgrading us to A+. We consider our portfolio of diversified businesses in both mature and emerging markets to be a unique competitive strength, and are pleased this view is shared by S&P.”

However, S&P also indicated that further upgrades are unlikely. “We consider a positive rating action to be remote,” the agency said. “We could take a negative rating action if the capital adequacy measured by our capital model falls materially below the ‘A’ range or operating performance materially deteriorates compared with our expectation during the same time period.”

It added: “Furthermore, large acquisitions may also result in negative rating actions.”