Insurer could make small aquisitions, says rating agency
Rating agency Standard & Poor's (S&P) has revised its outlook on insurer RSA's A ratings to positive. It has also affirmed the ratings.
S&P said the revised outlook reflects the agency's improved view of RSA's competitive position and underlying operating performance. The agency expects RSA's management to remain committed to its strategy of sustainable profitable performance, underpinned by its strong enterprise risk management, continue to produce combined operating ratios of around 93%-97%, and to exceed its return on equity (ROE) target.
S&P expects RSA's net combined ratio for 2010 is likely to be at or below 99%. It added that the group will likely enhance its competitive position mainly through organic development, although small acquisitions are also possible. S&P also expects capital adequacy to be at least good, with no deterioration in the quality of capital employed.
"Positive rating pressure may be exerted if, in our view, capitalization improves to a level that supports a higher rating, and other key performance metrics are met or exceeded," said Standard & Poor's credit analyst Nigel Bond in a statement. "Negative rating pressure may be exerted if RSA does not consistently meet its public combined operating ratio and ROE targets, or if its capital adequacy falls significantly below its rating level. Given the group's strong performance in the first nine months of 2010, we believe such pressure is unlikely."
