A.M. Best Affirms Rating for Royal & Sun Alliance.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Oct. 5, 2001

A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) for Royal & Sun Alliance Insurance Group of Canada (Royal & Sun Alliance), Toronto and Unifund Assurance Company, St. John's, Newfoundland.

The Royal & Sun Alliance group's three members are Royal & Sun Alliance Insurance Company of Canada, Quebec Assurance Company and Western Assurance Company. Additionally, A.M. Best has assigned a negative outlook to the rating.

The rating reflects the Canadian property and casualty group's role as core insurance subsidiaries of Royal & Sun Alliance Insurance Group plc, its ultimate parent in the United Kingdom. The Canadian group is led by the Royal and Sun Alliance Insurance Company of Canada and includes Quebec Assurance Company, Western Assurance Company and Unifund Assurance Company.

The rating also reflects the very strong position in the Canadian property and casualty marketplace that Royal & Sun Alliance and Unifund hold. The group has demonstrated consistent overall profitability, strong underwriting leverage, sound liquidity and adequate reserves. The Royal and Sun Alliance group's excellent operating results have been derived from its diversified earnings base, favorable investment returns and strong claims service capabilities.

It has demonstrated controlled growth in net premiums written by offering a comprehensive product range that includes personal lines, commercial lines and integrated products through multiple distribution channels. The Royal and Sun Alliance group continues to increase operating efficiencies through strategic partnerships and the utilization of technology to increase broker support and customer convenience. The management team has successfully addressed the market's need for product diversification, cross selling and the use of innovative technology.

Partially offsetting these rating strengths are the extremelycompetitive conditions in the Canadian property and casualty marketplace. In Ontario, the group will be challenged to turnaround the unfavorable underwriting results in its auto business. Furthermore, the group has experienced difficulties in achieving rate efficiencies in commercial lines, which has resulted in an increase in the underwriting ratio. However, the pool continues to address this problem through the implementation of rate increases and tighter underwriting guidelines.

Moreover, A.M. Best has assigned a negative outlook to the core insurance subsidiaries of Royal & Sun Alliance Insurance Group plc. These include the primary general insurance companies in the United Kingdom and the property and casualty companies in the United States and Canada. The negative outlook considers A.M. Best's concerns about the adequacy of the group's reserves, particularly with regard to asbestos and environmental (A&E) liabilities in the U.S., loss cost inflation and the group's inconsistent financial performance. In particular, A.M. Best is concerned with the under performance of some of the group's U.S. operations.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.