A.M. Best Assigns Financial Strength and Debt Ratings To Royal & Sun Alliance Insurance Group plc.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--May 04, 2000 A.M. Best Co. has assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. a group financial strength rating of A+ (Superior--A.M. Best's second highest financial strength rating) to the core insurance subsidiaries of Royal & Sun Alliance Insurance Group plc. These include the primary general insurance companies in the United Kingdom, the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. property/casualty companies and the non-life companies in Canada. The A+ rating represents an upgrade from A (Excellent) for the previously rated U.S. companies. The Canadian life operations were assigned an initial rating of A. In addition, A.M. Best has assigned existing security ratings Security ratings Commercial rating agencies' assessment of the credit and investment risk of securities. of "a" to the subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". and an "a-" to the preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. issued by Royal & Sun Alliance Insurance Group plc, London. The subordinated debt is guaranteed by a subsidiary, Royal & Sun Alliance Insurance plc, London. The ratings reflect the Group's market profile, earnings diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. , excellent financial and operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. , alternative liquidity and new management's credible strategic plan. Management's strategy is centered on establishing the Group as a dominant global general insurer, supported by the efficient sharing of knowledge worldwide through the establishment of group practices. The general insurance segment enjoys financial flexibility and scale of operations that is derived from its position as a top-ten international property/casualty insurer, based on annual gross premiums written When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. . The life business does not benefit from the same international market profile and scale as the property/casualty operations. However, on a regional basis in the U.K. market, the company ranks among the top ten insurers, based on total admissible (algorithm) admissible - A description of a search algorithm that is guaranteed to find a minimal solution path before any other solution paths, if a solution exists. An example of an admissible search algorithm is A* search. assets. Royal & SunAlliance has earnings diversification from its property/casualty and life operations. Although the majority of profits are generated from the property/casualty business, A.M. Best believes that the life operations provide a measure of earnings stability to the organization. Although Royal & SunAlliance has made significant acquisitions, the organization's conservative capital management practices have allowed it to historically maintain relatively low financial leverage supported by a strong debt service capability. A.M. Best believes that management intends to maintain the current debt to capital ratio with any future acquisitions. However, in 1999, the Group announced its intention to return excess capital to shareholders following an extensive Risk-Based Capital exercise. This, along with the partial funding of the Orion Capital Corporation and Trygg-Hansa Forsakrings AB acquisitions with subordinated debt, signals a more active financial management strategy than in the past. The Group has an established track record of favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. in its core property/casualty subsidiaries. Royal & SunAlliance's committed bank lines of credit also provide it with significant alternative liquidity. In order to improve the lackluster lack·lus·ter adj. Lacking brightness, luster, or vitality; dull. See Synonyms at dull. Adj. 1. lackluster - lacking brilliance or vitality; "a dull lackluster life"; "a lusterless performance" operating trends of its life and property/casualty businesses, Royal & SunAlliance has put in place a new management team, led by CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Bob Mendelsohn (appointed two years ago and previously Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. in the United States), that has instituted a number of strategic initiatives. While A.M. Best believes that many of the operational improvements will ultimately be successful, the effectiveness of these measures has yet to be demonstrated in the Group's results. These strengths are offset by the competitive nature of the Group's markets and integration risks emanating from its material historical acquisition strategy. Globally, the Group operates in a price sensitive, mature financial-services market and competes with other financially strong and well-established multinational institutions. The merger between Royal Insurance Holdings plc and Sun Alliance Group plc in 1996 challenged the group's management to reduce costs, control risk selection and create a more focused strategy. A.M. Best anticipates that the integration risk from the 1999 Orion Capital Corporation and Trygg-Hansa Forsakrings AB acquisitions--as well as future mergers and acquisitions--will be minimal because of the significant management expertise developed from the sizeable Royal Insurance/Sun Alliance merger. The positive rating characteristics of Royal & SunAlliance's property/casualty operations include diversified diversified (di·verˑ·s earnings and distribution network, strong capital position, reserve adequacy, operating performance in line with industry results and prudent acquisition and financing strategy. Earnings are evenly distributed between commercial and personal lines. While the Group's earnings are predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. generated in the United Kingdom and United States, other sources include international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. in Canada, continental Europe Continental Europe, also referred to as mainland Europe or simply the Continent, is the continent of Europe, explicitly excluding European islands and, at times, peninsulas. and Scandinavia, South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. and the Asia-Pacific region. The property/casualty products are broadly distributed by agents, brokers and through direct and corporate partnerships with financial institutions. The operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. maintain strong balance sheets. Although the parent--Royal & Sun Alliance Insurance Group plc--up-streamed capital from its subsidiaries to pay a special dividend of (pound)751 million to shareholders, the insurance subsidiaries still maintain a favorable capital position relative to their peers. Reserves are adequate, especially when we consider that the average tail for its business is only two years. Historical operating performance has been volatile, yet generally in line with the industry, and has somewhat lagged behind its largest global peers. Royal & SunAlliance's disciplined underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. approach focuses on the bottom line. Management has instituted procedures that A.M. Best expects will allow the Group to improve its overall results. The Group has refocused its efforts to reduce the combined ratio, with a published target of achieving a combined operating ratio Operating Ratio A ratio that shows the efficiency of management by comparing operating expense to net sales: of 103% for 2001. It has established procedures to measure underwriting results through return on capital by line of business and underwriting groups. If the re-underwriting process does not produce the required return on capital, management is applying a "fix or eliminate" strategy and will either run-off or sell the under-performing operations. While A.M. Best believes that these actions will improve profitability, the full effect of management's actions has yet to be demonstrated. Partially offsetting these positive factors of Royal & SunAlliance's property/casualty operations are the under-performing business written in the two years following the 1996 Royal Insurance and Sun Alliance merger, an internationally competitive market and a moderately aggressive investment strategy. A.M. Best believes that the merger between Royal Insurance & Sun Alliance made strategic sense because of the cost savings resulting from the redundancies in both companies' U.K. books of business and from the complementary nature of businesses in their respective overseas operations. Although the transaction was completed in 1996, the under- performing business, primarily written two years immediately following the merger, has been a drag on Verb 1. drag on - last unnecessarily long drag out last, endure - persist for a specified period of time; "The bad weather lasted for three days" 2. the underwriting results of the Group. Royal & SunAlliance has decided to re-underwrite or run-off this business. The adverse impact of under performing business on reported results is expected to be minimal by December 2000. Royal & SunAlliance faces challenges resulting from pricing and margin pressures from an internationally competitive property/casualty market. In addition, the Group underwrites a significant amount of premium in the highly competitive middle-market segment. The investment portfolio includes a moderate proportion of equity securities which subjects the Group's capital position and operating results to market volatility. The Group's life business's strengths are a diverse offering of products, geographic spread of business, well-managed balance sheet, consistent operating trends and a focused distribution network. The life segment offers investment, pension and protection products. The Group sold its U.S. life business in 1999. Although Royal & SunAlliance conducts most of its business in the United Kingdom, the Group also sells its products internationally--in Canada, continental Europe, South America and the Asia Pacific region. Earnings are somewhat weighted toward pension products with the majority of the remaining earnings generated by life insurance sales. The Group's life operations maintain adequate capitalization even though the Sun Alliance & London Assurance Company Ltd. and Royal & Sun Alliance Life & Pensions Ltd. funds' regulatory solvency The ability of an individual to pay his or her debts as they mature in the normal and ordinary course of business, or the financial condition of owning property of sufficient value to discharge all of one's debts. solvency n. was adversely affected by a provision of approximately (pound)1.2 billion for guaranteed annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. options in 1998. This additional reserve strengthening is partially mitigated mit·i·gate v. mit·i·gat·ed, mit·i·gat·ing, mit·i·gates v.tr. To moderate (a quality or condition) in force or intensity; alleviate. See Synonyms at relieve. v.intr. To become milder. by the derivatives utilized by both companies to hedge future deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. in this business as a result of a decline in interest rates. The conservative provision for the guaranteed annuity option business written by Royal & Sun Alliance Life & Pensions Ltd. further mitigates the potential for additional reserve strengthening. A.M. Best believes that the financial strength of the life business is enhanced by the implicit support of its strong parent, Royal & Sun Alliance Insurance Group plc. The life business maintains prudent asset-liability controls, matching asset risk to the type of business written along with the capitalization of each fund. Profitability--measured by return on assets--has remained stable over the last four years. In addition, the life segment has reported favorable levels of persistency that have exhibited positive historical trends. In September 1999, Royal & SunAlliance announced a restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of its U.K. distribution network focusing on Independent Financial Advisors, the elimination of its commissioned sales force and the closure of a material number of tied-agency networks. A.M. Best believes this action will lower the life business's costs and should improve profitability and efficiency. A.M. Best believes the IFA Immunofluorescent assay (IFA) A blood test sometimes used to confirm ELISA results instead of using the Western blotting. In an IFA test, HIV antigen is mixed with a fluorescent compound and then with a sample of the patient's blood. network is competitive and, with the low pension charges established by the U.K. government, less efficient market players like Royal & SunAlliance could face future earnings pressure. The life business's positive rating factors are somewhat mitigated by the Group's lack of scale, limited historical growth and a challenging international life insurance market. The lack of scale, along with the previous management's dominant focus on its core property/casualty segment, has resulted in a high expense structure for the life operations. However, A.M. Best believes that the reorganization of the U.K. life business, announced by the new management in September 1999, should improve efficiencies and profitability. Royal & SunAlliance plans to lower its new business acquisition costs and its maintenance expense ratio through improved processing and further integration of its administrative systems. The Group's life operations have historically experienced limited growth beyond that arising from the expansion of the industry. The life operations have grown mainly through acquisitions--the group's top and bottom line results have remained flat during the past four years except for its most recent fiscal year. However, the improved operating performance in 1999 was primarily the result of the acquisitions of the Trygg-Hansa Forsakrings AB and Tyndall Australia Ltd. A.M. Best believes that the Group has not leveraged its strong general insurance brand image that would allow it to benefit from cross selling between the property/casualty and life operations. Royal & SunAlliance's life business will be challenged by potential government regulation, the introduction of products to meet new consumer demands and the increasing consolidation of the international life insurance market. Royal & Sun Alliance Insurance Group plc, through its subsidiaries, operates in property and casualty insurance, life insurance and asset management businesses. As of March 31, 2000, the company reported total assets of (pound)29,746 million, and shareholder equity of (pound)6,341 million. A.M. Best acknowledges the core role of the insurance subsidiaries in the operations of Royal & Sun Alliance Insurance Group plc. The financial strength ratings have been assigned to the following subsidiaries: United Kingdom companies: - "a" rating on subordinated debt; Euronotes 6.875% Fixed/Floating due 2019. - "a" rating on subordinated debt; Euronotes Floating Rate due 2019. - "a" rating on subordinated debt; Global bonds 8.95% due 2029. - "a-" rating on preferred stock. Canadian companies This is a list of companies from Canada.
Directory: A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Current Companies : - "a" rating on subordinated debt; Euronotes 6.875% Fixed/Floating due 2019. - "a" rating on subordinated debt; Euronotes Floating Rate due 2019. - "a" rating on subordinated debt; Global bonds 8.95% due 2029. - "a-" rating on preferred stock. United States companies This is a list of companies from the United States:
: : - "a" rating on subordinated debt; Euronotes 6.875% Fixed/Floating due 2019. - "a" rating on subordinated debt; Euronotes Floating Rate due 2019. - "a" rating on subordinated debt; Global bonds 8.95% due 2029. - "a-" rating on preferred stock. The following initial security ratings were assigned to the debt issued by Royal & Sun Alliance Insurance Group plc: - "a" rating on subordinated debt; Euronotes 6.875% Fixed/Floating due 2019. - "a" rating on subordinated debt; Euronotes Floating Rate due 2019. - "a" rating on subordinated debt; Global bonds 8.95% due 2029. - "a-" rating on preferred stock. 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 www.ambest.com. |
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