A.M. Best Takes Various Rating Actions on Royal & Sun Alliance Insurance Group plc.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of the Royal & Sun Alliance Insurance Group plc (R&SA) (United Kingdom) and its core subsidiaries. At the same time, A.M. Best has assigned an issuer credit rating (ICR) of "a-" to each of these companies. A.M. Best has also affirmed the ratings of "bbb" and "bbb-" of R&SA's subordinated debt and preferred stock, respectively. (See link below for financial strength ratings and detailed debt issues.) The outlook on all ratings remains negative.

The ratings reflect R&SA's improving risk-adjusted capitalisation and improving operating performance, as well as its excellent business profile. The main offsetting factor continues to be the potential for further reserve deterioration--particularly in the United States--and the uncertainty as to the scale of future retained profits.

A.M. Best expects R&SA's prospective level of risk-adjusted capitalisation to improve following the GBP 450 million (USD 823 million) perpetual subordinated notes issue completed on July 23, 2004, and the prospective divestments of the U.K. and Codan life operations.

Improving operating performance--Results at the half-year 2004 were improved, in line with A.M. Best expectations, with a reported consolidated combined ratio of 99.7% (108% at year-end 2003). A.M. Best believes that R&SA is likely to maintain the consolidated combined ratio below 100% on average across the insurance cycle for ongoing businesses due to expense reduction, the ongoing disposal programme and the withdrawal from certain unprofitable lines of business. As expected, results for the ongoing operations in the United Kingdom, Scandinavia, Canada and International businesses continue to improve despite high ongoing costs associated with the restructuring of the discontinued U.S. operations.

Improving risk-based capitalisation--The benefits of the restructuring of R&SA are likely to begin to emerge in 2004, which include an improved loss experience and that the prospective level of risk-adjusted capitalisation will continue to support R&SA's A- (Excellent) rating.

The main offsetting factor continues to be the potential for further reserve deterioration. GBP 200 million pre tax (USD 366 million) remains from the contingent liability established at the third quarter 2003 for future adverse loss development, relating largely to discontinued business in the United States. A.M. Best believes that workers' compensation, general liability and product liability are the lines of business most at risk to adverse loss development, as well as potential asbestos and environmental reserve deficiency. A.M. Best continues to closely monitor the development of R&SA's reserves.

For a complete list of Royal & Sun Alliance Insurance Group's financial strength and debt ratings, please visit http://www.ambest.com/press/091003rsa.pdf.

For a list of A.M. Best's debt ratings, please visit http://www.ambest.com/debt.

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 http://www.ambest.com.