A.M. Best Affirms Ratings of Roins Financial Services Limited’s Subsidiaries

A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of Royal & Sun Alliance Insurance Company of Canada (RSA Canada), Western Assurance Company (Western Assurance) (both domiciled in Toronto, Canada) and Quebec Assurance Company (Quebec Assurance) (Montreal, Canada). These members are together known as RSA Canadian Property/Casualty Pool (RSA Canadian Pool) (Toronto, Canada).

In addition, A.M. Best has revised the outlook to positive from stable and affirmed the FSR of B (Fair) and the ICR of "bb+" of Canadian Northern Shield Insurance Company (CNS) (Vancouver, Canada).

Concurrently, A.M. Best has affirmed the FSR of B+ (Good) and ICR of "bbb-" of Ascentus Insurance Ltd. (Ascentus) (Toronto, Canada) as well as the FSR of B (Fair) and ICR of "bb+" of Unifund Assurance Company (Unifund) (St. John's, Canada). The outlook for the above ratings is stable, with the exception of CNS. Collectively, all of the insurance entities in Canada are referred to as the RSA Group of Canada (Ontario, Canada). All companies are subsidiaries of Roins Financial Services Limited (RFSL) (Ontario, Canada), the Canadian immediate holding company for its parent, RSA Insurance Group plc (RSA plc) [LSE: RSA] (United Kingdom).

A.M. Best also has withdrawn the FSR of A (Excellent) and ICR "a+" of GCAN Insurance Company (Toronto, Canada) due to the amalgamation of the company into RSA Canada on January 1, 2012.

The rating actions on RSA Canadian Pool reflect A.M. Best's viewpoint that the pool maintains strong risk-adjusted capitalization, solid investment income and sound reserve development. The pool has produced solid underwriting results, which have consistently increased equity over the last five years, prior to stockholder dividends. Collectively, the pool provides commercial property/casualty coverage as well as personal and specialty coverages throughout . The pool maintains a presence in all of the Canadian provinces and distributes its products through multiple distribution channels, including a large independent broker network. The ratings also reflect RSA Canadian Pool's strong integration with RSA plc through its systems and procedures as well as its significant contribution to RSA plc's overall profit.

The ratings of CNS acknowledge its elevated underwriting leverage, high underwriting expenses and adequate operating performance. CNS affords the RSA Group of Canada improved geographic diversity, increased distribution and growth opportunities within British Columbia, where a majority of its premiums are written. CNS is fully integrated into RSA Group of Canada's operations and continues to benefit from the implicit and explicit support it receives as a member of that group. Its revised outlook represents RSA Group of Canada's recent elevated commitment to CNS in the near term, particularly as it implements significant reinsurance protection.

The ratings of Unifund recognize its continued stabilized risk-adjusted capitalization, consistent operating performance and favorable reserve development. The rating actions also reflect Unifund's strong integration with RSA plc through its systems and procedures and its significant contribution to RSA plc's overall profit. Historically, Unifund has been a growth vehicle for the overall Canadian organization. In prior years, rapid premium expansion outpaced equity growth, which resulted in elevated underwriting leverage measures and a sharp decline in overall risk-adjusted capitalization. More recently, premium levels have risen gradually, equity has paced this growth and overall risk-adjusted capitalization has plateaued. However, Unifund remains highly leveraged as net and gross underwriting leverage ratios exceed the industry composite. The company primarily is a writer of personal lines insurance for associations and affinity groups throughout Ontario, Alberta, Newfoundland and Labrador and Nova Scotia.

The ratings of Ascentus are based on its solid level of risk-adjusted capitalization, which supports its underwriting and investment risk. The company's level of premium volume has sharply declined in recent years, since all private passenger auto and personal property business was renewed into RSA Canada. The company now writes some marine business throughout Canada.

Going forward, A.M. Best will be disclosing for all rated entities the potential rating factors that could cause negative rating movement in the near to mid term. As a result, A.M. Best does not expect to downgrade (or place a negative outlook on) the ratings of the insurance entities of RFSL in the near to mid term (except where noted below). However, such actions would ensue if: the companies were to incur material losses in their risk-adjusted capitalization; be unable to maintain their underwriting to the budgeted levels with the current set of preventative measures that have been recently put in place; have a material change in the level of operational and/or financial support provided by RSA plc in a manner that affects their operational performance; or have substantial adverse reserve development relative to their peers, as well as to the industry's averages.

The positive outlook on the ratings of CNS already factors in probable positive movement in the near term, although the company remains susceptible to all aforementioned downside risks.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Rating Members of Insurance Groups"; and "Understanding BCAR for Canadian Property/Casualty Insurers." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.