Best’s Rating Actions on R&SA-Canada

June 28, 2007

A.M. Best Co. has affirmed the financial strength ratings (FSR) of “A-” (Excellent) and assigned issuer credit ratings (ICR) of “a-” to Royal & Sun Alliance Insurance Company of Canada (RSA Canada) and Quebec Assurance Company. Best also affirmed the FSRs of “B++” (Good) and” B+” (Good) and assigned ICRs of “bbb” and “bbb-” to Western Assurance Company and Ascentus Insurance Ltd., both of Ontario.

In addition Best announced that it has upgraded the FSR to “C+” (Marginal) from “C” (Marginal) and assigned an ICR of “b-” to Newfoundland’s Unifund Assurance Company. The outlook for the FSRs has been revised to stable from negative, and the outlook assigned to the ICRs is stable. All companies are subsidiaries of R&SA Canada Group.

“The affirmation of the FSRs of RSA Canada, Quebec Assurance and Western Assurance reflects each company’s risk-adjusted capitalization, favorable operating performance and sound reserve development,” Best explained. “The ratings of Ascentus are based on its solid level of capitalization to support its underwriting and investment risk.” However, Best noted that “direct premium volume has sharply declined in recent years, and all private passenger auto and personal property business is being renewed into RSA Canada.”

The upgrade for Unifund’s FSR “is based on its improved risk-adjusted capitalization and profitable operating performance,” the bulletin continued. However, Best noted that “Unifund, which is used as a growth vehicle, is impacted by rapid premium expansion and elevated underwriting leverage measures.”

The rating agency indicated that its main concerns were “softening market conditions, fierce competition and the long-term benefits of regulated product reforms to auto insurance in the core operating territories of Ontario and Alberta. As a result, the companies will be challenged to maintain current levels of profitability.”

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