Moody's may upgrade Royal & Sun

Moody's Investors Service said it placed the European ratings of the Royal & Sun Alliance Group, including the Ba1 perpetual subordinated capital securities guaranteed by Royal & Sun Alliance Insurance plc, on review for possible upgrade following the group's announcement that it intends to sell its U.S. operations to Arrowpoint Capital for a deferred consideration of £158 million.

The agency understands that the sale of the U.S. operations is likely to result in an estimated loss on disposal of around £443 million, reflecting a capital contribution of £151 million to the U.S. regulated entities, the write-off of the U.S. net assets and other related costs. The transaction is conditional upon shareholder and regulatory approval and completion is targeted for the end of the year.

Moody's said the review reflects its view that, whilst the disposal will result in a significant loss for the group, it will also largely eliminate the group's future exposure to the U.S. operations, which have produced significant underwriting losses in recent years and have weighed on the group's ratings.

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