Nevertheless, A.M. Best and Standard & Poor's have both affirmed the company's "A-minus" rating.

"The goodwill charge does not affect Standard & Poor's assessment of R&SA's capital adequacy," S&P said in a statement.

"As expected, 2002 year-end results reflect the company's improving operating performance, while maintaining an excellent business position in its key markets," said A.M. Best. "R&SA continues to execute its risk reduction program, ceasing to write certain lines of business and further divesting and closing non-core operations."

Fitch recently downgraded the company to "triple-B-plus" (a rating based on public information), with a negative outlook. (That rating action was fully described in a prior Online News Service article posted on Feb. 27.)

At press time, Fitch had take no further rating action.

David Wharrier, director, insurance group, with Fitch Ratings, said the entire group has a ?600 million ($966 million) regulatory solvency surplus (the amount above the minimum level required by regulators to continue writing on a global basis). "While that is a reasonable buffer, there are still uncertainties surrounding a large number of issues which could positively or negatively affect that buffer," he told National Underwriter. Those issues, he said, are "reserving for asbestos and the World Trade Center, exposures to collateralized debt obligations, outstanding litigation, and potential misselling of life products in the United Kingdom."

(RS&A reported that discussions with the Financial Services Authority, the U.K, regulation, over potential misselling of life products could require further financial support for subsidiaries and could result in the possible imposition of penalties by the FS&A.)

Mr. Wharrier also noted that the consolidated capital and surplus position for U.S. operations, as of Dec. 31, 2002, is $20 million below an initial regulatory trigger level.

"To resolve this issue, a proportion of the fixed interest investment portfolio?will be sold in the first quarter of 2003," R&SA said in its annual report.

The U.S. regulators have "a trigger mechanism that is equal to twice the regulatory solvency," said an R&SA representative. "We were $20 million below that trigger level at year-end, but we did not breach our solvency regulations at any point."

Mr. Wharrier was also concerned that the company announced in November 2002 that it intended to sell its U.S. surplus lines subsidiary, RSUI, in the 2003 first quarter, in a bid to raise capital.

R&SA told analysts today that that had been a misprint in the November announcement and the sale was actually due to occur in the first half of 2003.

"It was a mistake in the press release," said Malcolm Gilbert, a R&SA representative. "Actually the sale is well [along] and whether it's going to be in the first quarter or the first half, I think is going to be pretty marginal."

The IPO of its Asia/Pacific operation is proceeding as planned in the first half of 2003, according to RS&A.

(Correction: An Online News Service article discussing Fitch's downgrade of Royal & SunAlliance, posted on Feb. 27, erroneously said R&SA was adding ?250 million ($400 million) to reserves in the first quarter of 2003. It should have said the reserving exercise was due to occur in the fourth quarter of 2002. The same error appeared in a Mar. 3 article of our print edition.)