Moody's, on of the World's leading credit rating agencies, have warned that if negative stockmarkets continue to eat into company capital, two with-profits funds - Royal & Sun Alliance Life & Pensions and Sun Alliance & London Assurance Company (both part of the Royal & Sun Alliance Group) - may face a downgrade from their A2 insurance rating.
However, R & SA reassured existing policyholders that they shouldn't be concerned. They said that all the funds are solvent and they are obliged to maintain them that way. The funds could be backed up if there were an issue.
R & SA Group decided last autumn that their expansion plans would be focussed on their general insurance division, which would become their core business. Last November R & SA sold off non-core subsidiaries in an effort to raise £800 million to go towards these expansion plans.
The sale of Canada Life is R & SA's sixth subsidiary sale. It has raised £522 million since January 2002 and still needs to raise just under £300 million, therefore, more sales are inevitable.