Mail Stop 6010
Via Facsimile and U.S. Mail
September 22, 2005
Mr. Andrew K. Haste
Group Chief Executive
Royal & Sun Alliance Insurance Group plc
One Plantation Place, 9th Floor
30 Fenchurch Street
London EC3M 3BD, Great Britain
Re: Royal & Sun Alliance Insurance Group plc
Form 20-F for Fiscal Year Ended December 31, 2004
File No. 001-15146
Dear Mr. Haste:
We have limited our review of your filing to those issues we
have addressed in our comments. Where indicated, we think you
should
revise your document in response to these comments. If you
disagree,
we will consider your explanation as to why our comment is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Item 5. Operating and Financial Review and Prospects
Liquidity and Capital Resources, page 97
1. We note that that you have conducted substantive restructuring
of
operations and that in 2004 you experienced significant negative
cash
flow of 1,581 million. Please include a discussion that will
provide
investors with a better understanding of the expected impact of
your
reorganization and restructuring programs on known trends,
demands,
commitments and uncertainties. For each major type of cost and
reportable segment, discuss and quantify the expected effects on
future earnings, cash flows and financial position resulting from
these programs, including the aggregate costs expected to be
incurred, cumulative amount incurred to date, future periods when
material cash outlays are anticipated and whether ultimate cost
savings may be offset by anticipated increases in other expenses
or
reductions in revenues. Include a description of any remaining
insurance reserves related to your reorganization and
restructuring
programs and the expected impact on future operations and
financial
condition of known trends in claim frequency and severity related
to
these reserves.
Critical Accounting Policies, page 103
2. We believe your disclosure relating to US GAAP critical
accounting
policies and estimates could be improved to include a discussion
of
the uncertainties in applying these accounting policies, the
likelihood that materially different amounts would be reported
under
different conditions or using different assumptions and
quantification of the related variability in operating results
that
you expect to be reasonably likely to occur. Focusing on your
continuing businesses, please disclose the uncertainties in
applying
these accounting policies, the historical accuracy of these
critical
accounting estimates, a quantification of their sensitivity to
changes in key assumptions and the expected likelihood of material
changes in the future. Refer to the Instructions to Item 5 of Form
20-F.
3. Disclosures explaining the likelihood that materially different
amounts would be reported under different conditions or using
different assumptions are consistent with the objectives of
Management`s Discussion and Analysis and the Instructions to Item
5
of Form 20-F. We believe your disclosure regarding losses and
loss
expenses could be improved to include an explanation of the
judgments
and uncertainties surrounding these estimates and the potential
impact on your financial statements. Accordingly, please disclose
the
following information for each of your lines of business.
* Disclose the reserves accrued as of the latest balance sheet
date
presented. The total of these amounts should agree to the amount
presented on the balance sheet.
* You state that loss reserve estimation techniques include
"projections given by various methodologies to assist in setting
the
range of possible outcomes." Quantify this range at each balance
sheet date.
* Discuss the key assumptions and corroborative evidence used to
arrive at management`s best estimate of loss reserves within this
range and what specific factors led management to believe this
amount
rather than any other amount within the range represented the best
estimate of incurred losses.
* For each of your longer-tail businesses, such as workers`
compensation and asbestos coverage, provide more insight into the
existence and effects on future operations and financial condition
of
known trends, events and uncertainties. Information you should
consider, but not be limited to, includes the following:
a. the number of claims pending at each balance sheet date;
b. the number of claims reported for each period presented;
c. the number of claims dismissed, settled, or otherwise resolved
for
each period;
d. the nature of the claims including relevant characteristics of
the
claimant population (e.g., involves a large number of relatively
small individual claims of a similar type);
e. the total settlement amount for each period;
f. the cost of administering the claims;
g. emerging trends that may result in future reserve adjustments.
4. We note that you omitted certain disclosures relating to the
significant increases in your estimates of loss reserves recorded
in
prior years. Given the magnitude of these changes and your
reorganization and restructuring programs, we believe that
expanded
disclosure would benefit investors and is consistent with the
objectives of Item 5 of Form 20-F. For each of these changes in
estimate, please disclose the following information by line of
business. Distinguish between changes in estimate related to your
discontinued and continuing businesses.
* Identify the years to which the change in estimate relates and
the
amount of the related loss reserve as of the beginning of the year
that was re-estimated. Explain and quantify offsetting changes in
estimate that increase and decrease the loss reserve.
* Identify the nature and timing of the change in estimate,
explicitly identifying and describing in reasonable specificity
the
new events that occurred or additional information acquired since
the
last reporting date that led to the change in estimate.
* Identify changes in key assumptions you made to estimate the
reserve since the last reporting date.
* Explain why recognition was not required in earlier periods.
* Describe any trends such as, the number of claims incurred,
average
settlement amounts, number of claims outstanding at period ends
along
with average per claim outstanding, and any other trends,
necessary
to understand the change in estimate. Explain the rationale for a
change in estimate that does not correlate with these trends.
Item 18. Financial Statements
Note 48. Summary of Differences between UK and US Generally
Accepted
Accounting Principles, page F-75
5. We note that in your reconciliation from UK GAAP to IFRS at
December 31, 2004 in your Form 6-K dated 16 August 2005, Exhibit
99.2
Interim Results-15 August 2005, you reclassify insurance contracts
that do not contain significant insurance risk as financial
contracts
or derivatives. We were unable to determine whether a
corresponding
adjustment had been made in your reconciliations from UK GAAP to
US
GAAP in your 2004 Form 20-F. Please tell us where this adjustment
is
located in your reconciliation to US GAAP or explain to us the
basis
for your conclusion that such an adjustment was not required in
your
reconciliations from UK GAAP to US GAAP.
Note 50. Additional US GAAP Disclosures, page F-97
6. We note that your UK GAAP operating segment disclosure
in
Note 45 includes a profitability measure, "group operating result
(based on longer term investment return)" and the corresponding
segment financial measure. These profitability measures exclude a
number of recurring items that appear to be important to the
segment
performance assessments and resource allocations made by your
chief
operating decision maker. Your description on page F-67 does not
indicate whether or how your chief operating decision maker
utilizes
these profitability measures. Please explain to us your basis for
concluding that these UK GAAP segment disclosures meet the
requirements of paragraphs 29-30 of SFAS 131. Otherwise, provide
segment disclosures in Note 50 that conform to the SFAS 131
guidance.
7.Your disclosure in Note 31 indicates continuing reorganization
and
integration charges. Please add disclosure to Note 50 to include
information required by paragraphs 44 and 47 of SFAS 144 and
paragraph 20 of SFAS 146 or tell us why these disclosures are not
required. 8. [I can`t get this to number] We note that
you
sold most of your US property casualty businesses to Travelers
Indemnity Company through a renewal rights transaction and
negotiated
a number of other renewal rights arrangements. However, it appears
that you provide no further explanation or analysis of these
transactions in your filing. Given the ongoing risks associated
with
the US market, evidenced by the magnitude of your recent losses,
we
believe that additional disclosure about these transactions is
necessary. Please add disclosure to Note 50 that explains the
primary
terms of these arrangements, including as applicable consideration
received (or paid), recorded gain or loss, expected impact on
future
operating results from the businesses subject to these renewal
rights
transactions, ongoing servicing obligations, associated
reinsurance
arrangements, adequacy of related insurance reserves retained by
the
Company and related contingent obligations or guarantees. Describe
how you accounted for these arrangements with references to
applicable US GAAP technical literature. Include a discussion in
Item
5. Operating and Financial Review and Prospects that will provide
investors with a better understanding of how these arrangements
are
likely to impact future operating results and cash flow.
* * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested information. Detailed letters greatly
facilitate our review. Please understand that we may have
additional
comments after reviewing your amendment and responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in your letter, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Frank Wyman, Staff Accountant, at 202-551-
3660
or Don Abbott, Senior Staff Accountant, at 202-551-3608, if you
have
questions regarding the comments. In this regard, do not hesitate
to
contact me, at (202) 551-3679.
Sincerely,
Jim B. Rosenberg
Senior Assistant Chief Accountant
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Mr. Andrew K. Haste
Royal & Sun Alliance Insurance Group plc
September 22, 2005
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