RSA Insurance Group Plc may be set for more downgrades, threatening its ability to retain commercial clients, after Standard & Poor’s cut its credit rating to the lowest in more than a decade.

S&P lowered RSA one notch to A- after trading closed yesterday, the lowest since 2002, and said the company could be downgraded up to two more levels in the next 90 days. RSA issued three profit warnings in less than six weeks amid a capital shortfall at its Irish unit, developments S&P said reflect “a weakening in RSA management.”

More downgrades may push RSA into low investment-grade ratings that could make it too risky for insurance brokers to recommend its products to commercial clients, according to Marcus Rivaldi, a London-based analyst at Morgan Stanley.

RSA Executive Chairman Martin Scicluna is meeting rating agencies this week in London after the Dec. 13 resignation of Chief Executive Officer Simon Lee. Scicluna told investors last week that his priority is to return capital to more “comfortable” levels after the insurer was forced to inject an extra 135 million pounds ($220.1 million) into its Irish unit.

Balance Sheet

RSA has never been rated lower than A- by S&P, a spokeswoman for the rating company said today. Fitch Ratings, which has an A rating on RSA, also said it may downgrade the company yesterday. The press office at Moody’s Investors Service, which rates RSA A2, wasn’t immediately available for a comment.

“What is most important is that RSA avoids a downgrade by any agency into the BBB range,” Rivaldi, who has an overweight rating on RSA, said in a note to clients today. “Were that to occur, we believe the group’s commercial insurance operations would face significant challenges, given the importance of ratings in this space amongst the brokers and customers.”

S&P said further downgrades would occur if the rating agency deems RSA’s moves to strengthen capital and profitability insufficient or it weakens the company’s competitive position. RSA chief financial officer Richard Houghton said in e-mailed comments yesterday that S&P’s downgrade would have “no material impact” on the company’s operations.

Analysts expect RSA to cut its dividend when it reports full-year earnings on Feb. 20 and sell assets in either Asia or Latin America. The company is reviewing operations that span 32 countries across Europe, Asia, and the Americas.

S&P cut RSA to A from A+ in November after an investigation into irregular accounting practices in Ireland forced the company to inject an initial 70 million pounds into the unit. At the time, Fitch and Moody’s kept their ratings unchanged on the company. S&P said yesterday that RSA may be upgraded should the company “maintain our current capital and earning assessment.”

The shares climbed 2.4 percent to 92.3 pence at 9:36 a.m. in London today, the first gain in eight trading days. The stock has still lost 27 percent this year, wiping more than 1.2 billion pounds off the market value.

–Editors: Keith Campbell, Jon Menon