OREANDA-NEWS. Fitch Ratings has affirmed Old Mutual plc's (Old Mutual) Long-term Issuer Default Rating (IDR) at 'BBB+', Old Mutual Life Assurance Company's (South Africa) (OMLACSA) National Insurer Financial Strength Rating (IFS) at 'AAA(zaf)' and Old Mutual Wealth Life Assurance Company Limited's (OMW) IFS at 'A-'. The agency simultaneously downgraded Mutual & Federal Insurance Company Limited's (M&F) Insurer Financial Strength (IFS) rating to 'BBB+' from 'A-'. The Outlooks are Stable.

A full list of rating actions is available at the end of this commentary.

The rating actions follow the recent downgrade of South Africa's Issuer Default Ratings (IDRs) to Long-term foreign currency 'BBB-' from 'BBB' and to Long-term local currency 'BBB' from 'BBB+', as outlined in the commentary titled 'Fitch Downgrades South Africa to 'BBB-'; Outlook Stable' published on 4 December 2015 on www.fitchratings.com.

KEY RATING DRIVERS
Old Mutual's ratings are constrained by the South African sovereign rating. On an unconstrained basis, the ratings reflect the group's position as the market-leading life insurer and largest fund manager in South Africa, and significant presence in the UK savings market. The group also has non-life operations in South Africa through M&F , and an asset management business in the US.

M&F's IFS rating, as well as the implied international IFS rating for the Old Mutual group's South African operations, is one notch higher than the South African sovereign local currency rating (BBB/Stable), reflecting Old Mutual's geographical diversification with a sizeable proportion of earnings generated in the UK and Europe.

Fitch considers M&F and its subsidiary, Mutual & Federal Risk Financing Limited (M&F RF), as "Core" to the Old Mutual group under the agency's insurance group rating methodology, based on its importance to Old Mutual's strategy and integration of management into the Old Mutual group. As a result M&F's IFS rating benefits from uplift from its standalone profile to one notch above South Africa's local currency IDR.

The affirmation of OMW at 'A-', two notches above South Africa's local currency IDR, reflects Fitch's view that the possibility of OMW resources being called upon to support the South African operations is remote.

OMLACSA's and M&F's National scale ratings have not been affected by the sovereign downgrade, as the relative creditworthiness of South African insurance groups remains unchanged, in Fitch's view. The main industry-wide risk factors to South African insurers' ratings remain broadly unchanged, in Fitch's view.

RATING SENSITIVITIES
A one-notch upgrade or downgrade of the South African sovereign rating would trigger a corresponding upgrade or downgrade of M&F's IFS rating.

A one-notch downgrade of the South African sovereign rating would not trigger a downgrade of OMW's ratings, but could trigger a one-notch downgrade of Old Mutual's ratings.

A change to the sovereign ratings is unlikely to affect the National IFS ratings of the Old Mutual group, including M&F, as the relativity of these ratings to that of the best credits in South Africa is expected to remain unaffected.

The Old Mutual group's international-scale ratings could be downgraded if there is a material reduction in the geographical diversification of earnings or deterioration in the quality of non-South African earnings, with hard-currency cover falling below 2x.

OMLACSA's National ratings would be downgraded if its creditworthiness deteriorates materially relative to the South African sovereign and its peers in the South African market.

Given Fitch's view that M&F RF is "Core" to M&F and in turn M&F is "Core" to the Old Mutual group under Fitch's insurance group rating methodology, any upgrade or downgrade of Old Mutual's ratings could lead to a corresponding change in M&F's ratings. A downgrade of M&F RF's ratings could also be triggered by a change in M&F RF's "Core" status within M&F.

A downgrade of M&F could also be triggered by deterioration in the standalone profile of M&F to an extent that Fitch no longer considers it as "Core" to Old Mutual. This could result from sustained weak operating performance, lower capitalisation and/or severe weakening in M&F's market share.

FULL LIST OF RATING ACTIONS

Old Mutual plc
Long-term IDR: affirmed at 'BBB+'; Outlook Stable
Senior unsecured debt: affirmed at 'BBB'
Subordinated debt: affirmed at 'BB+'
Short-term IDR and commercial paper: affirmed at 'F2'

Old Mutual Life Assurance Company (South Africa) Limited
National IFS rating: affirmed at 'AAA(zaf)'; Outlook Stable
National Long-term rating: affirmed at 'AAA(zaf)'; Outlook Stable
Subordinated debt: affirmed at 'AA(zaf)'

Old Mutual Wealth Life Assurance Limited
IFS rating: affirmed at 'A-'; Outlook Stable
Long-term IDR: affirmed at 'A-' '; Outlook Stable

Mutual & Federal Insurance Company Limited (M&F)
National IFS rating: affirmed at 'AAA(zaf)'; Outlook Stable
IFS rating: downgraded to 'BBB+' from 'A-'; Outlook Stable

Mutual & Federal Risk Financing Limited
National IFS rating: affirmed at 'AAA(zaf)'; Outlook Stable