OREANDA-NEWS. Fitch Ratings has revised the Outlooks for Old Mutual plc's Long-term Issuer Default Rating (IDR) of 'BBB+' and Old Mutual Wealth Life Assurance Company Limited's (OMW) Insurer Financial Strength Rating (IFS) of 'A-' to Evolving from Stable.

Fitch has also downgraded Mutual & Federal Insurance Company Limited's (M&F) IFS Rating to 'BBB' from 'BBB+' and affirmed M&F's and Old Mutual Life Assurance Company (South Africa)'s (OMLACSA) National IFS Ratings at 'AAA(zaf)'. The Outlooks are Stable.

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

The rating actions follow the announcement of the Old Mutual group's new "managed separation" strategy on 11 March 2016, whereby the group will be split into four separate businesses by 2018. As a result, Fitch has revised its approach to rating the entities of the Old Mutual group from a group basis to a standalone basis, where the inherent credit strength of the major business units is assessed separately.

KEY RATING DRIVERS
The reorganisation aims to separate the group's four major business units, namely Old Mutual Emerging Markets, Old Mutual Wealth, Nedbank and OM Asset Management. The group expects to materially conclude this process by end-2018. This reflects the conclusion of a strategic review by the group that there are no significant synergistic benefits in maintaining the current group structure.

Fitch expects this new strategy to affect the rated entities as follows:

-Old Mutual plc will ultimately cease to exist in its current form. The group announced a new capital management policy, the intention to reduce group holding company debt materially and a phased reduction of central costs. The Evolving Outlook reflects uncertainty over the evolution of Old Mutual plc under the new strategy.

-OMW will operate as a standalone UK/European insurance business. As a result, Fitch will no longer apply a South Africa sovereign constraint on OMW's ratings. However, the Evolving Outlook reflects material uncertainty around the future standalone credit profile of OMW.

-OMLACSA, M&F and Mutual & Federal Risk Financing Limited (M&F RF) will continue to operate as "Core" entities under Old Mutual Emerging Markets (OMEM). Their ratings and Outlooks reflect OMEM's current and expected standalone credit profile, as the largest profit contributor to the existing Old Mutual group, and a market-leading life insurer and fund manager in South Africa.

- The downgrade of M&F's IFS rating, as well as the implied international IFS rating for OMEM's South African operations, reflects the constraint of the South African sovereign local currency rating (BBB/Stable) on OMEM. This is a result of OMEM's exposure to the South African operating environment and investment exposure to government securities, reflecting the change in our approach to assessing OMEM on a standalone basis. M&F's net underwriting profit increased significantly to ZAR273m in 2015 from R79m in 2014.

RATING SENSITIVITIES
Old Mutual plc's ratings would be revised as further reorganisation announcements are made, including further details on debt reduction.

OMW's ratings would be revised once Fitch has assessed the company's standalone profile, based on more information regarding the proposed reorganisation, including the ultimate ownership of OMW.

A one-notch upgrade or downgrade of the South African sovereign rating would trigger a corresponding action of M&F's IFS rating, but would not necessarily affect Old Mutual plc's and OMW's ratings.

A change to the South African sovereign ratings is unlikely to affect the National scale ratings of OMLACSA and M&F, as the relativity of these ratings to that of the best credits in South Africa is expected to remain unaffected.

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 and M&F RF are "Core" to OMEM under Fitch's insurance group rating methodology, any downgrade of OMLACSA's ratings, as the primary operating entity of OMEM, would lead to a corresponding change in M&F's ratings.

FULL LIST OF RATING ACTIONS

Old Mutual plc
Long-term IDR: affirmed at 'BBB+'; Outlook revised to Evolving from 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 revised to Evolving from Stable
Long-term IDR: affirmed at 'A-'; Outlook revised to Evolving from Stable

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

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