Reuters logo
4 months ago
Fitch Downgrades Old Mutual Plc's IDR to 'BBB'; Outlook Stable
April 12, 2017 / 2:30 PM / 4 months ago

Fitch Downgrades Old Mutual Plc's IDR to 'BBB'; Outlook Stable

(The following statement was released by the rating agency) LONDON, April 12 (Fitch) Fitch Ratings has downgraded Old Mutual Plc's (Old Mutual) Long-Term Issuer Default Rating (IDR) to 'BBB' from 'BBB+'. Fitch simultaneously affirmed Old Mutual Wealth Life Assurance Company Limited's (OMWL) Insurer Financial Strength Rating (IFS) at 'A'. The Outlooks are Stable. Fitch has also downgraded the IFS Rating of Mutual & Federal Insurance Company Limited (M&F) to 'BB+' from 'BBB-'. The Outlook is Stable. A full list of rating actions is at the end of this commentary. The rating actions follow the downgrade of South Africa's Long-Term Local-Currency IDR to 'BB+' from 'BBB-' (see 'Fitch Downgrades South Africa to 'BB+'; Outlook Stable' dated 7 April 2017 on www.fitchratings.com). The actions reflect that Old Mutual's ratings are constrained by South Africa's sovereign local currency rating, and the standalone credit quality of Old Mutual Emerging Markets (OMEM). 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. KEY RATING DRIVERS Old Mutual Plc Old Mutual's IDR is mainly driven by the credit quality of the Old Mutual Wealth (OMW) business unit, including its contribution to group hard-currency interest coverage. However, Old Mutual's ratings are constrained by South Africa's Long-Term IDR, reflecting the group's balance sheet and earnings exposure to South Africa. Old Mutual Wealth Life Assurance Company Limited We expect that the OMW business unit will operate as a standalone UK/European insurance business under a new holding company. On a standalone basis, OMW benefits from low balance sheet risk and its strong business position in the UK. However, uncertainty around future financial flexibility and profitability are rating weaknesses. Old Mutual Emerging Markets OMEM is one of South Africa's largest insurance groups, with a strong market position in most segments. Old Mutual Life Assurance Company South Africa (OMLACSA), OMEM's main operating entity, is strongly capitalised and, for participating business, has the ability to share potential investment losses with policyholders. We do not expect OMEM's operations to be materially disrupted by the group's restructuring plans. OMLACSA, M&F and Mutual & Federal Risk Financing Limited (M&F RF) will continue to operate as "Core" entities under 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. M&F's IFS rating, as well as the implied international IFS rating for OMEM's South African operations, is constrained by the South African sovereign local currency rating. This is a result of OMEM's exposure to the South African operating environment and investment exposure to government and other local securities. RATING SENSITIVITIES A further downgrade of the South African local currency sovereign rating could trigger a corresponding action on Old Mutual's IDR and M&F's IFS rating. OMW may be downgraded if net income fails to recover or market share deteriorates as a result of further operational difficulties in deploying its new investment platform. An improvement in OMW's profitability, as measured by net income return on equity above 9% on a sustained basis, could lead to an upgrade. A change to the South African sovereign ratings is unlikely to affect the National 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. The National Ratings of OMLACSA, M&F and M&F RF would be downgraded if OMEM's creditworthiness deteriorates materially relative to the South African sovereign and its peers in the South African market. FULL LIST OF RATING ACTIONS Old Mutual plc Long-Term IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable Subordinated debt: downgraded to 'BB' from 'BB+' Short-Term IDR and commercial paper: downgraded to 'F3' from 'F2' 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 'BB+' from 'BBB-'; Outlook Stable Mutual & Federal Risk Financing Limited National IFS rating: affirmed at 'AAA(zaf)'; Outlook Stable 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)' Contact: Primary Analyst Willem Loots Director +44 20 3530 1808 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Harish Gohil Managing Director +44 20 3530 1257 Committee Chairperson Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below