A.M. Best Affirms Ratings of Old Mutual Life Assurance Company (South Africa) Limited and Old Mutual plc.OLDWICK, N.J. -- A.M. Best Co. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the financial strength rating of A (Excellent) and the issuer credit rating of "a+" of Old Mutual Life Assurance Company (South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. ) Limited (OMLAC (SA)). At the same time, A.M. Best has affirmed the issuer credit rating of "a-" of Old Mutual plc (OM plc) and the ratings of the debt securities issued by OM plc and its subsidiaries. (See list below.) The outlook for all ratings is stable. The ratings reflect OMLAC (SA)'s strong but deteriorating business profile, good financial performance and strengthened risk-adjusted capitalisation. Strong business profile--OMLAC (SA) remains the largest life insurance company in the South African market. A.M. Best believes that the company is likely to stabilise new business market share at approximately 24% in 2006, assisted by the decision to reduce its expectations of new business margins. The improved distribution capabilities most notably in the Personal Financial Advisor segment and in bancassurance Bancassurance A French term referring to the selling of insurance through a bank's established distribution channels. Notes: The result is a bank that can offer banking, insurance, lending, and investment products to a customer. are likely to be the main drivers for increases in retail business production. Group business is likely to continue the growth experienced in 2005, assisted by the company's expansion in the broker market through Masthead mast·head n. 1. Nautical The top of a mast. 2. The listing in a newspaper or periodical of information about its staff, operation, and circulation. 3. (OMLAC (SA))'s independent broker initiative). Good financial performance--Operating earnings improved by a strong 20% in 2005 based on stable technical profitability and strong investment performance as the South African market remained buoyant Buoyant The term used to describe a commodities market where the prices generally rise with ease when there are considerable signals of strength. Notes: These types of markets can be very volatile as the prices are rapid to rise and fall with investor sentiment. during the year. New business margins stabilised at approximately 22% (from 24% a year before) but are likely to decline further in 2006 as the company tries to regain market share in the corporate business sector. Stable and strong capitalisation--OMLAC (SA)'s risk-adjusted capitalisation improved in 2005 (following the significant strengthening experienced in 2004) as the good performance of the South African investment markets resulted in an increase in revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. reserves. This was partly offset by the increase in investment counterparty risk Counterparty Risk The risk to each party of a contract that the counterparty will not live up to their contractual obligations. Notes: In most financial contracts, counterparty risk is known as default risk. due to the purchase of Nedbank shares in 2005. The debt rating of "a-" has been affirmed for the following: Old Mutual plc-- --EUR 400 million 6% medium term note issue, due 2007 The debt rating of "bbb+" has been affirmed for the following: Old Mutual plc-- --GBP 350 million perpetual preferred callable Callable Applies mainly to convertible securities. Redeemable by the issuer before the scheduled maturity under specific conditions and at a stated price, which usually begins at a premium to par and declines annually. securities --USD 750 million 8% guaranteed cumulative perpetual preferred securities --GBP 300 million 10-year non-call, 5-year subordinated notes, due 2016 Old Mutual Life Assurance Company (South Africa) Limited-- --ZAR 300 billion 8.92% unsecured subordinated callable notes, due 2020 A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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