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 the financial strength rating of A (Excellent) and has assigned an issuer credit rating (ICR) of "a+" to Old Mutual Life Assurance Company (South Africa) Limited (OMLAC (SA)). At the same time, it has affirmed the ICR of "a-" of Old Mutual plc (OM plc) (United Kingdom) 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, its good financial performance and strengthened risk-adjusted capitalisation.

Strong but deteriorating business profile--OMLAC (SA) remains the largest life insurance company in the South African market despite a second year of disappointing new business production in 2004. A.M. Best believes that the company is likely to stabilise new business market share at approximately 20% in 2005 (compared to 22% in 2004 and 30% in 2003). The improved distribution capabilities--most notably in the Personal Financial Advisor segment and in bancassurance--are likely to be the main drivers for increases in retail business production. Group business is likely to increase from the 2004 low level, though growth in the segment will be impeded by OMLAC (SA)'s recent weakness in the broker market. A.M. Best believes that the company's effort to strengthen its position in the broker segment through Masthead (Old Mutual's independent broker initiative) will start delivering results towards the end of 2005.

Good financial performance--Operating earnings improved by a strong 56% in 2004 based on stable technical profitability and strong investment performance as the South African investment markets rebounded during the year. New business margins stabilised at approximately 24.5% (compared to 24.9% in 2003) but are likely to decline in 2005 as the company tries to regain market share in the corporate business sector. A.M. Best believes that the growth in regular premium employee benefits business is likely to result in another year of negative cash flow in 2005.

Strengthened capitalization--OMLAC (SA)'s risk-adjusted capitalisation improved significantly in 2004 as the good performance of the South African investment markets resulted in an increase in revaluation reserves while the company reduced its dividend payout. Investment counterparty risk is likely to increase due to the planned purchase of Nedcor 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 notes

Old Mutual plc--

--USD 750 million 8% guaranteed cumulative perpetual preferred securities

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

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 http://www.ambest.com.