A.M. Best Affirms Ratings of Old Mutual Plc and Its Key Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the issuer credit rating (ICR) of "a-" and the existing debt ratings of Old Mutual plc (OM) (United Kingdom). At the same time, A.M. Best has affirmed the financial strength ratings (FSR) and ICRs of the key European and South African entities of OM. (See below for a detailed list of the ratings.) The outlook for all ratings is stable.

The ratings reflect OM's strong business profile, stable financial performance and strengthened risk-adjusted capitalisation.

OM has, through its subsidiaries, leading business positions in the South African life and non-life markets, as well as in Scandinavian and U.K. life markets. The acquisition of Skandia has strengthened the company's position, providing it with a top ten position in the U.K. life market and strong presence in Germany and Colombia. The market share of its life subsidiary in South Africa (OMLAC [SA]) has stabilised after several years of decline, while Mutual & Federal Insurance Company (the company's non-life subsidiary in South Africa) remains one of the two largest non-life insurers in the market. Skandia and its subsidiaries have been benefiting from strong demand for unit-linked business in all of the markets they operate. A.M. Best believes that consolidated life premiums are likely to show a strong increase of between 5% and 8% in 2007, supported by the continuing demand for investment products in South Africa and Europe. Non-life premiums will remain stable due to the softening market rates in South Africa. The significant change in product mix for the life business that was evident in previous years has accelerated and resulted in the majority of new business being unit-linked. This, in turn, increases the potential for earnings volatility should the economic and investment conditions deteriorate.

A.M. Best believes that operating earnings will remain relatively stable in 2007 as the improving profitability from the group's asset management and banking operations and the stable performance of the insurance entities is counterbalanced by the impact of the strengthening British pound. In the longer term, the reduced profit margins arising from the life entities and the softening non-life market are likely to result in reduced technical profitability. At the same time, the proportion of earnings arising out of the insurance operations is likely to decline further (48% of consolidated profits in 2006). Expenses are likely to start declining following the completion of the integration of Skandia and the impact of the reorganisation of the back office of the South African insurance entities.

OM's risk-adjusted capitalisation improved in 2006, though its dependence on value of in-force business increased. A.M. Best believes that any improvements arising from the increasing focus on the less capital intensive unit-linked products are likely to be counterbalanced by the company's active management of its capital base. Financial leverage, while it increased following the Skandia acquisition, is likely to remain in line with the current rating.

The FSR of A (Excellent) and the ICR of "a+" has been affirmed for the following:

* Old Mutual Life Assurance Company (South Africa) Limited

* Skandia Insurance Company Ltd.

* Skandia Life Assurance Company Ltd.

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 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 Co. (South Africa) Ltd.-- -- ZAR 300 billion 8.92% unsecured subordinated callable notes, due 2020

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.