A.M. Best Removes From Under Review, Downgrades ICRs and Affirms FSR of OM Financial Life; All Outlooks Negative

2009-01-09 21:36:01 -

A.M. Best Co. has removed from under review and downgraded the issuer credit ratings (ICR) to "a" from "a+" of OM Financial Life Insurance Company (Baltimore, MD) and its wholly owned subsidiary, OM Financial Life Insurance Company of New York (Purchase, NY) (together known as OM Financial Life). The outlook assigned to these ratings is negative.


Concurrently, A.M. Best has affirmed the financial strength rating of A (Excellent) of OM Financial Life. The outlook for this rating has been revised to negative from stable. OM Financial Life represents the U.S. life insurance and annuity operations of its ultimate parent, Old Mutual plc (Old Mutual), an international financial services company based in London, England.


The downgrading of the ICRs reflects OM Financial Life's weakened stand-alone credit profile due to the severity of investment losses incurred in 2008 and the remaining investment risk in the portfolio. Through September 2008, OM Financial Life's statutory results have been severely impacted by $289 million of net realized investment losses. OM Financial Life's unrealized loss position at September 30, 2008 was approximately $2.1 billion, indicating the potential for additional impairments. These rating actions also reflect the contraction in OM Financial Life's business profile as new management has begun the implementation of a significant re-engineering plan focused on improving profitability. While A.M. Best views positively the new strategy and believes it will prove beneficial to the company's financial results going forward, the changes are material enough to carry significant execution risk and will likely result in a deterioration of OM Financial Life's market positions while tempering its business growth over the short to medium term.


The ratings of OM Financial Life recognize the financial strength and support of Old Mutual. To offset net statutory investment losses incurred through September 2008, Old Mutual has provided OM Financial Life with $100 million in capital contributions. In addition, an affiliated reinsurance transaction resulted in a $267 million pre-tax gain that was credited directly to surplus. A.M. Best believes this direct and indirect support demonstrates Old Mutual's commitment to the U.S. operations, as well as the strategic importance of the business to the group. Furthermore, since OM Financial Life's ratings are enhanced by the financial strength and support of Old Mutual, the negative outlook is a reflection of the rating outlook for Old Mutual and its other operating companies (please see the press release for Old Mutual plc published on January 9, 2009).


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


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.








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