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Fitch downgrades Old Mutual

Fitch has downgraded Old Mutual due to fears it may have to pump capital into its US life business.

Fitch downgraded Old Mutual’s long-term issuer default rating to BBB+ from A-the insurer financial strength ratings of its UK and Sweden-based insurance company subsidiaries to A from A+ and its US based subsidiaries to BBB- from BBB.

The agency says its downgrades relate concerns over US Life operations and the potential impact on the group as well as fears over the weakening operating environment of Old Mutual’s South African business.

Fitch expects that Old Mutual may need to inject additional capital into the US Life domestic operations in 2009 to maintain regulatory risk-based capital above 300 per cent.

The agency says the amount of capital contribution will depend on the credit environment and the potential for further investment impairments during the remainder of the year, which could be significant.

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