Fitch Downgrades OM Financial Life Ins Co's IFS to 'BBB'; Rating Watch Negative

NEW YORK--(Business Wire)--
Fitch Ratings has downgraded and placed on Rating Watch Negative
the following ratings of OM Financial Life Insurance Company (OM
Financial) and its wholly owned subsidiary OM Financial Life Insurance
Company of NY (OM Financial of NY), collectively referred to as OM
Financial Companies:

OM Financial

OM Financial of NY

--Insurer financial strength (IFS) rating to 'BBB' from 'BBB+'.

Today's rating action follows Fitch's rating actions on Old Mutual
plc's (Old Mutual) holding company Issuer Default Rating (IDR) and
related debt ratings (see separately published press release dated 15
Sept. 2008).

The action also follows Old Mutual's recent announcements of:

1) The resignation of its CEO, Jim Sutcliffe and immediate
replacement by Julian Roberts, and

2) New charges it is taking in its US Life operations - which
includes OM Financial Companies as well as its Bermuda operations.

Fitch's ratings take into account these announcements and Fitch's
view of the importance of OM Financial Companies to Old Mutual in
context with Fitch's group rating methodology.

The Rating Watch Negative primarily reflects Fitch's view that
uncertainty remains with respect to: 1) the credit environment and the
potential for additional impairments in OM Financial Companies'
investment portfolio, and 2) the growth and earnings prospects for
certain products of OM Financial Companies.

In Fitch's view the most important factor in OM Financial
Companies' IFS ratings continues to be the financial strength and
support of Old Mutual. Old Mutual has provided capital support,
management expertise, centralized services and reinsurance
relationships. Without such parental support, OM Financial Companies'
ratings would be lower than the current rating category.

In accordance with Fitch's group rating methodology, Fitch
believes OM Financial Companies are 'important' to Old Mutual as
opposed to Fitch's previous view of 'very important'. Fitch's change
in view is based the persistency of the charges that have arisen out
of this business over the past several periods, which has led to OM
Financial Companies contributing a small percentage to overall group
pretax operating IFRS earnings. In addition, Fitch believes the
near-term prospects for earnings grow is below expectations and is
inconsistent with businesses that Fitch considers 'Core' and 'Very
Important'. Therefore, the ratings uplift to the OM Financial
Companies' has narrowed by one notch.

Old Mutual recently announced that Old Mutual's U.S. Life
operations will incur investment impairments of $135 million in the
third quarter of 2008 primarily relates to OM Financial Companies'
exposure to Fannie Mae and Freddie Mac preferred securities. In
addition, the company announced reserve strengthening in its Bermuda
variable annuity business of $155 million pretax. These charges are in
addition to Old Mutual's previously disclosed charges in the first
half of 2008 including: 1) an impairment charge of $149 million on Old
Mutual's U.S. Life operations' residential mortgage-backed security
exposure, corporate bonds and preferred stocks, and 2) a $212 million
charge on the Bermuda business. In Fitch's view these charges signify
uncertainty of the credit markets and its impact on OM Financial
Companies.

Fitch expects that the aforementioned impairment charges will
drive a statutory net loss for 2008. Fitch believes this will have an
impact on OM Financial Companies' capital position, which is at a
level below the rating category (as measured by Fitch's 2006 Prism
score of 'BB' for OM Financial Companies and higher than average
operating leverage of 28 times (x) at March 31, 2008). Fitch expects
that Old Mutual will need to infuse capital into OM Financial
Companies by year end to maintain a consolidated RBC of 300%. In
Fitch's opinion, the amount of the capital contribution will depend
upon the credit environment and the potential for further investment
impairments during the remainder of the year, which could be
significant. Fitch's expectation is that Old Mutual will continue to
provide the capital necessary to support the U.S. Life operations over
the near term.

Old Mutual U.S. Life operations' remaining exposure to direct
subprime is about $720 million and $600 million in monoline insurer
exposure on a $20 billion portfolio. It should be noted that 99% of
the remaining subprime exposure remains above an 'AA' rating and 89%
of the monoline is indirect (wrapped) exposure.

Old Mutual U.S. Life Holdings (Old Mutual U.S.) is the holding
company for OM Financial Companies. Old Mutual U.S. is a wholly owned
subsidiary of its ultimate parent, U.K.-based Old Mutual plc.

OM Financial Companies focus on manufacturing annuity and life
insurance products for brokers, independent agents and institutional
distributors. Its target market is middle-market consumers saving for
retirement or seeking protection-oriented products. OM Financial is
Old Mutual's largest U.S. life insurance entity and along with its
affiliate, forms the cornerstone of OM Financial Companies' strategy.
OM Financial has admitted assets of approximately $18 billion and
total adjusted capital of approximately $700 million at March 31,
2008. OM Financial Companies is headquartered in Maryland.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site at all times. Fitch's code of conduct, confidentiality, conflicts
of interest, affiliate firewall, compliance and other relevant
policies and procedures are also available from the 'Code of Conduct'
section of this site.

Fitch Ratings
Lauren Kalinowski, CPA, 212-908-0524, New York
Bruce E. Cox, 312-606-2316, Chicago
or
Media Relations:
Cindy Stoller, 212-908-0526, New York

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