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AM Best Affirms Credit Ratings of Unum Group and Its Core U.S. Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)--

AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” of the core U.S. life/health insurance subsidiaries of Unum Group (Unum) (headquartered in Chattanooga, TN) [NYSE: UNM]. Additionally, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” of Unum Insurance Company (Unum Insurance) (Portland, ME) and Starmount Life Insurance Company (Starmount) (Portland, ME). Concurrently, AM Best has affirmed the Long-Term ICR of “bbb” and the Long-Term Issue Credit Ratings (Long-Term IR) of Unum. The outlook of the Credit Ratings (ratings) is stable. (See below for a complete listing of the companies and ratings.)

The ratings of the core U.S. life/health insurance subsidiaries of Unum reflect their balance sheet strength, which AM Best categorizes as strong, as well as their strong operating performance, favorable business profile and appropriate enterprise risk management.

Unum’s strong balance sheet strength is supported through the organization’s continued profitability and quality investment portfolio. Unum continues to report strong operating results from its core ongoing insurance operations. Premium growth has been steady over the past five years, averaging about 4%. Loss ratios and persistency have been relatively stable, which has driven the organization’s steady operating earnings. Nevertheless, the company did have a reserve charge for its legacy long-term care (LTC) business during the third quarter of 2018. This charge had a material impact on the consolidated GAAP results for the year; however, the company still reported good results, with net income of more than $500 million for the year. The steady earnings stream produced by Unum’s core businesses somewhat mitigates the potential of adverse financial impact from the closed LTC business in the future.

AM Best views Unum’s asset quality as good as investments are held mainly in investment grade fixed income securities. However, the company does have modest exposure to below investment grade bonds and commercial mortgage loans. Unum’s investment income has been relatively stable with modest impairments. The insurance operation’s liquidity is mainly supported by favorable operating cash flows. Additional financial flexibility is derived from holding company cash and investments, a $600 million revolving credit facility and access to Federal Home Loan Bank borrowings. Unum has manageable financial leverage of approximately 24% as of the first quarter of 2019. Interest coverage was just five times in 2018, lower than the high single-digit levels the company historically has reported. Unum’s new debt issue is not anticipated to materially increase the organization’s financial leverage on a long-term basis.

Unum maintains a leading market positions in the majority of its core product lines with a diverse nationwide distribution network. Additionally, the company continues to diversify its earnings stream with new product offerings and through growth in its dental and international businesses, which helps to deepen penetration and aid with client persistency. Unum’s enterprise risk management program is well-developed and incorporated into strategy and financial planning for the organization.

The FSR of A (Excellent) and the Long-Term ICRs of “a” have been affirmed with a stable outlook for the following core U.S. life/health subsidiaries of Unum Group:

  • Unum Life Insurance Company of America
  • Provident Life and Accident Insurance Company
  • The Paul Revere Life Insurance Company
  • Colonial Life & Accident Insurance Company
  • First Unum Life Insurance Company
  • Provident Life and Casualty Insurance Company

The FSR of A- (Excellent) and the Long-Term ICRs of “a-” have been affirmed with a stable outlook for the following U.S. subsidiaries of Unum Group:

  • Unum Insurance Company
  • Starmount Life Insurance Company

The Long-Term ICR of “bbb” has been affirmed with a stable outlook for Unum Group.

The following Long-Term IR has been assigned with a stable outlook:

Unum Group

-- “bbb” on $400 million 4.00% senior unsecured notes, due 2029

The following Long-Term IRs have been affirmed with a stable outlook:

Unum Group

-- “bbb” on $400 million 5.625% senior unsecured notes, due 2020
-- “bbb” on $350 million 3.0% senior unsecured notes, due 2021
-- “bbb” on $250 million 6.75% senior unsecured notes, due 2028
-- “bbb” on $200 million 7.25% senior unsecured notes, due 2028
-- “bbb” on $250 million 7.375% senior unsecured notes, due 2032
-- “bbb” on $250 million 5.75% senior unsecured notes, due 2042
-- “bbb” on $350 million 4.00% senior unsecured notes, due 2024
-- “bbb” on $275 million 3.875% senior unsecured notes, due 2025
-- “bbb” on $250 million 5.75% senior unsecured notes, due 2042
-- “bb+” on $300 million 6.25% junior subordinated notes, due 2058

Provident Financing Trust I

-- “bb+” on $300 million 7.405% capital securities, due 2038

The following indicative Long-Term IRs under the shelf registration have been affirmed with a stable outlook:

Unum Group

-- “bbb” on senior unsecured
-- “bbb-” on subordinated
-- “bb+” on preferred stock

Unum Group Financing Trust I and II—

-- “bb+” on preferred securities

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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