A.M. Best Affirms Ratings of Unum Group and Its Core U.S. Subsidiaries

A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a” of the core U.S. life/health insurance subsidiaries of Unum Group (Unum) (headquartered in Chattanooga, TN)(NYSE:UNM). Concurrently, A.M. Best has affirmed the ICR of “bbb” of Unum, as well as all existing debt securities issued by the organization. The outlook for all ratings is stable. (See below for a complete listing of the companies and ratings.)

The rating affirmations reflect Unum’s strong franchise, solid capitalization, diversified earnings sources and favorable operating performance despite the slow-growing U.S. economy. Partially offsetting these positive factors are the weak performance in the company’s closed block of long-term care (LTC) policies and above-average exposure to below investment grade bonds relative to the industry. A.M. Best recognizes that Unum’s LTC business, which has experienced margin pressures from pricing issues and the persistent low rate environment that continues to act as an earnings headwind, represents a significant portion of Unum’s capital.

Despite the sluggish economy, the enterprise continues to generate steady operating results on the strength of its Unum U.S., Colonial Life and Unum UK operations. The group has experienced favorable trends in premiums and benefit ratios, which speak well to Unum’s pricing discipline and its ability to produce consistent cash flows. In the United States, Unum’s disability line continues to benefit from a well-diversified liability profile based on industry segments. The Colonial Life segment also continues to be a stable contributor to overall earnings, reporting strong return-on-equity metrics. At Unum UK, its leading rank in income protection and completion of group life repricing has positioned the operation for profitable growth and maintenance of strong returns. Moreover, Unum’s investment portfolio provides a somewhat stable source of income due to manageable levels of impairments.