AM Best Upgrades Issuer Credit Ratings of Unum Group and Its Core U.S. Life/Health Subsidiaries

AM Best has upgraded the Long-Term Issuer Credit Ratings (Long-Term ICRs) to “a+” (Excellent) from “a” (Excellent) and affirmed the Financial Strength Rating (FSR) of A (Excellent) of the members of Unum Insurance Group. The outlook of the Long-Term ICRs has been revised to stable from positive, while the outlook of the FSR is stable. These companies are the core U.S. life/health (L/H) insurance subsidiaries of Unum Group (Unum) (headquartered in Chattanooga, TN) [NYSE: UNM]. In addition, AM Best has upgraded the Long-Term ICR to “bbb+” (Good) from “bbb” (Good) and the Long-Term Issue Credit Ratings (Long-Term IRs) of Unum. The outlook of the Long-Term ICR has been revised to stable from positive. (See below for a complete listing of the L/H subsidiaries and the Long-Term IRs.)

The Credit Ratings (ratings) reflect Unum’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The rating upgrades reflect Unum’s improved risk-adjusted capitalization and financial flexibility observed over the 2020-2023 period, previously recognized in 2022 with the revision of the Long-Term ICR outlooks to positive from stable, in conjunction with stable asset quality, strong financial flexibility, and enhanced liquidity. Improved risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), was observed after Unum reinsured a large block of individual disability reserves with a subsidiary of Global Atlantic Financial Group. The transaction, which completed in 2021, reduced outstanding reserves at the statutory group and materially improved risk-adjusted capitalization at the statutory group. Financial flexibility was improved through the issuance of $400 million of unissued pre-capitalized securities in 2021 While dividends out of the statutory entities to fully fund a long-term care (LTC) premium deficiency reserve (PDR) are expected to moderate risk-adjusted capital slightly, which remains above the company’s stated long-term target levels. AM Best expects Unum to maintain risk-adjusted capital, as measured by BCAR, at the very strong level over the medium term. Liquidity and financial flexibility are expected to remain elevated over the near term as Unum maintains its balance of unissued pre-capitalized securities and ample cash at the holding company. It also is expected that Unum will maintain financial leverage below management communicated 30% maximum, and likely closer to the year-end 2022 figure of 27%.