A.M. Best Affirms Ratings of Unum Group and Its Core U.S. Subsidiaries - Seite 2

Although Unum’s closed block has contributed modestly to earnings over the past two years, the reset of assumptions for the LTC block driven by low interest rates will impact 2014 GAAP results, and to a lesser extent, statutory results at First Unum, the group’s key New York subsidiary. A.M. Best believes that Unum will be able to absorb the charges without materially impacting its capital position. A.M. Best’s analysis includes the business reinsured to the former Bermuda subsidiary that was redomesticated to Vermont at year-end 2013. Although management’s philosophy to return “excess” capital to shareholders, largely through share repurchase, has caused the capital cushion at some of its subsidiaries to fluctuate, A.M. Best believes the group’s prospective risk-adjusted capital position will remain appropriate for its ratings.

Moreover, with total debt-to-capital at roughly 25%, strong interest coverage and over $500 million of holding company cash and marketable securities at Sept. 30, 2014, Unum has excellent financial flexibility. Unum has roughly $5.8 billion of net unrealized capital gains in its bond portfolio, with modest exposure to structured securities and real estate-related investments. A.M. Best will continue to monitor the group’s holdings in public below investment grade bonds, as well as its modest increases in private placements and commercial mortgages. A.M. Best believes Unum benefits from being a major player in these asset classes, which allows it to maintain good underwriting standards.

A.M. Best believes that a positive rating action is unlikely for Unum in the near to medium term. Factors that could lead to a negative rating action include sustained periods of higher-than-expected claims incidence, duration or severity; or a considerable decline in operating performance or risk-adjusted capitalization relative to A.M. Best’s expectations.

The FSR of A (Excellent) and the ICRs of “a” have been affirmed with a stable outlook for the following core U.S. 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 B++ (Good) and the ICR of “bbb” have been affirmed with a stable outlook for The Paul Revere Variable Annuity Insurance Company, a non-core subsidiary of Unum Group.