AM Best Revises Outlooks to Negative for Unum Group and Its Core U.S. Life/Health Subsidiaries – Service Wire

27May 2020

OLDWICK, N.J.–( COMPANIES WIRE)– AM Finest has modified the outlooks to negative from steady and verified the Financial Strength Ranking(FSR)of A (Excellent)and the Long-Term Company Credit Scores(Long-Term ICR) of”a” of the core U.S. life/health insurance coverage subsidiaries of Unum Group(Unum) (headquartered in Chattanooga, TN)[ NYSE: UNM] Concurrently, AM Finest has revised the outlook to unfavorable from stable and verified the Long-Term ICR of”bbb”and the Long-Term Problem Credit Scores(Long-Term IR)of Unum.(See below for a complete listing of the life/health subsidiaries

and Long-Term Internal Revenue Service.)In addition, AM Best has actually verified the FSR of A-(Excellent )and the Long-Term ICRs of”a-” of Unum Insurer(Unum Insurance Coverage )and Starmount Life Insurance Coverage Business( Starmount ). Both business are domiciled in Portland, ME. The outlook of these Credit Scores(ratings)remains steady

. The scores of the core U.S. life/health insurance subsidiaries of Unum reflect their balance sheet strength, which AM Finest categorizes as strong, as well as their strong operating efficiency, beneficial company profile and suitable enterprise risk management.

The unfavorable outlooks reflect the undesirable effect of statutory reserve enhancing for the organization’s closed long-lasting care (LTC) block of business, as well as the effect of the unfavorable financial conditions on Unum’s financial investment portfolio and operating results. Unum is reinforcing its reserves by establishing a $2.1 billion premium deficiency reserve (PDR), which will be accrued over the next 7 years based on an agreement Unum reached with its main regulator in Maine. Unum last did a reserve conditioning in 2018; however, that was just booked on a GAAP basis. The PDR is anticipated to be moneyed through operating capital, but to shore up liquidity, Unum has actually suspended its share repurchase program for 2020, which is primarily moneyed by dividends from the insurance entities.

Additionally, AM Finest notes the company does have direct exposure to listed below investment grade bonds and business mortgage loans, in addition to a big part of NAIC Class 2 bonds. Listed below financial investment grade fixed earnings securities represents 8% of invested assets; around one half of set earnings securities are NAIC 2-rated. Furthermore, Unum has a large portfolio of industrial mortgage, totaling $2.4 billion, or 6% of invested assets. Decrease in the credit quality of these fixed-income properties is AM Best’s main concern.

Unum’s strong balance sheet strength traditionally has actually been supported through the organization’s success and the favorable efficiency of its financial investment portfolio. Unum has actually reported strong operating results from its core ongoing insurance operations with constant premium growth over the past five years. Loss ratios and persistency have likewise been reasonably stable. Nevertheless, while running performance is prepared for to stay beneficial, there is the expectation that it will moderate over the near term due to economic pressure from the COVID-19 pandemic on Unum’s employer groups and individual members. Investment income has actually revealed incremental declines due to the consistent low interest rate environment, a trend that is expected to continue as rate of interest are at record lows.

The insurance operation’s liquidity is generally supported by favorable operating cash flows. Additional financial versatility is derived from holding business cash and investments, which totaled $1.03 billion at March 31, 2020, a $600 million revolving credit facility and access to Federal Home mortgage Bank borrowings. Unum has manageable monetary utilize of approximately 27%, including its new $500 million senior unsecured note issue. Interest coverage was strong at 8 times for year-end 2019.

Unum is a market leader in the majority of its core line of product, with a diverse across the country distribution network. The company has good diversity of incomes throughout its item portfolio, has actually broadened offerings with the intro of brand-new products, and the growth of its dental organisation and through its worldwide businesses. Unum actively seeks innovation to grow its service and differentiate itself in the market. Unum’s enterprise threat management program is well-developed and integrated into technique and financial preparation for the organization.

The ratings of Unum Insurance coverage reflect its balance sheet strength, which AM Finest categorizes as extremely strong, in addition to its minimal operating performance, limited organisation profile and appropriate enterprise risk management. Unum Insurance coverage started marketing brand-new items for the organization over the previous 2 years reporting material premium growth. Unum Insurance coverage offers pricing and product flexibility to its parent.

The scores of Starmount show its balance sheet strength, which AM Finest categorizes as strong, in addition to its appropriate operating performance, neutral organisation profile and appropriate business threat management. Starmount is Unum’s core dental and vision benefits entity. The company’s product portfolio is distributed under the Unum brand name by Unum’s across the country circulation network. Starmount likewise finances and administers oral products provided by its affiliate, Colonial Life & & Mishap Insurance Provider. Strong premium development has been reported over the past two years. Nevertheless, running performance remains unfavorable as the company grows these line of work. Unum continues to support Starmount’s development method through capital contributions.

The FSR of A (Outstanding) and the Long-Term ICRs of “a” have been verified with the outlooks modified to unfavorable from steady for the following core U.S. life/health subsidiaries of Unum Group:

  • Unum Life Insurance Business of America
  • Provident Life and Mishap Insurer
  • The Paul Revere Life Insurance Business
  • Colonial Life & & Mishap Insurance Provider
  • First Unum Life Insurance Business
  • Provident Life and Casualty Insurance Company

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

Unum Group—-
” bbb” on $500 million 4.50% senior unsecured notes, due 2025

The following Long-Term IRs have actually been affirmed with the outlooks modified to unfavorable from steady:

Unum Group—-
” bbb” on $400 million 5.625% senior unsecured notes, due 2020
— “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 6.75% senior unsecured notes, due 2028
— “bbb” on $200 million 7.25% senior unsecured notes, due 2028
— “bbb” on $400 million 4.00% senior unsecured notes, due 2029
— “bbb” on $250 million 7.375% senior unsecured notes, due 2032
— “bbb” on $250 million 5.75% senior unsecured notes, due 2042
— “bbb” on $250 million 5.75% senior unsecured notes, due 2042
— “bbb” on $450 million 4.50% senior unsecured notes, due 2049
— “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 Internal revenue service under the shelf registration have been affirmed with the outlooks revised to negative from stable:

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

Unum Group Funding Trust I and II—- “bb+” on preferred securities

This news release connects to Credit Ratings that have actually been published on AM Best’s site. For all score info relating to the release and important disclosures, including information of the office accountable for providing each of the private rankings referenced in this release, please see AM Finest’s Recent Ranking Activity web page. For additional information concerning the usage and constraints of Credit Score viewpoints, please view Guide to Best’s Credit Ratings. For info on the proper media usage of Best’s Credit Rankings and AM Finest news release, please view Guide for Media-Correct Usage&of Best’s Credit Ratings and AM Finest Score Action Press Launches. AM Finest is a global credit ranking firm, news publisher and data analytics supplier concentrating on the insurance coverage market. Headquartered in the United States, the business does organisation in over 100 nations with regional workplaces in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For additional information,see www.ambest.com. Copyright © 2020 by A.M. Finest Rating Providers, Inc. and/or its affiliates. ALL RIGHTS RESERVED. Source: businesswire.com

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