OLDWICK, N.J.–(BUSINESS WIRE)–AM Finest has revised the outlooks to detrimental from steady and affirmed the Monetary Power Ranking (FSR) of A (Wonderful) and the Lengthy-Time period Issuer Credit score Rankings (Lengthy-Time period ICR) of “a” of the core U.S. life/medical insurance subsidiaries of Unum Group (Unum) (headquartered in Chattanooga, TN) [NYSE: UNM]. Concurrently, AM Finest has revised the outlook to detrimental from steady and affirmed the Lengthy-Time period ICR of “bbb” and the Lengthy-Time period Challenge Credit score Rankings (Lengthy-Time period IR) of Unum. (See under for a whole itemizing of the life/well being subsidiaries and Lengthy-Time period IRs.)
As well as, AM Finest has affirmed the FSR of A- (Wonderful) and the Lengthy-Time period ICRs of “a-” of Unum Insurance coverage Firm (Unum Insurance coverage) and Starmount Life Insurance coverage Firm (Starmount). Each firms are domiciled in Portland, ME. The outlook of those Credit score Rankings (scores) stays steady.
The scores of the core U.S. life/medical insurance subsidiaries of Unum replicate their steadiness sheet energy, which AM Finest categorizes as sturdy, in addition to their sturdy working efficiency, favorable enterprise profile and applicable enterprise danger administration.
The detrimental outlooks replicate the unfavorable impression of statutory reserve strengthening for the group’s closed long-term care (LTC) block of enterprise, in addition to the impression of the unfavorable financial situations on Unum’s funding portfolio and working outcomes. Unum is bolstering its reserves by establishing a $2.1 billion premium deficiency reserve (PDR), which can be accrued over the subsequent seven years primarily based on an settlement Unum reached with its main regulator in Maine. Unum final did a reserve strengthening in 2018; nevertheless, that was solely booked on a GAAP foundation. The PDR is predicted to be funded by working cash flows, however to shore up liquidity, Unum has suspended its share repurchase program for 2020, which is generally funded by dividends from the insurance coverage entities.
Moreover, AM Finest notes the corporate does have publicity to under funding grade bonds and business mortgage loans, in addition to a big portion of NAIC Class 2 bonds. Beneath funding grade fastened earnings securities represents 8% of invested belongings; roughly one half of fastened earnings securities are NAIC 2-rated. Moreover, Unum has a big portfolio of business mortgage loans, totaling $2.Four billion, or 6% of invested belongings. Decline within the credit score high quality of those fixed-income belongings is AM Finest’s main concern.
Unum’s sturdy steadiness sheet energy traditionally has been supported by the group’s profitability and the favorable efficiency of its funding portfolio. Unum has reported sturdy working outcomes from its core ongoing insurance coverage operations with regular premium development over the previous 5 years. Loss ratios and persistency have additionally been comparatively steady. Nonetheless, whereas working efficiency is anticipated to stay favorable, there’s the expectation that it’ll reasonable over the close to time period as a result of financial stress from the COVID-19 pandemic on Unum’s employer teams and particular person members. Funding earnings has proven incremental declines as a result of persistent low rate of interest surroundings, a pattern that’s anticipated to proceed as rates of interest are at report lows.
The insurance coverage operation’s liquidity is especially supported by favorable working cash flows. Further monetary flexibility is derived from holding firm cash and investments, which totaled $1.03 billion at March 31, 2020, a $600 million revolving credit score facility and entry to Federal Dwelling loan Bank borrowings. Unum has manageable monetary leverage of roughly 27%, together with its new $500 million senior unsecured word concern. Curiosity protection was sturdy at eight instances for year-end 2019.
Unum is a market chief within the majority of its core product traces, with a various nationwide distribution community. The corporate has good variety of earnings throughout its product portfolio, has expanded choices with the introduction of latest merchandise, and the enlargement of its dental enterprise and thru its worldwide companies. Unum actively seeks innovation to develop its enterprise and differentiate itself available in the market. Unum’s enterprise danger administration program is well-developed and included into technique and monetary planning for the group.
The scores of Unum Insurance coverage replicate its steadiness sheet energy, which AM Finest categorizes as very sturdy, in addition to its marginal working efficiency, restricted enterprise profile and applicable enterprise danger administration. Unum Insurance coverage started advertising new merchandise for the group over the previous two years reporting materials premium development. Unum Insurance coverage affords pricing and product flexibility to its mother or father.
The scores of Starmount replicate its steadiness sheet energy, which AM Finest categorizes as sturdy, in addition to its satisfactory working efficiency, impartial enterprise profile and applicable enterprise danger administration. Starmount is Unum’s core dental and imaginative and prescient advantages entity. The corporate’s product portfolio is distributed below the Unum model by Unum’s nationwide distribution community. Starmount additionally underwrites and administers dental merchandise provided by its affiliate, Colonial Life & Accident Insurance coverage Firm. Robust premium development has been reported over the previous two years. Nonetheless, working efficiency stays unfavorable because the group grows these traces of enterprise. Unum continues to assist Starmount’s development technique by capital contributions.
The FSR of A (Wonderful) and the Lengthy-Time period ICRs of “a” have been affirmed with the outlooks revised to detrimental from steady for the next core U.S. life/well being subsidiaries of Unum Group:
- Unum Life Insurance coverage Firm of America
- Provident Life and Accident Insurance coverage Firm
- The Paul Revere Life Insurance coverage Firm
- Colonial Life & Accident Insurance coverage Firm
- First Unum Life Insurance coverage Firm
- Provident Life and Casualty Insurance coverage Firm
The next Lengthy-Time period IR has been assigned with a detrimental outlook:
— “bbb” on $500 million 4.50% senior unsecured notes, due 2025
The next Lengthy-Time period IRs have been affirmed with the outlooks revised to detrimental from steady:
— “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 Belief I—
— “bb+” on $300 million 7.405% capital securities, due 2038
The next indicative Lengthy-Time period IRs below the shelf registration have been affirmed with the outlooks revised to detrimental from steady:
— “bbb” on senior unsecured
— “bbb-” on subordinated
— “bb+” on most well-liked stock
Unum Group Financing Belief I and II—
— “bb+” on most well-liked securities
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