AM Best Upgrades Issuer Credit Ratings of Unum Group and Its Core U.S. Life/Health Subsidiaries
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
AM Best notes that Unum continues to have exposure to below-investment-grade bonds and commercial mortgage loans, as well as a large portion of NAIC Class 2 bonds. Below-investment-grade fixed-income securities represent
Reserve adequacy for Unum’s closed block LTC business remains a concern due to the complexity of reserve assumptions. However, near-term operating results have been favorable, statutory reserves have been increased through the funding of the PDR, and GAAP reserves have remained stable. Unum has announced that it will fully fund its LTC PDR in 2023, faster than the 2026 deadline initially agreed to with the
Unum’s operating performance remains strong as sales accelerate and profitability improves post-pandemic. Premium growth was nominal in 2021 but accelerated through 2022 and the first half of 2023 as the sales environment improved post-pandemic. Higher employment and wage inflation contributed to organic growth on in-force blocks of business. Operating profitability continued to improve in 2022 as lower mortality rates positively impacted the life business and a strong labor market combined with internal process improvements materially improved disability results. Investment income continued to contribute positively to both statutory and GAAP earnings in 2022. However, Interest rate driven valuation declines in the fixed income portfolio of
Unum continues to maintain good market share in its core business lines. The company has a large nationwide distribution network to support new business sales. Revenue and earnings are well-diversified across its employee benefits, voluntary and supplemental product portfolios. Unum has a mature ERM program that is incorporated into capital management, business planning and operations.
The Long-Term ICRs have been upgraded to “a+” (Excellent) from “a” (Excellent) and the FSR of A (Excellent) has been affirmed. The outlook of the Long-Term ICRs has been revised to stable from positive, while the FSR is stable for the following
- Unum Life Insurance Company of America
- Unum Insurance Company
- 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
- Starmount Life Insurance Company
The following Long-Term IRs have been upgraded, with the outlooks revised to stable from positive.
Unum Group—
-- to “bbb+” (Good) from “bbb” (Good) on
-- to “bbb+” (Good) from “bbb” (Good) on
-- to “bbb+” (Good) from “bbb” (Good) on
-- to “bbb+” (Good) from “bbb” (Good) on
-- to “bbb+” (Good) from “bbb” (Good) on
-- to “bbb+” (Good) from “bbb” (Good) on
-- to “bbb+” (Good) from “bbb” (Good) on
-- to “bbb+” (Good) from “bbb” (Good) on
-- to “bbb+” (Good) from “bbb” (Good) on
-- to “bbb+” (Good) from “bbb” (Good) on
-- to “bbb+” (Good) from “bbb” (Good) on
-- to “bbb-” (Good) from “bb+” (Fair) on
Provident Financing Trust I—
-- to “bbb-” (Good) from “bb+” (Fair) on
The following indicative Long-Term IRs under the shelf registration have been upgraded, with the outlooks revised to stable from positive.
Unum Group—
-- to “bbb+” (Good) from “bbb” (Good) on senior unsecured
-- to “bbb” (Good) from “bbb-” (Good) on subordinated
-- to “bbb-” (Good) from “bb+” (Fair) on preferred stock
Unum Group Financing Trust I and II—
-- to “bbb-” (Good) from “bb+” (Fair) on preferred securities
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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John McGlynn
Senior Financial Analyst
+1 908 882 2106
john.mcglynn@ambest.com
Bridget Maehr
Associate Director
+1 908 882 2080
bridget.maehr@ambest.com
Christopher Sharkey
Associate Director, Public Relations
+1 908 882 2310
christopher.sharkey@ambest.com
Al Slavin
Senior Public Relations Specialist
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al.slavin@ambest.com
Source: AM Best