• On 21 May 2013, Moody’s announced rating actions on MBIA Insurance Corp., National Public Finance Guarantee Corp., MBIA Inc. and other related entities. Because of the large number of credits across several asset classes affected by these rating actions, including Moody's-rated securities that are guaranteed or "wrapped" by these companies, ratings appearing on this website may not yet reflect current information. For current information on affected credits, please visit www.moodys.com/fig.
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Rating Action:

Moody's upgrades Unum (sr debt to Baa2 from Baa3); outlook to stable; rates shelf

Global Credit Research - 16 Aug 2012

Approximately $2.2 billion of securities affected

New York, August 16, 2012 -- Moody's Investors Service has upgraded the credit ratings of Unum Group (Unum; NYSE: UNM; senior debt to Baa2 from Baa3), and the insurance financial strength (IFS) ratings of the company's U.S. life insurance subsidiaries to A2 from A3. The ratings outlook on Unum and all of its insurance affiliates is stable.

Moody's has also assigned ratings to Unum's universal shelf registration (senior unsecured debt at (P)Baa2), which was filed on November 10, 2011 (for a complete list of ratings, see below).

RATINGS RATIONALE

Commenting on the rating upgrade, Moody's Vice President Ann Perry said, "Unum's credit profile has strengthened over the past couple of years and has proven to be sustainable as demonstrated by its improved business diversification and financial flexibility, and core earnings have remained stable in spite of the continuing soft economy." Moody's noted that Unum's earnings diversification has improved as voluntary benefits, which include various non-disability related products, are contributing a growing portion of the company's earnings. In addition, because benefit ratios in the company's core long term disability (LTD) business have remained relatively steady throughout the economic slowdown, Moody's expects limited downside risk from an acceleration of claims under its base scenario of a continued sluggish economic recovery.

The rating agency said that Unum's ratings reflect the company's leading market share in the group long-term and individual disability markets and the company's established position in the voluntary benefits market. The ratings also benefit from the company's access to a huge claims data base, focus on claims management and return-to-work programs, and its strong position in the group life market. That said, the inherent risks of the company's significant focus on its disability lines, as discussed below, will tend to limit upward rating pressure at the current ratings level.

According to Moody's, Unum also has a good quality and liquid investment portfolio, minimal exposure to structured securities, including non-agency RMBS securities, as well as below average investment concentration in commercial mortgages. During the financial crisis, Unum's impairments as a percent of invested assets were among the lowest in the industry. The rating agency added that it expects future investment losses will continue to be manageable relative to Unum's earnings capacity and capital.

Commenting on the challenges facing Unum, Moody's said that despite improvement in business diversification, a sizeable amount of Unum's product risk profile and earnings are still associated with the disability business in both the U.S. and UK. Moody's views the disability product risk profile as one of the higher in the life insurance industry, as this is a long-tailed business and claims development can be influenced in unexpected ways by a variety of economic and societal factors. With the sluggish recovery and persistent unemployment, the rating agency said that claims could increase if there were a double dip recession or unemployment rates increased. In addition, the rating agency noted that Unum has experienced weaker earnings in its UK group disability and group life operations, and will need to address increasing loss ratios through price increases and operational improvements.

The multi-security shelf registration allows Unum to issue senior unsecured debt, subordinated debt, and preferred stock. The shelf registration also allows for the issuance of preferred securities by Unum Group Financing Trusts I/II, which are statutory business trusts established by the company solely for the purpose of raising financing for Unum. Preferred securities issued by the Unum Group Financing Trusts I/II (rated (P)Baa3) will be irrevocably and unconditionally guaranteed by Unum and will rank pari passu with the company's subordinated debt.

Moody's said that although the company's focus on its disability lines will tend to limit upward rating movement, the following could place upward pressure on Unum's ratings: 1) a sustained consolidated NAIC RBC ratio of at least 375%; 2) continued pricing discipline and strengthening of loss ratios (i.e., sustained U.S. group disability loss ratio of not greater than 80%); 3) adjusted financial leverage consistently below 20%; and 4) cash flow and earnings coverage are maintained at levels of at least 6 times and 9 times, respectively. Conversely, the following could place downward pressure on Unum's ratings: 1) sustained U.S. group disability loss ratio of over 85%; 2) regulatory capitalization falls below a 325% NAIC RBC ratio; 3) adjusted financial leverage exceeds 25%; or 4) cash-flow and earnings coverage fall below 4 times and 7 times, respectively.

The following ratings have been upgraded with a stable outlook:

Unum Group: Senior unsecured debt to Baa2, from Baa3;

UNUM Corporation: Senior unsecured debt to Baa2, from Baa3; backed senior unsecured MTN to (P)Baa2, from (P)Baa3;

Provident Companies, Inc.: Senior unsecured debt to Baa2, from Baa3;

Provident Financing Trust I: Preferred stock to Baa3 (hyb), from Ba1 (hyb);

UnumProvident Finance Company plc: Senior unsecured debt to Baa2, from Baa3;

UNUM Life Insurance Company of America: Insurance financial strength to A2, from A3;

First UNUM Life Insurance Company: Insurance financial strength to A2, from A3;

Colonial Life & Accident Insurance Company: Insurance financial strength to A2, from A3;

Provident Life and Accident Insurance Co.: Insurance financial strength to A2, from A3;

Paul Revere Life Insurance Company: Insurance financial strength to A2, from A3;

Paul Revere Variable Annuity Insurance Co.: Insurance financial strength to A2, from A3.

The following provisional ratings have been assigned, with a stable outlook:

Unum Group: Senior unsecured debt shelf at (P)Baa2; subordinated debt shelf at (P)Baa3; preferred shelf at (P)Ba1;

Unum Group Financing Trust I/II: Preferred stock at (P)Baa3.

Unum Group is headquartered in Chattanooga, Tennessee. At June 30, 2012, Unum had total assets of approximately $61 billion and total shareholders' equity of about $8 billion.

The principal methodology used in this rating was Moody's Global Rating Methodology for Life Insurers published in May 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Ann G. Perry
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert Riegel
MD - Insurance
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's upgrades Unum (sr debt to Baa2 from Baa3); outlook to stable; rates shelf
No Related Data.

 

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