A.M. Best Co.
has assigned a debt rating of “bbb” to the newly issued 30-year, $250 million 5.75% senior unsecured notes of
(Unum) (headquartered in Chattanooga, TN) [NYSE: UNM]. The assigned outlook is stable. Unum’s existing financial strength, issuer credit and debt ratings remain unchanged.
A.M. Best expects the proceeds from the issuance to be used for general corporate purposes and notes that Unum’s next debt maturity occurs in late 2015. As of June 30, 2012, Unum’s debt-to-capital ratio was approximately 23%, which is slightly below the company’s guideline of 25%. The group’s financial leverage has remained at the lower end of its targeted range for some time and is generally conservative compared to its industry peers. With the additional debt, Unum’s financial leverage will be just over 25%. Although interest coverage will decline marginally, it remains solid at roughly seven times.
Unum’s ratings recognize its diverse business mix, prominent market position in its core business lines, favorable operating results and good financial flexibility. Despite continued economic headwinds and challenges to grow the top line, Unum’s operating trends have been favorable over the last several quarters. Additionally, A.M. Best believes that Unum maintains sound risk-adjusted capitalization at its operating companies and good financial flexibility at the holding company. A.M. Best will continue to monitor the impact of the current macroeconomic environment—including low interest rates—on the earnings and capital positions of Unum’s insurance operations.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at
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