A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of the core U.S. life/health insurance subsidiaries of Unum Group (Unum) (headquartered in Chattanooga, TN) [NYSE: UNM]. Concurrently, A.M. Best has affirmed the ICR of “bbb” of Unum as well as all existing debt securities issued by the organization. The outlook for all ratings is stable. (See below for a complete listing of the companies and ratings.) The rating affirmations reflect Unum’s strong franchise, solid capitalization, diversified earnings sources and favorable operating performance. In a challenging economic environment for employee benefits companies, Unum has reported premium growth across most of its core markets, driven by the Unum U.S. segment. The organization continues to generate consistent earnings with an emphasis on underwriting discipline and expense management, and its returns have historically exceeded industry medians. Unum is well recognized in the United States as having a leading position in the group disability market, supplemented by its top-three rankings in group life and voluntary benefits. Over the last several quarters, Unum U.S.’ core group disability segment reported loss ratios in the 84%-85% range, evidencing a lack of volatility that some of its competitors have recently experienced. However, Unum U.K. and Colonial Life have recently reported less favorable sales trends as well as volatility in key metrics for certain product lines. For example, Unum U.K.’s life business recently experienced a noteworthy increase in average claims size, leading to deteriorating profitability for this line of business. A.M. Best notes that persistency within all of Unum’s segments continues to be generally favorable, reflecting the group’s ability to retain quality business. Over the past several years, Unum has maintained its consolidated risk-adjusted capitalization primarily through healthy operating results. While the capital cushion at some of its subsidiaries fluctuates periodically as it is deployed through share repurchase or other means, A.M. Best believes the group’s prospective risk-adjusted capital position will remain appropriate for its ratings. Moreover, with total debt-to-capital at roughly 25%, strong interest coverage and just under $800 million of holding company cash and marketable securities, Unum has excellent financial flexibility. Additionally, the organization has approximately $7 billion of net unrealized capital gains in its bond portfolio, with modest exposure to structured securities and real estate-related investments.