Fitch Rates Unum's Senior Notes 'BBB'

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned a 'BBB' rating to Unum Group's (NYSE: UNM) issuance of new senior unsecured notes due 2021 and 2042.

The ratings are equivalent to the ratings assigned to UNM's existing senior unsecured notes, and reflect standard notching based on Fitch's rating criteria. Fitch expects proceeds from the debt issuance to be used for general corporate purposes, including the repayment of maturing debt. Adjusting for approximately $350 million of senior notes maturing on Sept. 30, 2016, Fitch expects the new issuance to increase UNM's financial leverage to approximately 27%, up from 26% at Dec. 31, 2015.

KEY RATING DRIVERS

Fitch affirmed UNM's ratings on April 29, 2016. The company's ratings continue to reflect its strong, stable operating performance in its core businesses, moderate investment risk, solid capital and liquidity at both the insurance subsidiary and holding company level, as well as the company's leadership position in the U.S. employee benefits market. The ratings also consider the impact of the low interest rate environment on UNM's ongoing businesses, competitive challenges in the company's core U.S. disability business, and modest improvement in the performance of its U.K. business.

Based in Chattanooga, TN, UNM is the largest provider of group disability income insurance in the U.S. and the U.K, and the largest provider of group life insurance in the U.S. For the year ended Dec. 31, 2015, the company reported total revenue of $10.7 billion and total assets of $60.6 billion.

RATING SENSITIVITIES

The key rating triggers that could lead to an upgrade include:

--Improved general economic conditions including growth in employment, salaries and disposable income, which enables UNM to achieve its long-term target of 5%-7% annual earnings growth on its core operations.

--GAAP earnings-based interest coverage over 12x and statutory maximum allowable dividend coverage of interest expense over 5x.

--U.S. risk-based capital ratio above 400% and run-rate financial leverage below 20%.

Key rating triggers that could lead to a downgrade include:

--Deterioration in financial results that includes an increase in the U.S. group disability benefit ratio over 87%, GAAP earnings-based interest coverage falling below 8x, and statutory maximum allowable dividend interest expense coverage falling below 3x.

--Any additional significant reserve strengthening charges in the near term.

--Holding company cash falls below management's target of approximately 1x fixed charges (interest expense plus common stock dividend), or roughly $327 million.

--U.S. risk-based capital ratio below 350% and financial leverage above 28%.

FULL LIST OF RATING ACTIONS

Fitch assigns the following rating:

Unum Group Inc.

--$250 million senior unsecured notes due 2042 'BBB';

--$350 million senior unsecured notes due 2021 'BBB'.

Last Relevant Committee Date: April 29, 2016.

Additional information is available on www.fitchratings.com

Applicable Criteria

Insurance Rating Methodology (pub. 16 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871172

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004003

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160504006887/en/

Fitch Ratings
Primary Analyst
Bradley S. Ellis, CFA
Director
+1-312-368-2089
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Tana M. Higman
Director
+1-312-368-3122
or
Committee Chairperson
Brian C. Schneider, CPA, CPCU, ARe
Senior Director
+1-312-606-2321
or
Media Relations
Hannah James, New York, +1-646-582-4947
[email protected]

Source: Fitch Ratings

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