A.M. Best has affirmed the Financial Strength Rating (FSR)of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "a"of the core U.S. life/health insurance subsidiaries of (Unum) (headquartered inChattanooga, TN) (NYSE:UNM). Additionally, A.M. Best has upgraded the FSR to A-(Excellent) from B++ (Good) and the Long-Term ICR to "a-" from "bbb"of Unum Insurance Co.(Unum Insurance) (Portland, ME). A.M. Best also has affirmed the FSR of A-(Excellent) and the Long-Term ICR of "a-" of (Starmount) (Baton Rouge, LA). Concurrently, A.M. Best has affirmed theLong-Term ICR of "bbb" and the Long-Term Issue Credit Ratings(Long-Term IR) of Unum. The outlook of these Credit Ratings (ratings) isstable. (See below for a complete listing of the companies and ratings.)
The rating affirmations reflect Unum's favorable operatingperformance in recent periods, despite the impact of the low interest rateenvironment, and its robust business profile, with leading market positions inseveral different markets and diverse distribution networks. Partiallyoffsetting these positive rating factors is the exposure to its significantclosed block of long-term care (LTC) policies, which historically hasexperienced margin pressures from pricing issues and the persistent low rateenvironment, as well as Unum's above-average exposure to below investment gradebonds relative to the industry average.
Despite the intense competition in the employee benefitsmarket, Unum continues to generate steady operating results on the strength ofits Unum US, Colonial Life &Accident Insurance Co. (Colonial Life) and Unum UK operations. Thegroup has experienced favorable trends in premiums written and benefit ratios,which is reflective of Unum's pricing discipline and its ability to produceconsistent cash flows. Unum also has expanded its presence in the dentalinsurance market, a growing segment, with the recent acquisition of Starmount.While Unum has experienced some fluctuating sales at Unum US over the past fiveyears partially due to distractions from health care reform and more of a focuson the mid-to-smaller case market size, Colonial Life continues to reportstrong top-line growth benefiting from an increase in demand for voluntaryproducts. This segment also continues to be a stable contributor to overallearnings, reporting strong return-on-equity metrics.