Fitch Affirms Unum Group's Ratings; Outlook Stable

  Fitch Affirms Unum Group's Ratings; Outlook Stable

Business Wire

CHICAGO -- February 11, 2013

Fitch Ratings has affirmed Unum Group Inc.'s (NYSE: UNM) holding company
ratings, including the senior debt rating at 'BBB', as well as the Insurer
Financial Strength (IFS) ratings of all domestic operating subsidiaries at
'A'. The Rating Outlook is Stable. See below for a complete listing of all
ratings.

KEY RATING DRIVERS

The rating rationale includes UNM's overall operating performance which has
remained strong despite a weak global economy; conservative investment
portfolio; solid capital and liquidity at both the insurance subsidiary and
holding company levels; the company's leadership position in the U.S. employee
benefits market; and increased diversification. Offsetting these positives are
Unum U.K.'s weak recent results and continued challenges UNM faces in managing
its run-off long-term care book of business, especially in the current low
interest rate environment.

The Stable Outlook reflects Fitch's belief that while UNM's premium growth and
operating margins continue to be challenged by the weak economic environment
and competitive market conditions, the company's overall profitability will
continue to support the current rating. Operating margins in UNM's U.S.
disability business have held up better than Fitch's expectations, and they
have been better than those of peers.

While Unum U.K. results have shown deterioration, particularly within the
group life segment, the company has taken steps to improve results going
forward including implementing significant rate increases and claims
management improvements while reducing its focus on the large case market.
Unum U.K. also entered into a 50% coinsurance arrangement effective Jan. 1,
2013 designed to reduce earnings volatility and capital requirements.

During 2012, UNM repurchased $500 million of its shares. Fitch's expectation
is that further share repurchases will be funded through operating earnings to
mitigate the impact on financial leverage and the capitalization of the
operating subsidiaries. Further, Fitch generally views measured stock
repurchase as a more prudent use of capital than acquisitions or premium
growth in a soft rate environment.

UNM's financial leverage was 25% at year-end 2012. Fitch considers the
company's debt service capacity as being strong for the rating level with GAAP
earnings based interest coverage at 10x in 2012. Holding company liquidity
totaled $805 million at year-end 2012, up from approximately $756 million at
year-end 2011. UNM's risk-based capital of its U.S. insurance subsidiaries was
estimated at 396% at year-end 2012, at the high end of management's near to
intermediate term target of 375%-400%.

RATING SENSITIVITIES

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

--Improved general economic conditions including a growth in employment,
salaries and disposable income which enable 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 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 $290
million.

--U.S. risk-based capital ratio below 350% and financial leverage above 25%.

Fitch affirms the following ratings with a Stable Outlook:

Unum Group Inc.

--Issuer Default Rating (IDR) at 'BBB+';

--7.125% senior notes due Sept. 30, 2016 at 'BBB';

--7% senior notes due July 15, 2018 at 'BBB';

--5.625% senior notes due Sept. 15, 2020 at 'BBB';

--7.25% senior notes due March 15, 2028 at 'BBB';

--6.75% senior notes due Dec. 15, 2028 at 'BBB';

--7.375% senior notes due June 15, 2032 at 'BBB';

--5.75% senior notes due Aug. 15, 2042 at 'BBB'.

Provident Financing Trust I

--7.405% junior subordinated capital securities at 'BB+'.

UnumProvident Finance Company plc,

--6.85% senior notes due Nov. 15, 2015 at 'BBB'.

Unum Group members:

Unum Life Insurance Company of America

Provident Life & Accident Insurance Company

Provident Life and Casualty Insurance Company

The Paul Revere Life Insurance Company

The Paul Revere Variable Annuity Insurance Company

First Unum Life Insurance Company

Colonial Life & Accident Insurance Company

--IFS at 'A'.

Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Jan. 11, 2013).

Applicable Criteria and Related Research:

Insurance Rating Methodology -- Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=698731

Contact:

Fitch Ratings, Inc.
Primary Analyst
Tana M. Higman, +1-312-368-3122
Director
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Bruce E. Cox, +1-312-606-2316
Director
or
Committee Chairperson
Donald F. Thorpe, +1-312-606-2353
Senior Director
or
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com
 
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