AM Best has revised the outlooks to positive from stable for the Long-Term Issuer Credit Ratings (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of "a" (Excellent) for the majority members of Unum Insurance Group. Concurrently, AM Best has upgraded the FSR to A (Excellent) from A- (Excellent) and the Long-Term ICR to "a" (Excellent) from "a-" (Excellent) of Unum Insurance Company (Portland, ME). The outlook of the Long-Term ICR has been revised to positive from stable while the outlook of the FSR is stable. These companies are the core U.S. life/health (L/H) insurance subsidiaries of Unum Group (Unum) (headquartered in Chattanooga, TN) (NYSE:UNM). In addition, AM Best has revised the outlook to positive from stable for the Long-Term ICR and affirmed the Long-Term ICR of "bbb" (Good) and the Long-Term Issue Credit Ratings (Long-Term IR) of Unum. (See below for a complete listing of the L/H subsidiaries and the Long-Term IRs.) The outlook of the FSR is stable.

The Credit Ratings (ratings) reflect Unum's balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The revision of the outlooks for the Long-Term ICRs to positive from stable reflects strengthening in risk-adjusted capitalization and financial flexibility over the 2020-2021 period, in conjunction with stable asset quality, adequate reserves and enhanced liquidity. AM Best expects stronger risk-adjusted capitalization to persist over the medium term as dividends out of the statutory entities are not expected to reduce capital materially. The completion of a reinsurance transaction with a subsidiary of Global Atlantic Financial Group in 2021 to reinsure a large block of individual disability policies materially reduced outstanding reserves at the statutory group and increased risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR). The addition of $400 million of unissued pre-capitalized securities enhanced financial flexibility such that Unum now has a large pool of contingent capital available on demand, at favorable rates. Favorable earnings are anticipated to accelerate the recognition and funding of a premium deficiency reserve (PDR) for Unum's closed block of long-term care (LTC) business, which is anticipated to contribute further to the group's balance sheet strength over the medium term.

Unum's strong balance sheet strength historically has been supported through the retention of strong operating earnings and the favorable performance of its investment portfolio. Premium growth resumed in 2021 and accelerated in the first quarter of 2022 as the sales environment improved based on economic and social restrictions related to the COVID-19 pandemic receding. Higher employment and wage inflation contributed to organic growth on in-force blocks of business. Operating profitability also improved in 2021 as higher premiums drove better scale and offset higher benefit ratios. COVID-19 continued to impact group life results through 2021 due to higher mortality. However, other lines of business experienced much more benign benefit ratio mean reversion with group disability only slightly above the pre-pandemic level and supplemental and voluntary business at pre-pandemic levels. Despite moderation from historical levels due to the COVID-19 pandemic, profitability remains strong, and AM Best expects it to return to historical levels as the impacts of COVID-19 subside. Investment income has shown incremental declines due to the persistent low interest rate environment over the past few years. A trend that may reverse given the prospect of high inflation and rising interest rates over at least the short term.

AM Best notes that the company continues to have exposure to below investment grade bonds and commercial mortgage loans, as well as a large portion of NAIC Class 2 bonds. Below investment grade fixed income securities represent 71% of capital and surplus, and approximately one half of fixed income securities are NAIC 2-rated. Additionally, Unum has a large portfolio of commercial mortgage loans, totaling $2.6 billion, or 65% of capital and surplus. However, these assets performed well in 2020 and 2021 with very few credit losses in absolute terms and relative to industry benchmarks.

Reserve adequacy for Unum's closed block LTC business remains a concern due to the complexity of reserve assumptions. However, near-term operating results have been favorable, statutory reserves have been increased through the funding of the PDR, and GAAP reverses have remained stable.

The insurance operation's liquidity is supported mainly by favorable operating cash flows. Additional financial flexibility is derived from holding company cash and investments, which totaled $1.3 billion at March 31, 2022, a $500 million revolving credit facility and access to Federal Home Loan Bank borrowings. Unum has manageable financial leverage of approximately 23% and reported interest coverage of 6.3 times in 2021. Financial flexibility also was enhanced by the arrangement of $400 million of 20-year, 4.046% pre capitalized securities. This agreement provides the company at will access to a large pool of contingent capital at favorable terms.

Unum continues to maintain good market share in its core business lines. The company has a large nationwide distribution network to support new business sales. Revenue and earnings are well-diversified across its employee benefits, voluntary and supplemental product portfolios. Unum has a mature ERM program that is incorporated into capital management, business planning and operations.

The FSR of A (Excellent) and the Long-Term ICRs of "a" (Excellent) have been affirmed, with the outlooks of the Long-Term ICRs revised to positive from stable. The outlook of the FSR is stable for the majority of the U.S. L/H subsidiaries of Unum Group.

Unum Life Insurance Company of America
Provident Life and Accident Insurance Company
The Paul Revere Life Insurance Company
Colonial Life & Accident Insurance Company
First Unum Life Insurance Company
Provident Life and Casualty Insurance Company
Starmount Life Insurance Company

The following Long-Term IRs have been affirmed, with the outlooks revised to positive from stable.

Unum Group—

-- "bbb" (Good) on $350 million 4.00% senior unsecured notes, due 2024

-- "bbb" (Good) on $275 million 3.875% senior unsecured notes, due 2025

-- "bbb" (Good) on $500 million 4.50% senior unsecured notes, due 2025

-- "bbb" (Good) on $250 million 6.75% senior unsecured notes, due 2028

-- "bbb" (Good) on $200 million 7.25% senior unsecured notes, due 2028

-- "bbb" (Good) on $400 million 4.00% senior unsecured notes, due 2029

-- "bbb" (Good) on $250 million 7.375% senior unsecured notes, due 2032

-- "bbb" (Good) on $250 million 5.75% senior unsecured notes, due 2042

-- "bbb" (Good) on $250 million 5.75% senior unsecured notes, due 2042

-- "bbb" (Good) on $450 million 4.50% senior unsecured notes, due 2049

-- "bbb" (Good) on $600 million 4.125% senior unsecured bonds, due 2051

-- "bb+" (Fair) on $300 million 6.25% junior subordinated notes, due 2058

Provident Financing Trust I—

-- "bb+" (Fair) on $300 million 7.405% capital securities, due 2038

The following indicative Long-Term IRs under the shelf registration have been affirmed, with the outlooks revised to positive from stable.

Unum Group—

-- "bbb" (Good) on senior unsecured

-- "bbb-" (Good) on subordinated

-- "bb+" (Fair) on preferred stock

Unum Group Financing Trust I and II—

-- "bb+" (Fair) on preferred securities

This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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AM Best Revises Issuer Credit Rating Outlooks to Positive for Unum Group and Majority of Its U.S. Life/Health Subsidiaries