OREANDA-NEWS. Fitch Ratings has assigned a 'BBB' rating to Unum Group, Inc.'s (NYSE: UNM) issuance of $275 million of 10-year senior unsecured notes. Fitch has also affirmed UNM's holding company ratings, including the existing senior debt rating at 'BBB'. In addition, Fitch has affirmed the Insurer Financial Strength (IFS) ratings for of all of UNM's domestic operating subsidiaries at 'A'. The Rating Outlook is Stable. A full list of ratings follows at the end of this release.

Fitch expects proceeds from the debt issuance to be used for general corporate purposes. Adjusting for approximately $152 million of senior notes maturing on Nov. 15, 2015, Fitch expects the new issuance to increase UNM's financial leverage to approximately 26%, up from 25% at Sept. 30, 2015, but anticipates a return to approximately 25% in the near-term.

KEY RATING DRIVERS

UNM's ratings continue to reflect the company's 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 the UNM's ongoing businesses, competitive challenges in the company's core U.S. disability business, and ongoing profit challenges in the its U.K. business.

The Stable Outlook reflects Fitch's belief that while UNM's premium growth and operating margins continue to be challenged by the uneven economic environment and competitive market conditions, the company's overall profitability has been strong, and will continue to support the current rating. Operating margins in UNM's U.S. disability business have held up well through recent challenging conditions, particularly in comparison to the company's peers. The company has been experiencing an improving trend in the benefit ratio of its core U.S. group disability income business over the past several years, which has helped support the its overall profitability.

After experiencing significant challenges in 2011 and 2012, UNM U.K.'s operating income stabilized in 2013 and showed moderate improvement in 2014. However, the unit experienced a modest decline in operating income in the first three quarters of 2015. The improvement in profitability in 2014 reflected implementation of rate increases beginning in 2011, particularly on its U.K. group life business, as well as claims management initiatives and a repositioning of the business to reduce focus on the large case market. As expected, the unit's persistency experienced a significant decline as a result of the rate increases.

Fitch considers the UNM's debt service capacity to be strong for the rating level with GAAP earnings based interest coverage of 9.9x through the first three quarters of 2015. Holding company liquidity, including an intermediate holding company, totalled $484 million at Sept. 30, 2015. UNM reported consolidated risk-based capital of its U.S. insurance subsidiaries of an estimate 400% at Sept. 30, 2015, which is essentially unchanged from year-end 2014 and is 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%.

FULL LIST OF RATING ACTIONS

Fitch assigns the following rating:

Unum Group Inc.
--$275 million senior unsecured notes due 2025 'BBB'.

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';
--4.00% senior notes due March 15, 2024 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
Unum Insurance Company
First Unum Life Insurance Company
Colonial Life & Accident Insurance Company
--IFS at 'A'.