Unum 2006 Annual Report Download - page 30

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“Credit watch” or “under review” highlights the potential direction of a short-term or long-term rating. It focuses on
identifiable events and short-term trends that cause a rating to be placed under heightened surveillance by the rating
agency. These events may include mergers, acquisitions, recapitalizations, or anticipated operating developments.
Ratings may be placed on credit watch or under review when an event or a change in an expected trend occurs and
additional information is needed to evaluate the current rating level. This status does not mean that a rating change
is inevitable, and ratings may change without first being placed on a watch list.
Our financial strength ratings as of February 2007 for our principal U.S. domiciled insurance company subsidiaries
were:
• A- (Excellent) by AM Best – 4th of 15 rankings
• A- (Strong) by Fitch – 7th of 24 rankings
• Baa1 (Adequate) by Moody’s – 8th of 21 rankings
• BBB+ (Good) by S&P – 8th of 21 rankings
Our senior debt ratings as of February 2007 were:
• bbb- (Good) by AM Best – 10th of 22 rankings
• BBB- (Good) by Fitch – 10th of 24 rankings
• Ba1 (Speculative) by Moody’s – 11th of 21 rankings
• BB+ (Speculative) by S&P – 11th of 22 rankings
The ratings from Fitch have a “stable” outlook, and the ratings from Moody’s and AM Best have a “negative”
outlook. S&P’s outlook on our holding company ratings is “positive,” and the outlook on our subsidiaries is
“stable.” None of the ratings are currently under review or on credit watch. See further discussion in “Risk Factors
– Debt and Financial Strength Ratings” contained herein in Item 1A and in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations – Ratings” contained herein in Item 7. A rating is not a
recommendation to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the
rating agency. Each rating should be evaluated independently of any other rating.
Competition
There is intense competition among insurance companies for the types of products we sell. We believe that the
principal competitive factors affecting our business are integrated product choices, price, quality of customer service
and claims management, financial strength, and claims-paying ratings. In the individual and group income
protection markets, we compete in the United States with a limited number of major companies and regionally with
other companies offering specialty products. Our principal competitors for our other products, including group life
and long-term care as well as the product offerings sold to groups of employees through payroll deduction, include
the largest insurance companies in the United States. Some of these companies have more competitive pricing or
have higher claims-paying ratings. Some may also have greater financial resources with which to compete.
In the United Kingdom, we compete for individual and group products with a number of large internationally
recognized providers. The life insurance market continues to go through a restructuring phase which has led to
opportunities for both the strong specialist supplier and also new organizations that have recently been established to
handle the run-off of closed businesses. Current penetration levels indicate that there is still significant upside
growth potential in the United Kingdom for the types of products we offer.
All areas of the employee benefits markets are highly competitive due to the yearly renewable term nature of the
products and the large number of insurance companies offering products in this market. There is a risk that
purchasers of employee benefits products may be able to obtain more favorable terms from competitors in lieu of
renewing coverage with us. The effect of competition may, as a result, adversely affect the persistency of these and
other products, as well as our ability to sell products in the future.
We must attract and retain independent agents and brokers to actively market our products. Strong competition
exists among insurers for agents and brokers. We compete with other insurers for sales agents and brokers primarily
on the basis of our product offerings, financial strength, support services, and compensation. Sales of our products
could be materially adversely affected if we are unsuccessful in attracting and retaining agents and brokers.