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81
Unum 2009 Annual Report
We compete based in part on the financial strength ratings provided by rating agencies. A downgrade of our financial strength ratings
can be expected to adversely affect us and could potentially, among other things, adversely affect our relationships with distributors of our
products and services and retention of our sales force, negatively impact persistency and new sales, particularly large case group sales and
individual sales, and generally adversely affect our ability to compete. A downgrade in the issuer credit rating assigned to Unum Group can
be expected to adversely affect our cost of capital or our ability to raise additional capital.
The table below reflects the issuer credit ratings for Unum Group and the financial strength ratings for each of our traditional insurance
subsidiaries as of the date of this filing.
AM Best Fitch Moody’s S&P
Issuer Credit Ratings bbb- (Good) BBB (Good) Ba1 (Speculative) BBB- (Good)
Financial Strength Ratings
Provident Life & Accident A- (Excellent) A (Strong) Baa1 (Adequate) A- (Strong)
Provident Life & Casualty A- (Excellent) A (Strong) Not Rated Not Rated
Unum Life of America A- (Excellent) A (Strong) Baa1 (Adequate) A- (Strong)
First Unum Life A- (Excellent) A (Strong) Baa1 (Adequate) A- (Strong)
Colonial Life & Accident A- (Excellent) A (Strong) Baa1 (Adequate) A- (Strong)
Paul Revere Life A- (Excellent) A (Strong) Baa1 (Adequate) A- (Strong)
Paul Revere Variable A- (Excellent) A (Strong) Baa1 (Adequate) Not Rated
Unum Limited Not Rated Not Rated Not Rated A- (Strong)
We maintain an ongoing dialogue with the four rating agencies that evaluate us in order to inform them of progress we are making
regarding our strategic objectives and financial plans, as well as other pertinent issues. A significant component of our communications
involves our annual review meeting with each of the four agencies. We hold other meetings throughout the year regarding our business,
including, but not limited to, quarterly updates.
On March 13, 2009, AM Best affirmed its ratings of Unum Group and its operating subsidiaries, maintaining the outlook for the Company
as “stable.” On June 9, 2009, Moody’s affirmed its ratings of Unum Group and its operating subsidiaries, also maintaining the outlook for the
Company as “stable.” On September 25, 2009, S&P affirmed its ratings of Unum Group and its operating subsidiaries, maintaining the outlook
for the Company as “stable.” On December 23, 2009, at our request, AM Best withdrew its rating for Unum Limited and will no longer provide
a rating for that subsidiary. On February 12, 2010, Fitch upgraded its ratings of Unum Group and its operating subsidiaries to BBB and A,
respectively, and changed the outlook for the Company to “stable.”
There have been no other changes in any of the rating agencies’ outlook statements or ratings during 2009 or prior to the date of this filing.
Agency ratings are not directed toward the holders of our securities and are not recommendations to buy, sell, or hold our securities.
Each rating is subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be regarded as an
independent assessment, not conditional on any other rating. Given the dynamic nature of the ratings process, changes by these or other
rating agencies may or may not occur in the near-term. Based on our ongoing dialogue with the rating agencies concerning our improved
insurance risk profile, our financial flexibility, our operating performance, and the quality of our investment portfolio, we do not expect any
negative actions from any of the four rating agencies related to either Unum Group’s current issuer credit ratings or the financial strength
ratings of its insurance subsidiaries. However, in the event that we are unable to meet the rating agency specific guideline values to maintain
our current ratings, including but not limited to maintenance of our capital management metrics at the threshold values stated and maintenance
of our financial flexibility and operational consistency, we could be placed on a negative credit watch, with a potential for a downgrade to
both our issuer credit ratings and our financial strength ratings.
See “Ratings” contained in Item 1 and “Risk Factors” contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2009 for further discussion.