Fitch Ratings reiterated the Issuer Default Rating (IDR) at
'BBB+' and senior debt rating at 'BBB' of
). Concurrently, the rating agency reiterated the Insurer
Financial Strength (IFS) at 'A' of the company's operating
subsidiaries. The ratings carry a stable outlook.
CINCINNATI FINL (CINF): Free Stock Analysis
EMPLOYERS HLDGS (EIG): Free Stock Analysis
UNUM GROUP (UNM): Free Stock Analysis Report
XL GROUP PLC (XL): Free Stock Analysis Report
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The rating affirmations were based on the company's dominant
position in the U.S. employee benefits market, wide array of
offerings, continued solid operational results, conventional
investment portfolio, and sufficient capital and liquidity.
Nevertheless, soft results at Unum UK and headwinds from a
sustained low interest rate environment in managing the run-off
long-term care book of business dwarfed the positives.
Though Unum UK is experiencing weak results in the group life
segment, the company has implemented a rate increase focusing on
effective claims management. Also, to lower earnings volatility
and capital requirements, Unum UK inked a 50% coinsurance
agreement, in effect from Jan 1, 2013.
The stable outlook accounts for headwinds from the soft macro
environment and stiff competition to premium growth and margin
expansion. However, Fitch noted that Unum's U.S. disability
business has delivered operating margins that exceed its
benchmark as well as its peers.
Rating affirmations or upgrades from credit rating agencies play
an important part in retaining investor confidence on the stock
as well as maintaining creditworthiness in the market. We believe
that the company's strong score with the credit rating agencies
will help it write more business going forward.
Fitch stated that the ratings might be upgraded if Unum achieves
5%-7% earnings growth in the long-term, interest coverage is more
than 12x with statutory maximum allowable dividend coverage of
interest expense over 5x, risk-based capital ratio moves above
400% and financial leverage stays below 20%.
However, the ratings might downgrade if the U.S. group disability
benefit ratio moves over 87%, interest coverage falls below 8x,
statutory maximum allowable dividend interest expense coverage
slides below 3x, risk-based capital ratio moves below 350%,
financial leverage crosses 25% or cash balance falls below $290
million. Additionally, ratings might face downward movement if
the company incurs reserve strengthening charges in the near
Unum Group presently carries a Zacks Rank #3 (Hold). Insurers
XL Group plc
Cincinnati Financial Corp.
) carry a Zacks Rank #1 (Strong Buy), while
Employers Holdings, Inc.
) carries a Zacks Rank # 2 (Buy) and appear impressive.