AM Best


A.M. Best Revises Outlook to Positive for OneAmerica Financial Partners, Inc. and Its Subsidiaries


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Analyst(s)

Ken Johnson, CFA

(908) 439-2200, ext. 5056

ken.johnson@ambest.com

Rosemarie Mirabella, CFA, CPA

(908) 439-2200, ext. 5892

rosemarie.mirabella@ambest.com

Public Relations

Rachelle Morrow

(908) 439-2200, ext. 5378

rachelle.morrow@ambest.com

Jim Peavy

(908) 439-2200, ext. 5644

james.peavy@ambest.com


FOR IMMEDIATE RELEASE

OLDWICK, N.J. - JUNE 10, 2010 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a+" of American United Life Insurance Company (AUL) and its affiliates, The State Life Insurance Company and Pioneer Mutual Life Insurance Company (Fargo, ND)—all of which comprise the OneAmerica Group (OneAmerica). Concurrently, A.M. Best has revised the outlook to positive from stable and affirmed the debt rating of "a-" on the surplus notes of AUL. Additionally, A.M. Best has revised the outlook to positive from stable and affirmed the ICR of "bbb+" and senior debt rating of "bbb+" of OneAmerica Financial Partners, Inc., an intermediate holding company within OneAmerica's mutual holding company structure. All companies are domiciled in Indianapolis, IN, unless otherwise specified. (See below for the detailed listing of the companies and ratings.)

The ratings reflect OneAmerica's sound risk-adjusted capital position, strong top line revenue growth and consistently strong operating performance in core business lines. Additionally, the ratings recognize OneAmerica's diversified sources of revenues and earnings and success in both its individual and retirement services segments, which have facilitated organic growth. OneAmerica has established and growing positions in several markets—full-service micro/small retirement plans, life insurance and asset-based long-term care. A.M. Best notes that OneAmerica's investment portfolio has performed significantly better than most of its life/annuity peers with respect to both realized and unrealized losses over the last few years. Furthermore, OneAmerica's mutual holding company structure facilitates a strategy focused on long-term financial strength, and its core product lines have minimal equity market exposure.

Offsetting these positive factors are the ongoing competitive pressures in OneAmerica's core lines, particularly in the 401(k) and 403(b) markets. However, A.M. Best notes strong overall growth within the retirement services segment during the last few years, with double-digit sales growth and record earnings reported in 2009. Nonetheless, OneAmerica continues to face ongoing competition from other life and annuity companies with considerable scale and market penetration. Additionally, the group's employee benefits segment remains modestly sized.

OneAmerica's exposure to non-agency residential mortgage-backed securities and below investment grade bonds is significantly lower than life industry norms with no allocation to subprime or Alt-A collateral. However, OneAmerica maintains an above-average allocation to whole loan commercial mortgages relative to peers, albeit with a more conservative overall credit profile and below-average exposure to commercial mortgage-backed securities. OneAmerica's debt-to-capital ratio (excluding other comprehensive income) is prudent at roughly 16%, with solid interest coverage of approximately eight times.

The FSR of A (Excellent) and ICRs of "a+" have been affirmed for the following members of OneAmerica Group:

- American United Life Insurance Company

- The State Life Insurance Company

- Pioneer Mutual Life Insurance Company


The following debt ratings have been affirmed:

American United Life Insurance Company—

- "a-" on $75 million 7.75% surplus notes, due 2026

OneAmerica Financial Partners Inc.—

- "bbb+" on $200 million 7.00% senior unsecured notes, due 2033

For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating Methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.

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