CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 17, 2009 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a+" of American United Life Insurance Company (AUL) (Indianapolis, IN) and its affiliates, The State Life Insurance Company (Indianapolis, IN) and Pioneer Mutual Life Insurance Company (North Dakota), comprising the OneAmerica Group (OneAmerica). Concurrently, A.M. Best has affirmed the debt rating of "a-" on the surplus notes of AUL. Additionally, A.M. Best has affirmed the ICR and senior debt rating of "bbb+" of OneAmerica Financial Partners, Inc., an intermediate holding company. The outlook for all ratings is stable. (See below for the detailed listing of the companies and ratings.)
The ratings reflect OneAmerica's sound capital position, well-managed distribution and above-average enterprise risk management for its business profile as compared to similarly rated peers. Additionally, the ratings recognize OneAmerica's diversified sources of revenues and earnings generated by its streamlined operating segments, which have facilitated organic growth. OneAmerica has established and growing positions in several markets—full-service micro/small retirement plans, employee benefits, life insurance and asset-based long-term care. A.M. Best notes that OneAmerica's investment portfolio has performed significantly better than most if its life/annuity peers with respect to realized and unrealized losses. Furthermore, OneAmerica's mutual holding company structure facilitates a strategy focused on long-term financial strength.
Offsetting these positive factors are the competitive pressures in OneAmerica's core markets, particularly in the 401(k) market. Challenges due to the market downturn have resulted in a decrease in GAAP pre-tax operating income for the first time in four years. Despite increased competition from life insurers and other financial services firms, OneAmerica posted double digit sales growth in 2008. Additionally, although A.M. Best notes that OneAmerica's investments are well diversified and lack exposure to subprime or Alt-A collateral, its portfolio maintains an above-average allocation to mortgage-related investments relative to its peer group.
Although OneAmerica has not had any mortgage loan delinquencies in the past five years, A.M. Best expects that the life industry will experience rising defaults in the near to medium term in response to the deepening recession. In general, A.M. Best is most cautious on retail, hotel and office properties within close proximity to distressed housing markets and/or labor markets where unemployment is high.
OneAmerica's unadjusted total debt-to-total capital (excluding other comprehensive income) is roughly 17%, with interest coverage of approximately four times. Financial leverage and coverage ratios have remained consistent the past few years and remain within A.M. Best's expectations for the current ratings.
The FSR of A (Excellent) and ICRs of "a+" have been affirmed for the following members of the OneAmerica Group members:
- American United Life Insurance Company
- 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 www.ambest.com/ratings.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/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.