CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 10, 2012 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings of “aa-” 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 affirmed the ICR and senior debt ratings of “a-” of OneAmerica Financial Partners, Inc., an intermediate stock holding company within OneAmerica’s mutual holding company structure. A.M. Best also has affirmed the debt rating of “a” on the outstanding surplus notes of AUL. The outlook for all ratings is stable. All companies are domiciled in Indianapolis, IN, unless otherwise specified. (See below for the detailed listing of the debt ratings.)
These rating actions reflect OneAmerica’s consistently strong sales, favorable retention and positive net flows, which continue to contribute to solid operating earnings within its core businesses of retirement services and individual life. Additionally, the ratings recognize OneAmerica’s sound capitalization and continued expansion of its distribution channels, particularly within retirement services, that have facilitated organic growth. OneAmerica continues to differentiate itself with growing positions in several markets including full-service small-to-medium retirement plans, life insurance and asset-based long-term care. 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.
OneAmerica’s investment management performance also ranks favorably with respect to minimal impairments over an extended period of time. The portfolio has continued to perform significantly better than many of its life/annuity peers with regards to realized and unrealized losses over the last few years. Below investment grade bond exposure has increased modestly but remains well within acceptable limits given the sound capital position of the company. OneAmerica also maintains an above-average allocation to direct commercial mortgage loans relative to peers, albeit with a favorable credit profile due to conservative underwriting, which emphasizes shorter duration amortizing loans.
Partially offsetting these positive rating factors is the ongoing competitive pressures in OneAmerica’s core lines, particularly in the 401(k) and 403(b) markets. Also, the company has experienced some contraction of earnings and revenue growth over the last year within its employee benefits segment, due to less favorable results in the group life line of business. OneAmerica continues to work to stabilize and grow this segment due to its long-term opportunities for cross-selling existing core products. However, A.M. Best does note the strong overall growth within the retirement services segment over the last few years, with double-digit sales growth and record earnings reported in 2011. Nonetheless, OneAmerica continues to face ongoing competition from other life and annuity companies with considerable scale and market penetration. The group’s employee benefits segment remains modestly sized and it has experienced higher mortality. Additionally, the group has some interest rate risk associated with its life asset-backed products.
OneAmerica’s financial leverage is modest and interest coverage remains solid. There are no debt maturities in the near to intermediate term.
A.M. Best believes OneAmerica is well positioned at its current ratings. Factors that could have a negative effect on the outlook and/or ratings include a material decline in net operating income and/or significant asset impairments and realized losses, which would lead to a meaningful decline in risk-adjusted capital.
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.—
- “a-” on $200 million 7.00% senior unsecured notes, due 2033
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Life/Health Insurers”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.