AM Best


A.M. Best Affirms Ratings of OneAmerica Financial Partners Inc. and Its Subsidiaries


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Colleene Parodi
Senior Financial Analyst
(908) 439-2200, ext. 5095
colleene.parodi@ambest.com

Rosemarie Mirabella
Assistant Vice President
(908) 439-2200, ext. 5892
rosemarie.mirabella@ambest.com


Rachelle Morrow
Senior Manager, Public Relations
(908) 439-2200, ext. 5378
rachelle.morrow@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - MAY 15, 2014 03:00 PM (EDT)
A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) 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 a detailed listing of the debt ratings.)

The rating actions reflect OneAmerica's solid risk-adjusted capital position, strong consolidated top-line revenue growth and favorable liquidity. OneAmerica continues to maintain strong net flows and has exceptional retention, which has resulted in consistently favorable operating performance across its core individual life and retirement services business lines. In addition, the ratings recognize OneAmerica's diversified sources of revenues and earnings and its leading market position in hybrid products that feature access to life insurance benefits or annuity account values to pay for long-term care.

Additionally, the ratings reflect continued growth in full-service small-to-medium retirement plans and overall improvement of OneAmerica's relative market position within the U.S. life industry. OneAmerica's investment risk profile is well managed, with lower below investment grade bond exposure, strong issuer credit diversification and a well-performing commercial mortgage loan portfolio. OneAmerica's mutual holding company structure facilitates a strategy focused on long-term financial strength with a well-developed enterprise risk management program supported by good surrender charge protection in its liability structure and minimal equity market exposure. OneAmerica's financial leverage is prudent at roughly 14%, with solid interest coverage of approximately nine times and modest use of operating leverage.

Partially offsetting these positive rating factors is increased competition within the U.S. insurance market place within life and retirement services, particularly in the 401(k) and 403(b) markets. While the employee benefits segment remains strategically important to the retirement segment, historically its contribution to OneAmerica's operating and business profile has been modest. In addition, the group's asset-based long-term care products have some interest rate risk; however, this risk is partially mitigated by the expected high persistency of asset-based care products and utilization of a macro interest rate hedge program.

Positive rating actions are unlikely in the near term. Factors that could lead to potential negative rating actions include a sizeable decline in net operating income and/or significant asset impairments and realized losses with a resulting material decline in capitalization.

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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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