Fitch Affirms Union Central's IFS Rating at 'A+'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed The Union Central Life Insurance Company's (Union Central) Insurer Financial Strength (IFS) rating at 'A+' and surplus note rating at 'A-'. Fitch has also assigned an IFS rating of 'A+' to Union Central affiliates; Ameritas Life Insurance Corp (Ameritas), First Ameritas Life Insurance Corp. of New York (First Ameritas), and Acacia Life Insurance Company (Acacia). The Rating Outlook is Stable. A full rating list is shown below.

The newly assigned ratings were made based on the criteria established in Fitch's Approach to Rating Insurance Groups (March 24, 2010). It is Fitch's opinion that each of the named companies is a core subsidiary of the insurance operations of UNIFI Mutual Holding Company (UNIFI); they are of a material size or support group objectives, provide operational support, and share management and resources with each other.

The rating rationale for the ratings and Stable Outlook is based on the strength of capital within the insurance operations of UNIFI. Total adjusted capital (TAC) was $1.3 billion and estimated consolidated risk based capital (RBC) was 529% at June 30, 2010. Fitch believes the current capital position is very strong for the rating category despite some deterioration caused by investment losses in 2008 and 2009. Prior to these losses estimated year-end 2007 TAC was $1.7 billion and RBC was 626%.

Fitch believes a consolidated RBC of at least 450% and the ability to move capital when and where it is needed are both key rating drivers of UNIFI's insurance operations maintaining their current ratings. Fitch expects the company to maintain strong statutory capitalization due, in-part, to the company's more limited ability to raise capital given its mutual holding company status. Based on Fitch's stress testing results, Fitch believes that the company's future loss exposure is manageable in comparison to total capital and run-rate earnings. A key rating assumption is that under stress scenarios UNIFI will be able to contain future investment and loan loss provisions below $250 million. Fitch's view of capital also benefits from the company's limited use of financial leverage, which is less than 3%. Fitch assumes UNIFI will maintain financial leverage at less than 10%.

Today's rating action assumes that company's earnings profile, which has been negatively impacted by the economic downturn and difficult financial market conditions, will stabilize but not reach pre-crisis levels over the near term. Fitch notes that the earnings performance of the company's non-insurance operations, namely Acacia Federal Savings Bank and Calvert Group, have experienced material deterioration primarily due to the market sensitivity of its products.

Lastly, the ratings consider the competitive challenges that UNIFI faces as a mid-size life insurer competing against companies with much larger scale and capital resources. UNIFI's size can limit its ability to gain expense efficiencies and certain distribution relationships. Maintaining a viable market position within the context of a long-term positive earnings profile is important.

UNIFI is the mutual holding company and ultimate parent of the insurance operations which have home offices in Lincoln, Nebraska; Bethesda, Maryland and Cincinnati, Ohio. The company offers life insurance, annuities, individual disability insurance, group dental and eye care, retirement plans, investments, mutual funds, banking, and public finance. UNIFI had $16.9 billion in GAAP assets and $2 billion in equity as of Dec. 31, 2009, on a consolidated basis.

Fitch affirms the following ratings.

Union Central Life Insurance Company

--IFS at 'A+';

--Issuer Default Rating at 'A';

--Surplus note 8.2% due 2026 at 'A-'.

The Rating Outlook is Stable.

Fitch assigns the following ratings with a Stable Outlook.

Ameritas Life Insurance Corp.

First Ameritas Life Insurance Corp. of New York

Acacia Life Insurance Company

--IFS at 'A+'.

Additional information is available at 'www.fitchratings.com'. The above ratings for Ameritas, First Ameritas, and Acacia have been initiated by Fitch as a service to investors. For all ratings the issuer did not participate in the rating process other than through the medium of its public disclosure.

Related Research:

--'Insurance Rating Methodology' dated Aug. 16, 2010.

--'Life Insurance Rating Methodology' dated March 24, 2010.

Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547766

Life Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=506285

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