OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A+ (Superior) and the 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 issue 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 issue 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 issue ratings.)
The rating affirmations reflect OneAmerica’s consistently strong sales, favorable retention and positive, albeit moderating net retirement flows, which continue to contribute to solid operating earnings within its core businesses of retirement services and individual life. The ratings recognize increased scale within retirement services through recent acquisitions within its recordkeeping trust platform, continued growth in the full service small to midsized retirement market and the long term progress made in improving its relative U.S. life market position. Growth in this segment is primarily the result of its niche market position within life and annuity asset-based Care Solutions, which provide access to a long term care benefit.
The quality of the group’s balance sheet remains strong with sound risk-adjusted capitalization and a well-performing high quality investment portfolio with lower than average below investment grade bond exposure and strong issuer credit diversification. Liquidity resources are viewed favorably with additional access to Federal Home Loan Bank borrowings, cash resources at the holding company and unrealized gains within the bond portfolio. The ratings also reflect the diversified sources of revenue and earnings from its established niche position within its core retirement services and individual life segments, excellent persistency and strong enterprise risk management framework. Financial leverage remains moderate with a debt to capital ratio of roughly 13% (inclusive of a $75 million surplus note) with strong interest coverage and modest use of operating leverage.
Partially offsetting factors are the competitive pressures in the U.S. life and retirement market, ongoing operating challenges related to bottom-line growth within its employee benefits segment, potential interest rate risk embedded in its asset-based Care Solutions product line, which is partially offset by maintenance of a macro hedge program and some recent moderation of net flows within retirement services. The employee benefits segment is viewed as strategically important for cross-selling existing core products, although its relative contribution to earnings has historically been modest. OneAmerica continues to face ongoing competition from other life and annuity companies, particularly in the 401(k) and 403(b) markets, which have considerable scale and market penetration.
The following issue 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
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.
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