OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Long-Term Issue Credit Rating (Long-Term IR) of “a” on $800 million Floating Rate Insured Notes due 2037 (notes) issued by Northwind Holdings, LLC (Northwind Holdings), a Delaware limited liability company and wholly owned subsidiary of Unum Group (Unum). The outlook of the Long-Term IR is stable.
Northwind Holdings was formed for the limited purpose of holding the stock of Northwind Reinsurance Company (Northwind Re), issuing the notes and engaging in other activities incidental to the performance of its duties. Northwind Holdings is the sole shareholder of Northwind Re, a special purpose financial captive insurance company domiciled in Vermont. Northwind Re was established to provide reinsurance coverage to three of Unum’s subsidiaries, Provident Life and Accident Insurance Company, The Paul Revere Life Insurance Company and Unum Life Insurance Company of America, as well as to facilitate the funding of a portion of the capital required to support a closed block of individual disability income policies.
A.M. Best’s rating action takes into consideration the adequacy of the excess cash flows at Northwind Re available to be transferred as dividends to Northwind Holdings to service the notes; the ability to meet or exceed certain benchmarks (e.g., principal note payment, dividend distribution, reserve balances) relative to its plan and forecast; the performance of its investment portfolio, which primarily consists of investment-grade securities and is the primary source of funds to pay ongoing claims; and Unum’s operating subsidiaries’ current Financial Strength Rating of A (Excellent) and Long-Term Issuer Credit Ratings of “a”. No consideration was given for payment assurance or support provided by MBIA Insurance Corporation, the financial guarantor, which ensures the timely payment of scheduled interest and the repayment of principal at maturity to the noteholders.
Northwind Holdings’ Long-Term IR and outlook may come under negative pressure if any of the following events occur: 1) cash flows to service the note obligations become insufficient; 2) the Credit Rating of Unum Group deteriorates; 3) the coverage ratio of the reserves to policy benefits deteriorates; 4) actual operating performance fails to meet certain benchmarks; and 5) performance of its investment portfolio deteriorates. However, the Long-Term IR and outlook could benefit if a favorable trend occurs in the aforementioned categories.
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