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

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 each rating 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 growing business profile, with a top-five market share in whole life insurance and strong position within Asset-Care, its hybrid life product with long-term care benefits. OneAmerica continues to demonstrate strong growth in assets under administration primarily due to three acquisitions made since 2010 within its Retirement Services segment and to a lesser extent, its recent entry into the Pension Risk Transfer marketplace. OneAmerica maintains a strong risk-adjusted capital position, as measured by Best’s Capital Adequacy Ratio (BCAR). 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 supported by good surrender charge protection in its liability structure and minimal equity market exposure. A.M. Best views its liquidity as strong due to an unrealized gain position within its bond portfolio, access to Federal Home Loan Bank funding, potential access to capital markets and cash resources maintained at OneAmerica Financial Partners, Inc. Additionally, financial leverage remains moderate with strong interest coverage. Finally, OneAmerica has a leading enterprise risk management system in place with well-developed risk tolerance statements with strong quantitative thresholds, coupled with ongoing monitoring and risk remediation plans.

Partially offsetting rating factors include a modest reduction in OneAmerica’s absolute capital (although risk-adjusted capital remains stable) as a result of dividends upstreamed to its parent. OneAmerica also will need sizeable technological investments in systems infrastructure to realize efficiencies of scale over time, and this carries potential execution risk. As a result, A.M. Best believes operating results are likely to remain relatively flat over the near term. Additionally, OneAmerica faces strong competition in key market segments within individual life and annuities, which may accelerate as more companies explore the potential of offering a hybrid life-annuity product with long-term care benefits, and the retirement market remains highly competitive with ongoing challenges. Interest rate risk within Asset-Care remains given the persistent low interest rate environment. Finally, the company’s employee benefits segment, despite recent premium growth, has struggled to remain profitable and become a meaningful earnings contributor to the group.

Positive rating action could occur over time if OneAmerica’s management continues to execute on integrating its recent acquisitions and translates its existing strategy into profitable premium and earnings growth that contributes to a material increase in risk-adjusted capital. A negative rating action could be taken if spending increases fail to drive expected synergies, or if operating profit continues to decline. A negative rating action also could be taken if risk-adjusted capital continues to decline, either from large increases in spending or poor operational performance, or if the parent organization’s financial condition deteriorates significantly.

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 see A.M. Best’s Recent Rating Activity web page.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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A.M. Best

Erik Miller, CFA, +1 908-439-2200, ext.5187

Senior Financial Analyst

erik.miller@ambest.com

or

Christopher Sharkey, +1 908-439-2200, ext. 5159

Manager, Public Relations

christopher.sharkey@ambest.com

or

Rosemarie Mirabella , +1 908-439-2200, ext. 5892

Assistant Vice President

rosemarie.mirabella@ambest.com

or

Jim Peavy, +1 908-439-2200, ext. 5644

Assistant Vice President, Public Relations

james.peavy@ambest.com

Source: A.M. Best