Captive’s $800m floating rate insured notes affirmed

Vicky Beckett 21/11/2011

$800m floating rate insured notes have been affirmed an ‘a’ debt rating, due to 2037 notes being issued by the captive of the world’s largest disability insurance company, Unum Group.

Unum’s captive, Northwind Holdings, was created for the limited purpose of holding the stock of Northwind Re issuing the notes and engaging in other activities incidental to the performance of its duties.

AM Best’s rating takes note of the current financial strength rating of ‘A’ (Excellent) and issuer credit ratings of ‘a’ of Unum’s operating subsidiaries.

The rating’s outlook is stable.

It also considers adequacy of the excess cash flows at Northwind Re available to be transferred as dividends to Northwind Holdings to service the notes.

The remaining portion of the monetized excess cash flows and the ability to meet or exceed certain benchmarks (such as principal note payment and reserve balances) relative to plan/forecast are commended.

The rating was also achieved by the performance of Northwind Holdings investment portfolio, primarily consisting of investment-grade securities and is the primary source of funds to pay ongoing claims.

Best did not consider payment assurance/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 note holders

Northwind Holdings’ rating and outlook could be negatively affected if an unfavourable earnings trend develops over a prolonged period or if certain benchmarks are not achieved or deteriorate relative to the plan/forecast.

However, the company’s rating and outlook could increase if a favourable trend in its operating performance increases or if certain benchmarks exceed the plan/forecast.

Northwind Holdings is the sole shareholder of Northwind Reinsurance Company, a special purpose financial captive insurance company domiciled in Vermont.

Northwind Re was created to provide reinsurance coverage to three Unum subsidiaries, Provident Life and Accident Insurance Company, The Paul Revere Life Insurance Company and Unum Life Insurance Company of America.

It also facilitates the funding of a portion of the capital required to support a closed block of individual disability policies.

Tags: AM Best, Captive, Frrn, Holidngs, Insurance, Northwind, Ratings, Re, Unum

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Captive’s $800m floating rate insured notes affirmed

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