UnumProvident Corp., a group and individual disability insurance provider, completed an insurance-linked ABS deal backed by premiums on long-term disability insurance policies. Proceeds from the transaction will finance a portion of the insurer's capital reserve requirements. The deal closed last Wednesday.
The transaction is an innovative one for the ABS industry. Although insurance-linked notes have been issued previously to finance regulatory capital requirements, this transaction is the first to be secured by premiums on long-term disability insurance policies. Essentially, the deal is a reinsurance agreement between Unum America, the U.S.-based subsidiary of Chattanooga, Tenn.-based UnumProvident, and Tailwind Holdings, LLC, the special-purpose vehicle that will issue the notes. UnumProvident tapped Goldman Sachs to act as lead manager on the $130 million 144a deal. On the strength of an MBIA wrap, Fitch Ratings, Moody's Investor Service, Standard & Poor's and insirance specialist A.M. Best all gave the bonds triple A ratings.