Fitch Affirms Union Central's IFS Rating at 'A+'; Outlook to Positive.

NEW YORK -- Fitch Ratings has affirmed The Union Central Life Insurance Company's (Union Central) insurer financial strength (IFS) rating at 'A+' and surplus notes at 'A-'. The Rating Outlook is revised to Positive from Stable. See rating list below.

The affirmation of Union Central's ratings reflects that it is a core subsidiary of the UNIFI Companies (UNIFI). The most important factor in UNIFI's combined financial strength is its superior risk-based capitalization, represented by an NAIC RBC ratio of approximately 589% as of Sept. 30, 2006. Other balance sheet strengths include the company's investment portfolio, which is both very high quality and highly liquid.

Additional positive rating factors include the company's stable and diversified earnings, management's conservative and disciplined approach to the market (e.g., forgoing sales of products with aggressive product structures), and recent strong top-line growth in life, annuity, dental and mutual fund sales. The company's earnings capabilities are good and are expected to improve given positive marketing momentum from Union Central's strong distribution capabilities in the individual life area, the combination of complementary retirement services businesses, and strong core competencies in the dental and mutual fund segments.

Rating concerns focus on UNIFI's operating profile. In Fitch's opinion, the life and annuity insurance industry faces fierce competition. While UNIFI is now better positioned than prior to the merger, Fitch considers the company a mid-size player. As such, the company does not benefit from the scale advantages of larger competitors, particularly as they manifest themselves in expense efficiencies and certain distribution relationships. Fitch believes UNIFI will continue to face pricing pressure in its dental business and spread pressure in its annuity business. Further, Fitch believes that some of the benefits of the merger have not yet come to fruition. In particular, Fitch will closely monitor the transition of Ameritas and Acacia's agency field force to a variable cost platform in 2007.

The Positive Outlook reflects Fitch's belief that as the merger seasons there is the potential for the realization of meaningful benefits. Over the next 12-18 months as the company demonstrates these benefits as well as continued sales growth and its excess capital position, Fitch expects to adjust the rating accordingly.

The UNIFI Companies is headquartered in Lincoln, Nebraska with home offices in Lincoln, Nebraska; Bethesda, Maryland and Cincinnati, Ohio. The company offers life insurance, annuities, individual disability insurance, group dental and eye care, retirement plans, investments, mutual funds, banking, worksite benefits and public finance. UNIFI Companies has over $25 billion in assets under management, $16.5 billion in insurance assets and $1.9 billion in GAAP equity as of Sept. 30, 2006.

Fitch affirms the following ratings:

Union Central Life Insurance Company 

--Insurer financial strength 'A+';

--Issuer Default Rating 'A';

--8.2% Surplus note due Nov. 1, 2026 'A-'.

The Rating Outlook has been revised to Positive.

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