S&P Assigns UnumProvident Prelim $1B Mixed Shelf Rtgs

Business Wire, Nov 22, 2000

Business Editors

NEW YORK--(BUSINESS WIRE)--Nov. 22, 2000

Standard & Poor's today assigned its preliminary single-'A'-minus/triple-'B'-plus/triple-'B' ratings to UnumProvident Corp.'s (UnumProvident) $1 billion senior debt/subordinated debt/preferred securities universal shelf registration. In addition, Standard & Poor's affirmed its single-'A'-minus counterparty credit rating on UnumProvident. The outlook is negative.

Major Rating Factors:

-- Standard & Poor's believes UnumProvident has an excellent business profile that should benefit from its dominant positions in both the individual disability (DI) and group long-term disability (LTD) markets, enabling the company to generate a superior level of ongoing earnings. Although year-to-date DI and LTD sales and ongoing pretax GAAP earnings through the first three quarters of 2000 remain below 1999 results for the same period, 2000 has been a turnaround year for the company, with earnings and LTD sales showing consistent improvement on a quarterly basis throughout the year.

-- UnumProvident's pretax GAAP operating earnings are derived primarily from its DI (31%), LTD (29%), group life (20%), and voluntary benefits (17%) operations. Although earnings for the first three quarters of 2000 declined 9% from the same period in 1999, quarterly earnings have increased throughout the year. Standard & Poor's believes the company will produce a superior level of earnings, as measured by Standard & Poor's earnings adequacy model, for the year as a whole.

-- Management has undertaken several capital-raising initiatives this year, including the sale of the company's individual life and corporate-owned life insurance blocks of business, to help bolster the capitalization of its insurance companies. Standard & Poor's expects group operating capital to be maintained in the range of 145%-150%, as measured by Standard & Poor's capital adequacy model. UnumProvident's debt to capital at the end of the third quarter of 2000 stands at 26%, with preferreds to capital at 6%. Standard & Poor's expects fixed charge coverage of about 6.6 times for 2000. All of these ratios support the current ratings.

OUTLOOK: NEGATIVE

Although UnumProvident's sales and earnings have improved thus far in 2000, the company must show that it can sustain more robust performance before a stable outlook is warranted. -- CreditWire