Fitch Affirms UnumProvident's Rtgs; Rtg Outlook To Stable

Business Wire, July 3, 2001

Business Editors

NEW YORK--(BUSINESS WIRE)--July 3, 2001

Fitch affirms UnumProvident Corporation's (UNM) existing debt and insurer financial strength ratings (See complete list below) and changes the Rating Outlook to Stable from Negative.

The rating affirmation and change in Rating Outlook reflects the company's good earnings, strong capitalization, strengthened balance sheet and growth in new sales and persistency. UnumProvident Corp.'s and its subsidiaries' earnings have rebounded from the significant non-recurring charges taken in 1999 and 2000 associated with merger related activities, heavy reserve strengthening and business divestitures. UNM earned consolidated GAAP net income of $564.2 million in 2000, up from a loss of $182.9 million in 1999. First quarter 2001 adjusted earnings of $147.6 million improved almost 10% over the $134.5 million earned during the same period in 1999.

Both new sales growth and persistency, particularly in the group disability products, have been trending upwards since the first quarter of 2000, after declining in 1999. New sales on an aggregate basis have averaged 8% and 12% during 2000 and the first quarter 2001 respectively. The operating subsidiary capital positions have significantly benefited from a combination of growth in retained earnings, the impact of recent reinsurance transactions, and divestitures of non-core business lines. On a consolidated basis, the company's NAIC risk-based capital ratio (RBC) of 216% at year-end 2000 is up from 182% at year-end 1999. With the impact of statutory codification, Fitch expects RBC to reach close to 270 % by year-end 2001.

UnumProvident Corporation's financial leverage, as measured by the ratio of debt to total capital, was 27% at year-end 2000, down from 31.3% at year-end 1999. Fitch expects debt leverage to decline to 25%-26% over the next couple of years from the combination of profitable growth and modest debt reduction. Fixed charge coverage remains good at approximately 5.8 times (x) and is expected to approximate 6.5x by year-end 2001.

UnumProvident was formed through the June 1999 merger of Unum Corporation and Provident Companies, Inc., combining the nations largest providers of group disability and individual disability and long term care. UNM reported total assets of $41.1 billion and shareholders equity of $5.8 billion at March 31st, 2001.

Entity/Issue/Type                  Action    Rating/Outlook

UnumProvident Corp.
--Senior debt                      Affirm      `A-`/Stable
--Commercial paper                 Affirm      `F2'/Stable

Provident Financing Trust I
--Preferred stock                  Affirm    `BBB '/Stable

Unum Life Insurance Company of America
--Insurer financial strength       Affirm     `AA-`/Stable

Provident Life & Accident Insurance Company
--Insurer financial strength       Affirm     `AA-`/Stable

The Paul Revere Life Insurance Company
--Insurer financial strength       Affirm     `AA-`/Stable

First Unum Life Insurance Company
--Insurer financial strength       Affirm     `AA-`/Stable

Colonial Life & Accident Insurance Company
--Insurer financial strength       Affirm     `AA-`/Stable

Paul Revere Protective Life Insurance Co.
--Insurer financial strength       Affirm     `AA-`/Stable

Paul Revere Variable Life Insurance Co.
--Insurer financial strength       Affirm     `AA-`/Stable