Fitch Comments on UnumProvident's Market Conduct Resolution

Business Wire, Nov 18, 2004

NEW YORK -- Fitch Ratings comments that UnumProvident Corporation (Unum) and its subsidiaries ratings are unaffected by today's announcement that the company has reached a settlement with lead state regulators in its multistate market conduct review. The ratings (see complete list below) remain on Rating Watch Negative, where they were placed on Feb. 5, 2004. Fitch expects to resolve the Rating Watch status in the next couple of weeks after the completion of a detailed reserve study.

While Unum is expected to incur a one-time fourth quarter charge of approximately $112 million pretax to implement changes involved in the settlement, as well as a fine of approximately $15 million, Fitch views the resolution positively as an elimination of uncertainty. Although an agreement has been reached by the three lead investigative states, including the New York Attorney General and the U.S. Department of Labor, final settlement of the multistate review is subject to ratification by at least two thirds of the 47 states involved.

Fitch notes that there were no findings or conclusions of wrong-doing in the review. The primary components of the settlement include enhancements to the company's claims settlement practices and reassessment of certain denied or closed claims, as well as additional corporate and board governance to oversee the reassessment process and claims handling. The one-time charge includes reassessment costs of approximately $71 million pretax for operating expenses and payments on reopened claims and approximately $41 million pretax in reserve strengthening due to new claims-handling procedures. The charge, which is expected to be reflected in the fourth quarter of 2004, will be presented on both a GAAP and statutory basis. In addition, ongoing process changes and additional governance oversight will affect earnings by approximately $10 million pretax annually.

Based in Chattanooga, Tennessee, UnumProvident Corp. is the nation's largest provider of group and individual disability insurance. Unum reported total assets of $49.8 billion and shareholders' equity of $6.9 billion at Sept. 30, 2004.

The following have a Negative Rating Watch:

UnumProvident Corp.

-- Senior debt 'BBB-'.

Provident Financing Trust I

-- Preferred stock 'BB '.

UnumProvident Group members:

-- Insurer financial strength 'A-'.

Group members are:

Unum Life Insurance Company of America

Provident Life & Accident Insurance Company

Provident Life and Casualty Insurance Company

The Paul Revere Life Insurance Company

First Unum Life Insurance Company

Colonial Life & Accident Insurance Company

Paul Revere Variable Annuity Insurance Co.