UnumProvident Responds To Moody's Report
03/10/2003
CHATTANOOGA, TN -- UnumProvident (NYSE: UNM) today issued the following statement in response to a March 7, 2003 research report issued by Moody's Investors Service indicating Moody's could downgrade UnumProvident's credit ratings. "The Company will continue to work with Moody's through the review process to attempt to address their issues and concerns. UnumProvident is committed to maintaining a strong financial base to support our business." The Company noted the following: - It continues to remain a priority with the Company to maintain strong financial strength ratings with the leading rating agencies. Although the other organizations that rate UnumProvident also have the Company's rating under review, they all presently maintain higher ratings than Moody's. UnumProvident's present financial strength ratings are as follows:
- AM Best - A (excellent)
- Standard & Poor's - A+ (strong)
- Fitch - A+ (strong)
- The Company's consolidated regulatory capital position at year-end 2002 is below the level of 2001, but in-line to better than the levels of 1999 and 2000. The Company plans this year to move capital back to, or above, the levels of 2001.
- The Company closed 2002 with statutory capital & surplus (including the interest maintenance reserve and asset valuation reserve) of $3.6 billion. While this is down 6.0% from year-end 2001, it is up 6.6% from mid-year 2002, demonstrating the Company's ability to generate capital from internal operations.
- As reported earlier in the year, UnumProvident is responding to a routine comment letter with the Securities and Exchange Commission related to the Company's accounting for the timing and amount of other-than-temporary impairments recorded on below-investment-grade securities. The Company is in discussion with the staff of the SEC to resolve these issues.
- Moody's expressed concern that some of the investments held in the Company's investment portfolio are trading at levels below purchase price. Since the Company generally holds investments for very long periods in order to match its long liability durations, it is less concerned with fluctuations in price from one period to the next.
- The Company has over $2.9 billion in gross unrealized gains in its investment portfolio and $1.8 billion of net unrealized gains. Moreover, as part of its plan to reduce its exposure to the high yield market, the Company has sold $300 million or 10% of its high-yield portfolio since the beginning of 2003.
- UnumProvident's cash flow remains strong. The Company has ample dividend capacity within its insurance subsidiaries as well as other sources of cash to meet its external obligations.
The subsidiaries of UnumProvident Corporation offer a comprehensive, integrated portfolio of products and services backed by industry-leading return-to-work resources and disability expertise. UnumProvident is the world leader in protecting income and lifestyles through its comprehensive offering of group, individual, and voluntary benefits products and services. UnumProvident's primary operations are in the United States, Canada and the U.K. A "safe harbor" is provided for "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Statements in this press release, which are not historical facts, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties include such general matters as general economic or business conditions; events or consequences relating to terrorism and acts of war; competitive factors, including pricing pressures; legislative or regulatory changes; and the interest rate environment. More specifically, they include fluctuations in insurance reserve liabilities, projected new sales and renewals, persistency rates, incidence and recovery rates, pricing and underwriting projections, retained risks in reinsurance operations, availability and cost of reinsurance, level and results of claim-related litigation, the level of pension benefit costs and funding, and investment results, including credit deterioration of investments. For further information of risks and uncertainties that could affect actual results, see the sections entitled "Cautionary Statement Regarding Forward-Looking Statements" and "Risk Factors" in the Company's Form 10-K for the fiscal year ended December 31, 2001 and subsequently filed Form 10-Qs. The forward-looking statements are being made as of the date of this press release and the Company expressly disclaims any obligation to update any forward-looking statement contained herein.
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