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23 May 2006
MOODY'S AFFIRMS UNUMPROVIDENT RATINGS (SENIOR DEBT AT Ba1); CHANGES OUTLOOK TO STABLE
Approximately $2.3 billion of securities affected.
New York, May 23, 2006 -- Moody's Investors Service has affirmed UnumProvident Corporation's
(UnumProvident; NYSE: UNM) credit ratings (senior debt at Ba1),
as well as the Baa1 insurance financial strength ratings of the company's
U.S. life insurance subsidiaries. The outlook on
the ratings has been changed to stable from negative.
Commenting on the change in UnumProvident's outlook, Moody's
said that the company had shown improvement in several of its key financial
metrics. The rating agency said that this includes lower financial
leverage, stronger cash flow interest coverage and earnings interest
coverage ratios, and a more robust risk based capital (RBC) ratio
on a consolidated basis. Moody's noted that the company has
eliminated its inter-company loans and has improved the maturity
structure of its outstanding debt. According to the rating agency,
statutory net income has stabilized in the past two years, reaching
$641 million in 2005 (including $129 million of non-recurring
income associated with recapture of a reinsurance contract). In
addition, Moody's stated that UnumProvident's ratings
outlook reflected some improvement in the sales mix, as well as
some progress in stabilizing persistency for the company's core
disability insurance operations.
However, Moody's believes UnumProvident still faces a competitive
marketplace and challenges in the company's efforts to restore profitability
to its core U.S. group long-term disability business.
Furthermore, the rating agency believes that the recent California
and multi-state regulatory settlements could continue to put pressure
on expenses and profits as UnumProvident reassesses its claims reserves
and changes its policy provisions and policy claims handling procedures
to comply with the agreements. Moody's indicated that it
is concerned that the company is still experiencing disruption in its
employee benefits claims centers, following implementation of the
multi-state claims settlement agreement. The rating agency
added that it is concerned that these claims disruption costs could be
permanent, and that claim center expenses could be higher than levels
anticipated at the time of the settlement, resulting in lower than
expected ongoing profitability.
Moody's said that the following expectations have been incorporated
into the stable outlook: absence of additional one-time charges,
including those related to the claims settlement agreements; group
income protection benefit ratio to decrease to 92% by year-end
2006; RBC of at least 285% on a consolidated basis (including
off-shore captive reinsurers) and on a legal entity basis;
continued improvement in statutory and GAAP earnings; holding company
liquidity equal to at least one year's interest payments; earnings
interest coverage and cash flow interest coverage of at least 4 times
and 3.5 times respectively; and Moody's adjusted financial
leverage (including pension and lease adjustments) of less than 30%
(adjusted debt to total adjusted capital).
The following ratings have been affirmed, with a stable outlook:
UnumProvident Corporation: Senior unsecured debt at Ba1; subordinated
shelf at (P) Ba2; preferred shelf at (P) Ba3
UNUM Corporation: Senior unsecured debt at Ba1
Provident Companies, Inc.: Senior unsecured debt at
Provident Financing Trust I: Preferred stock at Ba2
Provident Financing Trusts II/III: Backed preferred shelf at (P)
UnumProvident Finance Company plc: Senior unsecured debt at Ba1
UNUM Life Insurance Company of America: Insurance financial strength
First UNUM Life Insurance Company: Insurance financial strength
Colonial Life & Accident Insurance Company: Insurance financial
strength at Baa1
Provident Life and Accident Insurance Co.: Insurance financial
strength at Baa1
Paul Revere Life Insurance Company: Insurance financial strength
Paul Revere Variable Annuity Insurance Co.: Insurance financial
strength at Baa1
Moody's last rating action on UnumProvident took place on April
15, 2005 when the rating agency changed the company's outlook
UnumProvident Corporation is headquartered in Chattanooga, Tennessee.
At March 31, 2006, UnumProvident had total assets of $50.5
billion and total shareholders' equity of $6.6 billion.
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to punctually repay senior policyholder claims
and obligations. For more information, visit our website
Financial Institutions Group
Moody's Investors Service
Ann G. Perry
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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