CHATTANOOGA, Tenn., May 3 /PRNewswire-FirstCall/ -- UnumProvident
Corporation (NYSE: UNM) announced today its results for the first quarter of
2005.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030929/CHM022LOGO-a )
The Company reported net income of $152.2 million ($0.49 per diluted
common share) for the first quarter of 2005, compared to a net loss of $562.3
million ($1.91 per diluted common share) for the first quarter of 2004.
Included in the results for the first quarter of 2005 are net realized after
tax investment losses of $2.1 million ($0.01 per diluted common share),
compared to net realized after tax investment gains of $16.1 million ($0.05
per diluted common share) in the first quarter of 2004. Included in net
realized after tax investment gains and losses are after tax gains of $1.2
million in the first quarter of 2005 and $26.6 million in the first quarter of
2004 reflecting the increase in the fair value of DIG Issue B36 derivatives.
Also included in the results for the first quarter of 2004 is the impact
of the restructuring of the Closed Block Individual Income Protection
business, which reduced results $967.0 million before tax and $701.0 million
after tax ($2.37 per diluted common share). The restructuring charges
included a charge for reserve strengthening of $110.6 million before tax and
the write-off of intangible assets of $856.4 million before tax. The first
quarter of 2004 also includes income from discontinued operations totaling
$7.0 million after tax ($0.02 per diluted common share).
Income from continuing operations was $154.3 million ($0.50 per diluted
common share) in the first quarter of 2005, compared to $115.6 million ($0.39
per diluted common share) in the first quarter of 2004, excluding the net
realized after tax investment gains and losses and the first quarter of 2004
restructuring charges. The Company believes operating income or loss, a non-
GAAP financial measure which excludes realized investment gains and losses, is
a better performance measure and a better indicator of the profitability and
underlying trends in the business. Realized investment gains and losses are
dependent on market conditions and general economic events and are not
necessarily related to decisions regarding the Company's underlying business.
For a reconciliation to the most directly comparable GAAP measures, refer to
the attached digest of earnings.
Also included in the first quarter of 2005 is the release of $32.0 million
of income tax liabilities that relate primarily to interest on the timing of
expense deductions. The $32.0 million ($0.10 per diluted common share)
increase to net income is reported as a reduction to income tax expense in the
quarter.
"Although our operating results in the first quarter improved over the
year ago performance, they did not meet our expectations," said Thomas R.
Watjen, president and chief executive officer. "The majority of our
operations met or exceeded our plans, but that was more than offset by adverse
experience in our U.S. group income protection claims operations, which we
believe has been temporarily disrupted by the implementation of changes made
in response to the multistate regulatory settlement agreements we entered into
at year-end and other process improvement initiatives undertaken in 2004. I
believe we are seeing the effect on our claims operations of trying to absorb
a considerable amount of change in a short period of time. We anticipated
some disruption in claim processing and in the timing of claim decisions, but
we experienced more in the first quarter than we expected. I believe that we
will gradually restore our performance to more acceptable levels, and I am
working very closely with our benefits area management team to assure that we
are taking the necessary actions to improve performance while continuing to
fully comply with our settlement agreements and maintaining the level of
quality desired."
Results by Segment
In the following discussions of the Company's segment operating results,
"operating revenue" excludes net realized investment gains and losses.
"Operating income" or "operating loss" excludes income tax, net realized
investment gains and losses, and results of discontinued operations.
The Income Protection segment reported operating income of $79.7 million
in the first quarter of 2005, compared to $74.3 million in the first quarter
of 2004.
Within the segment, the group income protection line reported operating
income of $42.3 million in the first quarter of 2005, compared to $30.3
million in the prior year first quarter. The benefit ratio for the group
income protection line was 90.5 percent in the first quarter of 2005, compared
to 89.4 percent in the first quarter of 2004. Claim recoveries and the timing
of claim decisions were adversely impacted by disruption associated with the
implementation of the organizational and procedural changes the Company made
in response to the multistate regulatory settlement agreements entered into
during the fourth quarter of 2004 and other process improvement initiatives.
The Company currently believes this disruption is temporary and will not
impact its long-term expectation for claim recovery rates. However, if the
operational improvement the Company has projected occurs at a slower rate,
there could be some additional costs in its claim operations over the next
several quarters. Submitted incidence was generally flat in the first quarter
of 2005 compared to the experience of the first quarter of 2004 and slightly
higher as seasonally expected compared to the fourth quarter of 2004. The
results in this business line also reflect improved earnings in the Company's
U.K. subsidiary, Unum Limited, and in its U.S. group short-term income
protection line of business.
Also within this segment, the recently issued individual income protection
line of business reported operating income of $21.2 million in the first
quarter of 2005, compared to operating income of $29.3 million in the first
quarter of 2004. The decline in earnings primarily reflects lower net
investment income and a slight increase in the benefit ratio relative to the
prior year first quarter results.
The long-term care line, which includes the results of both group and
individual long-term care, reported operating income of $13.0 million in the
first quarter of 2005, compared to $11.0 million in the first quarter of 2004.
Finally, the disability management services line of business reported
operating income of $3.2 million in the first quarter of 2005, compared to
$3.7 million in the first quarter of 2004.
Premium income for the Income Protection segment increased 0.4 percent to
$1,028.8 million in the first quarter of 2005, compared to $1,025.1 million in
the first quarter of 2004. Within this segment, premium income for the group
income protection line declined 1.7 percent to $773.9 million in the first
quarter of 2005 from $786.9 million in the first quarter of 2004. Premium
income for the recently issued individual income protection line increased 8.2
percent to $140.4 million in the first quarter of 2005 from $129.8 million in
the first quarter of 2004. Finally, premium income for the long-term care
line increased 5.6 percent to $114.5 million in the first quarter of 2005 from
$108.4 million in the first quarter of 2004.
New annualized sales (submitted date basis) for group long-term income
protection fully insured products declined 15.8 percent to $54.8 million in
the first quarter of 2005 from $65.1 million in the first quarter of 2004.
The decline was attributable to lower sales at Unum Limited in the U.K. which
offset a slight increase in new sales in the U.S. operations. New annualized
sales (submitted date basis) for group short-term income protection fully
insured products declined 37.7 percent to $16.0 million in the first quarter
of 2005 from $25.7 million in the first quarter of 2004 due to declines in the
overall employer market segment sales. New annualized sales (paid for basis)
for recently issued individual income protection increased 3.7 percent to
$30.5 million in the first quarter of 2005 from $29.4 million in the first
quarter of 2004.
Premium persistency in the Company's U.S. group long-term income
protection business was 82.6 percent for the first quarter of 2005, compared
to 84.8 percent for the full year 2004 and slightly higher than the Company's
previous guidance. This decline is consistent with the Company's efforts to
re-price portions of its in-force business in order to improve its
profitability. Persistency in the Company's group short-term income
protection line of business was 78.3 percent for the first quarter of 2005,
compared to 80.6 percent for full year 2004 and slightly below the Company's
previous guidance.
The Life and Accident segment reported operating income of $71.3 million
in the first quarter of 2005, compared to $56.9 million in the first quarter
of 2004. The improved performance is attributable to lower paid incidence
levels relative to the year ago experience.
Premium income in this segment declined 4.0 percent to $470.4 million in
the first quarter of 2005, compared to $490.1 million in the first quarter of
2004. New annualized sales (submitted date basis) in the group life line
totaled $47.5 million in the first quarter of 2005, compared to $39.6 million
in the first quarter of 2004. New annualized sales in the accidental death &
dismemberment line of business totaled $3.4 million in the first quarter of
2005, compared to $2.5 million in the year ago quarter. New annualized sales
in the brokerage voluntary life and other lines totaled $36.8 million in the
first quarter of 2005, compared to $35.6 million in the first quarter of 2004.
Premium persistency in the Company's U.S. group life line of business was
72.5 percent for the first quarter of 2005, compared to 84.0 percent for full
year 2004 and below the Company's previous guidance. The decline in
persistency was due to higher terminations of some larger cases which had been
targeted for significant rate increases.
The Colonial segment reported operating income of $43.8 million in the
first quarter of 2005, compared to $36.6 million in the first quarter of 2004.
The benefit ratio for this segment improved to 53.8 percent in the first
quarter of 2005, compared to 55.5 percent in the first quarter of 2004,
primarily due to a lower benefit ratio for the life product line. Premium
income for this segment increased 6.8 percent to $193.5 million in the first
quarter of 2005, compared to $181.1 million in the first quarter of 2004. New
annualized sales in this segment declined 0.6 percent to $61.3 million in the
first quarter of 2005 from $61.7 million in the first quarter of 2004.
The Individual Income Protection - Closed Block segment reported operating
income of $23.1 million in the first quarter of 2005, compared to a loss of
$923.8 million in the first quarter of 2004. Included in the segment results
for the first quarter of 2004 are the charges related to the restructuring of
this segment. Recovery trends in this segment were generally lower in the
first quarter of 2005 relative to the first quarter of 2004, reflecting the
implementation of the claims management changes during the quarter. Premium
income for this segment was $242.0 million in the first quarter of 2005,
compared to $251.3 million in the first quarter of 2004.
The Other segment, which includes results from products no longer actively
marketed, reported operating income of $6.1 million in the first quarter of
2005, compared to $7.1 million in the first quarter of 2004.
The Corporate segment, which includes investment earnings on corporate
assets not specifically allocated to a line of business, corporate interest
expense, and certain other corporate expenses, reported a loss of $39.2
million in the first quarter of 2005, compared to a loss of $46.7 million in
the first quarter of 2004.
The Company's average number of shares outstanding used to calculate the
per diluted common share results was 307,610,852 for the first quarter of
2005, compared to 294,989,771 for the first quarter of 2004.
Book value per common share at March 31, 2005 was $23.68, compared to
$24.08 at March 31, 2004.
UnumProvident Corporation senior management will host a conference call on
Wednesday, May 4 at 9:00 a.m. (eastern) to discuss the results of operations
for the first quarter and may include forward-looking information, such as
guidance on future results or trends in operations, as well as other material
information. The dial-in number is (913) 981-5591. Alternatively, a live
webcast of the call will be available at http://www.unumprovident.com in a
listen-only mode. About fifteen minutes prior to the start of the call, you
should access the "Investor and Shareholder Information" section of our
website. A replay of the call will be available by telephone and on our
website through Tuesday, May 10. In addition, the Company's Statistical
Supplement for the first quarter of 2005 is available on the Company's
website.
About UnumProvident
UnumProvident (UNM) is the largest provider of group and individual
disability income protection insurance in the United States and United
Kingdom. Through its subsidiaries, UnumProvident Corporation insures more than
25 million people and paid $5.9 billion in total benefits to customers in
2004. With primary offices in Chattanooga, Tenn., and Portland, Maine, the
company employs more than 12,000 people worldwide. For more information,
visit http://www.unumprovident.com .
Safe Harbor Agreement
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,
regulatory, or tax 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 and experience, retained risks in
reinsurance operations, availability and cost of reinsurance, level and
results of litigation, rating agency actions, regulatory actions, negative
media attention, the level of pension benefit costs and funding, investment
results, including credit deterioration of investments, and effectiveness of
product and customer support. 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, 2004. 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.
DIGEST OF EARNINGS
(Unaudited)
UnumProvident Corporation (UNM: NYSE)
and Subsidiaries
($ in millions, except share data)
Three Months Ended March 31
2005 2004
Operating Revenue by Segment $2,575.1 $2,598.3
Net Realized Investment Gain (Loss) (3.2) 25.4
Total Revenue $2,571.9 $2,623.7
Operating Income (Loss) by Segment $184.8 $(795.6)
Net Realized Investment Gain (Loss) (3.2) 25.4
Income Tax (Benefit) 29.4 (200.9)
Income (Loss) from Continuing Operations 152.2 (569.3)
Income from Discontinued Operations,
Net of Tax - 7.0
Net Income (Loss) $152.2 $(562.3)
PER SHARE INFORMATION
Assuming Dilution:
Income (Loss) from Continuing Operations $0.49 $(1.93)
Income from Discontinued
Operations, Net of Tax - 0.02
Net Income (Loss) $0.49 $(1.91)
Basic:
Income (Loss) from Continuing Operations $0.52 $(1.93)
Income from Discontinued
Operations, Net of Tax - 0.02
Net Income (Loss) $0.52 $(1.91)
Weighted Average Common Shares -
Basic (000s) 295,490.5 294,989.8
Weighted Average Common Shares -
Assuming Dilution (000s) 307,610.9 294,989.8
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Three Months Ended Three Months Ended
March 31, 2005March 31, 2004
(in millions) Per Share* (in millions) Per Share*
Income from Continuing
Operations, excluding
Net Realized
Investment Gains and
Losses and Closed
Block Restructuring
Charges, Net of Tax $154.3 $0.50 $115.6 $0.39
Net Realized Investment
Gain (Loss) (3.2) (0.01) 25.4 0.08
Income Tax Benefit
(Expense) on Net
Realized Investment Gain (Loss) 1.1 - (9.3) (0.03)
Closed Block Restructuring
Charges, Net of Tax - - (701.0) (2.37)
Income (Loss) from
Continuing Operations,
Net of Tax $152.2 $0.49 $(569.3) $(1.93)
* Assuming Dilution
SOURCE UnumProvident Corporation
-0- 05/03/2005
/CONTACT: Thomas A. H. White, Senior Vice President, Investor Relations,
+1-423-294-8996, or Linnea R. Olsen, Director, Investor Relations,
+1-410-872-8970, or Jim Sabourin, Vice President, Corporate Communications,
+1-423-294-6300, or toll free, +1-866-750-8686, all of UnumProvident
Corporation/
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/Web site: http://www.unumprovident.com /
(UNM)
CO: UnumProvident Corporation
ST: Tennessee
IN: FIN INS
SU: ERN CCA MAV
CF-MH
-- CLTU057 --
3015 05/03/200516:00 EDThttp://www.prnewswire.com