CHATTANOOGA, Tenn., Aug. 2 /PRNewswire-FirstCall/ -- UnumProvident
Corporation (NYSE: UNM) announced today its results for the second quarter of
2005.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030929/CHM022LOGO-a )
The Company reported net income of $171.3 million ($0.55 per diluted
common share) for the second quarter of 2005, compared to $7.2 million ($0.02
per diluted common share) for the second quarter of 2004. Included in the
results for the second quarter of 2005 are net realized after-tax investment
gains of $42.6 million ($0.13 per diluted common share), compared to net
realized after-tax investment losses of $55.9 million ($0.18 per diluted
common share) in the second quarter of 2004. Included in net realized after-
tax investment gains and losses are after-tax gains of $40.6 million in the
second quarter of 2005 and after-tax losses of $48.9 million in the second
quarter of 2004 reflecting the change in the fair value of DIG Issue B36
derivatives.
Also included in the second quarter of 2004 is the impact of the closing
of the sale of the Company's Canadian branch, which resulted in a net loss
from discontinued operations of $67.8 million after tax ($0.23 per diluted
common share).
Income from continuing operations, excluding net realized after-tax
investment gains and losses, was $128.7 million ($0.42 per diluted common
share) in the second quarter of 2005, compared to $130.9 million ($0.43 per
diluted common share) in the second quarter of 2004. 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.
"Our second quarter results reflect continued earnings improvement for
most of our operations and further indications that we are beginning to
restore growth to selected areas of the business," said Thomas R. Watjen,
president and chief executive officer. "One of the areas which adversely
impacted our results this year is some disruption to our claims management
process as we implemented changes in that area. I am pleased that we saw
steady improvement in this area throughout the quarter, and I expect that to
continue in the second half of the year. In short, we continued to build
momentum in the second quarter and, although challenges remain, our confidence
in the future is building."
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 $91.8 million
in the second quarter of 2005, compared to $90.8 million in the second quarter
of 2004.
Within the segment, the group income protection line reported operating
income of $53.6 million in the second quarter of 2005, compared to $49.4
million in the prior year second quarter. The benefit ratio for the group
income protection line was 90.0 percent in the second quarter of 2005,
compared to 89.4 percent in the second quarter of 2004 and 90.5 percent in the
first quarter of 2005. Claim recoveries and the timing of claim decisions
continued to be adversely impacted by 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. Management has assessed the
changes in practice that disrupted the claim decision process for both new
claims and open claims and identified aspects of the procedural or
organizational changes in the agreements or their operational implementation
that need to be addressed to eliminate the delay in making claim decisions.
Certain of these procedural and organizational changes have been addressed,
and while the disruption has not been eliminated, progress was made during the
second quarter in restoring operational effectiveness. 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 is likely to be some
additional costs in its claim operations over the next several quarters. While
the impact of the disruption reduced the operating income in the Company's
U.S. group long-term income protection line of business in the second quarter
of 2005 relative to the year ago quarter, the overall results in this business
line reflect improved earnings in the group long-term income protection
business in the Company's U.K. subsidiary, Unum Limited, and in the 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 $22.3 million in the second
quarter of 2005, compared to operating income of $24.6 million in the second
quarter of 2004. The decline in earnings primarily reflects lower net
investment income which more than offset a decline in the benefit ratio
relative to the prior year second quarter results.
The long-term care line, which includes the results of both group and
individual long-term care, reported operating income of $12.5 million in the
second quarter of 2005, compared to $12.7 million in the second quarter of
2004. Finally, the disability management services line of business reported
operating income of $3.4 million in the second quarter of 2005, compared to
$4.1 million in the second quarter of 2004.
Premium income for the Income Protection segment increased slightly to
$1,037.7 million in the second quarter of 2005, compared to $1,024.5 million
in the second quarter of 2004. Within this segment, new annualized sales
(submitted date basis) for group long-term income protection fully insured
products increased 18.0 percent to $86.5 million in the second quarter of 2005
from $73.3 million in the second quarter of 2004. The increase was
attributable to higher sales in both the U.S. operations and Unum Limited in
the U.K. New annualized sales (submitted date basis) for group short-term
income protection fully insured products declined 13.0 percent to $14.7
million in the second quarter of 2005 from $16.9 million in the second quarter
of 2004 due to lower large case sales. New annualized sales (paid for basis)
for recently issued individual income protection increased 5.2 percent to
$24.1 million in the second quarter of 2005 from $22.9 million in the second
quarter of 2004.
Premium persistency in the Company's U.S. group long-term income
protection business was 83.2 percent for the second quarter of 2005, compared
to 84.8 percent for the full year 2004. 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 80.1 percent for the second quarter of
2005, compared to 80.6 percent for full year 2004.
The Life and Accident segment reported operating income of $64.3 million
in the second quarter of 2005, compared to $58.6 million in the second quarter
of 2004. The improved performance is primarily attributable to improved
performance in the accidental death & dismemberment, voluntary life and other,
and U.K. group life lines of business.
Premium income in this segment declined 4.7 percent to $472.7 million in
the second quarter of 2005, compared to $496.2 million in the second quarter
of 2004. New annualized sales (submitted date basis) in this segment declined
27.9 percent to $61.2 million in the second quarter of 2005, compared to $84.9
million in the second quarter of 2004.
Premium persistency in the Company's U.S. group life line of business was
75.0 percent for the second quarter of 2005, compared to 84.0 percent for full
year 2004. 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 $43.6 million in the
second quarter of 2005, compared to $39.4 million in the second quarter of
2004. The benefit ratio for this segment improved to 53.8 percent in the
second quarter of 2005, compared to 55.2 percent in the second quarter of
2004, primarily due to a lower benefit ratio for the life product line.
Premium income for this segment increased 6.3 percent to $195.6 million in the
second quarter of 2005, compared to $184.0 million in the second quarter of
2004. New annualized sales in this segment increased 4.3 percent to $65.9
million in the second quarter of 2005 from $63.2 million in the second quarter
of 2004.
The Individual Income Protection - Closed Block segment reported operating
income of $27.7 million in the second quarter of 2005, compared to $30.0
million in the second quarter of 2004. The benefit ratio was slightly higher
in the second quarter of 2005 compared to the second quarter of 2004,
reflecting lower claim recoveries and generally stable claim incidence trends.
Operating expenses in the second quarter of 2005 increased relative to the
year ago quarter due to the payment of a judgment in a lawsuit. Premium income
for this segment was $232.8 million in the second quarter of 2005, compared to
$249.2 million in the second quarter of 2004 due to the expected decline in
this closed block of business.
The Other segment, which includes results from products no longer actively
marketed, reported operating income of $10.5 million in each of the second
quarters of 2005 and 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 $37.6
million in the second quarter of 2005, compared to a loss of $30.7 million in
the second quarter of 2004, which included a $9.4 million curtailment gain
related to changes in the Company's retiree medical plan.
The Company's average number of shares outstanding used to calculate the
per diluted common share results was 309,108,296 for the second quarter of
2005, compared to 301,478,204 for the second quarter of 2004.
Book value per common share at June 30, 2005, was $26.37, compared to
$21.01 at June 30, 2004.
UnumProvident Corporation senior management will host a conference call on
Wednesday, Aug. 3 at 9 a.m. (Eastern) to discuss the results of operations for
the second 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 (888) 283-6901. Alternatively, a live web
cast of the call will be available at http://www.unumprovident.com in a
listen-only mode. About 15 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, Aug. 9. In addition, the Company's Statistical Supplement for the
second 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 and
investigations, 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, 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.
DIGEST OF EARNINGS
(Unaudited)
UnumProvident Corporation (UNM: NYSE)
and Subsidiaries
($ in millions, except share data)
Three Months Ended Six Months Ended
June 30June 30
2005 2004 2005 2004
Operating Revenue by Segment $2,591.2 $2,595.8 $5,166.3 $5,194.1
Net Realized Investment Gain
(Loss) 65.5 (86.5) 62.3 (61.1)
Total Revenue $2,656.7 $2,509.3 $5,228.6 $5,133.0
Operating Income (Loss) by
Segment $200.3 $198.6 $385.1 $(597.0)
Net Realized Investment Gain
(Loss) 65.5 (86.5) 62.3 (61.1)
Income Tax (Benefit) 94.5 37.1 123.9 (163.8)
Income (Loss) from Continuing
Operations 171.3 75.0 323.5 (494.3)
Loss from Discontinued
Operations, Net of Tax - (67.8) - (60.8)
Net Income (Loss) $171.3 $7.2 $323.5 $(555.1)
PER SHARE INFORMATION
Assuming Dilution:
Income (Loss) from
Continuing Operations $0.55 $0.25 $1.05 $(1.67)
Loss from Discontinued
Operations, Net of Tax - (0.23) - (0.21)
Net Income (Loss) $0.55 $0.02 $1.05 $(1.88)
Basic:
Income (Loss) from
Continuing Operations $0.58 $0.25 $1.09 $(1.67)
Loss from Discontinued
Operations, Net of Tax - (0.23) - (0.21)
Net Income (Loss) $0.58 $0.02 $1.09 $(1.88)
Weighted Average Common Shares
- Basic (000s) 295,606.4 295,161.3 295,558.6 295,092.3
Weighted Average Common Shares
- Assuming Dilution (000s) 309,108.3 301,478.2 308,365.2 295,092.3
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Three Months Ended Three Months Ended
June 30, 2005June 30, 2004
(in (in
millions) Per Share * millions) Per Share *
Income from Continuing
Operations, excluding Net
Realized Investment Gains and
Losses $128.7 $0.42 $130.9 $0.43
Net Realized Investment Gain
(Loss) 65.5 0.21 (86.5) (0.28)
Income Tax Benefit (Expense)
on Net Realized Investment
Gain (Loss) (22.9) (0.08) 30.6 0.10
Income from Continuing
Operations, Net of Tax $171.3 $0.55 $75.0 $0.25
* Assuming Dilution
SOURCE UnumProvident Corporation
-0- 08/02/2005
/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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AP Archive: http://photoarchive.ap.org
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/Web site: http://www.unumprovident.com/
(UNM)
CO: UnumProvident Corporation
ST: Tennessee
IN: FIN INS
SU: ERN CCA
DL-JE
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3681 08/02/200516:00 EDThttp://www.prnewswire.com