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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 2, 1999
UNUMPROVIDENT CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 1-11834 62-1598430
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
2210 CONGRESS STREET
PORTLAND, MAINE 04122
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(Address of principal executive offices)
(Zip Code)
(207) 770-2211
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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ITEM 5. OTHER EVENTS
(a) On August 2, 1999, the Company issued a press released attached hereto
as Exhibit 99.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNUMProvident Corporation
(Registrant)
Date: August 5, 1999
/s/ Thomas R. Watjen
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Thomas R. Watjen
Executive Vice President
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EXHIBIT 99
UnumProvident Corporation
2211 Congress Street
Portland, Maine 04122
1 Fountain Square
Chattanooga, TN 37402
August 2, 1999 ANALYSTS - Thomas A. H. White
(423) 755-8996
MEDIA - Catharine Hartnett
(207) 770-4361
UnumProvident Reports Net Operating Income of
$156.4 Million for Second Quarter of 1999
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Net Loss of $191.2 Million in Second Quarter of 1999 Reflects Previously
Announced Merger-Related Restructure Charges and Portfolio Rate Change
Portland, Maine and Chattanooga, Tn. -- UnumProvident Corporation (NYSE: UNM)
today reported after-tax operating income of $156.4 million ($0.66 per diluted
common share) for the second quarter of 1999, compared to $168.7 million ($0.69
per diluted common share) for the second quarter of 1998. These results include
after-tax incremental costs associated with the merger totaling $13.0 million
($0.05 per diluted common share) in the second quarter of 1999. These expenses,
which are not considered part of the merger-related charge detailed below,
primarily consist of training, integration and licensing costs, and compensation
costs. Adjusting for these additional expenses, adjusted after-tax operating
income totaled $169.4 million ($0.71 per diluted common share).
Chairman and Chief Executive Officer, James F. Orr, III said, "In our first
month as the newly-merged UnumProvident, I am very pleased with the progress we
are making in bringing our organizations together. We continue to be excited by
the growth opportunities we see in our primary markets -- group, individual, and
voluntary benefits -- and are working to position our company to expand our
leadership positions in each, while developing expanded integrated selling
opportunities."
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The net loss in the second quarter of 1999 was $191.2 million ($0.80 per diluted
common share) compared to net income of $173.5 million ($0.71 per diluted common
share) in the second quarter of 1998. The loss in the second quarter 1999
includes a merger-related charge of $142.2 million ($112.0 million after tax)
for employee-related expenses, exit activities related to duplicate facilities
and asset abandonments, and fees associated with the merger such as investment
banking, legal, and accounting fees. Also included in the second quarter is an
expense of $125.9 million ($81.8 million after tax) related to the early
retirement offer to employees. The loss also includes a portfolio discount rate
charge of $240.7 million ($156.5 million after tax) to change UNUM's process and
assumptions used to calculate the discount rate for claim reserves to those used
by Provident. These charges were previously announced on February 9, 1999.
Additionally, these net operating figures include net realized after-tax
investment gains of $2.7 million ($0.01 per diluted common share) in the second
quarter of 1999 and $3.4 million ($0.01 per diluted common share) in the second
quarter of 1998.
President and Chief Operating Officer, J. Harold Chandler said, "As we look to
the second half of 1999, our priority is to position UnumProvident for the year
2000 and beyond. This includes positioning our Company financially and
operationally to capitalize on our leadership position in the industry. We will
be reviewing our accounting policies and financial strategies to align with our
new company's strategic and financial objectives. We are also making
considerable progress toward our objective of bringing our two companies
together. We have just completed, for example, extensive training for our field
organization and have plans in the early fall for a comprehensive rollout to the
producer community. Furthermore, we have begun the process of repositioning our
investment portfolio and are beginning to realize the expected merger-related
cost savings. We are confident in our ability to successfully manage these
initiatives in a way which capitalizes on the opportunities we see in our
markets."
Results by Segment
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The Employee Benefits segment, which includes group disability, group life,
accidental death and dismemberment coverages (AD&D), group long-term care, and
the results of managed disability, reported a loss before net realized
investment gains and losses and federal income taxes ("loss") of $47.3 million
in the second quarter of 1999, compared to income before net realized investment
gains and losses and federal income taxes ("income") of $146.1 million in the
second quarter of 1998. Excluding the impact of the discount rate related
charge attributed to this segment, $191.7 million, this segment reported income
of $144.4 million in the second quarter of 1999. Group disability reported a
loss of $109.6 million in the second quarter of 1999, compared to income of
$100.0 million one year ago. Excluding the impact of the discount rate related
charge, this line reported income of $82.1 million in the second quarter of
1999.
The lower results in group disability are primarily the result of higher claims
incidence in the second quarter of 1999 relative to one year ago. The group
life, AD&D, and group long-term care lines of business reported income of $61.0
million in the second quarter of 1999, compared to income of $44.7 million one
year ago. The results in these lines benefited from strong premium growth and
an improved loss ratio relative to the second quarter of 1998.
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Premium income for the Employee Benefits segment increased 16.1 percent to
$960.7 million in the second quarter of 1999, compared to $827.2 million in the
second quarter of 1998. New annualized sales in group disability increased 14.3
percent to $151.7 million in the second quarter of 1999, from $132.7 million in
the second quarter of 1998. New annualized sales in group life increased 58.9
percent to $88.8 million in the second quarter of 1999, from $55.9 million in
the second quarter of 1998.
The Individual segment, which includes results from the individual disability,
individual life, and individual long-term care lines of business, reported
income of $47.0 million in the second quarter of 1999, compared to $80.8 million
in the second quarter of 1998. Excluding the impact of the discount rate
related charge attributed to this segment, $38.9 million, this segment reported
income of $85.9 million in the second quarter of 1999. Individual disability
reported income of $35.2 million in the second quarter of 1999, compared to
income of $69.3 million in the year ago quarter. Excluding the impact of the
discount rate related charge, this line reported income of $74.1 million in the
second quarter of 1999, an increase of 6.9 percent.
Premium income in the Individual segment increased 3.1 percent to $427.3 million
in the second quarter of 1999, compared to $414.4 million in the second quarter
of 1998. New annualized sales in the individual disability income line totaled
$31.4 million in the second quarter of 1999, compared to $30.1 million in the
second quarter of 1998. New annualized sales in this line, excluding
discontinued products, increased 17.8 percent to $27.8 million in the second
quarter of 1999 from $23.6 million in the year ago quarter.
The Voluntary Benefits segment, which includes the results of products sold to
groups of employees through payroll deduction at the work-site, reported income
of $31.1 million in the second quarter of 1999, compared to $30.9 million in the
second quarter of 1998. Premium income for this segment increased 3.8 percent
to $173.1 million in the second quarter of 1999, compared to $166.8 million in
the second quarter of 1998. New annualized sales in this segment increased 10.6
percent to $58.3 million in the second quarter of 1999 from $52.7 million in the
second quarter of 1998. Partially offsetting the revenue increase was an
increase in incurred benefits in the quarter.
The Other segment, which includes results from products no longer actively
marketed, including corporate-owned life insurance, group pension, health,
individual annuities, and reinsurance pools and management, reported income of
$7.7 million in the second quarter of 1999, compared to $36.6 million in the
second quarter of 1998. During the second quarter of 1998, the Company
recognized a before-tax gain of $12.2 million ($1.4 million after-tax or $0.01
per diluted common share) on the sale of certain of its annuity business.
Excluding the impact of the discount rate related charge attributed to this
segment, $10.1 million, this segment reported income of $17.8 million in the
second quarter of 1999, compared to $24.4 million excluding the gain in the
second quarter of 1998. Revenue (excluding net realized investment gains and
losses) in this segment totaled $261.3 million in the second quarter of 1999,
compared to $266.1 million in the second quarter of 1998.
The Corporate segment, which includes investment earnings on corporate assets
not specifically allocated to a line of business, corporate interest expense,
amortization of goodwill, and certain
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corporate expenses, reported a loss of $317.3 million in the second quarter of
1999, compared to a loss of $34.0 million in the second quarter of 1998.
Excluding the impact of the merger related charge of $268.1 million and the
incremental costs associated with the merger of $17.1 million which were
allocated to this segment, this segment reported a loss of $32.1 million in the
second quarter of 1999.
As of June 30, 1999, book value per common share was $22.58, compared to $25.03
a year ago. Book value excluding net unrealized gains on securities was $21.27,
compared to $20.92 a year ago.
The subsidiaries of UnumProvident Corporation offer a comprehensive, integrated
portfolio of products and services backed by industry-leading return-to-work
resources and disability expertise. Marketed under the UNUM brand,
UnumProvident is the world leader in protecting income and lifestyles through
its comprehensive offering of group, individual and voluntary benefits products
and services. UnumProvident has operations in the United States, Canada, the
U.K., Japan, and elsewhere around the world.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Statements in this press release regarding the business of UnumProvident
Corporation, which are not historical facts are "forward-looking statements"
that involve risks and uncertainties. For a discussion of such risks and
uncertainties, which could cause actual results to differ from those contained
in the forward-looking statements, see "Forward-Looking Information" in the UNUM
Corporation Form 10-K/A and "Cautionary Statement Regarding Forward-Looking
Statements" and "Risk Factors" in the Provident Companies, Inc. Form 10-K/A, in
each case for the fiscal year ended December 31, 1998.
# # #
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DIGEST OF EARNINGS
(Unaudited)
UnumProvident Corporation (UNM:NYSE)
and Subsidiaries
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
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($ in millions except share data) 1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Revenue excluding net $ 2,273.4 $ 2,102.0 $ 4,535.3 $ 4,194.8
realized investment gains
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Income before special items $ 156.4 $ 168.7 $ 329.0 $ 327.1
and net realized investment
gains
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Income (loss) before net $ (193.9) $ 170.1 $ (109.3) $ 328.5
realized investment gains
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Net Income (Loss) $ (191.2) $ 173.5 $ (101.9) $ 338.1
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Average Shares - Assuming 238,438,363 242,834,922 238,108,914 242,730,449
Dilution
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Average Shares - Basic 238,438,363 237,021,156 238,108,914 236,824,018
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Income per share before $ 0.66 $ 0.69 $ 1.38 $ 1.34
special items and net
realized investment gains -
Assuming Dilution
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Income (loss) per share $ (0.81) $ 0.70 $ (0.46) $ 1.35
before net realized
investment gains - Assuming
Dilution
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Income (loss) per share $ (0.81) $ 0.72 $ (0.46) $ 1.38
before net realized
investment gains - Basic
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Net Income (Loss) per share - $ (0.80) $ 0.71 $ (0.43) $ 1.39
Assuming Dilution
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Net Income (Loss) per share - $ (0.80) $ 0.73 $ (0.43) $ 1.42
Basic
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Book Value $ 22.58 $ 25.03
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Book value excluding net $ 21.27 $ 20.92
unrealized gain on
securities
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</TABLE>
