NU Online News Service, May 6, 2004, 5:47 p.m. EDT – UnumProvident Corp., Chattanooga, Tenn., is trying to clean house.[@@]
The disability insurance and worksite benefits company is reporting a net loss of $562.3 million for the first quarter on $2.6 billion in revenue, compared with a net loss of $246.4 million on $2.4 billion in revenue for the first quarter of 2003.
The net loss is due mainly to an effort to put overly generous individual disability policies sold before the mid-1990s in a separate, heavily reinsured closed block, UnumProvident says.
UnumProvident has developed a reputation for posting unusual charges on a regular basis, but Thomas Watjen, the company’s new president, says putting the old, unprofitable individual policies in a closed block should help keep their losses from infecting the results for the newer, tighter, more profitable policies.
The move will “restore focus to the parts of our business which we believe are capable of producing good value for our shareholders and our other constituents,” Watjen says in a statement.
The first-quarter net loss includes $111 million in strengthening of closed-block reserves and an $856 million write-down of intangible closed-block assets. Excluding closed-block charges, UnumProvident earned $132 million.
Excluding write-downs and reserve strengthening, the closed-block policies had operating earnings of $43.2 million, UnumProvident says.
UnumProvident will be transferring about $707 million to National Indemnity Company, a unit of Berkshire Hathaway Inc., Omaha, Neb., to reinsure the closed-block policies against the possibility of a big increase in losses, the company says.
At UnumProvident’s continuing operations, long term care insurance sales and profits were up.
Group disability operating profits were flat and individual disability operating profits were down partly because of the effects of low interest rates.
Operating profits at the Colonial worksite marketing unit increased to $36.6 million, from $35.2 million.