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S&P: Settlement Might Help Disability Giant

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NU Online News Service, Nov. 19, 2004, 3:43 p.m. EST

The recently proposed package of long-term disability claims settlement agreements could be good for UnumProvident Corp., Chattanooga, Tenn.[@@]

Analysts at Standard & Poor’s Ratings Services, New York, give that assessment in a comment on the package announcement.

S&P has assigned UnumProvident a BB minus credit rating.

UnumProvident, the dominant player in the U.S. disability insurance market, said Thursday it has agreed with a group that includes 4 state insurance regulators and officials from the U.S. Department of Labor to pay $15 million in fines. The company also has agreed to spend about $112 million more to reassess 215,000 old LTD claims and beef up benefits for many claimants.

The agreements will take effect if insurance regulators from 33 states and other jurisdictions, such as the District of Columbia, accept the settlement offer by Dec. 20, UnumProvident said. UnumProvident said it also might start implementing the settlement agreement if a smaller number of jurisdictions approve it.

Although UnumProvident would have to spend about $127 million to meet the terms of the settlement and might have to pay a $145 million fine if it fails to meet settlement performance goals, the immediate financial impact “is manageable within the company’s existing resources without affecting the current ratings,” the S&P analysts write.

“The settlement removes a significant management distraction, allowing management to focus its attention on improving the performance of its core businesses as well as on resolving class-action litigation that remains outstanding,” the S&P analysts write.

The risk that some states might opt out of the multistate settlement and the risks associated with the broker compensation investigations are built into the current ratings, the analysts write.