At first glance, giant disability insurer UnumProvident Corp. seems as solid as a rock.
The company traces its roots back more than a century, and promotes itself as a reputable safety net for more than 25 million American workers. Its board includes two former U.S. senators.
But the company is under attack in scores of lawsuits -- backed by statements from some former employees -- alleging that it has been canceling customers' legitimate benefits to shore up the bottom line.
Several suits have been filed in California, and in one case, a $7.7-million jury award to a Novato woman was upheld last month by a federal judge who commanded UnumProvident to "obey the law."
The allegations aside, this much is beyond dispute: UnumProvident's revenue growth is sluggish, claims are up and profit has not been as strong as Wall Street has expected.
And the lawsuits only add to the troubles besetting the Chattanooga, Tenn.-based concern that insures about 2 million Californians and has a major regional office in Glendale with 300 employees.
Moody's Investors Service this month downgraded UnumProvident's debt ratings because, among other things, "earnings and capital growth going forward will be constrained." The other major ratings service, Standard & Poor's, also recently downgraded its outlook for the company's performance, citing "flat growth trends."
UnumProvident's stock has plunged by two-thirds since nearing $60 a share in mid-1999, wiping out nearly $10 billion of investors' wealth. The shares closed Tuesday at $17.52 on the New York Stock Exchange.
All of which keeps alive talk that the 3-year-old merger that created the company was a mistake -- or at least has been poorly executed under the watch of UnumProvident's senior executives.
The $5-billion deal combined Provident Cos., the nation's largest provider of disability insurance for individuals, with Unum Corp., the leader in group disability coverage. The transaction came two years after Provident bought rival Paul Revere Corp., another major disability carrier, and after both Unum and Provident had gone through a spree of buying and selling assets to focus more on disability coverage.
"We are disappointed that we've seen relatively flat earnings the last couple of years," said Thomas Watjen, UnumProvident's vice chairman and chief operating officer. But the company is set to rebound, he vowed, and he defended the merger as creating "a competitive advantage for us" by enabling UnumProvident to sell a wider array of policies to group and individual customers.
