UnumProvident Group FSR Affirmed; Outlook Stable

August 28, 2005

Standard & Poor’s Ratings Services has affirmed its ‘BBB+’ counterparty credit and financial strength ratings on the UnumProvident group of companies.

At the same time, Standard & Poor’s affirmed its ‘BB+’ counterparty credit and senior debt ratings on UnumProvident Corp. The outlook on all of the ratings is stable.

“The rating reflects continued challenges in improving profitability for the company’s largest line of business–U.S. group income protection–somewhat weakened financial flexibility due to a weak operating performance track record,” explained Standard & Poor’s credit analyst Rodney Clark. “The company has restored capital adequacy in its major operating subsidiaries to strong levels but now has somewhat limited access to further capital that might be needed to manage further surprises or to support future growth.”

Despite measures taken to improve profitability of the U.S. group disability business, this improvement continues to be slow, although other lines are generally showing stronger results. As a result, 2005 will show modest earnings improvement, with operating margins remaining about 10%. As the company continues its turn-around plan, U.S. group and individual sales are expected to decline by a single digit percentage in 2005, followed by modest growth in 2006.

Over the next year, if earnings on group disability show improvement and no additional significant charges occur, the outlook or ratings may be revised positively.

The ratings or outlook could be revised negatively if earnings fall significantly below current levels or if further significant reserve charges occur.

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