Friday, October 13, 2006

Life Insurance Cos in Takeover Speculation

  
Bloomberg, Hugh Son, 13 October 2006

Shares of UnumProvident Corp., the largest U.S. disability insurer, had their biggest gain in more than a year on speculation the company may be a takeover candidate.

The stock climbed $1.84, or 9.3 percent, to $21.72 in New York Stock Exchange composite trading, the most since August 2005. Canadian insurers including Sun Life Financial Inc., Manulife Financial Corp. and Great-West Lifeco Inc. are among potential buyers, according to Colin Devine, an analyst at Citigroup Inc. in New York.

"We have long viewed UNM as an attractive consolidation candidate if doing so would not get an acquirer downgraded," Devine wrote in a research note today. He has a 'buy' rating on the Chattanooga, Tennessee-based company.

Standard & Poor's and Moody's Investors Service lowered UnumProvident's credit ratings to junk in May 2004 after the company recognized shortfalls in reserves for claims. Later that year the insurer settled with regulators probing allegations it improperly denied benefits to clients.

UnumProvident spokesman Jim Sabourin declined to comment on the speculation, as did Peter Fuchs, spokesman for Manulife and Sun Life's Michel Leduc. Marlene Klassen, spokeswoman for Great West Life, didn't immediately return a call seeking comment.

The stock has fallen 65 percent since its high of $61.88 in 1999. In August, UnumProvident said it was taking longer than expected to lower its rate of payouts because of delays in a restructuring triggered by the regulatory settlement.

"This company has underperformed for so many years that if someone made a legitimate offer to the board it's kind of hard for them to argue they should remain independent," said Anton Schutz, who helps manage $260 million as president of Mendon Capital Advisors Corp. in Rochester, New York.

The firm sold its UnumProvident shares about a month ago, Schutz said.

Edward Spehar, an analyst at Merrill Lynch & Co. in New York, said he was 'skeptical' of a takeover. The shares are worth something in the 'high teens,' he wrote in a research note that rated the company a 'sell.'
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