8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 3, 2005

UNUMPROVIDENT CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	1-11834	62-1598430
(State or other jurisdiction of	(Commission	(IRS Employer
incorporation or organization)	File Number)	Identification No.)

1 Fountain Square

Chattanooga, Tennessee 37402

(Address of principal executive offices)(Zip Code)

(423) 294-1011

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On May 3, 2005, UnumProvident Corporation issued a press release reporting its results for the first quarter of 2005, a copy of which is furnished herewith as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

Also on May 3, 2005, UnumProvident Corporation posted on its website at www.unumprovident.com the Statistical Supplement relating to its financial results for the first quarter of 2005. A copy of the Statistical Supplement is furnished herewith as Exhibit 99.2 and incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information included or incorporated in this Item 2.02, including Exhibits 99.1 and 99.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall such information and exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits. The following exhibits are filed with this Report:

99.1	Press release of UnumProvident Corporation dated May 3, 2005, of earnings for the first quarter of 2005.
99.2	Statistical Supplement of UnumProvident Corporation for the first quarter of 2005.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	UnumProvident Corporation (Registrant)
Date: May 3, 2005.	By:	/s/ F. Dean Copeland
		Name:	F. Dean Copeland
		Title:	Senior Executive Vice President, General Counsel and Chief Administrative Officer

INDEX TO EXHIBITS

EXHIBIT

99.1	Press release of UnumProvident Corporation dated May 3, 2005, of earnings for the first quarter of 2005.
99.2	Statistical Supplement of UnumProvident Corporation for the first quarter of 2005.

EX-99.1

Exhibit 99.1

NEWS RELEASE

FOR IMMEDIATE RELEASE	For additional information contact:	Thomas A. H. White Senior Vice President, Investor Relations 423.294.8996 Linnea R. Olsen Director, Investor Relations 410.872.8970
May 3, 2005		Jim Sabourin Vice President, Corporate Communications 423.294.6043

UnumProvident Corporation Reports

First Quarter 2005 Results

Chattanooga, TN – UnumProvident Corporation (NYSE: UNM) announced today its results for the first quarter of 2005.

The Company reported net income of $152.2 million ($0.49 per diluted common share) for the first quarter of 2005, compared to a net loss of $562.3 million ($1.91 per diluted common share) for the first quarter of 2004. Included in the results for the first quarter of 2005 are net realized after tax investment losses of $2.1 million ($0.01 per diluted common share), compared to net realized after tax investment gains of $16.1 million ($0.05 per diluted common share) in the first quarter of 2004. Included in net realized after tax investment gains and losses are after tax gains of $1.2 million in the first quarter of 2005 and $26.6 million in the first quarter of 2004 reflecting the increase in the fair value of DIG Issue B36 derivatives.

Also included in the results for the first quarter of 2004 is the impact of the restructuring of the Closed Block Individual Income Protection business, which reduced results $967.0 million before tax and $701.0 million after tax ($2.37 per diluted common share). The restructuring charges included a charge for reserve strengthening of $110.6 million before tax and the write-off of intangible assets of $856.4 million before tax. The first quarter of 2004 also includes income from discontinued operations totaling $7.0 million after tax ($0.02 per diluted common share).

Income from continuing operations was $154.3 million ($0.50 per diluted common share) in the first quarter of 2005, compared to $115.6 million ($0.39 per diluted common share) in the first quarter of 2004, excluding the net realized after tax investment gains and losses and the first quarter of 2004 restructuring charges. The Company believes operating income or loss, a non-GAAP financial measure which excludes realized investment gains and losses, is a better performance measure and a better indicator of the profitability and underlying trends in the business. Realized investment gains and losses are dependent on market conditions and general economic events and are not necessarily related to decisions regarding the Company’s underlying business. For a reconciliation to the most directly comparable GAAP measures, refer to the attached digest of earnings.

Also included in the first quarter of 2005 is the release of $32.0 million of income tax liabilities that relate primarily to interest on the timing of expense deductions. The $32.0 million ($0.10 per diluted common share) increase to net income is reported as a reduction to income tax expense in the quarter.

“Although our operating results in the first quarter improved over the year ago performance, they did not meet our expectations,” said Thomas R. Watjen, president and chief executive officer. “The majority of our operations met or exceeded our plans, but that was more than offset by adverse experience in our U.S. group income protection claims operations, which we believe has been temporarily disrupted by the implementation of changes made in response to the multistate regulatory settlement agreements we entered into at year-end and other process improvement initiatives undertaken in 2004. I believe we are seeing the effect on our claims operations of trying to absorb a considerable amount of change in a short period of time. We anticipated some disruption in claim processing and in the timing of claim decisions, but we experienced more in the first quarter than we expected. I believe that we will gradually restore our performance to more acceptable levels, and I am working very closely with our benefits area management team to assure that we are taking the necessary actions to improve performance while continuing to fully comply with our settlement agreements and maintaining the level of quality desired.”

Results by Segment

In the following discussions of the Company’s segment operating results, “operating revenue” excludes net realized investment gains and losses. “Operating income” or “operating loss” excludes income tax, net realized investment gains and losses, and results of discontinued operations.

The Income Protection segment reported operating income of $79.7 million in the first quarter of 2005, compared to $74.3 million in the first quarter of 2004.

Within the segment, the group income protection line reported operating income of $42.3 million in the first quarter of 2005, compared to $30.3 million in the prior year first quarter. The benefit ratio for the

group income protection line was 90.5 percent in the first quarter of 2005, compared to 89.4 percent in the first quarter of 2004. Claim recoveries and the timing of claim decisions were adversely impacted by disruption associated with the implementation of the organizational and procedural changes the Company made in response to the multistate regulatory settlement agreements entered into during the fourth quarter of 2004 and other process improvement initiatives. The Company currently believes this disruption is temporary and will not impact its long-term expectation for claim recovery rates. However, if the operational improvement the Company has projected occurs at a slower rate, there could be some additional costs in its claim operations over the next several quarters. Submitted incidence was generally flat in the first quarter of 2005 compared to the experience of the first quarter of 2004 and slightly higher as seasonally expected compared to the fourth quarter of 2004. The results in this business line also reflect improved earnings in the Company’s U.K. subsidiary, Unum Limited, and in its U.S. group short-term income protection line of business.

Also within this segment, the recently issued individual income protection line of business reported operating income of $21.2 million in the first quarter of 2005, compared to operating income of $29.3 million in the first quarter of 2004. The decline in earnings primarily reflects lower net investment income and a slight increase in the benefit ratio relative to the prior year first quarter results.

The long-term care line, which includes the results of both group and individual long-term care, reported operating income of $13.0 million in the first quarter of 2005, compared to $11.0 million in the first quarter of 2004. Finally, the disability management services line of business reported operating income of $3.2 million in the first quarter of 2005, compared to $3.7 million in the first quarter of 2004.

Premium income for the Income Protection segment increased 0.4 percent to $1,028.8 million in the first quarter of 2005, compared to $1,025.1 million in the first quarter of 2004. Within this segment, premium income for the group income protection line declined 1.7 percent to $773.9 million in the first quarter of 2005 from $786.9 million in the first quarter of 2004. Premium income for the recently issued individual income protection line increased 8.2 percent to $140.4 million in the first quarter of 2005 from $129.8 million in the first quarter of 2004. Finally, premium income for the long-term care line increased 5.6 percent to $114.5 million in the first quarter of 2005 from $108.4 million in the first quarter of 2004.

New annualized sales (submitted date basis) for group long-term income protection fully insured products declined 15.8 percent to $54.8 million in the first quarter of 2005 from $65.1 million in the first quarter of 2004. The decline was attributable to lower sales at Unum Limited in the U. K. which offset a slight increase in new sales in the U.S. operations. New annualized sales (submitted date basis) for group short-term income protection fully insured products declined 37.7 percent to $16.0 million in the first quarter of 2005 from $25.7 million in the first quarter of 2004 due to declines in the overall employer market segment

sales. New annualized sales (paid for basis) for recently issued individual income protection increased 3.7 percent to $30.5 million in the first quarter of 2005 from $29.4 million in the first quarter of 2004.

Premium persistency in the Company’s U.S. group long-term income protection business was 82.6 percent for the first quarter of 2005, compared to 84.8 percent for the full year 2004 and slightly higher than the Company’s previous guidance. This decline is consistent with the Company’s efforts to re-price portions of its in-force business in order to improve its profitability. Persistency in the Company’s group short-term income protection line of business was 78.3 percent for the first quarter of 2005, compared to 80.6 percent for full year 2004 and slightly below the Company’s previous guidance.

The Life and Accident segment reported operating income of $71.3 million in the first quarter of 2005, compared to $56.9 million in the first quarter of 2004. The improved performance is attributable to lower paid incidence levels relative to the year ago experience.

Premium income in this segment declined 4.0 percent to $470.4 million in the first quarter of 2005, compared to $490.1 million in the first quarter of 2004. New annualized sales (submitted date basis) in the group life line totaled $47.5 million in the first quarter of 2005, compared to $39.6 million in the first quarter of 2004. New annualized sales in the accidental death & dismemberment line of business totaled $3.4 million in the first quarter of 2005, compared to $2.5 million in the year ago quarter. New annualized sales in the brokerage voluntary life and other lines totaled $36.8 million in the first quarter of 2005, compared to $35.6 million in the first quarter of 2004.

Premium persistency in the Company’s U.S. group life line of business was 72.5 percent for the first quarter of 2005, compared to 84.0 percent for full year 2004 and below the Company’s previous guidance. The decline in persistency was due to higher terminations of some larger cases which had been targeted for significant rate increases.

The Colonial segment reported operating income of $43.8 million in the first quarter of 2005, compared to $36.6 million in the first quarter of 2004. The benefit ratio for this segment improved to 53.8 percent in the first quarter of 2005, compared to 55.5 percent in the first quarter of 2004, primarily due to a lower benefit ratio for the life product line. Premium income for this segment increased 6.8 percent to $193.5 million in the first quarter of 2005, compared to $181.1 million in the first quarter of 2004. New annualized sales in this segment declined 0.6 percent to $61.3 million in the first quarter of 2005 from $61.7 million in the first quarter of 2004.

The Individual Income Protection – Closed Block segment reported operating income of $23.1 million in the first quarter of 2005, compared to a loss of $923.8 million in the first quarter of 2004. Included in the segment results for the first quarter of 2004 are the charges related to the restructuring of this segment. Recovery trends in this segment were generally lower in the first quarter of 2005 relative to the first quarter of

2004, reflecting the implementation of the claims management changes during the quarter. Premium income for this segment was $242.0 million in the first quarter of 2005, compared to $251.3 million in the first quarter of 2004.

The Other segment, which includes results from products no longer actively marketed, reported operating income of $6.1 million in the first quarter of 2005, compared to $7.1 million in the first quarter of 2004.

The Corporate segment, which includes investment earnings on corporate assets not specifically allocated to a line of business, corporate interest expense, and certain other corporate expenses, reported a loss of $39.2 million in the first quarter of 2005, compared to a loss of $46.7 million in the first quarter of 2004.

The Company’s average number of shares outstanding used to calculate the per diluted common share results was 307,610,852 for the first quarter of 2005, compared to 294,989,771 for the first quarter of 2004.

Book value per common share at March 31, 2005 was $23.68, compared to $24.08 at March 31, 2004.

UnumProvident Corporation senior management will host a conference call on Wednesday, May 4 at 9:00 a.m. (eastern) to discuss the results of operations for the first quarter and may include forward-looking information, such as guidance on future results or trends in operations, as well as other material information. The dial-in number is (913) 981-5591. Alternatively, a live webcast of the call will be available at www.unumprovident.com in a listen-only mode. About fifteen minutes prior to the start of the call, you should access the “Investor and Shareholder Information” section of our website. A replay of the call will be available by telephone and on our website through Tuesday, May 10. In addition, the Company’s Statistical Supplement for the first quarter of 2005 is available on the Company’s website.

UnumProvident is the largest provider of group and individual income protection insurance in the United States and United Kingdom. Through its subsidiaries, UnumProvident insures more than 25 million people and provided $5.9 billion in total benefits to customers in 2004. With primary offices in Chattanooga, Tennessee, and Portland, Maine, the Company employs more than 11,600 people worldwide. For more information, visit www.unumprovident.com.

A “safe harbor” is provided for “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Statements in this press release, which are not historical facts, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties include such general matters as general economic or business conditions; events or consequences relating to terrorism and acts of war; competitive factors, including pricing pressures; legislative, regulatory, or tax changes; and the interest rate environment. More specifically, they include fluctuations in insurance reserve liabilities, projected new sales and renewals, persistency rates, incidence and recovery rates, pricing and underwriting projections and

experience, retained risks in reinsurance operations, availability and cost of reinsurance, level and results of litigation, rating agency actions, regulatory actions, negative media attention, the level of pension benefit costs and funding, investment results, including credit deterioration of investments, and effectiveness of product and customer support. For further information of risks and uncertainties that could affect actual results, see the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” in the Company’s Form 10-K for the fiscal year ended December 31, 2004. The forward-looking statements are being made as of the date of this press release and the Company expressly disclaims any obligation to update any forward-looking statement contained herein.

###

DIGEST OF EARNINGS

(Unaudited)

UnumProvident Corporation (UNM:NYSE)

and Subsidiaries

($ in millions, except share data)

	Three Months Ended March 31
	2005			2004
Operating Revenue by Segment	$	2,575.1		$	2,598.3
Net Realized Investment Gain (Loss)		(3.2	)		25.4
Total Revenue	$	2,571.9		$	2,623.7
Operating Income (Loss) by Segment	$	184.8		$	(795.6	)
Net Realized Investment Gain (Loss)		(3.2	)		25.4
Income Tax (Benefit)		29.4			(200.9	)
Income (Loss) from Continuing Operations		152.2			(569.3	)
Income from Discontinued Operations, Net of Tax		—			7.0
Net Income (Loss)	$	152.2		$	(562.3	)
PER SHARE INFORMATION
Assuming Dilution:
Income (Loss) from Continuing Operations	$	0.49		$	(1.93	)
Income from Discontinued Operations, Net of Tax		—			0.02
Net Income (Loss)	$	0.49		$	(1.91	)
Basic:
Income (Loss) from Continuing Operations	$	0.52		$	(1.93	)
Income from Discontinued Operations, Net of Tax		—			0.02
Net Income (Loss)	$	0.52		$	(1.91	)
Weighted Average Common Shares—Basic (000s)		295,490.5			294,989.8
Weighted Average Common Shares—Assuming Dilution (000s)		307,610.9			294,989.8
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
	Three Months Ended March 31, 2005						Three Months Ended March 31, 2004
	(in millions)			Per Share *			(in millions)			Per Share *
Income from Continuing Operations, excluding Net Realized
Investment Gains and Losses and Closed
Block Restructuring Charges, Net of Tax	$	154.3		$	0.50		$	115.6		$	0.39
Net Realized Investment Gain (Loss)		(3.2	)		(0.01	)		25.4			0.08
Income Tax Benefit (Expense) on Net Realized Investment Gain (Loss)		1.1			—			(9.3	)		(0.03	)
Closed Block Restructuring Charges, Net of Tax		—			—			(701.0	)		(2.37	)
Income (Loss) from Continuing Operations, Net of Tax	$	152.2		$	0.49		$	(569.3	)	$	(1.93	)

* Assuming Dilution

EX-99.2

EXHIBIT 99.2

UnumProvident

Statistical Supplement First Quarter 2005

TABLE OF CONTENTS

(dollars in millions, except share data)

Interim Results are Unaudited

	Page
Financial Highlights	1
Consolidated Statements of Operations	2
Financial Sales Data	3
Consolidated Balance Sheets	4
Financial Results by Segment	5
Quarterly Historical Financial Results by Segment	6
Financial Results and Selected Statistics by Segment
Income Protection	7
Life and Accident	8
Colonial	9
Individual Income Protection - Closed Block	10
Other	11
Corporate	12
Investment Fact Sheets	13
Statutory Capital and Surplus and Results	14
Notes to Statistical Supplement	15

Throughout this supplement, operating revenue and operating income (loss) before income taxes exclude realized investment gains and losses.

N.M. = not a meaningful percentage

UnumProvident Financial Highlights

	Three Months Ended						Year Ended
	3/31/2005			3/31/2004			12/31/2004			12/31/2003			12/31/2002
Financial Results
Premium Income	$	1,935.0		$	1,956.2		$	7,839.6		$	7,615.7		$	7,151.1
Segment Operating Revenue	$	2,575.1		$	2,598.3		$	10,435.7		$	10,165.4		$	9,568.2
Net Realized Investment Gain (Loss)		(3.2	)		25.4			29.2			(173.8	)		(309.1	)
Revenue	$	2,571.9		$	2,623.7		$	10,464.9		$	9,991.6		$	9,259.1
Income (Loss) from Continuing Operations Before Cumulative Effect of Accounting Principle Change	$	152.2		$	(569.3	)	$	(192.2	)	$	(264.6	)	$	396.9
Income (Loss) from Discontinued Operations, net of tax		—			7.0			(60.8	)		(161.7	)		11.4
Cumulative Effect of Accounting Principle Change, net of tax		—			—			—			39.9			(7.1	)
Net Income (Loss)	$	152.2		$	(562.3	)	$	(253.0	)	$	(386.4	)	$	401.2
Assets	$	50,836.6		$	50,476.9		$	50,832.3		$	49,718.3		$	45,259.5
Stockholders’ Equity	$	7,052.4		$	7,134.3		$	7,224.1		$	7,271.0		$	6,843.2

Note: Included in the first quarter and full year 2004 net loss is an after-tax charge of $701.0 million related to the restructuring of the individual income protection - closed block business. Also included in the full year 2004 net loss is an after-tax charge of $87.8 million related to the settlement of the multistate market conduct examination. Included in the 2003 net loss is an after-tax charge of $581.1 million related to group income protection reserve strengthening.

See “Notes to Statistical Supplement” on page 15 for additional information.

1

UnumProvident Financial Highlights

	Three Months Ended					Year Ended
	3/31/2005		3/31/2004			12/31/2004			12/31/2003			12/31/2002
Per Common Share Information
Assuming Dilution:
Income (Loss) from Continuing Operations Before
Cumulative Effect of Accounting Principle Change	$	0.49	$	(1.93	)	$	(0.65	)	$	(0.96	)	$	1.63
Income (Loss) from Discontinued Operations, net of tax		—		0.02			(0.21	)		(0.58	)		0.05
Cumulative Effect of Accounting Principle Change, net of tax		—		—			—			0.14			(0.03	)
Net Income (Loss)	$	0.49	$	(1.91	)	$	(0.86	)	$	(1.40	)	$	1.65
Basic:
Income (Loss) from Continuing Operations Before
Cumulative Effect of Accounting Principle Change	$	0.52	$	(1.93	)	$	(0.65	)	$	(0.96	)	$	1.64
Income (Loss) from Discontinued Operations, net of tax		—		0.02			(0.21	)		(0.58	)		0.05
Cumulative Effect of Accounting Principle Change, net of tax		—		—			—			0.14			(0.03	)
Net Income (Loss)	$	0.52	$	(1.91	)	$	(0.86	)	$	(1.40	)	$	1.66
Dividends Paid	$	0.0750	$	0.0750		$	0.3000		$	0.3725		$	0.5900
Book Value	$	23.68	$	24.08		$	24.36		$	24.55		$	28.33
Price (UNM closing price on last trading day of period)	$	17.02	$	14.63		$	17.94		$	15.77		$	17.54

1.1

UnumProvident Consolidated Statements of Operations

	Three Months Ended						Year Ended
	3/31/2005			3/31/2004			12/31/2004			12/31/2003			12/31/2002
Revenue
Premium Income	$	1,935.0		$	1,956.2		$	7,839.6		$	7,615.7		$	7,151.1
Net Investment Income		528.0			534.1			2,158.7			2,158.4			2,028.9
Net Realized Investment Gain (Loss)		(3.2	)		25.4			29.2			(173.8	)		(309.1	)
Other Income		112.1			108.0			437.4			391.3			388.2
Total Revenue		2,571.9			2,623.7			10,464.9			9,991.6			9,259.1
Benefits and Expenses
Benefits and Change in Reserves for Future Benefits		1,737.9			1,879.3			7,248.4			7,868.1			6,324.8
Commissions		207.7			221.3			842.3			844.1			820.2
Interest and Debt Expense		52.8			49.2			207.1			187.2			162.4
Deferral of Policy Acquisition Costs		(137.6	)		(148.3	)		(557.3	)		(665.9	)		(671.4	)
Amortization of Deferred Policy Acquisition Costs		115.8			108.6			436.7			458.6			398.9
Amortization of Value of Business Acquired and Goodwill		4.1			3.9			15.8			37.5			39.0
Impairment of Intangible Assets		—			856.4			856.4			—			—
Other Operating Expenses		409.6			423.5			1,675.0			1,697.2			1,592.0
Total Benefits and Expenses		2,390.3			3,393.9			10,724.4			10,426.8			8,665.9
Income (Loss) from Continuing Operations Before Income Taxes and Cumulative Effect of Accounting Principle Change		181.6			(770.2	)		(259.5	)		(435.2	)		593.2
Income Taxes (Benefit)		29.4			(200.9	)		(67.3	)		(170.6	)		196.3
Income (Loss) from Continuing Operations Before Cumulative Effect of Accounting Principle Change		152.2			(569.3	)		(192.2	)		(264.6	)		396.9
Income (Loss) from Discontinued Operations, net of tax		—			7.0			(60.8	)		(161.7	)		11.4
Cumulative Effect of Accounting Principle Change, net of tax		—			—			—			39.9			(7.1	)
Net Income (Loss)	$	152.2		$	(562.3	)	$	(253.0	)	$	(386.4	)	$	401.2
Average Number of Shares Outstanding
Basic		295,490,460			294,989,771			295,224,305			276,132,176			242,032,884
Dilutive Securities:
Purchase Contracts (see page 15)		10,292,134			—			—			—			—
Options and Other Dilutive Securities		1,828,258			—			—			—			1,037,230
Assuming Dilution		307,610,852			294,989,771			295,224,305			276,132,176			243,070,114
Actual Number of Shares Outstanding		297,801,193			296,291,201			296,545,913			296,143,422			241,587,260

2

UnumProvident Financial Sales Data

	Three Months Ended						Year Ended
	3/31/2005		3/31/2004		% Change		12/31/2004		12/31/2003		12/31/2002
Income Protection Segment
Fully Insured Products
Group Long-term Income Protection	$	54.8	$	65.1	(15.8	)%	$	283.7	$	380.6	$	382.2
Group Short-term Income Protection		16.0		25.7	(37.7	)		79.5		127.2		129.3
Individual Income Protection - Recently Issued		30.5		29.4	3.7			105.5		122.8		128.2
Group Long-term Care		5.0		3.3	51.5			18.7		27.0		23.5
Individual Long-term Care		3.1		5.4	(42.6	)		19.5		43.9		63.7
Total Fully Insured Products		109.4		128.9	(15.1	)		506.9		701.5		726.9
Administrative Services Only (ASO) Products
Group Long-term Income Protection		0.1		0.2	(50.0	)		1.1		6.5		4.8
Group Short-term Income Protection		0.7		1.6	(56.3	)		7.3		14.4		20.2
Total ASO Products		0.8		1.8	(55.6	)		8.4		20.9		25.0
Income Protection Segment	$	110.2	$	130.7	(15.7	)	$	515.3	$	722.4	$	751.9
Life and Accident Segment
Group Life	$	47.5	$	39.6	19.9		$	234.6	$	269.3	$	288.6
Accidental Death & Dismemberment		3.4		2.5	36.0			12.8		26.6		41.1
Brokerage Voluntary Life and Other		36.8		35.6	3.4			81.3		75.3		57.5
Life and Accident Segment	$	87.7	$	77.7	12.9		$	328.7	$	371.2	$	387.2
Colonial Segment	$	61.3	$	61.7	(0.6	)	$	278.5	$	285.2	$	257.1
Individual Income Protection - Closed Block Segment	$	1.6	$	2.0	(20.0	)	$	7.8	$	12.1	$	18.6
Total Sales from Continuing Operations	$	260.8	$	272.1	(4.2	)	$	1,130.3	$	1,390.9	$	1,414.8
Sales from Discontinued Operations	$	—	$	7.5	(100.0	)	$	10.1	$	36.6	$	34.5
Total	$	260.8	$	279.6	(6.7	)%	$	1,140.4	$	1,427.5	$	1,449.3

3

UnumProvident Consolidated Balance Sheets

	March 31, 2005			December 31,
				2004			2003
Assets
Investments
Fixed Maturity Securities Available-for-Sale
Continuing	$	32,614.6		$	32,488.4		$	30,084.2
Discontinued		—			—			1,102.4
Total Fixed Maturity Securities Available-for-Sale		32,614.6			32,488.4			31,186.6
Equity Securities		12.3			12.9			39.1
Mortgage Loans		521.1			498.2			474.7
Real Estate		26.2			27.4			25.9
Policy Loans		3,073.5			3,073.6			2,877.9
Other Long-term Investments		74.3			77.0			91.9
Short-term Investments		252.0			410.2			332.2
Total Investments		36,574.0			36,587.7			35,028.3
Cash and Bank Deposits		60.5			130.7			119.2
Reinsurance Receivable		7,256.9			6,969.2			6,242.6
Accrued Investment Income		603.5			588.3			543.6
Deferred Policy Acquisition Costs		2,901.9			2,882.5			3,051.9
Value of Business Acquired		96.0			101.5			463.5
Goodwill		271.2			271.1			476.7
Current Income Tax		11.8			—			—
Other Discontinued Assets		—			—			330.2
Other Assets		3,030.7			3,269.6			3,429.8
Separate Account Assets		30.1			31.7			32.5
Total Assets	$	50,836.6		$	50,832.3		$	49,718.3
Liabilities
Policy and Contract Benefits	$	1,994.5		$	2,060.1		$	1,928.4
Reserves for Future Policy and Contract Benefits and Unearned Premiums		33,986.5			33,507.1			31,431.1
Other Policyholders’ Funds		2,380.3			2,425.3			2,493.3
Income Tax		930.2			1,060.9			946.8
Short-term Debt		202.0			227.0			—
Long-term Debt		2,862.0			2,862.0			2,789.0
Other Discontinued Liabilities		—			—			1,462.6
Other Liabilities		1,398.6			1,434.1			1,363.6
Separate Account Liabilities		30.1			31.7			32.5
Total Liabilities		43,784.2			43,608.2			42,447.3
Stockholders’ Equity
Common Stock		30.0			29.8			29.8
Additional Paid-in Capital		1,613.1			1,588.4			1,609.1
Retained Earnings		4,315.5			4,185.5			4,526.9
Accumulated Other Comprehensive Income		1,173.3			1,481.1			1,171.2
Treasury Stock		(54.2	)		(54.2	)		(54.2	)
Deferred Compensation		(25.3	)		(6.5	)		(11.8	)
Total Stockholders’ Equity		7,052.4			7,224.1			7,271.0
Total Liabilities and Stockholders’ Equity	$	50,836.6		$	50,832.3		$	49,718.3

4

UnumProvident Segment Deferred Policy Acquisition Cost

	Income Protection			Life and Accident			Colonial			Individual Income Protection - Closed Block			Corporate and Other			Consolidated
Balances at December 31, 2002	$	1,587.3		$	485.5		$	440.6		$	318.3		$	0.8		$	2,832.5
Capitalized		333.1			159.3			166.1			7.5			(0.1	)		665.9
Amortized		(191.0	)		(108.0	)		(118.3	)		(41.3	)		—			(458.6	)
Foreign Currency and Other		13.6			0.6			—			(2.3	)		0.2			12.1
Balances at December 31, 2003		1,743.0			537.4			488.4			282.2			0.9			3,051.9
Capitalized		255.9			127.8			173.7			—			(0.1	)		557.3
Amortized		(196.1	)		(109.4	)		(131.2	)		—			—			(436.7	)
Impairment		—			—			—			(282.2	)		—			(282.2	)
Foreign Currency and Other		(8.8	)		1.3			—			—			(0.3	)		(7.8	)
Balances at December 31, 2004		1,794.0			557.1			530.9			—			0.5			2,882.5
Capitalized		59.8			32.5			45.3			—			—			137.6
Amortized		(50.9	)		(30.5	)		(34.4	)		—			—			(115.8	)
Foreign Currency and Other		(2.0	)		(0.4	)		—			—			—			(2.4	)
Balances at March 31, 2005	$	1,800.9		$	558.7		$	541.8		$	—		$	0.5		$	2,901.9

4.1

UnumProvident Segment Balance Sheets - March 31, 2005

	Income Protection
	Group Income Protection		Individual Income Protection - Recently Issued		Other Lines		Total Income Protection		Life and Accident		Colonial		Individual Income Protection - Closed Block		Corporate and Other			Consolidated
Assets
Investments	$	11,692.0	$	1,203.3	$	2,090.8	$	14,986.1	$	3,420.8	$	1,588.1	$	10,915.8	$	5,663.2		$	36,574.0
Deferred Policy Acquisition Costs		701.7		780.4		318.8		1,800.9		558.7		541.8		—		0.5			2,901.9
Value of Business Acquired		56.7		3.5		—		60.2		19.4		16.4		—		—			96.0
Goodwill		14.7		188.9		67.6		271.2		—		—		—		—			271.2
All Other		1,204.8		336.4		120.9		1,662.1		380.8		11.1		4,990.9		3,948.6			10,993.5
Total Assets	$	13,669.9	$	2,512.5	$	2,598.1	$	18,780.5	$	4,379.7	$	2,157.4	$	15,906.7	$	9,612.3		$	50,836.6
Liabilities
Reserves and Policyholder Benefits	$	10,332.2	$	1,238.6	$	1,703.5	$	13,274.3	$	2,556.2	$	1,212.5	$	12,744.7	$	8,573.6		$	38,361.3
Debt		—		—		—		—		—		—		—		3,064.0			3,064.0
All Other		599.9		249.5		178.1		1,027.5		254.1		153.3		348.3		575.7			2,358.9
Total Liabilities		10,932.1		1,488.1		1,881.6		14,301.8		2,810.3		1,365.8		13,093.0		12,213.3			43,784.2
Other Allocated Stockholders’ Equity		2,550.9		945.8		443.3		3,940.0		1,495.3		732.7		2,292.7		(2,657.1	)		5,803.6
Unrealized Gain/Loss on Securities		186.9		78.6		273.2		538.7		74.1		58.9		521.0		56.1			1,248.8
Total Allocated Stockholders’ Equity		2,737.8		1,024.4		716.5		4,478.7		1,569.4		791.6		2,813.7		(2,601.0	)		7,052.4
Total Liabilities and Allocated Stockholders’ Equity	$	13,669.9	$	2,512.5	$	2,598.1	$	18,780.5	$	4,379.7	$	2,157.4	$	15,906.7	$	9,612.3		$	50,836.6

Allocated stockholders’ equity is determined on the basis of an internal allocation formula that reflects the volume and risk components of the business and aligns with the Company’s target capital levels for regulatory and rating agency purposes. This formula is modified periodically to recognize changes in the views of capital requirements.

4.2

UnumProvident Segment Balance Sheets - December 31, 2004

	Income Protection
	Group Income Protection		Individual Income Protection - Recently Issued		Other Lines		Total Income Protection		Life and Accident		Colonial		Individual Income Protection - Closed Block		Corporate and Other			Consolidated
Assets
Investments	$	11,668.9	$	1,187.2	$	1,936.9	$	14,793.0	$	3,398.2	$	1,499.6	$	11,068.9	$	5,828.0		$	36,587.7
Deferred Policy Acquisition Costs		704.7		770.9		318.4		1,794.0		557.1		530.9		—		0.5			2,882.5
Value of Business Acquired		81.8		—		—		81.8		3.0		16.7		—		—			101.5
Goodwill		15.9		187.6		67.6		271.1		—		—		—		—			271.1
All Other		1,254.9		339.4		143.5		1,737.8		375.0		64.0		4,922.5		3,890.2			10,989.5
Total Assets	$	13,726.2	$	2,485.1	$	2,466.4	$	18,677.7	$	4,333.3	$	2,111.2	$	15,991.4	$	9,718.7		$	50,832.3
Liabilities
Reserves and Policyholder Benefits	$	10,111.6	$	1,205.0	$	1,618.0	$	12,934.6	$	2,572.5	$	1,191.0	$	12,736.8	$	8,557.6		$	37,992.5
Debt		—		—		—		—		—		—		—		3,089.0			3,089.0
All Other		691.6		255.3		154.9		1,101.8		218.6		131.5		379.4		695.4			2,526.7
Total Liabilities		10,803.2		1,460.3		1,772.9		14,036.4		2,791.1		1,322.5		13,116.2		12,342.0			43,608.2
Other Allocated Stockholders’ Equity		2,531.4		945.3		441.9		3,918.6		1,469.7		720.5		2,309.6		(2,741.0	)		5,677.4
Unrealized Gain/Loss on Securities		391.6		79.5		251.6		722.7		72.5		68.2		565.6		117.7			1,546.7
Total Allocated Stockholders’ Equity		2,923.0		1,024.8		693.5		4,641.3		1,542.2		788.7		2,875.2		(2,623.3	)		7,224.1
Total Liabilities and Allocated Stockholders’ Equity	$	13,726.2	$	2,485.1	$	2,466.4	$	18,677.7	$	4,333.3	$	2,111.2	$	15,991.4	$	9,718.7		$	50,832.3

Allocated stockholders’ equity is determined on the basis of an internal allocation formula that reflects the volume and risk components of the business and aligns with the Company’s target capital levels for regulatory and rating agency purposes. This formula is modified periodically to recognize changes in the views of capital requirements.

4.3

UnumProvident Financial Results by Segment

	Three Months Ended						Year Ended
	3/31/2005		3/31/2004		%Change		12/31/2004		12/31/2003		%Change
Premium Income
Income Protection	$	1,028.8	$	1,025.1	0.4	%	$	4,117.3	$	3,937.0	4.6	%
Life and Accident		470.4		490.1	(4.0	)		1,963.4		1,922.4	2.1
Colonial		193.5		181.1	6.8			741.0		693.5	6.8
Individual Income Protection - Closed Block		242.0		251.3	(3.7	)		986.6		1,028.5	(4.1	)
Other		0.3		8.6	(96.5	)		31.3		34.3	(8.7	)
		1,935.0		1,956.2	(1.1	)		7,839.6		7,615.7	2.9
Net Investment Income
Income Protection		228.9		217.2	5.4			905.7		889.0	1.9
Life and Accident		52.8		44.9	17.6			199.7		191.5	4.3
Colonial		25.0		22.8	9.6			94.5		90.0	5.0
Individual Income Protection - Closed Block		179.9		213.0	(15.5	)		799.1		824.2	(3.0	)
Other		29.1		32.0	(9.1	)		127.3		140.1	(9.1	)
Corporate		12.3		4.2	192.9			32.4		23.6	37.3
		528.0		534.1	(1.1	)		2,158.7		2,158.4	—
Other Income
Income Protection		66.4		64.4	3.1			252.0		237.0	6.3
Life and Accident		5.4		4.5	20.0			18.0		16.5	9.1
Colonial		1.2		0.3	N.M.			2.3		2.5	(8.0	)
Individual Income Protection - Closed Block		24.7		27.8	(11.2	)		100.3		95.9	4.6
Other		9.3		10.7	(13.1	)		31.2		31.4	(0.6	)
Corporate		5.1		0.3	N.M.			33.6		8.0	N.M.
		112.1		108.0	3.8			437.4		391.3	11.8
Total Operating Revenue
Income Protection		1,324.1		1,306.7	1.3			5,275.0		5,063.0	4.2
Life and Accident		528.6		539.5	(2.0	)		2,181.1		2,130.4	2.4
Colonial		219.7		204.2	7.6			837.8		786.0	6.6
Individual Income Protection - Closed Block		446.6		492.1	(9.2	)		1,886.0		1,948.6	(3.2	)
Other		38.7		51.3	(24.6	)		189.8		205.8	(7.8	)
Corporate		17.4		4.5	N.M.			66.0		31.6	108.9
		2,575.1		2,598.3	(0.9	)		10,435.7		10,165.4	2.7

5

UnumProvident Financial Results by Segment

	Three Months Ended								Year Ended
	3/31/2005			3/31/2004			%Change		12/31/2004			12/31/2003			%Change
Benefits and Expenses
Income Protection	$	1,244.4		$	1,232.4		1.0	%	$	5,023.6		$	5,629.8		(10.8	)%
Life and Accident		457.3			482.6		(5.2	)		1,929.5			1,865.6		3.4
Colonial		175.9			167.6		5.0			682.2			639.3		6.7
Individual Income Protection - Closed Block		423.5			1,415.9		(70.1	)		2,708.8			1,886.1		43.6
Other		32.6			44.2		(26.2	)		160.6			180.9		(11.2	)
Corporate		56.6			51.2		10.5			219.7			225.1		(2.4	)
		2,390.3			3,393.9		(29.6	)		10,724.4			10,426.8		2.9
Income (Loss) from Continuing Operations Before Income Taxes, Net Realized Investment Gain (Loss), and Cumulative Effect of Accounting Principle Change
Income Protection		79.7			74.3		7.3			251.4			(566.8	)	144.4
Life and Accident		71.3			56.9		25.3			251.6			264.8		(5.0	)
Colonial		43.8			36.6		19.7			155.6			146.7		6.1
Individual Income Protection - Closed Block		23.1			(923.8	)	102.5			(822.8	)		62.5		N.M.
Other		6.1			7.1		(14.1	)		29.2			24.9		17.3
Corporate		(39.2	)		(46.7	)	16.1			(153.7	)		(193.5	)	20.6
		184.8			(795.6	)	123.2			(288.7	)		(261.4	)	(10.4	)
Income Taxes (Benefit)		30.5			(210.2	)	(114.5	)		(77.7	)		(110.1	)	(29.4	)
Income (Loss) from Continuing Operations Before Net Realized Investment Gain (Loss) and Cumulative Effect of Accounting Principle Change		154.3			(585.4	)	126.4			(211.0	)		(151.3	)	(39.5	)
Net Realized Investment Gain (Loss)		(3.2	)		25.4		(112.6	)		29.2			(173.8	)	116.8
Tax Expense (Benefit) on Net Realized Investment Gain (Loss)		(1.1	)		9.3		111.8			10.4			(60.5	)	(117.2	)
Income (Loss) from Discontinued Operations, net of tax		—			7.0		N.M.			(60.8	)		(161.7	)	(62.4	)
Cumulative Effect of Accounting Principle Change, net of tax		—			—		—			—			39.9		(100.0	)
Net Income (Loss)	$	152.2		$	(562.3	)	127.1	%	$	(253.0	)	$	(386.4	)	34.5	%

Note: See “Notes to Statistical Supplement” on page 15 for information.

5.1

UnumProvident Quarterly Historical Financial Results by Segment

	3/31/05		12/31/04		9/30/04		6/30/04		3/31/04		12/31/03			9/30/03		6/30/03		3/31/03
Premium Income
Income Protection	$	1,028.8	$	1,034.2	$	1,033.5	$	1,024.5	$	1,025.1	$	1,007.2		$	992.2	$	986.0	$	951.6
Life and Accident		470.4		492.1		485.0		496.2		490.1		482.4			484.0		485.5		470.5
Colonial		193.5		189.5		186.4		184.0		181.1		177.2			174.0		171.7		170.6
Individual Income Protection - Closed Block		242.0		239.3		246.8		249.2		251.3		237.4			262.1		260.4		268.6
Other		0.3		9.2		10.6		2.9		8.6		7.7			9.0		7.6		10.0
		1,935.0		1,964.3		1,962.3		1,956.8		1,956.2		1,911.9			1,921.3		1,911.2		1,871.3
Net Investment Income
Income Protection		228.9		239.0		222.4		227.1		217.2		221.5			233.7		223.6		210.2
Life and Accident		52.8		59.3		50.0		45.5		44.9		46.7			50.7		47.1		47.0
Colonial		25.0		24.5		23.5		23.7		22.8		25.2			22.9		21.1		20.8
Individual Income Protection - Closed Block		179.9		203.6		192.6		189.9		213.0		211.0			208.0		200.9		204.3
Other		29.1		31.0		32.1		32.2		32.0		33.3			32.2		38.2		36.4
Corporate		12.3		7.1		6.6		14.5		4.2		11.1			7.8		4.1		0.6
		528.0		564.5		527.2		532.9		534.1		548.8			555.3		535.0		519.3
Other Income
Income Protection		66.4		62.0		63.9		61.7		64.4		61.4			61.4		58.4		55.8
Life and Accident		5.4		5.3		4.0		4.2		4.5		5.7			4.0		3.7		3.1
Colonial		1.2		0.6		0.7		0.7		0.3		0.4			0.4		1.3		0.4
Individual Income Protection - Closed Block		24.7		31.2		21.1		20.2		27.8		18.8			30.2		33.4		13.5
Other		9.3		3.6		7.8		9.1		10.7		2.1			9.0		9.0		11.3
Corporate		5.1		19.3		3.8		10.2		0.3		(1.4	)		0.5		3.7		5.2
		112.1		122.0		101.3		106.1		108.0		87.0			105.5		109.5		89.3
Total Operating Revenue
Income Protection		1,324.1		1,335.2		1,319.8		1,313.3		1,306.7		1,290.1			1,287.3		1,268.0		1,217.6
Life and Accident		528.6		556.7		539.0		545.9		539.5		534.8			538.7		536.3		520.6
Colonial		219.7		214.6		210.6		208.4		204.2		202.8			197.3		194.1		191.8
Individual Income Protection - Closed Block		446.6		474.1		460.5		459.3		492.1		467.2			500.3		494.7		486.4
Other		38.7		43.8		50.5		44.2		51.3		43.1			50.2		54.8		57.7
Corporate		17.4		26.4		10.4		24.7		4.5		9.7			8.3		7.8		5.8
		2,575.1		2,650.8		2,590.8		2,595.8		2,598.3		2,547.7			2,582.1		2,555.7		2,479.9

6

UnumProvident Quarterly Historical Financial Results by Segment

	3/31/05			12/31/04			9/30/04			6/30/04			3/31/04			12/31/03			9/30/03			6/30/03			3/31/03
Benefits and Expenses
Income Protection	$	1,244.4		$	1,344.1		$	1,224.6		$	1,222.5		$	1,232.4		$	1,668.0		$	1,199.2		$	1,169.5		$	1,593.1
Life and Accident		457.3			481.4			478.2			487.3			482.6			462.2			472.4			473.2			457.8
Colonial		175.9			174.6			171.0			169.0			167.6			165.2			158.8			158.7			156.6
Individual Income Protection - Closed Block		423.5			436.3			427.3			429.3			1,415.9			445.0			481.1			489.4			470.6
Other		32.6			39.5			43.2			33.7			44.2			45.4			41.5			48.0			46.0
Corporate		56.6			57.9			55.2			55.4			51.2			56.3			55.6			53.0			60.2
		2,390.3			2,533.8			2,399.5			2,397.2			3,393.9			2,842.1			2,408.6			2,391.8			2,784.3
Income (Loss) from Continuing Operations Before Income Taxes, Net Realized Investment Gain (Loss), and Cumulative Effect of Accounting Principle Change
Income Protection		79.7			(8.9	)		95.2			90.8			74.3			(377.9	)		88.1			98.5			(375.5	)
Life and Accident		71.3			75.3			60.8			58.6			56.9			72.6			66.3			63.1			62.8
Colonial		43.8			40.0			39.6			39.4			36.6			37.6			38.5			35.4			35.2
Individual Income Protection - Closed Block		23.1			37.8			33.2			30.0			(923.8	)		22.2			19.2			5.3			15.8
Other		6.1			4.3			7.3			10.5			7.1			(2.3	)		8.7			6.8			11.7
Corporate		(39.2	)		(31.5	)		(44.8	)		(30.7	)		(46.7	)		(46.6	)		(47.3	)		(45.2	)		(54.4	)
		184.8			117.0			191.3			198.6			(795.6	)		(294.4	)		173.5			163.9			(304.4	)
Income Taxes (Benefit)		30.5			(0.7	)		65.5			67.7			(210.2	)		(110.3	)		58.7			52.5			(111.0	)
Income (Loss) from Continuing Operations Before Net Realized Investment Gain (Loss) and Cumulative effect of Accounting Principle Change		154.3			117.7			125.8			130.9			(585.4	)		(184.1	)		114.8			111.4			(193.4	)
Net Realized Investment Gain (Loss)		(3.2	)		25.8			64.5			(86.5	)		25.4			(36.4	)		(25.8	)		(26.5	)		(85.1	)
Tax Expense (Benefit) on Net Realized Investment Gain (Loss)		(1.1	)		9.0			22.7			(30.6	)		9.3			(12.5	)		(9.3	)		(9.2	)		(29.5	)
Income (Loss) from Discontinued Operations, net of tax		—			—			—			(67.8	)		7.0			(179.1	)		10.4			4.4			2.6
Cumulative Effect of Accounting Principle Change, net of tax		—			—			—			—			—			39.9			—			—			—
Net Income (Loss)	$	152.2		$	134.5		$	167.6		$	7.2		$	(562.3	)	$	(347.2	)	$	108.7		$	98.5		$	(246.4	)
Per Common Share - Assuming Dilution
Income (Loss) from Continuing Operations Before Cumulative Effect of Accounting Principle Change	$	0.49		$	0.45		$	0.55		$	0.25		$	(1.93	)	$	(0.71	)	$	0.33		$	0.34		$	(1.03	)
Income (Loss) from Discontinued Operations, net of tax		—			—			—			(0.23	)		0.02			(0.61	)		0.03			0.02			0.01
Cumulative Effect of Accounting Principle Change, net of tax		—			—			—			—			—			0.14			—			—			—
Net Income (Loss)	$	0.49		$	0.45		$	0.55		$	0.02		$	(1.91	)	$	(1.18	)	$	0.36		$	0.36		$	(1.02	)

Note: See “Notes to Statistical Supplement” on page 15 for information.

6.1

UnumProvident Financial Results for Income Protection Segment

	Three Months Ended						Year Ended
	3/31/2005			3/31/2004			12/31/2004			12/31/2003			12/31/2002
Operating Revenue
Premium Income	$	1,028.8		$	1,025.1		$	4,117.3		$	3,937.0		$	3,570.7
Net Investment Income		228.9			217.2			905.7			889.0			783.1
Other Income		66.4			64.4			252.0			237.0			215.8
Total Operating Revenue		1,324.1			1,306.7			5,275.0			5,063.0			4,569.6
Benefits and Expenses
Benefits and Change in Reserves for Future Benefits		880.6			868.7			3,572.3			4,313.9			2,864.7
Commissions		103.0			107.8			413.2			405.6			399.1
Deferral of Policy Acquisition Costs		(59.8	)		(69.3	)		(255.9	)		(333.1	)		(361.2	)
Amortization of Deferred Policy Acquisition Costs		50.9			47.9			196.1			191.0			168.3
Amortization of Value of Business Acquired		3.2			3.0			12.3			3.9			2.2
Operating Expenses		266.5			274.3			1,085.6			1,048.5			957.3
Total Benefits and Expenses		1,244.4			1,232.4			5,023.6			5,629.8			4,030.4
Operating Income (Loss) Before Income Taxes and Net Realized Investment Gains and Losses	$	79.7		$	74.3		$	251.4		$	(566.8	)	$	539.2
Operating Ratios
Benefit Ratio		85.6	%		84.7	%		86.8	%		109.6	%		80.2	%
Operating Expense Ratio		25.9	%		26.8	%		26.4	%		26.6	%		26.8	%
Before-tax Profit (Loss) Margin		7.7	%		7.2	%		6.1	%		(14.4	)%		15.1	%

7

UnumProvident Financial Results for Group Income Protection

	Three Months Ended						Year Ended
	3/31/2005			3/31/2004			12/31/2004			12/31/2003			12/31/2002
Operating Revenue
Premium Income
Group Long-term Income Protection	$	630.1		$	629.8		$	2,530.4		$	2,402.9		$	2,198.7
Group Short-term Income Protection		143.8			157.1			616.1			630.9			601.6
Total Premium Income		773.9			786.9			3,146.5			3,033.8			2,800.3
Net Investment Income		182.5			171.2			720.3			704.3			639.2
Other Income		20.5			16.9			69.7			56.4			34.0
Total Operating Revenue		976.9			975.0			3,936.5			3,794.5			3,473.5
Benefits and Expenses
Benefits and Change in Reserves for Future Benefits		700.1			703.1			2,871.3			3,684.6			2,338.4
Commissions		58.7			60.0			234.7			227.1			229.4
Deferral of Policy Acquisition Costs		(24.3	)		(24.9	)		(94.5	)		(146.1	)		(152.9	)
Amortization of Deferred Policy Acquisition Costs		26.1			25.5			104.6			105.5			97.5
Amortization of Value of Business Acquired		3.1			3.0			12.1			3.6			2.0
Operating Expenses		170.9			178.0			715.8			687.0			608.7
Total Benefits and Expenses		934.6			944.7			3,844.0			4,561.7			3,123.1
Operating Income (Loss) Before Income Taxes and Net Realized Investment Gains and Losses	$	42.3		$	30.3		$	92.5		$	(767.2	)	$	350.4
Operating Ratios
Benefit Ratio		90.5	%		89.4	%		91.3	%		121.5	%		83.5	%
Operating Expense Ratio		22.1	%		22.6	%		22.7	%		22.6	%		21.7	%
Before-tax Profit (Loss) Margin		5.5	%		3.9	%		2.9	%		(25.3	)%		12.5	%

7.1

UnumProvident Financial Results for Individual Income Protection - Recently Issued

	Three Months Ended						Year Ended
	3/31/2005			3/31/2004			12/31/2004			12/31/2003			12/31/2002
Operating Revenue
Premium Income	$	140.4		$	129.8		$	526.3		$	498.6		$	434.6
Net Investment Income		16.7			22.6			81.9			101.2			87.4
Other Income		1.5			1.9			5.4			7.8			6.5
Total Operating Revenue		158.6			154.3			613.6			607.6			528.5
Benefits and Expenses
Benefits and Change in Reserves for Future Benefits		77.1			70.5			306.5			286.7			248.1
Commissions		30.0			30.8			113.4			106.0			94.1
Deferral of Policy Acquisition Costs		(29.1	)		(33.5	)		(125.8	)		(126.4	)		(133.2	)
Amortization of Deferred Policy Acquisition Costs		18.8			16.8			69.1			61.6			47.9
Amortization of Value of Business Acquired		0.1			—			0.2			0.3			0.2
Operating Expenses		40.5			40.4			153.0			138.7			124.6
Total Benefits and Expenses		137.4			125.0			516.4			466.9			381.7
Operating Income Before Income Taxes and Net Realized Investment Gains and Losses	$	21.2		$	29.3		$	97.2		$	140.7		$	146.8
Operating Ratios
Benefit Ratio		54.9	%		54.3	%		58.2	%		57.5	%		57.1	%
Interest Adjusted Loss Ratio		43.5	%		42.6	%		46.5	%		44.7	%		43.4	%
Operating Expense Ratio		28.8	%		31.1	%		29.1	%		27.8	%		28.7	%
Before-tax Profit Margin		15.1	%		22.6	%		18.5	%		28.2	%		33.8	%

7.2

UnumProvident Financial Results for Long-term Care

	Three Months Ended						Year Ended
	3/31/2005			3/31/2004			12/31/2004			12/31/2003			12/31/2002
Operating Revenue
Premium Income
Group Long-term Care	$	38.3		$	34.9		$	143.4		$	124.5		$	103.4
Individual Long-term Care		76.2			73.5			301.1			280.1			232.4
Total Premium Income		114.5			108.4			444.5			404.6			335.8
Net Investment Income		29.7			23.4			103.5			83.5			56.5
Other Income (Loss)		0.1			0.1			(0.2	)		(0.2	)		0.5
Total Operating Revenue		144.3			131.9			547.8			487.9			392.8
Benefits and Expenses
Benefits and Change in Reserves for Future Benefits		103.4			95.1			394.5			342.6			278.2
Commissions		14.3			17.0			65.1			72.5			75.6
Deferral of Policy Acquisition Costs		(6.4	)		(10.9	)		(35.6	)		(60.6	)		(75.1	)
Amortization of Deferred Policy Acquisition Costs		6.0			5.6			22.4			23.9			22.9
Amortization of Value of Business Acquired		—			—			—			—			—
Operating Expenses		14.0			14.1			55.9			67.0			68.1
Total Benefits and Expenses		131.3			120.9			502.3			445.4			369.7
Operating Income Before Income Taxes and Net Realized Investment Gains and Losses	$	13.0		$	11.0		$	45.5		$	42.5		$	23.1
Operating Ratios
Benefit Ratio		90.3	%		87.7	%		88.8	%		84.7	%		82.8	%
Operating Expense Ratio		12.2	%		13.0	%		12.6	%		16.6	%		20.3	%
Before-tax Profit Margin		11.4	%		10.1	%		10.2	%		10.5	%		6.9	%

7.3

UnumProvident Financial Results for Disability Management Services

	Three Months Ended				Year Ended
	3/31/2005		3/31/2004		12/31/2004		12/31/2003		12/31/2002
Operating Revenue
Premium Income	$	—	$	—	$	—	$	—	$	—
Net Investment Income		—		—		—		—		—
Other Income		44.3		45.5		177.1		173.0		174.8
Total Operating Revenue		44.3		45.5		177.1		173.0		174.8
Benefits and Expenses
Benefits and Change in Reserves for Future Benefits		—		—		—		—		—
Commissions		—		—		—		—		—
Deferral of Policy Acquisition Costs		—		—		—		—		—
Amortization of Deferred Policy Acquisition Costs		—		—		—		—		—
Amortization of Value of Business Acquired		—		—		—		—		—
Operating Expenses		41.1		41.8		160.9		155.8		155.9
Total Benefits and Expenses		41.1		41.8		160.9		155.8		155.9
Operating Income Before Income Taxes and Net Realized Investment Gains and Losses	$	3.2	$	3.7	$	16.2	$	17.2	$	18.9

7.4

UnumProvident Financial Results for Life and Accident Segment

	Three Months Ended						Year Ended
	3/31/2005			3/31/2004			12/31/2004			12/31/2003			12/31/2002
Operating Revenue
Premium Income
Group Life and Accidental Death & Dismemberment	$	409.7		$	435.9		$	1,741.3		$	1,723.2		$	1,634.2
Brokerage Voluntary Life and Other		60.7			54.2			222.1			199.2			165.6
Total Premium Income		470.4			490.1			1,963.4			1,922.4			1,799.8
Net Investment Income		52.8			44.9			199.7			191.5			192.6
Other Income		5.4			4.5			18.0			16.5			14.4
Total Operating Revenue		528.6			539.5			2,181.1			2,130.4			2,006.8
Benefits and Expenses
Benefits and Change in Reserves for Future Benefits		348.7			375.0			1,506.6			1,468.1			1,397.6
Commissions		43.7			45.5			174.0			177.3			164.9
Deferral of Policy Acquisition Costs		(32.5	)		(34.2	)		(127.8	)		(159.3	)		(148.4	)
Amortization of Deferred Policy Acquisition Costs		30.5			28.1			109.4			108.0			86.6
Amortization of Value of Business Acquired		0.6			0.6			2.3			1.8			0.4
Operating Expenses		66.3			67.6			265.0			269.7			253.5
Total Benefits and Expenses		457.3			482.6			1,929.5			1,865.6			1,754.6
Operating Income Before Income Taxes and Net Realized Investment Gains and Losses	$	71.3		$	56.9		$	251.6		$	264.8		$	252.2
Operating Ratios
Benefit Ratio		74.1	%		76.5	%		76.7	%		76.4	%		77.7	%
Operating Expense Ratio		14.1	%		13.8	%		13.5	%		14.0	%		14.1	%
Before-tax Profit Margin		15.2	%		11.6	%		12.8	%		13.8	%		14.0	%

8

UnumProvident Financial Results for Colonial Segment

	Three Months Ended						Year Ended
	3/31/2005			3/31/2004			12/31/2004			12/31/2003			12/31/2002
Operating Revenue
Premium Income
Income Protection	$	125.8		$	119.0		$	486.2		$	464.9		$	437.8
Life		28.0			26.6			106.9			96.7			80.4
Other		39.7			35.5			147.9			131.9			118.5
Total Premium Income		193.5			181.1			741.0			693.5			636.7
Net Investment Income		25.0			22.8			94.5			90.0			79.6
Other Income		1.2			0.3			2.3			2.5			3.7
Total Operating Revenue		219.7			204.2			837.8			786.0			720.0
Benefits and Expenses
Benefits and Change in Reserves for Future Benefits		104.1			100.5			408.3			395.4			357.2
Commissions		42.6			44.3			173.9			164.9			143.9
Deferral of Policy Acquisition Costs		(45.3	)		(44.8	)		(173.7	)		(166.1	)		(148.4	)
Amortization of Deferred Policy Acquisition Costs		34.4			32.6			131.2			118.3			107.7
Amortization of Value of Business Acquired		0.3			0.3			1.2			(0.9	)		1.5
Operating Expenses		39.8			34.7			141.3			127.7			120.6
Total Benefits and Expenses		175.9			167.6			682.2			639.3			582.5
Operating Income Before Income Taxes and Net Realized Investment Gains and Losses	$	43.8		$	36.6		$	155.6		$	146.7		$	137.5
Operating Ratios
Benefit Ratio		53.8	%		55.5	%		55.1	%		57.0	%		56.1	%
Operating Expense Ratio		20.6	%		19.2	%		19.1	%		18.4	%		18.9	%
Before-tax Profit Margin		22.6	%		20.2	%		21.0	%		21.2	%		21.6	%

9

UnumProvident Financial Results for Individual Income Protection - Closed Block

	Three Months Ended						Year Ended
	3/31/2005			3/31/2004			12/31/2004			12/31/2003			12/31/2002
Operating Revenue
Premium Income	$	242.0		$	251.3		$	986.6		$	1,028.5		$	1,106.3
Net Investment Income		179.9			213.0			799.1			824.2			814.5
Other Income		24.7			27.8			100.3			95.9			85.7
Total Operating Revenue		446.6			492.1			1,886.0			1,948.6			2,006.5
Benefits and Expenses
Benefits and Change in Reserves for Future Benefits		371.5			498.5			1,618.9			1,533.6			1,544.2
Commissions		18.5			20.1			76.3			85.5			109.2
Deferral of Policy Acquisition Costs		—			—			—			(7.5	)		(13.4	)
Amortization of Deferred Policy Acquisition Costs		—			—			—			41.3			36.2
Amortization of Value of Business Acquired and Goodwill		—			—			—			32.7			34.9
Intangible Assets Write-down		—			856.4			856.4			—			—
Operating Expenses		33.5			40.9			157.2			200.5			212.4
Total Benefits and Expenses		423.5			1,415.9			2,708.8			1,886.1			1,923.5
Operating Income (Loss) Before Income Taxes and Net Realized Investment Gains and Losses	$	23.1		$	(923.8	)	$	(822.8	)	$	62.5		$	83.0
Operating Ratios
Benefit Ratio		153.5	%		198.4	%		164.1	%		149.1	%		139.6	%
Interest Adjusted Loss Ratio		87.7	%		86.6	%		87.5	%		82.7	%		78.1	%
Operating Expense Ratio		13.8	%		16.3	%		15.9	%		19.5	%		19.2	%
Before-tax Profit (Loss) Margin		9.5	%		(367.6	)%		(83.4	)%		6.1	%		7.5	%

10

UnumProvident Financial Results for Other Segment

	Three Months Ended					Year Ended
	3/31/2005			3/31/2004		12/31/2004		12/31/2003		12/31/2002
Operating Revenue
Premium Income	$	0.3		$	8.6	$	31.3	$	34.3	$	37.6
Net Investment Income		29.1			32.0		127.3		140.1		154.2
Other Income		9.3			10.7		31.2		31.4		39.5
Total Operating Revenue		38.7			51.3		189.8		205.8		231.3
Benefits and Expenses
Benefits and Change in Reserves for Future Benefits		33.0			36.6		142.3		157.1		161.1
Commissions		(0.1	)		3.6		4.9		10.8		3.1
Deferral of Policy Acquisition Costs		—			—		0.1		0.1		—
Amortization of Deferred Policy Acquisition Costs		—			—		—		—		0.1
Amortization of Value of Business Acquired		—			—		—		—		—
Operating Expenses		(0.3	)		4.0		13.3		12.9		21.6
Total Benefits and Expenses		32.6			44.2		160.6		180.9		185.9
Operating Income Before Income Taxes and Net Realized Investment Gains and Losses	$	6.1		$	7.1	$	29.2	$	24.9	$	45.4

11

UnumProvident Financial Results for Corporate Segment

	Three Months Ended						Year Ended
	3/31/2005			3/31/2004			12/31/2004			12/31/2003			12/31/2002
Operating Revenue
Net Investment Income	$	12.3		$	4.2		$	32.4		$	23.6		$	4.9
Other Income		5.1			0.3			33.6			8.0			29.1
Total Operating Revenue		17.4			4.5			66.0			31.6			34.0
Benefits and Expenses
Interest and Debt Expense		52.8			49.2			207.1			187.2			162.4
Unallocated Operating Expenses		3.8			2.0			12.6			37.9			26.6
Total Benefits and Expenses		56.6			51.2			219.7			225.1			189.0
Operating Loss Before Income Taxes and Net Realized Investment Gains and Losses	$	(39.2	)	$	(46.7	)	$	(153.7	)	$	(193.5	)	$	(155.0	)

12

UnumProvident Investment Fact Sheet at March 31, 2005

Bonds (Fair Value)	3/31/05
Public	$	19,904.8	61.2	%
Mortgage-backed Securities		4,210.6	13.0
Private Placements		3,726.6	11.5
High Yield		2,113.1	6.5
Government Securities		2,044.0	6.3
Municipal Securities		47.6	0.1
Open Derivatives		460.7	1.4
Total	$	32,507.4	100.0	%

Quality Ratings of Bonds	Book Value		Fair Value
Aaa	24.6	%	24.4	%
Aa	7.3		7.1
A	23.3		23.7
Baa	37.7		38.3
Below Baa	7.1		6.5
Total	100.0	%	100.0	%

Selected Statistics	3/31/05		12/31/04
Portfolio Yield*	6.89	%	6.93	%
Average Duration	9.19		9.01
Average Credit Quality	A		A

* Bond equivalent yield is a book value and duration weighted average of the yield on the fixed income securities in the portfolio.

Schedule BA and Non-Current
Total Non-Current Investments	$	90.5	$	91.5
Total Schedule BA Assets	$	74.4	$	77.0

13

UnumProvident Investment Fact Sheet at March 31, 2005

Fixed Maturity Bonds - By Industry Classification-Unrealized Gain/Loss

Classification	Fair Value		Net Unrealized Gain		Fair Value of Bonds with Loss			Gross Unrealized Loss			Fair Value of Bonds with Gain		Gross Unrealized Gain
Basic Industry	$	2,317.8	$	203.0	$	351.0		$	(17.1	)	$	1,966.8	$	220.1
Canadian		380.1		82.6		—			—			380.1		82.6
Capital Goods		2,323.2		257.0		283.6			(10.6	)		2,039.6		267.6
Communications		2,733.9		270.0		468.2			(31.9	)		2,265.7		301.9
Consumer Cyclical		1,323.9		40.3		473.3			(44.6	)		850.6		84.9
Consumer Non-Cyclical		3,514.4		298.0		586.5			(17.8	)		2,927.9		315.8
Derivative Instruments		460.7		428.0		(85.4	)		(85.4	)		546.1		513.4
Energy (Oil & Gas)		2,535.7		349.3		140.0			(5.4	)		2,395.7		354.7
Financial Institutions		3,175.1		96.5		1,236.1			(61.2	)		1,939.0		157.7
Mortgage/Asset Backed		4,210.6		346.8		600.9			(6.3	)		3,609.7		353.1
Sovereigns		622.1		19.5		254.2			(5.5	)		367.9		25.0
Technology		322.4		23.7		86.7			(5.3	)		235.7		29.0
Transportation		1,057.6		110.3		103.6			(20.5	)		954.0		130.8
U.S. Government Agencies		2,164.1		33.0		1,150.6			(115.5	)		1,013.5		148.5
Utilities		5,365.8		477.5		928.9			(34.8	)		4,436.9		512.3
Total	$	32,507.4	$	3,035.5	$	6,578.2		$	(461.9	)	$	25,929.2	$	3,497.4

Gross Unrealized Loss on Fixed Maturity Bonds By Length of Time in Unrealized Loss Position

	Investment Grade					Below Investment Grade
Category	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss
Less than 91 days	$	2,264.4	$	(47.1	)	$	373.6	$	(13.9	)
91 through 180 days		478.7		(21.1	)		93.9		(12.3	)
181 through 270 days		23.1		(0.7	)		7.7		(0.2	)
271 days to 1 year		505.8		(57.1	)		—		—
Greater than 1 year		2,457.8		(254.1	)		373.2		(55.4	)
Total	$	5,729.8	$	(380.1	)	$	848.4	$	(81.8	)

13.1

UnumProvident Statutory Capital and Surplus

	As of March 31, 2005						As of December 31, 2004
	Capital and Surplus		AVR		Capital and Surplus + AVR		Capital and Surplus + AVR
Provident Life & Accident	$	1,427.8	$	40.5	$	1,468.3	$	1,455.0
Unum Life of America		1,222.3		80.7		1,303.0		1,277.6
Paul Revere Life (1)		1,134.7		22.3		1,157.0		1,137.0
Colonial Life & Accident		304.5		5.4		309.9		298.4
Provident Life & Casualty		84.2		0.3		84.5		84.6
First Unum Life		158.7		1.1		159.8		166.6
Paul Revere Variable (1)		122.4		0.5		122.9		121.6

(1) Capital and Surplus of Paul Revere Variable is included in Paul Revere Life

14

UnumProvident Statutory Operating Results

	Three Months Ended March 31
	Net Gain (Loss) from Operations After Tax						Net Realized Investment Gains (Losses) After Tax and Transfers to IMR						Net Income (Loss)
	2005			2004			2005			2004			2005			2004
Provident Life and Accident	$	48.8		$	35.3		$	19.1		$	(10.6	)	$	67.9		$	24.7
Unum Life of America		17.8			31.5			(7.9	)		(5.1	)		9.9			26.4
Paul Revere Life		44.1			46.1			—			(4.0	)		44.1			42.1
Colonial Life & Accident		22.1			13.3			1.1			(0.7	)		23.2			12.6
Provident Life and Casualty		0.3			(3.1	)		(0.2	)		(6.2	)		0.1			(9.3	)
First Unum		(1.0	)		7.4			—			(6.6	)		(1.0	)		0.8
Paul Revere Variable		1.9			2.1			—			(0.3	)		1.9			1.8
Total	$	134.0		$	132.6		$	12.1		$	(33.5	)	$	146.1		$	99.1

Note: Statutory results are reported in conformity with statutory accounting principles as prescribed by the National Association of Insurance Commissioners and adopted by the applicable state laws.

14.1

Notes to Statistical Supplement

(All numbers are before tax, except as noted)

2005 Other Item

1st Quarter

Subsequent to the end of the first quarter of 2005, the Internal Revenue Service completed its audit of the 1999 – 2001 years for the Company and issued its revenue agent’s report (RAR). A number of the proposed adjustments in the RAR are in dispute and will be appealed by the Company. Income tax liabilities of approximately $32.0 million that relate primarily to interest on the timing of expense deductions were released in the first quarter of 2005, all of which was reflected as a reduction to income tax expense.

2004 Offering

In May 2004, the Company issued 12,000,000 8.25% adjustable conversion-rate equity security units (units) in a private offering for $300.0 million. The Company subsequently registered the privately placed securities for resale by the private investors. Each unit has a stated amount of $25 and will initially consist of (a) a contract pursuant to which the holder agrees to purchase, for $25, shares of the Company’s common stock on May 15, 2007 and (b) a 1/40 or 2.5% ownership interest in a senior note issued by the Company due May 15, 2009 with a principal amount of $1,000. Upon settlement of the common stock purchase contract and successful remarketing of the senior note element of the units, the Company will receive proceeds of approximately $300.0 million and will issue between 17.7 million and 20.4 million shares of common stock. The purchase contract element of the units contributes to the number of quarterly weighted average common shares—assuming dilution when the average market price of the Company’s common stock is greater than the threshold appreciation price of $16.95 per share and the Company has income from continuing operations. The impact of the purchase contract element of the units on the number of quarterly weighted average common shares—assuming dilution, including the 2003 unit offering (see “2003 Public Offerings” discussion following), at various quarterly average stock price levels is as follows:

	Dilutive Share Impact (in millions)
Quarterly Average Stock Price	2004 Offering	2003 Offering	Combined
$13.00	no impact	no impact	no impact
$14.00	no impact	2.3	2.3
$15.00	no impact	5.0	5.0
$16.00	no impact	7.4	7.4
$17.00	0.1	9.5	9.6
$18.00	1.0	11.4	12.4
$19.00	1.9	13.1	15.0
$20.00	2.7	14.6	17.3

2004 Other Items

4th Quarter

In the fourth quarter 2004, certain of the Company’s insurance subsidiaries entered into settlement agreements with state insurance regulators upon conclusion of a multistate market conduct examination led by Maine, Massachusetts, and Tennessee relating to disability claims handling practices. A total of 48 states and the District of Columbia are parties to the settlement agreements. In addition, the U.S. Department of Labor, which had been conducting an inquiry relating to certain ERISA plans, is a party to the settlement agreements, and the New York Attorney General’s Office, which had engaged in its own investigation of the Company’s claims handling practices, notified the Company that it was in support of the settlement and was, therefore, closing its investigation on this issue. The examination report did not make any findings of violations of law or market conduct regulations. However, the examination report did identify areas of concern. These became the focus of specific changes and enhancements to the Company’s disability claims handling operations which are designed to assure each claim decision is made in a consistently high quality manner.

(continued on next page) 15

The primary components of the settlement agreements include:

• enhancements to the Company’s claims handling procedures;

• a reassessment process for claimants of certain previously denied or closed claims who elect to participate;

• additional corporate and board governance to support the oversight of the reassessment process and general claims handling practices; and

• payment of a fine in the amount of $15.0 million to be allocated among the states and jurisdictions that joined the agreement and a potential fine of $145.0 million in the future if certain standards are not met in examinations at the end of approximately two years.

In the fourth quarter of 2004, the Company recorded a loss of $127.0 million before tax, or $87.8 million after tax, comprised of four elements: $27.5 million of incremental direct operating expenses to conduct the two-year reassessment process; $44.0 million for benefit costs and reserves from claims reopened from the reassessment; $40.5 million for additional benefit costs and reserves for claims already incurred and currently in inventory that are anticipated as a result of the claim process changes being implemented; and the $15.0 million fine. The ongoing costs of changes in the claims handling process and governance improvements will be included in the Company’s operating expenses as incurred going forward. These ongoing costs are not anticipated to materially affect the Company’s results of operations.

2nd Quarter

In June 2004, the Company amended its postretirement medical plan and as a result of this amendment, the Company recorded a curtailment gain of $9.4 million before tax in the second quarter of 2004.

Also during the second quarter of 2004, the Company closed the sale of its Canadian operations and reported a loss of $113.0 million before tax and $70.9 million after tax on the sale of the branch. Assets transferred to the buyer included available-for-sale fixed maturity securities with a fair value of $1,099.4 million and a book value of $957.7 million. Liabilities transferred included reserves of $1,254.8 million. The Company retained a portion of the Canadian branch fixed maturity bond portfolio according to the terms of the transaction. The bonds retained had a fair value, at April 30, 2004, of $732.9 million and a yield of 7.14 percent. These investments, which were redeployed to other lines of business during the remainder of the year, added approximately four basis points to the investment portfolio yield rate, at April 30, 2004, in the Company’s continuing operations.

1st Quarter

In the first quarter of 2004, the Company restructured its individual income protection – closed block business wherein three of its insurance subsidiaries entered into reinsurance agreements to reinsure approximately 66.7 percent of potential future losses that occur above a specified retention limit. The individual income protection – closed block reserves in these three subsidiaries comprise approximately 90 percent of the Company’s overall retained risk in the closed block of individual income protection. The reinsurance agreements effectively provide approximately 60 percent reinsurance coverage for the Company’s overall consolidated risk above the retention limit. The maximum risk limit for the reinsurer is approximately $783.0 million initially and grows to approximately $2.6 billion over time, after which any further losses will revert to the Company. These reinsurance transactions were effective as of April 1, 2004. The Company transferred cash equal to $521.6 million of reserves ceded in the Individual Income Protection – Closed Block segment plus an additional $185.8 million in cash for a before-tax prepaid cost of insurance which was deferred and is being amortized into earnings over the expected claim payment period covered under the Company’s retention limit. The Company retained the higher yielding investments historically associated with these reserves and redeployed these investments to other lines of business.

(continued on next page) 15.1

In conjunction with the restructuring of the individual income protection – closed block business, effective January 1, 2004, the Company modified its reporting segments to include a separate segment for this business. The reporting, monitoring, and management of the closed block of individual income protection business as a discrete segment is consistent with the Company’s financial restructuring and separation of this business from the lines of business which actively market new products. In the past, this business had been reported in the Income Protection segment. Prior to 2004, detailed separate financial metrics and models were unavailable to appropriately manage this block of business separately from the recently issued individual income protection block of business.

The change in the Company’s reporting segments required the Company to perform, separately for the individual income protection – closed block business and individual income protection – recently issued business, impairment testing for goodwill and loss recognition testing for the recoverability of deferred policy acquisition costs and value of business acquired. As required under GAAP, prior to the change in reporting segments, these tests were performed for the individual income protection line of business on a combined basis. The testing indicated impairment of the individual income protection – closed block deferred policy acquisition costs, value of business acquired, and goodwill balances of $282.2 million, $367.1 million, and $207.1 million, respectively. These impairment charges, $856.4 million before tax and $629.1 million after tax, are included in the net loss reported for the first quarter of 2004.

Also as part of the restructuring, the Company analyzed the reserve assumptions related to its individual income protection – closed block reserves as a stand-alone segment. Previously these reserves were analyzed for the individual income protection line of business on a combined basis. Included in the analysis was a review of morbidity assumptions, primarily claim resolution rates, and claim reserve discount rate assumptions. Based upon this analysis, the Company lowered the claim reserve discount rate to reflect the segmentation of assets between the individual income protection – recently issued business and the individual income protection – closed block business, the change in the Company’s investment portfolio yield rates during the first quarter of 2004, the Company’s expectation of future investment portfolio yield rates, and the Company’s desire to maintain the relationship between the claim reserve discount rate and the investment portfolio yield rate for the individual income protection – closed block at the Company’s long-term objective. The segmentation of the investment portfolio was necessary to ensure appropriate matching of the duration of the assets and the related policy liabilities. Based on this analysis, in the first quarter of 2004 the Company increased its individual income protection – closed block claim reserves by $110.6 million before tax, or $71.9 million after tax, to reflect its current estimate of future benefit obligations. The first quarter 2004 change represented a 1.2 percent increase in total net individual income protection – closed block reserves as of March 31, 2004, which equaled $9.530 billion prior to this increase.

2003 Accounting Principle Changes

4th Quarter

Effective October 1, 2003, the Company adopted the provisions of Statement of Financial Accounting Standards No. 133 Implementation Issue B36 (DIG Issue B36), Embedded Derivatives: Modified Coinsurance Arrangements and Debt Instruments That Incorporate Credit Risk Exposure That Are Unrelated or Only Partially Related to the Creditworthiness of the Obligor Under Those Instruments. DIG Issue B36 addresses financial accounting and reporting for embedded derivatives in modified coinsurance contracts that incorporate credit risk exposure unrelated to the credit risk of the counterparty to the reinsurance contract and requires the bifurcation of any such derivative from the host reinsurance contract. The Company has two reinsurance contracts for which DIG Issue B36 is applicable. The adoption of DIG Issue B36 resulted in an increase in fixed maturity securities of $61.3 million to record the fair value of the embedded derivatives and a $39.9 million cumulative effect of accounting principle change, net of $21.4 million in tax.

(continued on next page) 15.2

Effective December 31, 2003, the Company adopted the provisions of Interpretation No. 46 (Interpretation 46), Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin (ARB) No. 51. Interpretation 46 expands upon ARB No. 51, Consolidated Financial Statements, to address financial accounting and reporting for certain entities in which a controlling financial interest cannot be identified based on an evaluation of voting interests. Transition to the provisions of Interpretation 46 required the Company to consolidate four special purpose entities whose purposes are to support the Company’s investment objectives. Prior to December 31, 2003, these entities were accounted for as fixed maturity securities in the available for sale portfolio and carried at fair value which was derived from the fair value of the underlying assets. For these four entities, the adoption of Interpretation 46 had no impact on the fair value of total invested assets reported in the Company’s consolidated statement of financial condition.

Adoption of Interpretation 46 also resulted in the de-consolidation of a trust that currently holds $300.0 million of junior subordinated debt securities of the Company and has issued a similar amount of mandatorily redeemable preferred securities. The impact of the de-consolidation was the elimination of the company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debt securities of the company included in the consolidated statement of financial condition and an increase of $300.0 million in long-term debt.

Effective January 1, 2003, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, and selected the prospective method of adoption allowed under the provisions of Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure. The adoption decreased after tax results for 2003 approximately $0.6 million.

2003 Public Offerings

In the second quarter of 2003, the Company issued a total of 52,877,000 shares of common stock, par value $0.10 per share, related to a public offering and received approximately $547.7 million in proceeds. In addition, the Company issued a total of 23,000,000 8.25% adjustable conversion-rate equity security units (units) related to a public offering for $575.0 million. Each unit has a stated amount of $25 and will initially consist of (a) a contract pursuant to which the holder agrees to purchase, for $25, shares of the Company’s common stock on May 15, 2006 and (b) a 1/40, or 2.5%, ownership interest in a senior note issued by the Company due May 15, 2008 with a principal amount of $1,000. Upon settlement of the common stock purchase contract and successful remarketing of the senior note element of the units, the Company will receive proceeds of approximately $575.0 million and will issue between 43.3 million and 52.9 million shares of common stock. The purchase contract element of the units contributes to the number of quarterly weighted average common shares—assuming dilution when the average market price of the Company’s common stock is greater than the threshold appreciation price of $13.27 per share and the Company has income from continuing operations. See “2004 Offering” discussion preceding for the impact of the purchase contract element of the units on the number of quarterly weighted average common shares-assuming dilution at various quarterly average stock price levels.

(continued on next page) 15.3

2003 Other Items

4th Quarter

Included in the fourth quarter of 2003 results is an after tax increase in group income protection reserves of $286.0 million, or $440.0 million before tax. In January 2004, the Company completed its annual review of claim reserves to ensure that its claim reserves make adequate and reasonable provision for future benefits and expenses. Approximately $300.0 million of the reserve strengthening reflects implementation of a lower discount rate for its group income protection claim reserves. The discount rate was lowered to reflect the Company’s expectation of future investment portfolio yield rates and the Company’s new discount rate management approach of maintaining a wider spread between its group income protection portfolio investment yield rate and its average discount rate. The Company’s new discount rate management approach is intended to better reflect the current investment environment and position the Company to be more responsive with discount rates on new incurred claims as changes to the investment environment emerge. Approximately $140.0 million of the reserve increase relates to a strengthening of the morbidity assumptions to reflect the impact of the continuing weak economic cycle on claim incidence and severity. Claim incidence in the second half of 2003 was 8 percent higher than the first half of the year and 5 percent above the second half of 2002. Increased claim incidence is expected to continue at an elevated level for several quarters as the early indications of a recovering economy are not yet reflected in improved consumer confidence or job creation. The reserve increase represents a 5.4 percent increase in total net group income protection reserves as of December 31, 2003, which were $8.186 billion prior to this increase.

During the fourth quarter of 2003, the Company entered into an agreement to sell its Canadian branch and expects the transaction to close during the first half of 2004. The Canadian branch is accounted for as “held for sale” at December 31, 2003 and also meets the accounting criteria for being reported as a discontinued operation in the consolidated financial statements. In conjunction with the classification of the Canadian branch as held for sale, the Company tested the goodwill related to the Canadian branch for impairment and determined that the balance of $190.9 million was impaired. The Company also recognized a loss of $9.3 million before tax and $6.0 million after tax to write down the value of bonds in the Canadian branch investment portfolio to market value. These two charges, $200.2 million before and $196.9 million after tax, are included in the loss from discontinued operations.

Additionally, during the fourth quarter of 2003, the Company recognized losses of $14.7 million before tax and $5.3 million after tax related to its Japan and Argentina operations, which are accounted for as “held for sale” assets and as such must be reported at the lower of the carrying value or fair value less cost to sell. Because the Company intends to have a continuing presence in each of these operations, they are not considered discontinued operations.

1st Quarter

Included in the net loss for the first quarter of 2003 is an increase in the Company’s group long-term income protection GAAP reserves of $454.0 million before tax, or $295.1 million after tax. In April of 2003, the Company completed an analysis of its assumptions related to its group long-term income protection claim reserves. This analysis was initiated based on a trend in lower net claim recovery rates observed during the first quarter of 2003. The claim recovery rates during the first quarter were below expected levels and were lower than those experienced in the past three years. The analysis of emerging net claim recovery rates and the reasons driving the changes resulted in a reduction in the Company’s long-term expectations. Based on the analysis noted above, the Company increased its group long-term income protection claim reserves as of March 31, 2003 to reflect its current estimate of future benefit obligations. The analysis indicated not only a decrease in overall claim recovery rates, but a change in claim recovery rates by claim duration.

2002 Cumulative Effect of Accounting Principle Change

1st Quarter

Effective January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards No. 142 (SFAS 142), Goodwill and Other Intangible Assets. The cumulative effect of adopting SFAS 142 was a decrease to net income of $7.1 million, net of a tax benefit of $3.9 million.

15.4