Unum CEO sees potential growth from small firms

By Ed Leefeldt

NEW YORK, May 10 (Reuters) - Unum Group (UNM.N) will seek to boost group disability plan sales to companies with 1,000 employees or less starting in June in a bid to raise earnings at its largest unit, its chief executive said on Thursday.

Under the strategy, "Simply Unum," the largest U.S. disability insurer will offer technology that makes plans easier to run for small companies, CEO Thomas Watjen said.

It is part of his push to grow revenue at the insurer, which has been under pressure from an activist investor to increase profits or consider selling pieces of the company.

"For a while our ability to survive was in question," Watjen told Reuters in an interview, harkening back to the beginning of his tenure as CEO in 2003 when bad earnings and bond defaults forced the company to raise $1.2 billion in a stock offering. "Now it's time to improve."

Watjen is ready to expand in all three of Unum's business areas: its British operation, its supplemental benefits program that competes with Aflac Inc. (AFL.N), and its U.S. brokerage operation, which provides employee benefits.

He said Unum's plan is to "educate and expand" in Britain, where only 15 percent of the work force has disability coverage compared with 60 percent in the United States.

In its Colonial supplemental benefits unit, the Chattanooga, Tennessee-based insurer plans to recruit up to 15 percent more agents and advertise more heavily.

Activist investor Relational Investors LLC disclosed this year that it had amassed a 7.5 percent stake in Unum, which changed its name from "UnumProvident" at the start of 2007.

Relational has said it will ask Unum to consider "strategic alternatives" if it does not meet its 2007 and 2008 goals.

'THE BEST DEFENSE'

"The best defense against a breakup is to perform," Watjen said. In the latest first quarter, earnings more than doubled.

Better 2007 earnings would give Unum leverage with rating agencies in its push to move up one notch to investment grade.

Watjen said another task for 2007 is securitizing a $10 billion "closed block" of a type of individual disability policy that is no longer sold but is still on the books. The closed block, with a return on equity of only 2 percent, is dragging down Unum's overall return from 14.5 percent to 9.5 percent, Watjen said.

Putting this in the hands of bondholders would free up a "huge slug of capital" held to pay those claims -- in addition to $950 million in excess capital that Unum will have on its books by the end of the year.

Analysts have pressed Watjen to buy back shares. He said if the $10 billion block was securitized it would "force that discussion" and probably lead to a buyback of stock and debt.

"We don't have to have a higher investment grade before we do this," he said. "But we would do nothing that would impede our progress toward an investment rating."

Watjen said Unum would complete this year a reassessment of old disability claims, of which 75 percent have been resolved.

In the third quarter of 2006, Unum posted a loss of $63.7 million because of a $211.5 million charge for those claims losses, which date back seven years.

((Editing by Braden Reddall; edward.leefeldt@reuters.com; Reuters Messaging: edward.leefeldt.reuters.com@reuters.net; +1 646 223 6315)) Keywords: UNUM/

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