UnumProvident Eyes Efficiency Through Cost Cuts

By Mike Pare
Staff Writer

UnumProvident Corp. officials said the company expects to wring out savings of $80 million in the next year in steps that include the sale of one of its four corporate jets.

The moves, equal to cutting about 5 percent of the disability insurer’s operating expenses, stem from an initiative launched in early spring dubbed E3 — "Efficiency + Effectiveness = Expectations."

UnumProvident chief executive Thomas R. Watjen told employees that a key goal of the company is improving about every aspect of its business. As examples, he cited similar efforts by companies such as Dell Computer, Southwest Airlines and FedEx.

"My goal is to create a similar culture at UnumProvident," he said. Some job positions are expected to be eliminated, according to the company, but most of the trims will take place through attrition and leaving vacant jobs unfilled.

UnumProvident spokeswoman M.C. Guenther said the number of employees affected by the cuts is expected to be small, though she couldn’t cite a figure.

"We’ll staff up or down based on business needs," she said, adding that reductions weren’t the purpose of the initiative.

Chattanooga-based Unum-Provident, the nation’s No. 1 disability insurer, employs about 3,300 people in the city and 13,000 worldwide.

The action comes on the heels of a financial restructuring undertaken by Mr. Watjen after he was named interim CEO in March 2003. It gained steam in the wake of his naming as permanent chief last September.

The company has sold pieces of its international business, and in May it took a $967 million, before-tax first-quarter charge related to an older block of individual disability business. In February, the company had taken a $440 million before-tax reserve for its group protection business.

Rating agency Standard & Poor’s cut UnumProvident’s debt to junk status, but the company’s stock price has held up and advanced somewhat since late May. The stock closed Thursday at $15.60, up 3 cents per share.

Mrs. Guenther said the company’s Colonial Life & Accident Insurance unit is not for sale.

She said Mr. Watjen has indicated "there will not be another shoe to drop in financial operations."

UnumProvident hired a consulting firm, the Robert E. Nolan Co., to help in the efficiency effort. Nolan Co. chief executive Dennis Sullivan said while a lot of firms look at controlling costs, his firm helps businesses focus on service and quality improvement.

"If you do things right the first time, in the long term you get to your expense savings," he said. "Companies that just cut costs typically cut in the wrong place."

In the efficiency initiative, the company formed 13 teams to identify improvements in their work areas, and they produced recommendations.

For example, the company’s benefits center is changing the way it handles claims by improving productivity and reducing medical record expenses. Other steps include not upgrading some technology and extending the life of computer software, said Mrs. Guenther.

The corporate jet already has been sold, she said. It is the second company jet to be sold in the past couple of years, said Mrs. Guenther.