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Salomon Cuts UnumProvident to 'Underperform'

Salomon Smith Barney downgraded UnumProvident (UNM) to underperform from in-line.

Analyst Colin Devine says the 64 cents fourth quarter earnings per share is in line with estimates.

The No. 1 disability insurer says its profit fell amid investment losses, and says it is answering questions from the Securities and Exchange Commission about its accounting treatment of some investments. UnumProvident also took a non-cash charge of $145 million in the quarter to shore up its employees' pension fund.

Devine sayts while there are no surprises in the insurer's underlying business, he thinks several company-specific issues could mask any meaningful progress in operating fundamentals over the next 12 months to 18 months. These risk include continued bad press related to disability claim payments; the company has recently faced lawsuits for allegedly cutting off benefits to policy holders.

Also, Devine cites uncertainty surrounding the timing and size of a possible capital raising in 2003, and a lack of resolution of UnumProvident's under-performing individual disability insurance business. Devine cut his $20 target to $18.

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