CSFB Cuts Estimates on UnumProvident
Credit Suisse First Boston cut its estimates and price target on UnumProvident (UNM ).
Analyst Caitlin Long says the market was very efficient in marking the stock down 37% on Monday. She notes the news of UnumProvident's $3.6 billion of adjusted statutory surplus is effectively backed by $695 million of intercompany loans; the market reacted by shaving $1.1 billion from the market capitalization. Long says that $1.1 billion is roughly how much it would cost UnumProvident to replace the $695 million with "real" capital by raising equity at UnumProvident's current discount to book value.
Long cut the $2.30 2003 earnings per share estimate to $1.90 on the belief that UnumProvident will raise $1 billion via a 50/50 common/convertible offering at a cost of $7 per share. She cut the $11 target to $7 on dilution from new equity.