UnumProvident Corp. fired Harold Chandler as chairman, chief executive and president Monday as part of an effort to restore confidence in the disability insurer which recently restated three years of earnings.
“By this action, the board is reaffirming its commitment to further strengthen the company’s financial position, improve the consistency of its performance, and restore investor confidence,” the company said in a statement.
Shares of the Chattanooga-based company rose 25 to close at $9.80 on the New York Stock Exchange.
Chandler’s firing comes a week after UnumProvident said it would reduce earnings by $29.1 million for 2000, 2001 and 2002 to resolve concerns of the Securities and Exchange Commission related to its investment disclosures.
But the company continues to face hundreds of lawsuits from policy holders who charge their claims were routinely denied, and Tennessee is investigating the company’s claims handling.
San Francisco attorney Ray Bourhis, who has won judgments against UnumProvident, thinks more changes will be needed.
“To make Harold Chandler into the fall guy and pay him off with a fat check so he doesn’t turn against the company and create problems for people above him, including on the board of directors, isn’t going to accomplish anything,” Bourhis said.
Chandler will receive severance of approximately $8.5 million and pension benefits of approximately $8.5 million.
The company said these charges are expected to reduce its first quarter net income by approximately $9.8 million, or 4 cents per share.
Chandler could not be reached for comment Monday. A personal telephone number could not be found, and company communications officials said they could not provide a number for him.
The company’s board appointed Thomas R. Watjen, currently vice chairman and COO, as interim president and CEO.
Watjen said in a statement, “While there’s no question we face a challenging business environment, UnumProvident is a strong organization with a sound business model, supported by $3.4 billion in capital.”
Outside directors C. William Pollard and Lawrence R. Pugh will serve as co-chairmen in a newly created Office of the Chairman of the Board, which will oversee activities between the board and senior management.
Last week, the company restated financial information, boosting previously reported net income for 2002 by $34.2 million and decreasing it by $38 million in 2001 and $25.3 million in 2000. Over that period, the company had reported net income of about $1.51 billion.
The change added 14 cents per share for 2002, following reductions of 16 cents per share in 2001 and 10 cents per share in 2000.
Two weeks ago, UnumProvident was fined $1 million by Georgia insurance officials in response to complaints about claims handling. Georgia State Insurance Commissioner John Oxendine said his agency’s investigation showed the company had a corporate mentality of “looking for every technical legal way to avoid paying a claim.”
Hundreds of policyholders have sued UnumProvident, contending the company routinely denies claims and requires its medical employees to support the denials.
In January, a California jury awarded $31.7 million to an eye surgeon who accused UnumProvident of denying benefits as part of a management scheme to boost profits.
F. Dean Copeland, currently senior executive vice president and general counsel, will assume the additional position of chief administrative officer.
UnumProvident, which claims about 30 percent of the nation’s disability insurance business, has about 3,500 employees in Portland, Maine, and about 3,000 in Chattanooga among 13,000 overall.