CHATTANOOGA, Tenn. (AP) – UnumProvident Corp. is selling its Canadian operations to RBC Insurance in the largest deal of its kind for the Chattanooga-based insurance giant since the 1999 merger that created it.

RBC will assume UnumProvident’s Canadian policy liabilities and has agreed to pay up to $382 million to finish the deal, both companies said Tuesday. The transaction is expected to be completed by March.

The deal releases more than $500 million in capital for UnumProvident, company officials said. The disability insurer plans to use the money to improve its capital position.

RBC also benefits in the deal by possessing a top performer, said Thomas R. Watjen, UnumProvident’s president and chief executive officer. “Our Canadian operation is the leading provider of individual income protection in Canada,” he said.

UnumProvident’s operations in Canada accounted for about 5 percent of its 2002 revenues of $9.9 billion, company officials said.

About 620 of UnumProvident’s 13,000 employees will be affected. All will be offered a job with RBC Insurance, officials said.

The insurer said no jobs among its 3,400 employees in Maine or 3,000 employees in Chattanooga are expected to be affected.

The sale was anticipated by some analysts, giving UnumProvident a way to restore rating agency and investor confidence in its balance sheet. The sale of UnumProvident’s Columbia, S.C.-based Colonial Life & Accident Insurance subsidiary also has been anticipated.

UnumProvident raised $1.1 billion through the sale of securities earlier this year.

Amid liquidity and other fears, UnumProvident’s stock had nose-dived to under $6 a share earlier this year, but the price has rebounded. The stock rose 47 cents on Tuesday, closing at $14.63 per share.

Analyst William Batcheller of National City Investment Management said UnumProvident is redeploying some of its assets to strengthen its capital base.

“It helps shore up its reserve position,” he told the Chattanooga Times Free Press.

Fitch Ratings said in a research note the transaction will enable UnumProvident to focus on its core disability and life insurance operations in the United States.

Jim Sabourin, UnumProvident’s vice president of corporate communications, said the company may leave markets that don’t support its objectives.

“Canadian-based insurers are in a much better position to capitalize on this opportunity in the Canadian marketplace,” he said.

Watjen said the deal allows UnumProvident to improve its balance sheet and capital reserves, which he termed “an integral component” of its long-term financial strategy.

UnumProvident was formed with the 1999 merger of Provident Cos. of Chattanooga and Unum Corp. of Portland, Maine. The merger created the nation’s largest disability insurance company.

RBC Insurance is a division of Royal Bank of Canada, that nation’s largest bank.

UnumProvident has suffered several black eyes recently, with hundreds of lawsuits filed by policyholders that contend it routinely denies claims and requires its medical employees to support the denials. Dozens of states are conducting investigations and Georgia insurance officials imposed a $1.1 million fine in March.

Shareholders also are suing, accusing UnumProvident of making misleading statements and improperly denying some claims to artificially inflate its stock price. At least two complaints seeking class-action status have been filed since the company announced in February that it had recorded investment losses of $93 million.

The company has described the complaints as “completely without merit.”

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On the Net:

UnumProvident: http://www.unumprovident.com/

RBC Insurance: http://www.rbcinsurance.com/

AP-ES-11-19-03 1045EST