Unum Group – ‘424B4’ on 5/6/97

As of:  Tuesday, 5/6/97   ·   Accession #:  940180-97-408   ·   File #:  333-25361

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Prospectus   —   Rule 424(b)(4)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       Final Prospectus                                      50    301K 

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                                        RULE NO. 424(b)(4)
                                                   REGISTRATION NUMBER 333-25361

PROSPECTUS                                                                      

5,917,500 Shares  
Provident Companies, Inc. 
COMMON STOCK  

----------------  

OF THE 5,917,500 SHARES OF COMMON STOCK BEING OFFERED, 4,734,000 SHARES ARE     
BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S.             
UNDERWRITERS AND 1,183,500 SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE       
UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITERS." 
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY TEXTRON INC. 
("TEXTRON" OR THE "SELLING STOCKHOLDER"), OTHER THAN SHARES WHICH MAY BE SOLD   
BY THE COMPANY PURSUANT TO THE OVER-ALLOTMENT OPTION DESCRIBED HEREIN. SEE "THE 
PAUL REVERE MERGER." PURSUANT TO AN AGREEMENT BETWEEN THE COMPANY AND THE       
SELLING STOCKHOLDER, THE SELLING STOCKHOLDER WILL PAY TO THE COMPANY A PORTION  
OF THE NET PROCEEDS RECEIVED BY THE SELLING STOCKHOLDER FROM THE SALE OF THE    
SHARES OFFERED HEREBY. THE COMPANY'S COMMON STOCK IS TRADED ON THE NEW YORK     
STOCK EXCHANGE UNDER THE SYMBOL "PVT." ON MAY 5, 1997, THE CLOSING SALE PRICE   
FOR THE COMMON STOCK ON THE NEW YORK STOCK EXCHANGE WAS $54 1/4.                

----------------  

SEE "RISK FACTORS" ON PAGE 8 FOR INFORMATION THAT SHOULD BE CONSIDERED BY 
PROSPECTIVE INVESTORS.  

----------------  

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND    
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES  
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE      
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS  
A CRIMINAL OFFENSE.                                                             

----------------  

PRICE $53 A SHARE 

----------------  

                                                                [Download Table]

                                         UNDERWRITING                           
                             PRICE TO   DISCOUNTS AND         PROCEEDS TO       
                              PUBLIC    COMMISSIONS(1) SELLING STOCKHOLDER(2)(3)
                           ------------ -------------- -------------------------
                                                                                
Per Share.................   $53.000        $1.855              $51.145         
Total(4).................. $313,627,500  $10,976,963         $302,650,538       

--------                                                                        

(1) The Company and the Selling Stockholder have agreed to indemnify the    
 Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriters."         
(2) The Company will pay expenses in connection with the offering estimated 
at $350,000. See "Underwriters."                                    
(3) Pursuant to an agreement between the Company and the Selling            
    Stockholder, the Selling Stockholder will pay to the Company $57,785,537
    of the net proceeds received by the Selling Stockholder from the sale of
the shares offered hereby. See "The Paul Revere Merger--Textron     
Agreements."                                                        
(4) The Company has granted to the U.S. Underwriters an option, exercisable 
within 30 days of the date hereof, to purchase up to an aggregate of
 887,625 additional shares of Common Stock at the price to public less
underwriting discounts and commissions, for the purpose of covering 
  over-allotments, if any. If the U.S. Underwriters exercise such option
in full, the total price to public and underwriting discounts and   
   commissions will be $360,671,625 and $12,623,507, respectively, and the
proceeds to the Company will increase by $45,397,581. See           
"Underwriters."                                                     

----------------  

The shares of Common Stock are offered, subject to prior sale, when, as and 
if accepted by the Underwriters named herein and subject to approval of         
certain legal matters by LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for    
the Underwriters. It is expected that delivery of the shares of Common Stock    
will be made on or about May 9, 1997 through the book-entry facilities of The   
Depository Trust Company, against payment therefor in immediately available     
funds.                                                                          

----------------  

MORGAN STANLEY & CO.                                       SALOMON BROTHERS INC 
Incorporated                                                            

May 5, 1997                                                                     

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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE 
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS            
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT  
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING            
STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER   
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE        
SECURITIES OFFERED HEREBY, TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS     
UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE     
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY         
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS   
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.                           

----------------  

TABLE OF CONTENTS 

                                                                [Download Table]

                                                                            PAGE
                                                                            ----
                                                                                
Forward Looking Statements................................................   3  
Available Information.....................................................   3  
Incorporation of Certain Documents by Reference...........................   4  
Prospectus Summary........................................................   5  
Risk Factors..............................................................   8  
The Paul Revere Merger....................................................  10  
Use of Proceeds...........................................................  14  
Price Range of Common Stock and Dividends.................................  14  
Capitalization............................................................  15  
Selected Consolidated Financial Data......................................  16  
Management's Discussion and Analysis of Financial Condition and Results of      
Operations................................................................  17  
Business..................................................................  28  
Management................................................................  38  
Beneficial Ownership of Common Stock......................................  41  
Selling Stockholder.......................................................  42  
Certain United States Tax Consequences to Non-United States Holders.......  44  
Underwriters..............................................................  46  
Legal Matters.............................................................  49  
Experts...................................................................  49  

----------------  

NOTICE TO NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED 
OR DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH          
CAROLINA, NOR HAS THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH          
CAROLINA RULED UPON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT.                  

State insurance holding company laws and regulations applicable to the      
Company generally provide that no person may acquire control of the Company,    
and thus indirect control of its insurance subsidiaries, unless such person     
has provided certain required information to, and such acquisition is approved  
(or not disapproved) by, the appropriate insurance regulatory authorities.      
Generally, any person acquiring beneficial ownership of 10% or more of the      
Common Stock would be presumed to have acquired such control, unless the        
appropriate insurance regulatory authorities upon advance application           
determine otherwise.                                                            

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS   
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,    
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH   
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THIS        
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."            

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FORWARD LOOKING STATEMENTS  

This Prospectus contains and incorporates by reference certain forward      
looking statements within the meaning of the Private Securities Litigation      
Reform Act of 1995 with respect to the results of operations and businesses of  
Provident Companies, Inc. (the "Company"). These forward looking statements     
involve certain risks and uncertainties. Factors that may cause actual results  
to differ materially from those contemplated or projected, forecast, estimated  
or budgeted in such forward looking statements include, among others, the       
following possibilities: (i) heightened competition, including specifically     
the intensification of price competition, the entry of new competitors and the  
development of new products by new and existing competitors; (ii) adverse       
state and federal legislation and regulation, including limitations on premium  
levels, increases in minimum capital and reserves, and other financial          
viability requirements; (iii) failure to develop multiple distribution          
channels in order to obtain new customers or failure to retain existing         
customers; (iv) inability to carry out marketing and sales plans, including,    
among others, changes to certain products and acceptance of the revised         
products in the market; (v) loss of key executives; (vi) changes in interest    
rates causing a reduction of investment income; (vii) general economic and      
business conditions which are less favorable than expected;                     
(viii) unanticipated changes in industry trends; (ix) inaccuracies in           
assumptions regarding future morbidity, persistency, mortality and interest     
rates used in calculating reserve amounts; (x) failure to continue improvement  
of the claims management process; and (xi) with respect to cost savings that    
will be realized from, and costs associated with, the acquisition of The Paul   
Revere Corporation ("Paul Revere") (the "Paul Revere Merger"), the following    
possibilities: (a) the expected cost savings to be realized beginning           
primarily in 1997 through combining certain functions of both the Company and   
Paul Revere, restructuring the field organizations of both companies to         
eliminate redundant facilities and better serve the combined company's          
customers, and reductions in staff cannot be fully realized because the         
changes are not made or unanticipated offsetting costs are incurred; and (b)    
costs or difficulties related to the integration of the businesses of the       
Company and Paul Revere are greater than expected. See "Risk Factors."          

AVAILABLE INFORMATION 

The Company is subject to the informational requirements of the Securities  
Exchange Act of 1934, as amended, and the rules and regulations promulgated     
thereunder (the "Exchange Act"), and in accordance therewith files reports,     
proxy and information statements and other information with the Securities and  
Exchange Commission (the "Commission"). Such reports, proxy and information     
statements and other information filed by the Company with the Commission can   
be inspected and copied at the public reference facilities maintained by the    
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; and    
at the Commission's Northeast Regional Office, 7 World Trade Center, Suite      
1300, New York, New York 10048, and Midwest Regional Office, Citicorp Center,   
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of    
such material can also be obtained at prescribed rates from the Public          
Reference Section of the Commission at 450 Fifth Street, N.W., Washington D.C.  
20549. The Commission maintains a Web site that contains reports, proxy and     
information statements and other information regarding registrants such as the  
Company that file electronically with the Commission. The address of such site  
is http://www.sec.gov. In addition, such reports, proxy and information         
statements and other information concerning the Company may be inspected at     
the offices of The New York Stock Exchange, Inc. ("NYSE"), 20 Broad Street,     
New York, New York 10005.                                                       

The Company has filed a Registration Statement on Form S-3 (the             
"Registration Statement") with the Commission pursuant to the Securities Act    
of 1933, as amended (the "Securities Act"), with respect to the Common Stock    
offered hereby. This Prospectus does not contain all the information set forth  
in the Registration Statement and the exhibits and schedules filed as a part    
thereof, as permitted by the rules and regulations of the Commission. For       
further information with respect to the Company and the Common Stock,           
reference is hereby made to the Registration Statement, including the exhibits  
and schedules filed as a part thereof. Statements contained in this Prospectus  
as to the contents of any contract or other document referred to herein are     
not necessarily complete, and where such contract or other document is an       
exhibit to the Registration Statement,                                          

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each such statement is qualified in all respects by the provisions of such      
exhibit, to which reference is hereby made for a full statement of the          
provisions thereof. The Registration Statement, including the exhibits and      
schedules filed as a part thereof, may be inspected without charge at the       
public reference facilities maintained by the Commission as set forth in the    
preceding paragraph. Copies of these documents may be obtained at prescribed    
rates from the Public Reference Section of the Commission at Room 1024,         
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.                

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

The following documents have been filed by the Company (File No. 1-11834)   
with the Commission pursuant to the Exchange Act, and are incorporated herein   
by reference:                                                                   

1. The Company's Annual Report on Form 10-K for the year ended December 31, 
1996;                                                                           

2. The Company's Current Reports on Form 8-K dated March 27, 1997; and      

3. The description of the Company's Common Stock (the "Common Stock") set   
forth in the Company's registration statement filed with the Commission         
pursuant to Section 12 of the Exchange Act, and any amendment or report filed   
for the purpose of updating any such description.                               

In addition, all documents filed by the Company pursuant to Sections 13(a), 
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the   
termination of the offering hereunder shall be deemed to be incorporated by     
reference in this Prospectus and to be a part hereof from the date of filing    
of such documents. Any statement contained in a document incorporated by        
reference herein shall be deemed to be modified or superseded for all purposes  
to the extent that a statement contained herein or in any other subsequently    
filed document which is deemed to be incorporated by reference herein modifies  
or supersedes such statement. Any statement so modified or superseded shall     
not be deemed, except as modified or superseded, to constitute a part of this   
Prospectus.                                                                     

The Company will provide, without charge, to each person to whom a copy of  
this Prospectus is delivered, upon the written or oral request of such person,  
a copy of any and all of the documents incorporated by reference (not           
including the exhibits to such documents, unless such exhibits are              
specifically incorporated by reference in such documents). Requests for such    
copies should be directed to Susan N. Roth, Secretary, Provident Companies,     
Inc., 1 Fountain Square, Chattanooga, Tennessee 37402, or by telephone at       
(423) 755-1011 or facsimile at (423) 755-3194.                                  

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the detailed          
information and financial statements, including the notes thereto, contained    
elsewhere or incorporated by reference in this Prospectus. Unless otherwise     
indicated, the information contained in this Prospectus assumes that the U.S.   
Underwriters' over-allotment option is not exercised.                           

THE COMPANY 

The Company is the largest provider of individual disability insurance and  
the second largest overall disability insurer in the United States on the basis 
of in-force premiums. It also provides a complementary portfolio of life        
insurance products, including life insurance, annuities, employer- and          
employee-paid group benefits and related services. The Company is the parent    
holding company for a group of insurance companies that collectively operate in 
all 50 states, the District of Columbia, Puerto Rico, and Canada.               

 Since 1994, the Company has completed a comprehensive corporate repositioning
that has prepared it to support growth and increase stockholder value. A new    
management team headed by J. Harold Chandler, who joined the Company in         
November 1993, initiated a strategic review of the business. As a result of its 
review, management refocused the Company's strategy to (i) serve the individual 
and employee benefits insurance markets, (ii) leverage the Company's disability 
insurance expertise, (iii) utilize multiple distribution channels to reach      
broader market segments, and (iv) more closely align the interests of the       
Company's employees with those of its stockholders.                             

The Company has successfully undertaken a number of major initiatives in    
pursuing this strategy. These initiatives include strengthening its capital     
position and investment portfolio, reorganizing internally, and reassessing its 
product offerings. The acquisitions of Paul Revere and GENEX Services, Inc.     
("Genex") in early 1997 are the latest accomplishments under the Company's      
strategic plan. Both acquisitions strengthen the Company's disability insurance 
capabilities and enable the Company to offer a more complete portfolio of       
products and services to its customers.                                         

The shares of Common Stock to be sold by Textron Inc. ("Textron" or the     
"Selling Stockholder") were acquired by the Selling Stockholder in the Paul     
Revere Merger. In accordance with the terms of the Paul Revere Merger Agreement 
(as defined herein), at the effective time of the Paul Revere Merger, each      
share of the common stock of Paul Revere (other than shares held by the Selling 
Stockholder) was converted into the right to receive, at the election of the    
holder of such share, either (i) $26.00 in cash, without interest thereon, (ii) 
 .767 of a share of Common Stock (the "Stock Consideration"), or (iii) $20.00 in
cash plus .177 of a share of Common Stock, and each share of Paul Revere Common 
Stock held by the Selling Stockholder was converted into the right to receive   
$20.00 in cash plus .1578 of a share of Common Stock, or a total of 5,917,500   
shares of Common Stock. See "The Paul Revere Merger."                           

 Pursuant to an agreement between the Selling Stockholder and the Company, the
Selling Stockholder will pay to the Company a portion of the net proceeds       
received by the Selling Stockholder from the sale of the shares offered hereby. 
See "The Paul Revere Merger--Textron Agreements." Following the completion of   
the offering, Textron will not hold any shares of Common Stock.                 

The Company's principal executive offices are located at 1 Fountain Square, 
Chattanooga, Tennessee 37402, and its telephone number is (423) 755-1011.       

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THE OFFERING

                                                                [Download Table]
                                                                                
Shares of Common Stock offered                                                  
 by the Selling Stockholder                                                     
 United States offering.........   4,734,000 shares                             
 International offering.........   1,183,500 shares                             
  Total.........................   5,917,500 shares                             
Shares of Common Stock to be                                                    
 outstanding after the offering.  66,884,726 shares*                            
Use of proceeds.................  The portion of the proceeds to be paid to the 
                                  Company will be used for general corporate    
                                  purposes, including possible acquisitions. See
                                  "Use of Proceeds."                            
NYSE symbol.....................  PVT                                           

--------                                                                        
* Based on the number of shares of Common Stock outstanding as of March 31,     
1997. Excludes an aggregate of 3,596,207 shares of Common Stock reserved for    
issuance upon exercise of options and similar rights outstanding as of such     
date.                                                                           

SUMMARY FINANCIAL DATA

                                                        [Enlarge/Download Table]

                          YEAR ENDED                                                                  
                         DECEMBER 31,                       YEAR ENDED DECEMBER 31,                   
                             1996         ------------------------------------------------------------
                         PRO FORMA (1)       1996        1995        1994        1993         1992    
                         -------------    ----------- ----------- ----------- -----------  -----------
                                     (IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)                
                                                                                                      
STATEMENT OF OPERATIONS                                                                               
 DATA:                                                                                                
 Revenue................  $   3,884.4     $   2,291.9 $   2,555.3 $   2,762.2 $   2,938.0  $   2,866.7
 Benefits and expenses..      3,927.3 (2)     2,065.7     2,379.3     2,561.3     3,078.1      2,686.9
                          -----------     ----------- ----------- ----------- -----------  -----------
 Income (loss) before                                                                                 
 income taxes...........        (42.9)          226.2       176.0       200.9      (140.1)       179.8
 Federal income taxes                                                                                 
 (credit)...............         (8.5)           80.6        60.4        65.6       (58.9)        67.2
                          -----------     ----------- ----------- ----------- -----------  -----------
 Net income (loss)......  $     (34.4)(2) $     145.6 $     115.6 $     135.3 $     (81.2) $     112.6
                          ===========     =========== =========== =========== ===========  ===========
 Net income (loss) per                                                                                
 common share...........  $      (.71)    $      2.92 $      2.27 $      2.71 $     (2.03) $      2.49
                          ===========     =========== =========== =========== ===========  ===========
 Dividends declared per                                                                               
 common share...........  $       .72     $       .72 $       .72 $      1.04 $      1.04  $      1.00
 Weighted average common                                                                              
  shares outstanding....   66,719,977      45,522,417  45,381,373  45,311,053  45,200,914   45,175,980
BALANCE SHEET DATA (AT                                                                                
YEAR END):                                                                                            
 Total assets...........  $  22,642.2     $  14,992.5 $  16,301.3 $  17,149.9 $  16,891.9  $  15,925.1
 Long-term debt                                                                                       
  including capital                                                                                   
  lease obligations.....        581.2           200.0       200.0       202.5       247.6        206.2
 Total debt.............        607.4           200.0       201.4       216.9       276.6        477.3
 Common stockholders'                                                                                 
 equity.................      2,322.4         1,582.4     1,496.1     1,012.9     1,245.4      1,387.5

--------                                                                        
(1) Reflects consummation of the Paul Revere Merger as of January 1, 1996 for   
  statement of operations data and as of December 31, 1996 for balance sheet
data, in each case assuming that Paul Revere stockholders (other than   
Textron) elect to receive the Stock Consideration. See "The Paul Revere 
Merger."                                                                
(2) Includes reserve strengthening of $380.0 million, before income taxes,      
 recorded by Paul Revere in the third quarter of 1996, which resulted in a
   decrease in net income of $244.3 million. See "The Paul Revere Merger--Paul
Revere Reserve Strengthening."                                          

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RECENT DEVELOPMENTS 

Provident's net income for the first quarter of 1997 was $40.8 million ($.81
per share of Common Stock), compared to $34.4 million ($.69 per share of Common 
Stock) for the first quarter of 1996. Included in these net income figures are  
net realized after-tax investment gains of $3.1 million ($.07 per share of      
Common Stock) in the first quarter of 1997 and losses of $.4 million ($.01 per  
share of Common Stock) in the first quarter of 1996.                            

After-tax operating earnings (excluding net realized investment gains and   
losses) were $37.7 million ($.74 per share of Common Stock) in the first        
quarter of 1997, compared to $34.8 million ($.70 per share of Common Stock) in  
the first quarter of 1996.                                                      

Revenue (excluding net realized gains and investment losses) in the         
Individual Life and Disability and Employee Benefits segments increased 1.1     
percent to $424.3 million in the first quarter of 1997, from $419.6 million in  
the first quarter of 1996. These two segments represent the lines of business   
that Provident is focusing on for growth in the future. Total revenue including 
the Other Operations segment, which consists of product lines closed to new     
business, totaled $566.6 million for the first quarter of 1997. This represents 
a decline of 4.3 percent from the $592.3 million reported in the first quarter  
of 1996, primarily due to the continued run-off of the group pension business.  

The following table presents certain information for the three-month periods
ended March 31, 1997 and 1996.                                                  

                                                                [Download Table]

                                                THREE MONTHS ENDED MARCH 31, 
                                                -----------------------------
                                                   1997(1)          1996     
                                                -----------------------------
                                                 (IN MILLIONS, EXCEPT SHARE  
                                                   AND PER SHARE AMOUNTS)    
                                                                             
STATEMENT OF OPERATIONS DATA:                                                
 Revenue....................................... $        571.3 $        591.7
 Benefits and expenses.........................          508.5          538.3
                                                -------------- --------------
 Income before income taxes....................           62.8           53.4
 Federal income taxes .........................           22.0           19.0
                                                -------------- --------------
 Net income ................................... $         40.8 $         34.4
                                                ============== ==============
 Net income per common share................... $          .81 $          .69
                                                ============== ==============
 Dividends declared per common share........... $          .18 $          .18
 Weighted average common shares outstanding....     46,605,854     45,434,964

--------                                                                        
(1) Does not include the results of operations for Paul Revere because the Paul 
Revere Merger was accounted for by the purchase method with an effective
date as of the close of business on March 31, 1997.                     

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RISK FACTORS  

In addition to the other information contained in this Prospectus,          
prospective investors should consider carefully the following factors before    
making an investment in the Common Stock offered hereby. Any one or more of     
such factors may cause the Company's actual results for various financial       
reporting periods to differ materially from those expressed in any forward-     
looking statements made by or on behalf of the Company.                         

RESERVES                                                                        

The Company maintains reserves for future policy benefits and unpaid claim  
expenses which include policy reserves and claim reserves established for its   
individual disability insurance, group insurance, and individual life           
insurance products. Policy reserves represent the portion of premiums received  
which are reserved to provide for future claims. Claim reserves are             
established for future payments not yet due on claims already incurred,         
primarily relating to individual disability and group disability insurance      
products. Reserves, whether calculated under generally accepted accounting      
principles ("GAAP") or statutory accounting practices, do not represent an      
exact calculation of future benefit liabilities but are instead estimates made  
by the Company using actuarial and statistical procedures. There can be no      
assurance that any such reserves would be sufficient to fund future             
liabilities of the Company in all circumstances. Future loss development could  
require reserves to be increased, which would adversely affect earnings in      
current and future periods. Adjustments to reserve amounts may be required in   
the event of changes from the assumptions regarding future morbidity (the       
incidence of claims and the rate of recovery, including the effects thereon of  
inflation, and other societal and economic factors), persistency, mortality,    
and interest rates used in calculating the reserve amounts. See "The Paul       
Revere Merger--Paul Revere Reserve Strengthening" and "Business--Reserves."     

CAPITAL ADEQUACY                                                                

The capacity for an insurance company's growth in premiums is in part a     
function of its statutory surplus. Maintaining appropriate levels of statutory  
surplus, as measured by state insurance regulators, is considered important by  
state insurance regulatory authorities and the private agencies that rate       
insurers' claims-paying abilities and financial strength. Failure to maintain   
certain levels of statutory surplus could result in increased regulatory        
scrutiny, action by state regulatory authorities or a downgrade by the private  
rating agencies.                                                                

Effective in 1993, the National Association of Insurance Commissioners      
("NAIC") adopted a risk-based capital ("RBC") formula, which prescribes a       
system for assessing the adequacy of statutory capital and surplus for all      
life and health insurers. The basis of the system is a risk-based formula that  
applies prescribed factors to the various risk elements in a life and health    
insurer's business to report a minimum capital requirement proportional to the  
amount of risk assumed by the insurer. The life and health RBC formula is       
designed to measure annually (i) the risk of loss from asset defaults and       
asset value fluctuation, (ii) the risk of loss from adverse mortality and       
morbidity experience, (iii) the risk of loss from mismatching of asset and      
liability cash flow due to changing interest rates and (iv) business risks.     
The formula is to be used as an early warning tool to identify companies that   
are potentially inadequately capitalized. The formula is intended to be used    
as a regulatory tool only and is not intended as a means to rank insurers       
generally.                                                                      

Based on computations made by the Company in accordance with the prescribed 
life and health RBC formula, each of the Company's life insurance subsidiaries  
exceeded the minimum capital requirements at December 31, 1996.                 

During 1995 and 1996, the Division of Insurance of the Commonwealth of      
Massachusetts (the "Massachusetts Division of Insurance") conducted a           
quadrennial examination of The Paul Revere Life Insurance Company ("Paul        
Revere Life") and The Paul Revere Variable Annuity Insurance Company ("Paul     
Revere Variable") for the period ended December 31, 1994. In connection with    
this examination, as well as in consideration of a comprehensive study          
undertaken by Paul Revere in 1995 and early 1996 of its statutory reserves,     
Paul Revere Life and The Paul Revere Protective Life Insurance Company ("Paul   
Revere Protective") strengthened their individual disability statutory          
reserves by a combined total of $35.0 million and reflected this strengthening  
in the annual statutory financial statements for the year ended December 31,    
1995.                                                                           

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During the third quarter of 1996, Paul Revere initiated a comprehensive     
study of the adequacy of its individual disability reserves under GAAP and      
under statutory accounting principles to consider experience through September  
30, 1996. The results of such study prompted Paul Revere to strengthen its      
GAAP individual disability reserves by $380.0 million before taxes in the       
quarter ended September 30, 1996. The Massachusetts Division of Insurance       
subsequently updated its examination of Paul Revere's statutory reserves to     
review the results of Paul Revere's statutory reserve study, with the result    
that Paul Revere's statutory reserves were strengthened by $144.0 million. In   
connection with the Paul Revere Merger, Textron, the principal stockholder of   
Paul Revere, contributed $121.0 million, representing the amount of the         
statutory reserve increases, net of tax benefits, as additional capital to      
Paul Revere prior to the effective time of the Paul Revere Merger. See "The     
Paul Revere Merger--Paul Revere Reserve Strengthening" and "Business--          
Reserves."                                                                      

DISABILITY INSURANCE                                                            

Disability insurance may be affected by a number of social, economic,       
governmental, competitive, and other factors. Changes in societal attitudes,    
work ethics, motivation, stability, and mores can significantly affect the      
demand for and underwriting results from disability products. Economic          
conditions affect not only the market for disability products, but also         
significantly affect the claims rates and length of claims. The climate and     
the nature of competition in disability insurance have also been markedly       
affected by the growth of Social Security, worker's compensation, and other     
governmental programs in the workplace. The nature of that portion of the       
Company's outstanding insurance business that consists of noncancelable         
disability policies, whereby the policy is guaranteed renewable through the     
life of the policy at a fixed premium, does not permit the Company to adjust    
its premiums on business in-force on account of changes resulting from such     
factors. Disability insurance products are important products for the Company.  
To the extent that disability products are adversely affected in the future as  
to sales or claims, the business or results of operations of the Company could  
be materially adversely affected. See "Business--Reporting Segments."           

INDUSTRY FACTORS                                                                

All of the Company's businesses are highly regulated and competitive. The   
Company's profitability is affected by a number of factors, including rate      
competition, frequency and severity of claims, lapse rates, government          
regulation, interest rates, and general business considerations. There are      
many insurance companies which actively compete with the Company in its lines   
of business, some of which are larger and have greater financial resources      
than the Company, and there is no assurance that the Company will be able to    
compete effectively against such companies in the future. See "Business--       
Competition."                                                                   

In recent years, some U.S. life insurance companies have faced claims,      
including class-action lawsuits, alleging various improper sales practices in   
the sales of certain types of life insurance products. These claims often       
relate to the selling of whole life and universal life policies that            
accumulate cash values which may be utilized to fund the cost of insurance in   
later years of the policy. Due to subsequent reductions in dividends or         
interest credited or due to other factors, the cash values have not             
accumulated sufficiently to cover costs of insurance, resulting in the need     
for ongoing premium payments. Although never a principal product line for the   
Company or Paul Revere, both companies have sold a modest amount of interest    
sensitive whole life and universal life policies. There can be no assurance     
that any future claims relating to sales of such policies will not have a       
material adverse effect on the Company.                                         

EFFECT OF THE PAUL REVERE MERGER; INTEGRATION OF OPERATIONS                     

The success of the Paul Revere Merger will be determined by various factors,
including the financial performance of the combined company's operations and    
management's ability to realize expected cost savings through combining         
certain functions of both the Company and Paul Revere and restructuring the     
field organizations of both companies. The integration of the operations of     
Paul Revere and the Company may be negatively affected if, among other things,  
the proposed changes are not made, customers do not react positively to some    
of the planned changes intended to increase service or integrate the            
businesses of the two companies,                                                

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unanticipated offsetting costs are incurred, or costs or difficulties related   
to the integration of the businesses of the Company and Paul Revere are         
greater than expected. There can be no assurance that the anticipated benefits  
of the Paul Revere Merger will be realized or that the Paul Revere Merger will  
not adversely affect the future operating results of the Company. See "The      
Paul Revere Merger."                                                            

THE PAUL REVERE MERGER  

On March 27, 1997, the Company completed the acquisition of Paul Revere.    
Pursuant to the Amended and Restated Agreement and Plan of Merger, dated as of  
April 29, 1996 (the "Paul Revere Merger Agreement"), among Paul Revere, the     
Company and Patriot Acquisition Corporation ("Newco"), a wholly-owned           
subsidiary of the Company, Newco was merged with and into Paul Revere, with     
the result that Paul Revere became a wholly-owned subsidiary of the Company.    
In accordance with the terms of the Paul Revere Merger Agreement, each share    
of Paul Revere Common Stock (other than shares held by Textron) was converted   
into the right to receive, at the election of the holder of such share, either  
(i) $26.00 in cash, without interest thereon (the "Cash Consideration"), (ii)   
.767 of a share of Common Stock (the "Stock Consideration"), or (iii) $20.00  
in cash plus .177 of a share of Common Stock (the "Mixed Consideration"), and   
each share of Paul Revere common stock held by Textron was converted into the   
right to receive $20.00 in cash plus .1578 of a share of Common Stock (the      
"Textron Consideration"). Any Paul Revere stockholder who surrenders such       
holder's shares without making an election will be deemed to have elected to    
receive the Cash Consideration.                                                 

Prior to consummation of the Paul Revere Merger, Textron owned 37,500,000   
shares of Paul Revere common stock, or approximately 83 percent of the          
45,000,000 outstanding shares of Paul Revere common stock. Accordingly, the     
shares of Paul Revere common stock held by Textron were converted at the        
effective time of the Paul Revere Merger into the right to receive $750.0       
million in cash and an aggregate of 5,917,500 shares of Common Stock. As of     
May 2, 1997, the former holders of approximately 81.67 percent of the Paul      
Revere common stock (other than Textron) had elected to receive the Stock       
Consideration (entitling such holders to receive an aggregate of approximately  
4,698,306 shares of Common Stock), approximately .1 percent had elected to      
receive the Cash Consideration (entitling such holders to receive an aggregate  
of $212,680 in cash), and the remaining approximately 18.21 percent had not     
yet surrendered their shares of Paul Revere common stock for exchange.          

The Company has funded the required cash payments to be made to Textron and 
the other former Paul Revere stockholders with the proceeds of the sale of      
9,523,810 shares of Common Stock to Zurich Insurance Company ("Zurich") and     
various affiliates of Zurich for $300.0 million in cash and with approximately  
$525.0 million of borrowings under the Company's existing line of credit. See   
"--Zurich Relationship" and "Management's Discussion and Analysis of Financial  
Condition and Results of Operations--Liquidity and Capital Resources."          

An appeal of the decision of the Massachusetts Commissioner of Insurance    
approving the acquisition of control of the Paul Revere insurance subsidiaries  
domiciled in Massachusetts by the Company has been filed by George E. Ginther   
and Niagara Financial Services, Inc. Mr. Ginther appeared and testified at the  
hearing held in connection with such acquisition of control prior to the        
approval on March 24, 1997 by the Massachusetts Commissioner of Insurance. The  
appeal alleges that the findings in the decision were unsubstantiated by the    
evidence and that the statutory criteria for approval of the merger were not    
met. The appeal requests a trial de novo before a state court to determine if   
the merger meets the statutory criteria under Massachusetts law and requests    
that the application of the order approving the merger be stayed and that the   
merger be ultimately disapproved, or conditionally approved. The Company        
believes the likelihood of success of the appeal is remote, and the Company     
intends to promptly file a motion to dismiss and otherwise to defend the        
approval vigorously. However, there can be no absolute assurance that such      
appeal will not result in a decision that is materially adverse to the          
Company.                                                                        

On May 1, 1997, the California Insurance Commissioner notified the Company  
that, because Paul Revere Variable was commercially domiciled in the State of   
California during 1996, the Company should have filed an                        

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application with the Commissioner seeking approval of the change in control of  
Paul Revere Variable in connection with the Paul Revere Merger. The Company is  
in the process of preparing a submission to the California Insurance            
Commissioner. Although the Company intends to seek such approval and believes   
that failure to obtain such approval would not have a material adverse effect   
on the Company, there can be no assurance that such approval can be obtained.   

PAUL REVERE RESERVE STRENGTHENING                                               

Paul Revere's individual disability insurance segment reported a loss before
income taxes of $343.3 million for the nine months ended September 30, 1996,    
as compared to income before income taxes of $48.5 million during the           
comparable period of 1995. This loss was attributable to reserve strengthening  
of $380.0 million, before income taxes, recorded in the third quarter of 1996.  
The reserve strengthening recorded was prompted by the results of a             
comprehensive study of the adequacy of its individual disability reserves       
under GAAP completed in October 1996. In connection with such reserve study,    
Paul Revere received an actuarial report from an independent actuarial firm,    
which report concluded that the net individual disability reserves of $2.2      
billion reported by Paul Revere at September 30, 1996, which reflected the      
$380.0 million reserve strengthening adjustment, were adequate on a GAAP        
basis, based on the assumptions reflected therein.                              

Subsequently, Paul Revere completed, in cooperation with the Massachusetts  
Division of Insurance, a comprehensive study of the adequacy of its statutory   
individual disability reserves, as a result of which Paul Revere's statutory    
reserves were increased by $144.0 million. Pursuant to the Amended and          
Restated Voting Agreement, dated as of April 29, 1996 (the "Textron Voting      
Agreement"), between Textron and the Company, Textron contributed to Paul       
Revere $121.0 million, representing the amount of required statutory reserve    
increases, net of tax benefits. See "--Textron Agreements."                     

TEXTRON AGREEMENTS                                                              

Under the original terms of the Paul Revere Merger Agreement entered into on
April 29, 1996, Textron was entitled to receive the Mixed Consideration. On     
November 5, 1996, the parties entered into the Paul Revere Merger Agreement as  
amended and restated, pursuant to which Textron was entitled to receive the     
Textron Consideration in lieu of the Mixed Consideration. In addition,          
pursuant to the Textron Voting Agreement and an Agreement, dated as of March    
27, 1997, between the Company and Textron (the "Textron Agreement"), Textron,   
prior to or at the effective time of the Paul Revere Merger, among other        
things, (i) provided to Paul Revere $146.0 million of additional capital        
($121.0 million of which was based on the results of the final determination    
of the required levels of Paul Revere's statutory reserves), (ii) contributed   
or agreed to contribute to Paul Revere certain assets having a value of         
approximately $15.0 million, (iii) reimbursed Paul Revere for certain           
severance costs, (iv) agreed to hold harmless Paul Revere and the Company from  
and against specified damages resulting from certain third party claims, and    
(v) as described below, agreed to pay to the Company certain proceeds from      
sales of Common Stock received by Textron in the Paul Revere Merger.            

Pursuant to the Textron Agreement, Textron has agreed to use its reasonable 
efforts to sell for cash all shares of Common Stock received by Textron in the  
Paul Revere Merger as soon as practicable after the effective date of the Paul  
Revere Merger, provided that the per share proceeds to Textron from any sale    
are not less than the Threshold Price (as defined below). Upon each sale of     
such shares, Textron has agreed to pay to the Company an amount per share       
equal to the difference (the "Appreciation") between the per share proceeds to  
Textron (after subtracting all commissions and other costs of sale) from such   
sale and $38.00 (appropriately adjusted for subdivisions, combinations, splits  
and other adjustments in the Common Stock after the effective date of the Paul  
Revere Merger, the "Threshold Price"); provided, that Textron is not required   
to make any such payment until, and only to the extent that, the Appreciation   
received by Textron in respect of all such sales exceeds, in the aggregate,     
$20.0 million (the "Textron Appreciation"). If all 5,917,500 shares of Common   
Stock held by Textron are sold in this offering, Textron will pay to the        
Company the net proceeds received by Textron in excess of an aggregate of       
approximately $244.8 million, or the per share net proceeds in excess of        
approximately $41.38 per share of Common Stock.                                 

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In the event that by February 27, 1998, Textron has not sold all of the     
shares of Common Stock received by it in the Paul Revere Merger, the Company    
has the right, which may be exercised from time to time at the Company's        
discretion, to repurchase some or all of such shares then held by Textron at a  
purchase price per share equal to the Threshold Price; provided, that until     
such time as Textron has realized the entire Textron Appreciation, the purchase 
price payable by the Company for each share purchased by the Company shall      
equal, if higher than the Threshold Price, the average (appropriately adjusted  
for any stock dividend, split, combination or reclassification) of the closing  
prices for the Common Stock as reported on the NYSE for the ten consecutive     
Trading Days (as defined in the Paul Revere Merger Agreement) ending on the     
fifth Trading Day before the day on which such shares are purchased by the      
Company.                                                                        

PAUL REVERE FINANCIAL PERFORMANCE                                               

For the year ended December 31, 1996, Paul Revere reported a net loss of    
$162.9 million, as compared to net income of $85.3 million and $91.8 million    
for the years ended December 31, 1995 and 1994, respectively. As noted above,   
the loss for 1996 is attributable to individual disability reserve              
strengthening of $380.0 million, before income taxes, recorded in the third     
quarter of 1996, which resulted in a decrease in net income of $244.3 million,  
after tax. See "--Paul Revere Reserve Strengthening." The following is an       
overview of Paul Revere's financial performance for the three years ended       
December 31, 1996.                                                              

Premiums, Policy and Contract Charges and Fees. Premiums increased in the   
period from 1994 to 1996 from $944.9 million to $1.14 billion, which increase   
was primarily attributable to growth in the individual insurance segment and    
group disability insurance line of business. Deposits received by Paul Revere   
from its interest-sensitive products (including both life insurance and annuity 
contracts) declined in 1996 as compared to 1995, and 1995 was relatively flat   
as compared to 1994. Account balances for these products increased to $2.13     
billion at December 31, 1996 as compared to $2.03 billion and $1.85 billion at  
December 31, 1995 and 1994, respectively.                                       

Net Investment Income. Net investment income increased by 4.1% in 1996 to   
$405.6 million as compared to $389.7 million in 1995, and by 6.8% in 1995 as    
compared to $364.9 million in 1994, as the growth in invested assets more than  
offset declining portfolio yields. The yields on average invested assets        
declined in all years due to an interest rate environment offering yields at    
less than average portfolio rates. In addition, net investment income for the   
year ended December 31, 1995 was positively impacted by the receipt of $7.7     
million representing the interest portion of two federal income tax refunds     
related to prior years. In 1994, accelerated prepayments on mortgage-backed     
securities and continued call activity generated an increase in funds available 
for investment at a time when interest rates were lower than the current        
portfolio yield. The average yield on Paul Revere's portfolio was 7.70%, 7.90%, 
and 7.99% in 1996, 1995 and 1994, respectively.                                 

Net Realized Investment Gains. Net realized investment gains decreased $40.4
million in 1996 to $48.6 million as compared to 1995 and increased $51.4        
million in 1995 to $89.0 million from $37.6 million in 1994. The increase in    
1995 was attributable to realized investment gains on equity-oriented and fixed 
income securities. The equity-oriented gains included sales of Textron common   
stock in accordance with a previously approved commitment. Additionally, in     
1995, this increase was partially due to a sale of common stock which was       
originally acquired in conjunction with a private placement debt financing.     
Fixed income security sale gains were generated due to the restructuring of the 
individual disability insurance segment investment portfolios in order to       
lengthen duration. Net realized investment gains were reduced by increases and  
increased by decreases in the provision for other than temporary declines in    
investments. The net decrease in the provision (including those investments     
subject to direct writedown) was $6.2 million during 1996 compared to net       
increases of $10.0 million and $9.2 million during 1995 and 1994, respectively. 

Benefits to Policyholders. Benefits to policyholders increased 40.1% in 1996
to $1.46 billion as compared to $1.04 billion in 1995 and 20.3% in 1995 as      
compared to $864.0 million in 1994. The increase in 1996 was primarily the      
result of individual disability reserve strengthening of $380.0 million, before 
income taxes, recorded in the third quarter of 1996. This reserve strengthening 
resulted in a decrease to net income of $244.3                                  

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million, after tax. The increase in 1995 as compared to 1994 was primarily      
attributable to adverse claim experience in the individual disability           
insurance segment. This adverse claim experience resulted principally from      
Paul Revere's excess-risk reinsurance line of business and the core block of    
policies issued during 1985-1989, especially in Florida and California. In      
addition, business issued to physicians performed below expectations. In 1995,  
due to the continued deterioration of claim experience in the excess-risk       
reinsurance business, Paul Revere recorded reserve strengthening of $59.0       
million, before income taxes.                                                   

Other Expenses. Paul Revere's expense ratio (excluding goodwill) was 33.1%, 
33.2% and 34.7% for the years ended December 31, 1996, 1995 and 1994,           
respectively. The ratio remained relatively flat in 1996 compared to 1995. The  
decrease in 1995 as compared to 1994 was primarily attributable to higher       
levels of premium revenues coupled with more aggressive expense management,     
including various initiatives to reduce home office and field expenses.         

Amortization of deferred costs increased $4.1 million in 1996 as compared to
1995 and increased $12.4 million in 1995 as compared to 1994. The increase      
from 1994 to 1995 reflected increasing business volumes in the individual and   
group disability insurance lines of business, partially offset by the effects   
of improved persistency.                                                        

ZURICH RELATIONSHIP                                                             

On March 27, 1997, the Company consummated the sale of 9,523,810 shares of  
Common Stock to Zurich for $300.0 million in cash, the proceeds of which were   
used to fund a portion of the cash payments required to be made to Paul Revere  
stockholders in the Paul Revere Merger. The Company and Zurich have also        
entered into a strategic marketing relationship pursuant to which the Company   
and Zurich have agreed to work with each other to utilize existing products     
and distribution channels and to explore joint opportunities and other areas    
to leverage each other's strengths. Zurich has agreed to certain restrictions   
on acquisitions of shares of Common Stock and is permitted, subject to certain  
limitations, to designate up to two persons to be nominated to serve as         
directors of the Company. Zurich has, under certain circumstances and subject   
to certain exceptions, a first refusal right to acquire shares of Common Stock  
proposed to be sold by certain members of the Maclellan family or related       
trusts and foundations. The Company has granted to Zurich certain rights to     
require the shares of Common Stock acquired by Zurich to be registered under    
the Securities Act, and the Company has registered such shares in order to      
facilitate resales of such shares by Zurich.                                    

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USE OF PROCEEDS 

Pursuant to an agreement between the Company and the Selling Stockholder,   
the Selling Stockholder will pay to the Company a portion of the net proceeds   
received by the Selling Stockholder from the sale of the shares offered         
hereby. The Company will receive all of the net proceeds from the sale of       
shares of Common Stock pursuant to exercise of the U.S. Underwriters' over-     
allotment option. The net proceeds to the Company from the sale by the Selling  
Stockholder of the 5,917,500 shares of Common Stock offered by the Selling      
Stockholder hereby are estimated to be $57,435,537 ($102,833,118 if the U.S.    
Underwriters' over-allotment option is exercised in full), after deducting      
underwriters' discounts and commissions, expenses payable by the Company, and   
retention by the Selling Stockholder of the Threshold Price and the Textron     
Appreciation (as such terms are defined in the Textron Agreement). See "The     
Paul Revere Merger--Textron Agreements."                                        

The Company intends to use the net proceeds it receives for general         
corporate purposes, including possible acquisitions of businesses or assets     
complementary to the Company's current businesses. The Company regularly        
engages in discussions to explore acquisition opportunities. The Company        
currently has no agreements or understandings to acquire any businesses.        
Pending utilization of the net proceeds received by the Company from this       
offering, the Company intends to invest them in short-term, income-generating,  
investment-grade securities.                                                    

PRICE RANGE OF COMMON STOCK AND DIVIDENDS 

The Common Stock is traded on the NYSE under the symbol "PVT." The following
table sets forth for the indicated calendar quarters the high and low sales     
prices for the Common Stock, as reported in the NYSE consolidated transaction   
system, and the dividends declared per share of Common Stock since January 1,   
1995.                                                                           

                                                                [Download Table]

                                                         SALES                  
                                                        PRICES                  
                                                       ------------    DIVIDENDS
                                                       HIGH    LOW     DECLARED 
                                                       ----    ----    ---------
                                                                                
1995                                                                            
 First Quarter........................................ $24 7/8 $21 1/2   $.18   
 Second Quarter.......................................   26     20 1/2    .18   
 Third Quarter........................................  27 1/2  21 7/8    .18   
 Fourth Quarter.......................................  33 7/8  26 1/4    .18   
1996                                                                            
 First Quarter........................................ $ 35    $ 29      $.18   
 Second Quarter.......................................  37 1/4  28 1/2    .18   
 Third Quarter........................................   39     35 3/4    .18   
 Fourth Quarter.......................................  51 1/2  36 7/8    .18   
1997                                                                            
                                                               $ 46             
 First Quarter........................................ $57 3/4  3/8      $.18   
 Second Quarter (through May 5, 1997).................  59 1/4   52       --    

As of March 31, 1997, there were approximately 1,305 holders of record of   
the Common Stock and 66,884,726 shares of Common Stock outstanding.             

The Company has paid consecutive cash dividends on its shares for over 40   
years. The payment of future dividends will depend upon future earnings, the    
financial condition of the Company, restrictions contained in loan agreements,  
and other factors.                                                              

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CAPITALIZATION  

The following table sets forth the consolidated capitalization of the       
Company and its subsidiaries as of December 31, 1996 (i) on an actual basis,    
(ii) as adjusted to reflect, on a pro forma basis, the Paul Revere Merger, and  
(iii) as adjusted further to reflect the sale by the Selling Stockholder of     
the 5,917,500 shares of Common Stock offered hereby and payment to the Company  
of a portion of the net proceeds therefrom. See "The Paul Revere Merger--       
Textron Agreement." The pro forma information reflecting the Paul Revere        
Merger based on the assumption that Paul Revere stockholders (other than        
Textron) elect to receive the Stock Consideration has been derived from, and    
should be read in conjunction with, pro forma financial information             
incorporated by reference herein. See "Available Information" and               
"Incorporation of Certain Documents by Reference."                              

                                                                [Download Table]

                                                      DECEMBER 31, 1996        
                                               --------------------------------
                                                         PRO FORMA  AS ADJUSTED
                                                          FOR THE   FURTHER FOR
                                                        PAUL REVERE     THE    
                                                ACTUAL    MERGER     OFFERING  
                                               -------- ----------- -----------
                                                        (IN MILLIONS)          
                                                                               
Long-term debt................................ $  200.0  $  581.2    $  581.2  
                                               --------  --------    --------  
Stockholders' equity:                                                          
 Preferred stock, 25,000,000 shares                                            
  authorized, 1,041,534 shares of 8.10%                                        
  Cumulative Preferred Stock issued and                                        
  outstanding.................................    156.2     156.2       156.2  
 Common stock, $1.00 par value; 150,000,000                                    
  shares authorized, 45,627,629 shares issued                                  
  and outstanding, 66,825,189 shares issued                                    
  and outstanding pro forma and as adjusted                                    
  (1).........................................     45.6      66.8        66.8  
 Additional paid-in capital...................     11.4     730.2       787.6  
 Retained earnings............................  1,525.4   1,525.4     1,525.4  
                                               --------  --------    --------  
  Total stockholders' equity..................  1,738.6   2,478.6     2,536.0  
                                               --------  --------    --------  
   Total capitalization....................... $1,938.6  $3,059.8    $3,117.2  
                                               ========  ========    ========  

--------                                                                        
(1) Excludes an aggregate of 2,119,727 shares of Common Stock reserved for      
issuance upon exercise of options outstanding as of December 31, 1996.  

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SELECTED CONSOLIDATED FINANCIAL DATA  

The following selected historical financial data as of and for the five     
years in the period ended December 31, 1996 have been derived from the audited  
consolidated financial statements of the Company, which are incorporated        
herein by reference. The following selected pro forma financial data reflect    
consummation of the Paul Revere Merger and have been derived from pro forma     
financial information of the Company incorporated herein by reference. The      
information set forth below should be read in conjunction with the Company's    
and Paul Revere's respective consolidated financial statements (including the   
notes thereto) and the pro forma financial information relating to the Paul     
Revere Merger (including the notes thereto), incorporated by reference herein.  
See "Available Information" and "Incorporation of Certain Documents by          
Reference."                                                                     

                                                        [Enlarge/Download Table]

                             YEAR ENDED                        YEAR ENDED DECEMBER 31,                       
                          DECEMBER 31, 1996  --------------------------------------------------------------- 
                            PRO FORMA (1)       1996         1995         1994         1993         1992     
                          -----------------  -----------  -----------  -----------  -----------  ----------- 
                                        (IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)                    
                                                                                                             
STATEMENT OF OPERATIONS                                                                                      
 DATA:                                                                                                       
Revenue:                                                                                                     
 Premium income.........     $   2,306.0     $   1,175.7  $   1,251.9  $   1,382.6  $   1,400.2  $   1,490.7 
 Net investment income..         1,498.4         1,090.1      1,221.3      1,238.6      1,318.7      1,241.8 
 Net realized investment                                                                                     
  gains (losses)........            40.0            (8.6)       (31.7)       (30.1)        43.6        (30.8)
 Other income...........            40.0            34.7        113.8        171.1        175.5        165.0 
                             -----------     -----------  -----------  -----------  -----------  ----------- 
 Total revenue..........         3,884.4         2,291.9      2,555.3      2,762.2      2,938.0      2,866.7 
                             -----------     -----------  -----------  -----------  -----------  ----------- 
Benefits and expenses:                                                                                       
 Benefits to                                                                                                 
 policyholders..........         3,110.7 (2)     1,661.2      1,904.6      1,981.2      2,502.8      2,102.6 
 Amortization of policy                                                                                      
  acquisition costs.....            74.0            64.0         71.0         59.4         61.0         66.9 
 Commissions and other                                                                                       
 expenses...............           742.6           340.5        403.7        520.7        514.3        517.4 
                             -----------     -----------  -----------  -----------  -----------  ----------- 
 Total benefits and                                                                                          
 expenses...............         3,927.3         2,065.7      2,379.3      2,561.3      3,078.1      2,686.9 
                             -----------     -----------  -----------  -----------  -----------  ----------- 
Income (loss) before                                                                                         
 federal income taxes...           (42.9)          226.2        176.0        200.9       (140.1)       179.8 
Federal income taxes                                                                                         
(credit)................            (8.5)           80.6         60.4         65.6        (58.9)        67.2 
                             -----------     -----------  -----------  -----------  -----------  ----------- 
Net income (loss).......     $     (34.4)(2) $     145.6  $     115.6  $     135.3  $     (81.2) $     112.6 
                             ===========     ===========  ===========  ===========  ===========  =========== 
Net income (loss) per                                                                                        
common share............     $      (.71)    $      2.92  $      2.27  $      2.71  $     (2.03) $      2.49 
                             ===========     ===========  ===========  ===========  ===========  =========== 
Weighted average common                                                                                      
 shares outstanding ....      66,719,977      45,522,417   45,381,373   45,311,053   45,200,914   45,175,980 
BALANCE SHEET DATA (AT                                                                                       
YEAR END):                                                                                                   
Total assets............     $  22,642.2     $  14,992.5  $  16,301.3  $  17,149.9  $  16,891.9  $  15,925.1 
Long-term debt including                                                                                     
 capital lease                                                                                               
 obligations............           581.2           200.0        200.0        202.5        247.6        206.2 
Total debt..............           607.4           200.0        201.4        216.9        276.6        477.3 
Common stockholders'                                                                                         
equity..................         2,322.4         1,582.4      1,496.1      1,012.9      1,245.4      1,387.5 

--------                                                                        
(1) Reflects consummation of the Paul Revere Merger as of January 1, 1996 for   
  statement of operations data and as of December 31, 1996 for balance sheet
data, in each case assuming that Paul Revere stockholders (other than   
Textron) elect to receive the Stock Consideration. See "The Paul Revere 
Merger."                                                                
(2) Includes reserve strengthening of $380.0 million, before income taxes,      
 recorded by Paul Revere in the third quarter of 1996, which resulted in a
decrease in net income of $244.3 million. See "The Paul Revere Merger-- 
Paul Revere Reserve Strengthening."                                     

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS 

OPERATING RESULTS                                                               

Revenue excluding net realized investment gains and losses (hereinafter     
"revenue") declined $286.5 million in 1996, or 11.1 percent, to $2.30 billion   
in 1996 from $2.59 billion in 1995. Revenue includes premium income, net        
investment income, and other income. This decline resulted from decreased       
revenue of $338.2 million in the Other Operations segment. This decline was     
partly offset by increased revenue of $28.3 million and $23.4 million in the    
Individual Life and Disability segment and Employee Benefits segment,           
respectively.                                                                   

In 1995, revenue declined $205.3 million, or 7.4 percent, to $2.59 billion  
from $2.79 billion in 1994. This decline resulted from decreased revenue of     
$295.4 million in the Other Operations segment. This decline was partly offset  
by increased revenue of $62.7 million in the Individual Life and Disability     
segment and of $27.4 million in the Employee Benefits segment.                  

Income before net realized investment gains and losses and federal income   
taxes (hereinafter "income") increased $27.1 million, or 13.0 percent, to       
$234.8 million in 1996 from $207.7 million in 1995. The increase resulted from  
higher income of $80.8 million in the Individual Life and Disability segment    
and of $7.7 million in the Employee Benefits segment. These increases were      
partly offset by decreased income of $61.4 million in the Other Operations      
segment.                                                                        

In 1995, income was $207.7 million, compared to $231.0 million in 1994. The 
decline resulted from decreased income of $23.2 million in the Employee         
Benefits segment and of $16.7 million in the Individual Life and Disability     
segment. These declines were only partly offset by increased income of $16.6    
million in the Other Operations segment.                                        

Net income totaled $145.6 million in 1996, compared to $115.6 million in    
1995 and $135.3 million in 1994. Net realized investment losses after federal   
income taxes were $5.4 million in 1996, $20.7 million in 1995, and $22.5        
million in 1994.                                                                

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INDIVIDUAL LIFE AND DISABILITY OPERATING RESULTS                                

                                                                [Download Table]

                                                      YEAR ENDED DECEMBER 31,   
                                                   -----------------------------
                                                     1996      1995      1994   
                                                   --------- --------- ---------
                                                           (IN MILLIONS)        
                                                                                
REVENUE EXCLUDING NET REALIZED INVESTMENT GAINS:                                
Premium income:                                                                 
 Individual disability income....................  $   582.8 $   584.5 $   578.7
 Individual life and annuities...................       63.5      62.9      66.2
                                                   --------- --------- ---------
   Total premium income..........................      646.3     647.4     644.9
Net investment income............................      393.6     361.3     302.4
Other income.....................................        7.7      10.6       9.3
                                                   --------- --------- ---------
     Total.......................................    1,047.6   1,019.3     956.6
                                                   --------- --------- ---------
BENEFITS AND EXPENSES:                                                          
Policy and contract benefits.....................      477.1     443.7     381.3
Change in reserves for future policy and contract                               
 benefits and                                                                   
 policyholders' funds............................      220.5     303.6     297.6
Amortization of deferred policy acquisition                                     
 costs...........................................       55.6      59.0      53.0
Other expenses...................................      177.1     176.5     171.5
                                                   --------- --------- ---------
     Total.......................................      930.3     982.8     903.4
                                                   --------- --------- ---------
Income before net realized investment gains and                                 
 federal income taxes............................      117.3      36.5      53.2
Net realized investment gains....................        8.5       4.7       5.8
                                                   --------- --------- ---------
Income before federal income taxes...............  $   125.8 $    41.2 $    59.0
                                                   ========= ========= =========
SALES--ANNUALIZED NEW PREMIUMS:                                                 
Individual disability income.....................  $    45.1 $    55.2 $    65.0
Individual life..................................        6.7       7.1       9.2
DEPOSITS--DEFERRED ANNUITIES.....................       21.2      82.4     141.8
LIFE INSURANCE IN FORCE..........................   12,585.2  12,709.1  12,683.6

Revenue in the Individual Life and Disability segment increased $28.3       
million, or 2.8 percent, to $1,047.6 million in 1996 from $1,019.3 million in   
1995. Net investment income increased $32.3 million, or 8.9 percent, to $393.6  
million in 1996 from $361.3 million in 1995. This increase was primarily the    
result of an increased allocation of capital to the individual disability       
income line of business. Premium income in this segment declined $1.1 million   
or .2 percent, to $646.3 million in 1996 from $647.4 million in 1995. In the    
individual disability income line of business, premium income declined $1.7     
million, or .3 percent, to $582.8 million in 1996 from $584.5 million in 1995.  
In the individual life line of business, premium income increased $.4 million,  
or .6 percent, to $63.3 million in 1996 from $62.9 million in 1995.             

In 1995, revenue in the Individual Life and Disability segment increased    
$62.7 million, or 6.6 percent, to $1,019.3 million from $956.6 million in       
1994. This increase was primarily the result of higher net investment income.   
Net investment income in this segment increased $58.9 million, or 19.5          
percent, due to an increased allocation of capital to the individual            
disability income line of business and higher investment income from the        
individual annuity line of business. Premium income in this segment increased   
$2.5 million to $647.4 million in 1995 from $644.9 million in 1994. In the      
individual disability income line, premium income was $584.5 million in 1995,   
compared to $578.7 million in 1994, while the individual life line of business  
experienced a decline in premium income from $66.2 million in 1994 to $62.9     
million in 1995.                                                                

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In November 1994, the Company announced its intention to discontinue selling
individual noncancelable disability contracts with long-term own-occupation     
provisions (other than conversion policies available under existing             
contractual arrangements). The Company is focusing on replacing the             
traditional noncancelable long-term own-occupation contracts with "loss of      
earnings" contracts which insure income rather than occupation. During the      
transition to the new products, revenue in this line was expected to decline    
as a result of a period of lower premiums associated with the new products.     
The magnitude and duration of the expected decline are dependent on the         
response of customers and competitors in the industry. In 1996, annualized new  
premiums for individual disability income declined $10.1 million, or 18.3       
percent, to $45.1 million, from $55.2 million in 1995. In the second half of    
1996, annualized new premiums totaled $24.6 million compared to $20.5 million   
in the first half of 1996 and $21.5 million in the second half of 1995.         

Income in the Individual Life and Disability segment increased $80.8 million
to $117.3 million in 1996 from $36.5 million in 1995. The improvement was       
primarily due to improved results in the individual disability income and the   
individual life lines of business. In the individual disability income line,    
income increased $78.2 million to $91.3 million in 1996, from $13.1 million in  
1995. This significant improvement was primarily due to a lower level of new    
claims in the third and fourth quarters of 1996 along with higher levels of     
claim resolutions. Management believes substantial investments in the           
individual disability claims management process since the first quarter of      
1995 helped produce the improvement in results in this line. The major          
elements of this investment included an emphasis on early intervention to       
better respond to the specific nature of the claims, increased specialization   
to properly adjudicate the increasingly specialized nature of disability        
claims, and an increased level of staffing with experienced claim adjusters.    
In addition, net investment income in this line increased due to a higher       
allocation of capital to this line of business. Income in the individual life   
line of business increased $3.2 million, or 15.3 percent, to $24.1 million in   
1996 from $20.9 million in 1995, while the individual annuities line of         
business produced income of $1.9 million in 1996 compared to $2.5 million in    
1995.                                                                           

In 1995, income in the Individual Life and Disability segment declined $16.7
million, or 31.4 percent, to $36.5 million, compared to $53.2 million in 1994.  
The decline was primarily due to the individual disability income line which    
produced income of $13.1 million in 1995, compared to $27.1 million in 1994.    
Poor results in the first quarter of 1995 from adverse claim experience on      
individual noncancelable disability income contracts with long-term own-        
occupation provisions which were issued between 1983 and 1989 were the primary  
reason for the decline. Specifically, the average size of new claims in the     
first quarter of 1995 was higher than the average level experienced for all of  
1994, and the level of claim resolutions was lower relative to 1994. During     
the last three quarters of 1995, claim resolutions were higher relative to the  
first quarter of 1995 and all of 1994. Management believes that the             
improvement in the final three quarters of 1995 was primarily the result of     
the allocation of significant resources to the Company's disability claims      
management unit. Lower income from the individual life and individual           
annuities lines of business also contributed to the decreased income in this    
segment. Income in the individual life line declined to $20.9 million in 1995,  
compared to $22.9 million in 1994, while income from the individual annuities   
line declined to $2.5 million in 1995 from $3.2 million in 1994.                

Deposits on deferred annuities sold through financial institutions totaled  
$8.1 million in 1996, compared to $78.2 million in 1995 and $131.8 million in   
1994. This decline was primarily the result of the termination of certain       
marketing relationships. Deposits on annuities sold through other distribution  
channels were $13.1 million in 1996, compared to $4.2 million in 1995 and       
$10.0 million in 1994.                                                          

The Company performed a loss recognition study on its individual disability 
income business as of September 30, 1993. The study resulted in a $423.0        
million pre-tax or $275.0 million after-tax charge to operating earnings. The   
charge was required under GAAP due to the significant decline in interest       
rates in 1993 and the increased level of morbidity experienced by the Company.  
Since 1993, the Company has performed annual loss recognition studies to        
determine the continued adequacy of the reserves that were established. Based   
upon the December 1996 loss recognition study, which incorporates management's  
best estimate for the assumptions used, reserves were adequate at December 31,  
1996.                                                                           

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The Company has engaged outside consultants to work with its personnel in   
refining its methodology for analyzing frequency and severity rates, as well    
as other factors that may affect reserve adequacy. Management intends to        
continue to work to provide the Company with a better methodology for           
anticipating changes in morbidity rates and a better methodology for            
reflecting those changes in the management of its business. Significant         
testing of any methodology must be undertaken. The preliminary results of the   
Company's analyses, which are subject to further development, testing and       
review, suggest a sufficiency in the Company's reserves.                        

It is not possible to predict with certainty whether morbidity, interest    
rates, and expenses will continue at a level consistent with the assumptions    
used in the loss recognition study, improve, or deteriorate; however, the       
current assumptions as to these factors represent management's best estimates   
in light of present circumstances. Additional increases to reserves would be    
required if there is material deterioration in morbidity, interest rates,       
and/or expenses. As part of its ongoing management of this line of business,    
the Company will conduct a loss recognition study annually to validate the      
continued adequacy of current reserves.                                         

EMPLOYEE BENEFITS OPERATING RESULTS                                             

                                                                [Download Table]

                                                      YEAR ENDED DECEMBER 31,   
                                                   -----------------------------
                                                     1996      1995      1994   
                                                   --------- --------- ---------
                                                           (IN MILLIONS)        
                                                                                
REVENUE EXCLUDING NET REALIZED INVESTMENT GAINS:                                
Premium income:                                                                 
 Voluntary benefits..............................  $    70.6 $    66.3 $    58.7
 Group life......................................      177.8     167.0     167.6
 Medical stop-loss...............................       49.4      62.2      66.9
 Group disability................................       69.4      59.5      53.6
 Packaged products...............................      134.2     130.9     118.8
                                                   --------- --------- ---------
   Total premium income..........................      501.4     485.9     465.6
Net investment income............................       97.9      90.6      85.5
Other income.....................................        6.8       6.2       4.2
                                                   --------- --------- ---------
     Total.......................................      606.1     582.7     555.3
                                                   --------- --------- ---------
BENEFITS AND EXPENSES:                                                          
Policy and contract benefits.....................      362.9     382.2     334.2
Change in reserves for future policy and contract                               
 benefits and                                                                   
 policyholders' funds............................       73.7      48.1      54.1
Amortization of deferred policy acquisition                                     
 costs...........................................        8.4      12.0       6.4
Other expenses...................................      104.8      91.8      88.8
                                                   --------- --------- ---------
     Total.......................................      549.8     534.1     483.5
                                                   --------- --------- ---------
Income before net realized investment gains and                                 
 federal income taxes............................       56.3      48.6      71.8
Net realized investment gains....................         .1       3.9       1.6
                                                   --------- --------- ---------
Income before federal income taxes...............  $    56.4 $    52.5 $    73.4
                                                   ========= ========= =========
SALES--ANNUALIZED NEW PREMIUMS:                                                 
Voluntary benefits...............................  $    23.0 $    20.2 $    20.6
Group life.......................................       37.8      24.2      16.7
Group disability.................................       16.5      10.7      14.4
LIFE INSURANCE IN FORCE..........................   87,079.7  83,276.3  71,460.5

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Revenue in the Employee Benefits segment increased $23.4 million, or 4.0    
percent, to $606.1 million in 1996 from $582.7 million in 1995. The increase    
was primarily due to higher premium income which increased $15.5 million, or    
3.2 percent, to $501.4 million in 1996 from $485.9 million in 1995. The         
increase was primarily the result of higher premium income in the voluntary     
benefits, group life, group disability, and packaged products lines of          
business, which more than offset lower premium income in the medical stop-loss  
line of business. Net investment income in this segment increased $7.3          
million, or 8.1 percent, to $97.9 million in 1996 from $90.6 million in 1995.   

In 1995, revenue in the Employee Benefits segment increased $27.4 million,  
or 4.9 percent, to $582.7 million from $555.3 million in 1994. Premium income   
increased $20.3 million, or 4.4 percent, to $485.9 million in 1995 from $465.6  
million in 1994. The increase in premium income in this segment was primarily   
the result of higher premium income in the voluntary benefits, group            
disability, and packaged products lines of business, which more than offset     
lower premium income in the group life and medical stop-loss lines of           
business. Net investment income in this segment increased $5.1 million, or 6.0  
percent, to $90.6 million in 1995, compared to $85.5 million in 1994.           

Income in the Employee Benefits segment increased $7.7 million, or 15.8     
percent, to $56.3 million in 1996 from $48.6 million in 1995. The increase was  
primarily due to improved results in the voluntary benefits and group           
disability lines of business. Income in the voluntary benefits line was $14.7   
million in 1996 compared to $7.9 million in 1995. Income in the group           
disability line was $2.9 million in 1996 compared to a loss of $12.8 million    
in 1995. Both lines benefited from improved profitability following repricing   
actions in 1995. The improvement in income in these lines of business was       
partly offset by lower income in the group life, medical stop-loss, and         
packaged products lines of business.                                            

In 1995, income in the Employee Benefits segment declined to $48.6 million, 
compared to $71.8 million in 1994. This decline was primarily the result of     
lower income in the medical stop-loss and group disability lines of business.   
Income in the medical stop-loss line declined to $16.4 million in 1995 as       
compared to $26.6 million in 1994, primarily as a result of lower premium       
income and higher loss ratios. Income in the group disability line declined to  
a loss of $12.8 million in 1995 from a loss of $4.5 million in 1994, primarily  
due to higher claim incidence and severity. These losses were primarily         
attributable to business associated with the medical and legal occupations.     
During the first quarter of 1995, the Company notified the existing group       
disability customers in the medical and legal occupational categories that      
coverages would be terminated under the terms of the existing contracts during  
1995, and the Company would no longer accept proposals for group disability     
coverage of new medical or legal groups. This action impacted approximately 15  
percent of the group disability block of business. The group life and           
voluntary benefits lines of business also produced lower income in 1995         
compared to 1994, while the packaged products line reported an increase in      
income.                                                                         

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OTHER OPERATIONS OPERATING RESULTS                                              

                                                                [Download Table]

                                                    YEAR ENDED DECEMBER 31,     
                                                  ----------------------------- 
                                                    1996      1995      1994    
                                                  --------  --------  --------- 
                                                         (IN MILLIONS)          
                                                                                
REVENUE EXCLUDING NET REALIZED INVESTMENT                                       
 LOSSES:                                                                        
Premium income:                                                                 
 Corporate-owned life...........................  $   23.6  $   24.8  $    26.1 
 Group single premium annuities.................       1.9        .5        4.7 
 Other..........................................       2.5      93.3      241.3 
                                                  --------  --------  --------- 
   Total premium income.........................      28.0     118.6      272.1 
Net investment income...........................     598.6     769.4      850.7 
ASO fees........................................       --       37.2      110.9 
Gain on sale of group medical business..........       --       21.8        --  
Other income....................................      20.2      38.0       46.7 
                                                  --------  --------  --------- 
     Total......................................     646.8     985.0    1,280.4 
                                                  --------  --------  --------- 
BENEFITS AND EXPENSES:                                                          
Policy and contract benefits....................     376.5     593.8      791.3 
Change in reserves for future policy and                                        
 contract benefits and                                                          
 policyholders' funds...........................     150.5     133.2      122.7 
Other expenses..................................      58.6     135.4      260.4 
                                                  --------  --------  --------- 
     Total......................................     585.6     862.4    1,174.4 
                                                  --------  --------  --------- 
Income before net realized investment losses and                                
 federal income taxes...........................      61.2     122.6      106.0 
Net realized investment losses..................     (17.2)    (40.3)     (37.5)
                                                  --------  --------  --------- 
Income before federal income taxes..............  $   44.0  $   82.3  $    68.5 
                                                  ========  ========  ========= 
FUNDS UNDER MANAGEMENT AND EQUIVALENTS AT END OF                                
 YEAR:                                                                          
Group single premium annuities..................  $1,188.1  $1,197.8  $ 1,209.5 
Traditional GICs................................   3,204.3   4,838.0    7,042.6 
Separate account GICs...........................      68.3     146.1      138.9 
Synthetic GICs..................................   2,176.6   2,571.9    1,626.8 
Other...........................................     304.7     301.1      275.5 
                                                  --------  --------  --------- 
     Total......................................  $6,942.0  $9,054.9  $10,293.3 
                                                  ========  ========  ========= 
LIFE INSURANCE IN FORCE.........................  $2,999.6  $2,967.2  $ 2,641.5 

The Other Operations segment includes the Company's group pension products, 
its corporate-owned life insurance ("COLI") products, corporate (unallocated)   
capital and assets, and the medical services business sold in 1995 (see Note    
13 of the Notes to Consolidated Financial Statements, incorporated by           
reference herein). The group pension and COLI blocks of business are            
essentially closed blocks of business which have been segregated for reporting  
and monitoring purposes. The group pension products include the Company's       
traditional guaranteed investment contracts ("GICs"), group single premium      
annuities ("SPAs"), and synthetic GICs.                                         

Revenue in the Other Operations segment declined $338.2 million, or 34.3    
percent, to $646.8 million in 1996 from $985.0 million in 1995. The decline     
was partially due to the sale of the medical services line of business, which,  
prior to its sale on April 30, 1995, contributed operating revenue of $146.1    
million and a gain from the sale of the business of $21.8 million. In           
addition, revenue in the group pension line of business declined $177.2         
million, or 30.3 percent, to $408.4 million in 1996 from $585.6 million in      
1995 due to a decrease in                                                       

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funds under management resulting from the strategic decision to discontinue     
the sale of traditional GICs. Premium income in this segment declined $90.6     
million, or 76.4 percent, to $28.0 million in 1996 from $118.6 million in       
1995. This decline was due to the sale of the medical services line of          
business, which produced $90.9 million of premium income prior to its sale in   
the second quarter of 1995.                                                     

In 1995, revenue in the Other Operations segment declined $295.4 million, or
23.1 percent, to $985.0 million as compared to $1,280.4 million in 1994.        
Premium income in this segment declined $153.5 million to $118.6 million in     
1995 as compared to $272.1 million in 1994. The primary reason for this         
decline was the sale of the medical services business which produced premium    
income of $241.3 million in 1994 and $90.9 million in 1995 prior to its sale    
effective April 30, 1995. Net investment income declined $81.3 million to       
$769.4 million in 1995 from $850.7 million in 1994. The primary reason for      
this decline was the decrease in funds under management in the group pension    
line of business. Net investment income in the group pension line declined      
$80.0 million to $574.2 million in 1995 as compared to $654.2 million in 1994.  
In addition, net investment income from corporate (unallocated) capital and     
assets declined due to additional capital being allocated to the individual     
disability income line of business. Administrative services only fees           
associated with the medical services business declined due to the sale of the   
medical services business in 1995. These fees totaled $110.9 million in 1994    
and $37.2 million in 1995.                                                      

The Company announced in December 1994 that it would discontinue the sale of
traditional GICs. Funds under management for the group pension line excluding   
deposits for synthetic GICs totaled $4.77 billion at December 31, 1996,         
compared to $6.48 billion at December 31, 1995, a decrease of 26.5 percent. In  
1995, funds under management decreased 25.2 percent, from $8.67 billion at      
December 31, 1994.                                                              

In 1995, the Company extended an offer to GIC contract holders to surrender 
their contracts on a more favorable basis than would otherwise be available to  
them. Contracts with a book value of $291.7 million were surrendered under the  
offer. The Company has no plans for another offer of this kind. Early           
surrenders of traditional GICs totaled $40.8 million in 1996 and $662.1         
million in 1995. The Company does not anticipate significant early withdrawals  
on its remaining GICs as virtually all of the contracts are subject to a        
market value adjustment for early withdrawal.                                   

In keeping with management's strategic desire to focus its resources in the 
Individual Life and Disability and Employee Benefits segments, the Company      
decided to discontinue the sale of synthetic GICs and is selling this block of  
business through an assumptive reinsurance transaction which is subject to the  
approval of the contract holders and respective state regulators. This sale is  
expected to be completed by December 31, 1997. Accumulated funds from the sale  
of the Company's synthetic GICs totaled $2.18 billion at December 31, 1996,     
$2.57 billion at December 31, 1995, and $1.63 billion at December 31, 1994.     

Revenue in this segment is expected to continue to decline as a result of   
the discontinuance of the sales of traditional GICs and group SPAs and the      
run-off of the funds under management. As the traditional GICs mature, capital  
will be available for use by the Company as amounts allocated to this line are  
released.                                                                       

Income in 1996 declined $61.4 million to $61.2 million from $122.6 million  
in 1995. This decline was partially due to the 1995 sale of the medical         
services line of business, which produced operating income of $3.2 million and  
a gain from the sale of $21.8 million during 1995. In addition, the decline in  
this segment was due to lower income in the group pension line of business,     
which declined $26.1 million, or 35.4 percent, to $47.6 million in 1996 from    
$73.7 million in 1995. The decline in this line was primarily the result of     
lower funds under management and lower income from a reduced amount of capital  
allocated to this line. Income from the COLI line of business declined          
slightly to $19.7 million in 1996 as compared to $20.5 million in 1995.         

Income in this segment increased $16.6 million to $122.6 million in 1995    
from $106.0 million in 1994. Higher income in the group pension line of         
business and the gain from the sale of the medical services line were the       
primary reasons for the increase in income. The group pension line produced     
income of $73.7 million in 1995, compared to $48.8 million in 1994. This line   
of business benefited from an improvement in the spread                         

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between interest credited on contracts and the interest earned on the invested  
assets, as well as income from bond call premiums, early surrender penalties,   
and lower expenses. Income from the block of COLI declined slightly to $20.5    
million in 1995 from $21.1 million in 1994. This decline in income was          
primarily attributable to a decline in premium income in this line of           
business. Income from the medical services line of business declined to $3.2    
million for the four months of 1995 from $16.9 million for the year 1994. In    
addition, the Other Operations segment in 1995 included an unusually high       
level of corporate expenses related to several initiatives underway within the  
Company.                                                                        

Management expects that income in 1997 from the group pension line will     
decline from the levels recorded in 1996 as the funds under management          
decline. Management also expects that the level of corporate expenses related   
to this segment will be lower in 1997 than in 1996.                             

LIQUIDITY AND CAPITAL RESOURCES                                                 

As a holding company, the Company is dependent upon payments from its       
wholly-owned insurance subsidiaries and Genex to pay dividends to its           
stockholders and to pay its expenses. These payments by the Company's           
subsidiaries may take the form of either dividends or interest payments on      
amounts loaned to such subsidiaries by the Company.                             

State insurance laws generally restrict the ability of insurance companies  
to pay cash dividends or make other payments to their affiliates in excess of   
certain prescribed limitations. In Tennessee, Provident's state of domicile,    
regulatory approval is required if an insurance company seeks to make loans to  
affiliates in amounts equal to or in excess of three percent of the insurer's   
admitted assets, or to pay cash dividends in any 12-month period in excess of   
the greater of such company's net gain from operations of the preceding year    
or ten percent of its surplus as regards policyholders at the end of the        
preceding year, each as determined in accordance with prescribed or permitted   
statutory accounting practices. The maximum annual dividend which a             
Massachusetts insurance company is permitted to pay without the prior approval  
of the Massachusetts Commissioner of Insurance is the greater of (a) ten        
percent of the insurance company's surplus to policyholders as of the thirty-   
first day of December next preceding or (b) the insurance company's statutory   
net gain from operations for the 12-month period ending the thirty-first day    
of December next preceding. Legislation enacted in Massachusetts further        
provides that any dividend not paid out of earned surplus may be made only      
with prior approval of the Massachusetts Commissioner of Insurance. In          
November 1996, Provident National Assurance Company ("National") made an        
extraordinary cash distribution in the amount of $100.0 million to the          
Company. An aggregate of $141.5 million would be available in 1997 for the      
payment of dividends or other distributions by the Company's top-tier           
insurance subsidiaries without regulatory approval.                             

The Company's requirements are met primarily by cash flow provided from     
operations, principally in its insurance subsidiaries. Premium and investment   
income as well as maturities and sales of invested assets provide the primary   
sources of cash. Cash flow from operations was sufficient in 1996. Cash is      
applied to the payment of policy benefits, costs of acquiring new business      
(principally commissions) and operating expenses, as well as purchases of new   
investments. The Company has established an investment strategy that            
management believes will provide for adequate cash flow from operations.        

The Company expects no material adverse effect on its liquidity as a result 
of the discontinuance of the sales of traditional GICs. While traditionally     
the investment strategy for this product line has been to match the effective   
asset durations with the related expected liability durations, the Company has  
moved to a cash flow matching strategy.                                         

In May 1995, the Company sold 26 restructured mortgage loans with a         
principal amount of $147.5 million and a book value of $122.6 million. The      
transaction resulted in a before-tax realized investment loss of $23.1          
million. In October 1995, the Company completed the sale of commercial          
mortgage loans with a principal amount and a book value of $962.4 million       
through a securitization collateralized by 366 loans. The transaction resulted  
in a before-tax realized investment gain of $8.9 million. In February 1996,     
the Company sold 24                                                             

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mortgage loans with a principal amount of $81.6 million and a book value of     
$75.9 million, realizing a before-tax investment loss of $5.7 million. These    
transactions increased the liquidity of the investment portfolio and            
facilitated the move to a cash flow matching strategy for the GIC portfolios.   
The proceeds from the mortgage sales were reinvested in fixed maturity          
securities and were also used to fund the limited-time GIC surrender offer in   
1995 described in "Other Operations."                                           

The sale of the mortgage loans is expected to result in lower investment    
income in the future, as well as lower net realized investment losses and       
lower investment expenses. Overall, the Company expects these transactions to   
have a positive effect on net income in future years. Management also expects   
the transactions to improve asset quality, liquidity, asset/liability           
management, and the capital adequacy ratios.                                    

On April 29, 1996, the Company announced that it had entered into the Paul  
Revere Merger Agreement pursuant to which the Company would acquire Paul        
Revere at a price of approximately $1.2 billion. The Company and Textron        
announced on November 6, 1996, that the Paul Revere Merger Agreement had been   
amended and restated and that, in connection with that amendment and            
restatement, Textron had agreed to provide additional capital to Paul Revere    
and that the parties would make certain other adjustments relating to the       
Company's acquisition of Paul Revere. This followed the announcement by Paul    
Revere of a $244.3 million after-tax reserve strengthening in its individual    
disability insurance segment in the third quarter of 1996. The strengthening    
reflected the results of a previously announced comprehensive reserve study     
prepared in accordance with GAAP.                                               

The financial terms of the acquisition set forth in the amended and restated
Paul Revere Merger Agreement were unchanged to Paul Revere's public             
stockholders from those of the original Paul Revere Merger Agreement. Under     
the terms of the Paul Revere Merger Agreement as amended and restated, Textron  
committed to make a capital contribution to Paul Revere of between $100.0       
million and $180.0 million. The amount of the contribution, determined by the   
amount of statutory reserve strengthening required by the Massachusetts         
Division of Insurance as a condition to approving the acquisition of Paul       
Revere by the Company, was $121.0 million on an after-tax basis, of which       
$83.5 million was contributed to Paul Revere as of December 31, 1996, and       
$37.5 million was contributed on February 18, 1997. Textron also agreed to the  
resetting of the exchange ratio used in computing the number of shares of       
Common Stock that constituted the stock portion of the merger consideration     
Textron received for its 37.5 million shares of Paul Revere stock. The          
exchange ratio for Textron as defined in the original Paul Revere Merger        
Agreement was to be no lower than .0295, compared to a minimum Textron          
exchange ratio of .0263 under the amended and restated Paul Revere Merger       
Agreement. This change reduced the number of shares of Common Stock that        
Textron was entitled to receive. Additional consideration totaling              
approximately $40 million was also contributed to Paul Revere by Textron. The   
amended and restated Paul Revere Merger Agreement contains certain limited      
purpose hold harmless provisions pursuant to which Textron agreed to indemnify  
the Company from specified damages. Subsequently, Textron agreed to enter into  
the Textron Agreement, pursuant to which, among other things, Textron agreed    
to pay to the Company a portion of the net proceeds received by Textron from    
the sale of the shares of Common Stock offered hereby. See "The Paul Revere     
Merger--Textron Agreements." The Paul Revere Merger was consummated on March    
27, 1997.                                                                       

The foregoing discussion of the amended and restated Paul Revere Merger     
Agreement is a summary of the terms of the amended and restated Paul Revere     
Merger Agreement and is qualified in its entirety by reference to the amended   
and restated Paul Revere Merger Agreement and the joint press release of the    
Company and Textron dated November 6, 1996, which have been previously filed    
with the Commission, together with a more complete description of the terms of  
the Paul Revere Merger. See "The Paul Revere Merger."                           

The Paul Revere Merger was financed through common equity issuance to Zurich
and various affiliates of Zurich, common equity issuance to Paul Revere         
stockholders, debt, and internally generated funds. The debt financing was      
provided through an $800.0 million five-year revolving credit facility with     
various domestic and international banks. The revolving credit facility was     
established in 1996 to provide partial financing for the purchase of Paul       
Revere, to refinance the existing bank term notes of $200.0 million, and for    
general corporate uses. At March 31, 1997 and December 31, 1996, outstanding    
borrowings under the revolving credit facility were                             

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$725.0 million and $200.0 million, respectively. The credit facility has a      
current interest rate of 5.965 percent and contains certain restrictive         
covenants governing the Company's ability to pay dividends and requirements     
that the Company satisfy certain financial covenants, including requirements    
as to minimum adjusted statutory surplus and RBC levels. The Company believes   
the cash flows from the combined operations will be sufficient to meet its      
operating and financing cash flow requirements.                                 

On February 28, 1997, the Company acquired Genex, a leading provider of case
management, vocational rehabilitation, and related services to corporations,    
third party administrators, and insurance companies. In 1996, Genex's revenues  
totaled $85.9 million. These services are utilized in the management of         
disability and worker's compensation claims.                                    

As a result of the release of capital generated by the run-off of the GIC   
portfolio, the sale of the commercial mortgage loans, the sale of the medical   
services line, and other corporate actions, the Company has increased its       
available capital to support the growth of its businesses, including assisting  
in the financing of the two acquisitions discussed above. Management continues  
to analyze potential opportunities to utilize the capital to further enhance    
stockholder value, including exploring options that would support the           
Company's growth initiatives.                                                   

INVESTMENTS                                                                     

Investment activities are an integral part of the Company's business, and   
profitability is significantly affected by investment results. Invested assets  
are segmented into portfolios which support the various product lines.          
Generally, the investment strategy for the portfolios is to match the           
effective asset durations with related expected liability durations and to      
maximize investment returns, subject to constraints of quality, liquidity,      
diversification, and regulatory considerations. This discussion should be read  
in connection with Note 3 of the Notes to Consolidated Financial Statements     
incorporated by reference herein. See "Available Information" and               
"Incorporation of Certain Documents by Reference." The following table          
provides the distribution of invested assets for the years indicated.           

                                                                [Download Table]

                                                             AT DECEMBER 31,    
                                                            ------------------- 
                                                            1996   1995   1994  
                                                            -----  -----  ----- 
                                                                                
Investment-grade fixed maturity securites..................  77.0%  79.3%  72.6%
Below-investment-grade fixed maturity securities...........   6.7    6.2    4.6 
Equity securities..........................................    .1    --      .1 
Mortgage loans.............................................   --      .7   10.0 
Real estate................................................   1.1    1.4    1.6 
Policy loans...............................................  13.1   10.7    9.1 
Other......................................................   2.0    1.7    2.0 
                                                            -----  -----  ----- 
  Total.................................................... 100.0% 100.0% 100.0%
                                                            =====  =====  ===== 

The following table provides certain investment information and results for 
the years indicated.                                                            

                                                                [Download Table]

                                                  YEAR ENDED DECEMBER 31,      
                                               ------------------------------- 
                                                 1996       1995       1994    
                                               ---------  ---------  --------- 
                                                       (IN MILLIONS)           
                                                                               
Average cash and invested assets.............. $14,056.3  $14,914.4  $15,047.3 
Net investment income.........................   1,090.1    1,221.3    1,238.6 
Average yield*................................       7.8%       8.2%       8.2%
Net realized investment losses................ $    (8.6) $   (31.7) $   (30.1)

--------                                                                        
* Average yield is determined by dividing net investment income by the average  
cash and invested assets for the year. Excluding net unrealized gains and     
losses on securities, the yield is 8.1%, 8.3%, and 8.3% for 1996, 1995, and   
1994, respectively. See Notes 1 and 3 of the Notes to Consolidated Financial  
Statements incorporated by reference herein.                                  

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For the past three years, the Company's exposure to non-current investments 
has improved significantly from prior years. These non-current investments are  
primarily foreclosed real estate and mortgage loans which became more than      
thirty days past due in their principal and interest payments. Non-current      
investments, comprised of foreclosed real estate, totaled $7.3 million at       
December 31, 1996, or .05 percent of invested assets. Non-current investments   
at year-end 1995 were $31.9 million, or .22 percent of invested assets,         
compared to $88.5 million, or .59 percent of invested assets at year-end 1994.  

As previously discussed under Liquidity and Capital Resources, the Company  
sold a substantial portion of its commercial mortgage loan portfolio in 1995.   
The remaining exposure of $104.8 million of mortgage loans was liquidated       
during 1996.                                                                    

During 1996, the Company sold four foreclosed properties with a book value  
of $11.8 million. During 1995, the Company sold twelve foreclosed properties    
with a book value of $39.6 million.                                             

The Company's investment in mortgage-backed securities totaled $2.4 billion 
on an amortized cost basis at December 31, 1996, and $2.9 billion at December   
31, 1995. At December 31, 1996, the mortgage-backed securities had an average   
life of 8.3 years and effective duration of 6.0 years. The mortgage-backed      
securities are valued on a monthly basis using valuations supplied by the       
brokerage firms that are dealers in these securities. The primary risk          
involved in investing in mortgage-backed securities is the uncertainty of the   
timing of cash flows from the underlying loans due to prepayment of principal.  
The Company uses models which incorporate economic variables and possible       
future interest rate scenarios to predict future prepayment rates. The Company  
has not invested in mortgage-backed derivatives, such as interest-only,         
principal-only or residuals, where market values can be highly volatile         
relative to changes in interest rates.                                          

As with most other fixed income investments, below-investment-grade bonds   
are subject to the effects of changes in the overall level of interest rates,   
which can affect both capital and reinvestment return. Below-investment-grade   
bonds are inherently more risky than investment-grade bonds since the risk of   
default by the issuer, by definition and as exhibited by bond rating, is        
higher. Also, the secondary market for certain below-investment-grade issues    
can be highly illiquid. Management does not anticipate any liquidity problem    
caused by the investments in below-investment-grade securities, nor does it     
expect these investments to adversely affect its ability to hold its other      
investments to maturity.                                                        

The Company's exposure to below-investment-grade fixed maturity securities  
at December 31, 1996, was $891.1 million, representing 6.7 percent of invested  
assets, below the internal limit of 7.5 percent of invested assets for this     
type of investment. The Company's exposure to below-investment-grade fixed      
maturities at December 31, 1995, was $911.8 million, representing 6.2 percent   
of invested assets. Included in the below-investment-grade portfolio was the    
Company's holding of $100.0 million of Healthsource, Inc. ("Healthsource")      
6.25% preferred stock, received as part of the consideration for the sale of    
the group medical services business. The preferred stock was redeemed in cash   
at par by Healthsource during 1996.                                             

Changes in interest rates and individuals' behavior affect the amount and   
timing of asset and liability cash flows. Management has added resources in     
the investment area to address modeling and testing of all asset and liability  
portfolios to improve interest rate risk management and net yields. Testing     
the asset and liability portfolios under various interest rate and economic     
scenarios allows management to choose the most appropriate investment strategy  
as well as to prepare for the most disadvantageous outcomes.                    

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BUSINESS  

GENERAL                                                                         

The Company is the largest provider of individual disability insurance and  
the second largest overall disability insurer in the United States on the       
basis of in-force premiums. It also provides a complementary portfolio of life  
insurance products, including life insurance, annuities, employer- and          
employee-paid group benefits and related services. The Company is the parent    
holding company for a group of insurance companies that collectively operate    
in all 50 states, the District of Columbia, Puerto Rico, and Canada. The        
Company's insurance company subsidiaries are Provident Life and Accident        
Insurance Company ("Accident"), National, and Provident Life and Casualty       
Insurance Company ("Casualty" and together with Accident and National,          
"Provident"), and Paul Revere Life, and its two subsidiaries, Paul Revere       
Variable and Paul Revere Protective.                                            

Since 1994, the Company has completed a comprehensive corporate             
repositioning that has prepared it to support growth and increase stockholder   
value. A new management team headed by J. Harold Chandler, who joined the       
Company in November 1993, initiated a strategic review of the business. As a    
result of its review, management refocused the Company's strategy to (i) serve  
the individual and employee benefits insurance markets, (ii) leverage the       
Company's disability insurance expertise, (iii) utilize multiple distribution   
channels to reach broader market segments, and (iv) more closely align the      
interests of the Company's employees with those of its stockholders.            

The Company has successfully undertaken a number of major initiatives in    
pursuing this strategy. Specifically, the Company (i) sold its group medical    
business for $231.0 million in cash and stock, (ii) began winding down its GIC  
business which carried high capital requirements, (iii) reduced the annual      
dividend on the Common Stock from $1.04 to $.72 per share to preserve capital   
to fund future growth, (iv) simplified the corporate legal structure and        
eliminated a dual class of common stock that had special voting rights in       
order to present a more conventional corporate structure profile to the         
investing market, (v) sold in three transactions $1,160.9 million in            
commercial mortgage loans as part of repositioning its investment portfolio,    
(vi) restructured its marketing and distribution channels, along with the       
support areas of product development, underwriting and claims, to better reach  
and serve individual and employee benefits customers, (vii) strengthened its    
claims management procedures in the disability income insurance business, on    
which the Company took a $423.0 million pre-tax charge in the third quarter of  
1993 to strengthen reserves on a portion of that block of business, and (viii)  
began restructuring its disability income products to discontinue the sale of   
policies which combined noncancelable contracts with long-term own-occupation   
provisions and to offer in their place an income replacement contract with      
more reasonable limits and better pricing for elective provisions.              

The acquisitions of Paul Revere and Genex in early 1997 are the latest      
accomplishments under the Company's strategic plan. Both acquisitions           
strengthen the Company's disability insurance capabilities and enable the       
Company to offer a more complete portfolio of products and services to its      
customers. Paul Revere is a specialist in disability insurance, with $972.8     
million of disability premium income (86 percent of its total premium income)   
in 1996. From 1989 through 1996 it was the largest provider of individual       
disability insurance in the United States and Canada on the basis of in-force   
premiums. By combining Paul Revere's operations with those of Provident, the    
Company expects to realize significant operating efficiencies, including        
leveraging both companies' knowledge of disability risks, specialized claims    
and underwriting skills, and sales expertise. The Company also expects to       
realize cost savings as a result of combining the corporate, administrative,    
and financial operations of the two companies. These savings are expected to    
be achieved over a two-year period following consummation of the Paul Revere    
Merger, although no assurance can be given as to the amount or timing thereof.  
See "Risk Factors--Effect of the Paul Revere Merger; Integration of             
Operations."                                                                    

Genex provides the Company with specialized skills in disability case       
management and vocational rehabilitation that will help advance the Company's   
goal of providing products that enable disabled policyholders to return to      
work. Genex provides a full range of disability management services, including  
worksite injury management, telephonic early intervention services for injured  
workers, medical case management, vocational                                    

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rehabilitation, and disability cost analysis, to third party administrators,    
corporate clients and insurance companies. It employs 1,300 people, including   
1,100 medical and vocational rehabilitation experts, in 120 offices in the      
United States and Canada. While Genex has historically focused on the worker's  
compensation market, Genex and the Company are now offering customized          
disability programs for the employee benefits market that are intended to       
integrate and simplify coverages, control costs and improve efficiency for      
employers with significant disability and related claims. The Company also      
expects Genex to play an increasingly significant role in helping the Company   
manage its own exposure to individual and group disability claims.              

The Company's Individual Life and Disability reporting segment includes     
individual disability insurance, individual life insurance and individual       
annuities. The Employee Benefits segment includes group long- and short-term    
disability insurance, group life insurance, accident and sickness and           
accidental death and disability coverages, medical stop loss insurance, and     
voluntary benefits (employer-sponsored individual products sold at the          
worksite through payroll deduction). For 1997, the Employee Benefits segment    
will also include the results of Genex. The Company's Other Operations segment  
includes the results from products the Company no longer produces for sale,     
including GICs, group single premium annuities, COLI and the group medical      
business sold in 1995. This segment will also include Paul Revere's dental      
insurance block of business.                                                    

BUSINESS STRATEGIES                                                             

The Company's objective is to grow its business and improve its             
profitability by continuing to follow the strategies set forth below.           

Serve the Individual and Employee Benefits Markets. The Company believes    
that the broad individual and employee benefits insurance markets are           
attractive for a company with its specialty focus on disability insurance.      
First, the Company believes disability insurers have not traditionally served   
the broad market's potential demand for protection against loss of income due   
to disability, as evidenced by the industry's size. The total in-force premium  
from disabilty products is approximately $9 billion, compared to $50 billion    
for annuities and $97 billion for life insurance. The Company believes that,    
if it is responsive to the needs of its markets, there is opportunity for       
growth in the disability industry.                                              

Second, individual disability insurance has traditionally been sold         
primarily in the medical and physician markets, where market penetration has    
been significant. The Company believes that expanding its marketing to other    
market segments offers greater opportunities for growth. The penetration of     
the attorney, executive and professional markets, for example, is far less      
than that of the medical and physician markets. The market of middle managers   
and front-line workers has not been significantly developed by individual       
disability insurers. Each of these markets is significantly larger than the     
medical and physician market. The Company's strategy is to design products and  
services that meet the needs of these underpenetrated market segments,          
offering them both individual disability insurance and related life insurance,  
annuities and other products.                                                   

Third, the Company believes that the markets for group disability insurance 
are also underpenetrated. The Company is focused on creating customized         
solutions for employee benefits customers that include group disability         
insurance and related employee- and employer-paid benefits as well as           
disability management services. The employee benefits market is undergoing a    
change as employers seek to simpify coverages, control costs and improve        
efficiency. The Company has positioned itself to package its products and       
services to meet this growing demand for managed disability programs and 24-    
hour coverage.                                                                  

The Company encourages its sales representatives and producers to respond to
the needs of customers by cross-selling complementary products to each          
account. In the past several years, for example, the Company has made ease of   
meeting customers' needs the priority for its information systems investments.  
The Company can now offer combined proposals that include pre-approved life     
insurance with individual disability policies and bill a range of voluntary     
product offerings through a single payroll deduction entry on an employee's     
paycheck. The Company has also recently implemented new employee and producer   
compensation plans that reward the sale of several of the Company's products    
rather than single product sales, including grants of stock options to          

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selected producers and a new multi-line producer compensation plan designed to  
leverage a producer's production and overall compensation.                      

Leverage Disability Insurance Expertise and Risk Management Skills. In      
serving its markets, the Company leads with its disability insurance            
expertise. The Company is the largest provider of individual disability         
insurance with $1.4 billion of premium income in 1996 (pro forma for the Paul   
Revere Merger), and the second largest overall disability insurer in the        
United States, on the basis of in-force premiums, with an additional $258.4     
million of group disability insurance premium. The skills required for          
disability risk management are substantially different from those used in       
managing the risk of other life insurance products. The Company believes that   
its risk management skills represent a competitive advantage in the disability  
businesses. The Company has made a number of recent improvements to its         
capabilities. In the claims management area, for example, the Company has       
shifted from a geographic distribution of workflow to an organization focused   
on impairments (psychiatric, orthopedic, partial disabilities, etc.) in order   
to provide claimants with more specialized attention. The addition of Genex's   
case management and vocational rehabilitation expertise will enable the         
Company to further refine its efforts to assist disabled claimants to return    
to gainful employment.                                                          

Utilize Multiple Distribution Channels to Reach Different Market Segments.  
The Company's experience is that different distribution channels reach          
different market segments. Therefore, its strategy is to distribute its         
products through a number of channels in order to reach the broad individual    
and employee benefits markets. The Company distributes its individual products  
primarily through independent insurance brokers, personal producing general     
agents and corporate marketing agreements with other insurance companies,       
associations and financial institutions. It distributes employee benefits       
products primarily through brokers, benefits consultants and a direct sales     
force that calls on large corporations. All products and distribution channels  
are supported through a network of 70 integrated sales and service offices in   
the United States, nine offices in Canada, and non-field sales organizations    
located in Chattanooga, Tennessee, Worcester, Massachusetts and Burlington,     
Ontario.                                                                        

The Company believes there are substantial opportunities to increase sales  
by improving the productivity of each of these distribution channels and        
opening new distribution channels for its products. For example, the National   
Accounts distribution system, which involves the sales of the Company's         
products by agents of other insurance companies, generates sales from a small   
percentage of the agents of the National Account companies. A major focus for   
1997 is increasing the penetration of these National Account relationships.     
The Company also is in the development stages of offering lead generation and   
other direct marketing support for its distribution efforts.                    

Align the Interests of the Company's Employees and Producers With Those of  
its Stockholders. The Company's strategic plan is supported by the goal of      
raising employee stock ownership in the Company. Beginning in 1994, the         
Company shifted its long-term cash compensation program for executives to a     
stock-based plan, introduced ownership requirements of several times salary     
for executive managment, and instituted stock option and share grant plans for  
executive and middle management. The Company continued to introduce new         
programs to encourage ownership in 1995, establishing an employee stock         
purchase plan open to all employees, introducing stock-based incentive awards,  
and expanding the option program to field sales employees. Most recently, the   
Company has created a stock-based plan for executives' short-term compensation  
and has expanded its option plans to producers who meet certain sales and       
profitability goals. These programs are intended to more closely align the      
interests of employees, producers and stockholders.                             

Prior to the implementation of these programs in 1994, there was little     
employee ownership of Common Stock. The Company had 564,217 outstanding         
options for shares of Common Stock as of December 31, 1993. As of December 31,  
1996, employees owned more than 200,000 shares of Common Stock through the      
employee stock purchase and 401(k) plans, and the Company had 2,119,727         
outstanding stock options. Approximately 50 percent of Provident's employees    
participate in one or more of these stock ownership programs. The Company       
intends to extend these programs to employees of Paul Revere and Genex.         

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REPORTING SEGMENTS                                                              

The Company is organized around its customers, with reporting segments that 
reflect its major market segments: Individual Life and Disability and Employee  
Benefits. The Other Operations segment includes products that the Company no    
longer produces for sale. For a discussion of the operating results of each of  
the reporting segments, see "Management's Discussion and Analysis of Financial  
Condition and Results of Operations."                                           

Individual Life and Disability. The Individual Life and Disability segment  
includes the results of disability, life and annuity products sold to           
policyholders on an individual basis. Individual disability comprises the       
majority of the segment, with $582.8 million of premium income in 1996 and      
$1,366.6 million of premium income on a pro forma basis. Individual life        
insurance products generated $63.3 million of premium income in 1996 and $97.8  
million of premium income on a pro forma basis. Annuity deposits were $21.2     
million in 1996 and $210.0 million on a pro forma basis.                        

Individual disability income insurance provides the insured with a portion  
of earned income lost as a result of sickness or injury. Under an individual    
disability income policy, monthly benefits generally are fixed at the time the  
policy is written. The benefits typically range from 30 percent to 75 percent   
of the insured's monthly earned income. Various options with respect to length  
of benefit periods and waiting periods before payment begins are available and  
permit tailoring of the policy to a specific policyholder's needs. Provident    
also markets individual disability income policies which include payments for   
transfer of business ownership and business overhead expenses. Individual       
disability income products do not provide for the accumulation of cash values.  

Premium rates for these products are varied by age, sex, and occupation     
based on assumptions concerning morbidity, persistency, policy related          
expenses, and investment income. The Company develops its assumptions based on  
its own claim experience and published industry tables. The Company's           
underwriters evaluate the medical and financial condition of prospective        
policyholders prior to the issuance of a policy.                                

Almost all of the Company's in-force individual disability income insurance 
was written on a noncancelable basis. Under a noncancelable policy, as long as  
the insured continues to pay the fixed annual premium for the policy's          
duration, the policy cannot be canceled by the Company nor can the premium be   
raised. Due to the noncancelable, fixed premium nature of the policies          
marketed in the past, profitability of this part of Provident's business is     
largely dependent upon achieving the morbidity and interest rate assumptions    
set in the 1993 loss recognition study with respect to the business written in  
1993 and prior and those set in the pricing of business written after 1993.     
The profitability of the Paul Revere business will be largely dependent on      
meeting the assumptions included in the purchase accounting adjustments         
recorded in connection with the Paul Revere Merger. As of December 31, 1996,    
reserves were adequate for Provident and for Paul Revere. See "Management's     
Discussion and Analysis of Financial Condition and Results of Operations" and   
the pro forma financial information incorporated herein by reference.           

The Company's lead disability product is currently a noncancelable loss of  
earnings ("LE") contract instead of the traditional noncancelable, long-term,   
own-occupation contract. The LE contract insures income rather than             
occupation. In 1995, Provident discontinued selling individual noncancelable    
contracts with long-term own-occupation provisions (other than conversion       
policies available under existing contractual arrangements), lifetime benefits  
and high maximum issue and participation limits that were identified as the     
cause of the 1993 loss recognition. In contrast to these policies, for which    
benefits are determined based on whether the insured can work in his or her     
original occupation, the LE policy requires policyholder to satisfy two         
conditions for benefits to begin: reduced ability to work due to accident or    
sickness and earnings loss of at least 20 percent. These policies are aimed at  
repositioning the individual disability income product by making it more        
attractive to a broader market of individual consumers, including middle to     
upper income individuals and corporate benefit buyers. In late 1996, Paul       
Revere largely discontinued selling individual noncancelable contracts with     
long-term own-occupation provisions that provided benefits even if the insured  
was working in another occupation.                                              

The Company's life insurance offerings include term, universal life, and    
interest-sensitive life insurance products. Universal life products provide     
permanent life insurance with adjustable interest rates applied to the          

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cash value and are designed to achieve specific policyholder objectives such    
as higher accumulation values and/or flexibility with respect to amount of      
coverage and premium payments. The principal difference between fixed premium   
and universal life insurance policies centers around policy provisions          
affecting the amount and timing of premium payments. Under universal life       
policies, policyholders may vary the frequency and size of their premium        
payments, and policy benefits may fluctuate accordingly. Premium payments       
under the fixed premium policies are not variable by the policyholder and, as   
a result, generally reflect lower administrative costs than universal life      
products for which extensive monitoring of premium payments and policy          
benefits is required.                                                           

The largest number of ordinary life policies sold in 1995 and 1996 were the 
ten-year level-term policies. These products have level premiums for an         
initial ten-year period after which the policyholder may resubmit to the        
underwriting process and possibly qualify for a new ten year period at the      
attained age premiums; otherwise, premiums revert to a yearly renewable term    
premium which increases annually. When measured by annualized premiums,         
universal life with the flexibility and features described above was the        
largest product category sold by Provident in this segment in recent years.     
Paul Revere's largest product category is interest-sensitive whole life         
insurance.                                                                      

Premium rates for the Company's life insurance products are based on        
assumptions as to future mortality, investment yields, expenses, and lapses.    
Although a margin for profit is included in setting premium rates, the actual   
profitability of products is significantly affected by the variation of actual  
experience from assumed experience. Profitability of fixed premium products is  
also dependent upon investment income on reserves. The profitability of         
interest-sensitive products is determined primarily by the ultimate             
underwriting experience and the ability to maintain anticipated investment      
spreads. The Company believes that the historical claim experience for these    
products has been satisfactory.                                                 

From the Company's viewpoint, the risks involved with interest-sensitive    
products include actual versus assumed mortality, achieving investment returns  
that at least equal the current declared rate, competitive position of          
declared rates on the policies, meeting the contractually guaranteed minimum    
crediting rate, and recovery of policy acquisition costs. From the              
policyholder's perspective, the risk involved with interest-sensitive products  
is whether or not the declared rates on the policy will compare favorably with  
the returns available elsewhere in the marketplace.                             

The Company offers several annuity products, including tax-sheltered        
retirement vehicles, single and flexible premium deferred annuities, single     
premium annuities, and indexed annuities. On a pro forma basis, the Company     
generated $210.0 million of deposits in 1996. Profitability of annuity          
products is affected by the gross margins (the spread between investment        
income and interest credited to policyholders) and the ability of the Company   
to control its administrative expenses.                                         

Employee Benefits. The Employee Benefits segment includes the results of    
group products sold to employers for the benefit of employees and individual    
products sold to groups of employees through payroll deduction at the worksite  
("voluntary benefits products"). The Company's Employee Benefits product        
offerings include group disability, group life insurance, medical stop-loss     
insurance, and other related group products, and voluntary life, disability,    
and cancer products. Group life comprises the majority of the segment, with     
$177.8 million of premium income in 1996 ($231.2 million of premium income on   
a pro forma basis). Group disability generated $69.4 million of premium income  
in 1996 and $258.4 million of premium income on a pro forma basis.              

Group long-term disability insurance provides employees with insurance      
coverage for loss of income in the event of extended work absences due to       
sickness or injury. Services are offered to employers and insureds to           
encourage and facilitate rehabilitation, retraining, and re-employment.         
Premiums for this product are generally based on expected claims of a pool of   
similar risks plus provisions for administrative expenses and profit. Some      
cases, however, carry experience rating provisions. Premiums for experience     
rated group disability business are based on the specific claim experience of   
the client with some credibility for the experience of the specific group. A    
few accounts are handled on an administrative services only basis with          
responsibility for funding claim payments remaining with the customer.          

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Profitability of group disability insurance is affected by deviations of    
actual claims experience from expected claims experience and the ability of     
the Company to control its administrative expenses. Morbidity is an important   
factor in disability claim experience. Also important is the general state of   
the economy; for example, during a recession the incidence of claims tends to   
increase under this type of insurance. In general, experience rated disability  
coverage for large groups has narrower profit margins and represents less risk  
to the Company than business of this type sold to small employers. This is      
because the Company must bear all of the risk of adverse claim experience in    
small case coverages while larger employers often bear much of this risk        
themselves. For disability coverages, case management and rehabilitation        
activities with regard to claims, along with appropriate pricing and expense    
control, are important factors contributing to profitability.                   

Group life insurance consists primarily of renewable term life insurance    
with the coverages frequently linked to employees' wages. Profitability in      
group life is affected by deviations of actual claim experience from expected   
claim experience and the ability of the Company to control administrative       
expenses. The Company also markets several group benefits products and          
services including accident and sickness indemnity, accidental death and        
dismemberment policies, and life and health benefits packages for affinity      
groups.                                                                         

Medical stop-loss insurance is provided to protect the insured against      
significant adverse claim experience with respect to group medical coverage.    
Under a variety of stop-loss arrangements, the Company charges a premium in     
exchange for an obligation that it will absorb (or reimburse the employer or    
plan) for claims in excess of a stated amount on an aggregate or individual     
basis. Profitability in medical stop-loss arrangements depends upon the         
ability of the Company to accurately predict actual claim trends relative to    
expected trends, predict rates of medical cost inflation, and analyze the       
claim practices of the underlying plan.                                         

Voluntary benefits products are offered through employer-sponsored payroll  
deduction programs. Provident's in-force business in 1996 consisted primarily   
of universal life and interest-sensitive life products (83.7 percent) as well   
as health products, principally intermediate disability income policies.        
Profitability in voluntary benefits is affected by the level of employee        
participation, persistency, deviations of actual morbidity and mortality        
experience from expected experience and the ability of the Company to control   
administrative expenses.                                                        

Other Operations. The Other Operations segment includes the results of GICs,
SPAs, a closed block of COLI, the medical services business sold in 1995, and   
any capital and assets that are not allocated to the principal business         
segments. Beginning in the second quarter of 1997, the segment will also        
include the results of Paul Revere's dental insurance business. Traditional     
GICs comprise the majority of the segment, with $3,204.3 million of funds       
under management as of December 31, 1996. Synthetic GICs accounted for          
$2,176.6 million and group SPAs accounted for $1,188.1 million of accumulated   
funds under management at December 31, 1996. Paul Revere's dental insurance     
business generated $48.3 million of premium income in 1996, excluding policies  
covering Paul Revere employees.                                                 

GIC products include traditional GICs, separate account GICs and synthetic  
GICs, in which the assets underlying the contract continue to be owned and      
retained by the trustee of the contact holder instead of the Company. In the    
first quarter of 1997, the Company announced that the synthetic GIC business    
was being sold through an assumptive reinsurance transaction. The sale, which   
is subject to the approval of the contract holders and respective state         
regulators, is expected to be completed by December 31, 1997.                   

Traditional GICs have comprised a major portion of this segment's products  
sold since 1982. Under traditional GICs, the Company guarantees the principal   
and interest to the contract holder for a specified period, generally three to  
five years. The Company marketed GICs for use in corporate tax-qualified        
retirement plans and derives profits from GICs on the spread between the        
amount of interest earned on invested funds and the fixed rate guaranteed in    
the GIC. Separate-account GICs, which were introduced in 1992, differ from      
traditional GICs in that the assets underlying the contract are segregated      
from the general account of Provident and held solely for the benefit of the    
specific contract involved. In December 1994, Provident discontinued the sale   
of traditional GICs, but continues to service its block of existing business.   
Sales of separate-account GICs were discontinued in 1996.                       

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Group SPAs are used as funding vehicles primarily when defined benefit      
pension plans are terminated. The Company also offers annuities as an           
employer-sponsored option for retirees receiving their distributions from       
401(k) plans. Pursuant to a group SPA contract, the Company receives a one-     
time premium payment and in turn agrees to pay a fixed monthly retirement       
benefit to specified employees. Sales of group SPAs were discontinued in 1996.  

The Company believes that there are three primary sources of risk associated
with traditional GICs and group SPAs. Underwriting risk represents the risk     
that a GIC has been priced properly to reflect the risk of withdrawal and for   
group SPAs, that the mortality rates and the ages and frequency at which        
annuitants will retire have been accurately projected. Asset/liability risk     
represents the risk that the investments purchased to back the GIC or group     
SPA will adequately match the future cash flows. Investment risk represents     
the risk that the underlying investments backing the GICs and group SPAs will   
perform according to the expectations of the Company at the time of purchase.   

COLI is a tax-leveraged policy sold from 1983 to 1990, with most of the     
block having been sold before June 21, 1986. Beginning in 1986, Congress began  
to enact tax legislation that significantly reduced the ability of              
policyholders to deduct policy loan interest on these products which detracted  
from the internal rate of return which theretofore had been available. In       
1988, Congress went further by enacting legislation that had adverse tax        
consequences for distributions/policy loans from modified endowment contracts.  
Under this legislation, new sales of the majority of Provident's COLI products  
would have been subject to adverse tax treatment as modified endowment          
contracts due to their high premium level. As a consequence, many of these      
products were withdrawn, and revised products which would not be considered     
modified endowment contracts were introduced. Policies issued prior to June     
21, 1986, however, were grandfathered from the modified endowment provisions.   
In 1996, Congress enacted tax legislation which generally eliminates tax        
deductions for policy loan interest on COLI products issued on or after June    
21, 1986.                                                                       

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CONSOLIDATED LIFE INSURANCE IN FORCE                                            

The following table sets forth the changes to life insurance in force and   
the number of policies in force for the Company's business segments for the     
indicated years. Reinsurance assumed has been included in these figures.        
Reinsurance ceded has not been deducted.                                        

                                                        [Enlarge/Download Table]

                                                                                               NUMBER     
                                                     FACE AMOUNT                                 OF       
                         -------------------------------------------------------------------- POLICIES    
                         IN FORCE                                                   IN FORCE  IN FORCE    
                         BEGINNING             OTHER          LAPSES AND   OTHER     END OF    END OF     
                          OF YEAR    SALES   INCREASES DEATHS SURRENDERS DECREASES    YEAR      YEAR      
                         --------- --------- --------- ------ ---------- --------- ---------- -------- ---
                                           (IN MILLIONS, EXCEPT NUMBER OF POLICIES)                       
                                                                                                          
1996:                                                                                                     
Individual Life and                                                                                       
Disability.............. $12,709.1 $ 1,109.2 $  239.6  $ 48.5 $ 1,109.9   $314.3   $ 12,585.2 173,330     
Employee Benefits.......  83,276.3  13,664.0  2,011.8   201.1  11,558.2    113.1     87,079.7 415,394     
Other Operations........   2,967.2       4.2     66.2    28.8       5.0      4.2      2,999.6  25,597     
                         --------- --------- --------  ------ ---------   ------   ---------- -------     
 Total.................. $98,952.6 $14,777.4 $2,317.6  $278.4 $12,673.1   $431.6   $102,664.5 614,321     
                         ========= ========= ========  ====== =========   ======   ========== =======     
1995:                                                                                                     
Individual Life and                                                                                       
Disability.............. $12,683.6 $ 1,062.7 $  260.3  $ 45.8 $ 1,050.4   $201.3   $ 12,709.1 179,310     
Employee Benefits.......  71,460.5   9,133.1  6,287.9   193.6   3,324.3     87.3     83,276.3 367,601     
Other Operations........   2,641.5       8.9    344.6    12.3      12.2      3.3      2,967.2  25,844     
                         --------- --------- --------  ------ ---------   ------   ---------- -------     
 Total.................. $86,785.6 $10,204.7 $6,892.8  $251.7 $ 4,386.9   $291.9   $ 98,952.6 572,755     
                         ========= ========= ========  ====== =========   ======   ========== =======     
1994:                                                                                                     
Individual Life and                                                                                       
Disability.............. $12,877.4 $ 1,299.6 $  210.0  $ 50.9 $ 1,406.7   $245.8   $ 12,683.6 185,440     
Employee Benefits.......  68,064.8   7,027.2  1,214.5   188.2   4,342.3    315.5     71,460.5 340,110     
Other Operations........   2,351.7       5.7    307.0    12.1      10.2       .6      2,641.5  25,995     
                         --------- --------- --------  ------ ---------   ------   ---------- -------     
 Total.................. $83,293.9 $ 8,332.5 $1,731.5  $251.2 $ 5,759.2   $561.9   $ 86,785.6 551,545     
                         ========= ========= ========  ====== =========   ======   ========== =======     

REINSURANCE                                                                     

The Company routinely reinsures portions of its business with other         
insurance companies. In a reinsurance transaction a reinsurer agrees to         
indemnify another insurer for part or all of its liability under a policy or    
policies it has issued for an agreed upon premium. The maximum amount of risk   
retained by the Company and not reinsured is $1 million on any individual life  
insured and $500,000 on individual accidental death insurance. The amount of    
risk retained by the Company on individual disability income products varies    
by policy type and year of issue. The Company also reinsures against            
catastrophic losses in the Employee Benefits segment. Since the ceding of       
reinsurance by the Company does not discharge its primary liability to the      
policyholder, the Company has control procedures with regard to reinsurance     
ceded. These procedures include the exchange and review of financial            
statements filed with regulatory authorities, exchange of Insurance Regulatory  
Information System results, review of ratings by A.M. Best Co., determination   
of states in which the reinsurer is licensed to do business, on-site visits     
before entering a contract to assess the operations and management of the       
reinsurer, consideration of the need for collateral, such as letters of         
credit, and audits of the Company's reinsurance activities by its Internal      
Audit staff. The Company also assumes reinsurance from other insurers.          

RESERVES                                                                        

The applicable insurance laws under which insurance companies operate       
require that they report, as liabilities, policy reserves to meet future        
obligations on their outstanding policies. These reserves are the amounts       
which, with the additional premiums to be received and interest thereon         
compounded annually at certain assumed rates, are calculated to be sufficient   
to meet the various policy and contract obligations as they mature. These laws  
specify that the reserves shall not be less than reserves calculated using      
certain specified mortality and morbidity tables, interest rates, and methods   
of valuation. The reserves reported in the Company's financial statements       
incorporated herein by reference are calculated based on GAAP and differ from   
those specified by the laws of the various states and carried in the statutory  
financial statements of the life insurance subsidiaries.                        

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These differences arise from the use of mortality and morbidity tables and      
interest assumptions which are believed to be more representative of the        
actual business than those required for statutory accounting purposes and from  
differences in actuarial reserving methods.                                     

The consolidated statements of income include the annual change in reserves 
for future policy and contract benefits. The change reflects a normal           
accretion for premium payments and interest buildup and decreases for policy    
terminations such as lapses, deaths, and annuity benefit payments.              

In addition to reserves for future policy and contract benefits, the Company
maintains a balance sheet liability for policyholders' funds. Traditional GICs  
were over 85 percent of the Company's policyholders' funds balance at December  
31, 1996. They are structured with a specific maturity and provide for          
withdrawals for payment of benefits to contract holders or other                
beneficiaries.                                                                  

Policyholders' funds, as shown on the Company's consolidated statements of  
financial condition as of December 31, 1996, were $3,717.1 million. Of this     
amount, $3,204.3 million reflected the Company's outstanding GICs, the          
maturity of which is as follows (in millions):                                  

                                                                [Download Table]
                                                                         
1 year or less.................................................. $1,453.8
Over 1 year but less than 2 years...............................    997.5
Over 2 years but less than 3 years..............................    567.9
Over 3 years but less than 4 years..............................    155.6
Over 4 years but less than 5 years..............................     22.7
Over 5 years....................................................      6.8
                                                                 --------
  Total......................................................... $3,204.3
                                                                 ========

See "Risk Factors--Reserves" and "The Paul Revere Merger--Paul Revere       
Reserve Strengthening."                                                         

COMPETITION                                                                     

There is intense competition among insurance companies for the individual   
and group insurance products of the types sold by the Company. At the end of    
1996, there were over 2,000 legal reserve life insurance companies in the       
United States, many offering one or more insurance products similar to those    
marketed by the Company. The Company's principal competitors in the employee    
benefits market include the largest insurance companies in the United States,   
many of which have substantially greater financial resources and larger staffs  
than the Company. In addition, in the individual life and annuities markets,    
the Company competes with banks, investment advisers, mutual funds, and other   
financial entities for investment of savings and retirement funds in general.   
In the individual and group disability markets, the Company competes in the     
United States and Canada with a limited number of major companies and           
regionally with other companies offering specialty products.                    

All areas of the employee benefits markets are highly competitive due to the
yearly renewable term nature of the products and the large number of insurance  
companies offering products in this market. The Company competes with other     
companies in attracting and retaining independent agents and brokers to         
actively market its products. The principal competitive factors affecting the   
Company's business are price and quality of service.                            

REGULATION                                                                      

The Company and its insurance subsidiaries are subject to detailed          
regulation and supervision in the jurisdictions in which each does business.    
With respect to the insurance subsidiaries, such regulation and supervision is  
primarily for the protection of policyholders rather than for the benefit of    
investors or creditors. Although the extent of such regulation varies, state    
insurance laws generally establish supervisory agencies with broad              
administrative powers.                                                          

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These supervisory and administrative powers relate chiefly to the granting  
and revocation of the licenses to transact business, the licensing of agents,   
the approval of policy forms, reserve requirements, and the form and content    
of required financial statements. As to the type and amounts of its             
investments, the Company's insurance subsidiaries must meet the standards and   
tests promulgated by the insurance laws and regulations of Tennessee,           
Massachusetts, New York, Delaware and certain other states in which they        
conduct business.                                                               

The Company and its insurance subsidiaries are required to file various,    
usually quarterly and/or annual, financial statements and are subject to        
periodic and intermittent review with respect to their financial condition and  
other matters by the various departments having jurisdiction in the states in   
which they do business. The field work related to the last such examination of  
the Provident insurance subsidiaries was completed on February 4, 1992, and     
covered operations for the five-year period ending December 31, 1990. No        
objections were raised by the reviewing authorities as a result of that         
examination. The examination for the five year period ending December 31,       
1995, began in February 1996 and should be completed during the second quarter  
of 1997. The field work related to the last such examination of the Paul        
Revere insurance subsidiaries is expected to be completed in the second         
quarter of 1997 and will cover operations for the four-year period ended        
December 31, 1994.                                                              

The laws of the states of Tennessee, Massachusetts, New York and Delaware   
require the registration of and periodic reporting by insurance companies       
domiciled within their jurisdiction which control or are controlled by other    
corporations or persons so as to constitute a holding company system. The       
Company is registered as a holding company system in Tennessee, Massachusetts,  
New York and Delaware. The holding company statutes require periodic            
disclosure concerning stock ownership and prior approval of certain             
intercompany transactions within the holding company system. The Company may    
from time to time be subject to regulation under the insurance and insurance    
holding company statutes of one or more additional states. See "Management's    
Discussion and Analysis of Financial Condition and Results of Operations."      

The NAIC and insurance regulators are re-examining existing laws and        
regulations and their application to insurance companies. In particular, this   
re-examination has focused on insurance company investment and solvency issues  
and, in some instances, has resulted in new interpretations of existing law,    
the development of new laws, and the implementation of non-statutory            
guidelines. The NAIC has formed committees and appointed advisory groups to     
study and formulate regulatory proposals on such diverse issues as the use of   
surplus notes, accounting for reinsurance transactions, and the adoption of     
risk-based capital rules. The NAIC is currently in the process of recodifying   
statutory accounting practices, the result of which is expected to standardize  
prescribed statutory accounting practices. Accordingly, this project, which is  
expected to be completed in 1997, will likely change, to some extent,           
prescribed statutory accounting practices and may result in changes to the      
accounting practices that the Company's insurance subsidiaries use to prepare   
their statutory financial statements.                                           

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MANAGEMENT  

Set forth below is certain information concerning directors and certain     
executive officers of the Company. Each director holds office until the next    
annual meeting of stockholders and until his or her successor has been elected  
and qualified. The information concerning the directors has been furnished by   
them to the Company.                                                            

                                                                [Download Table]

NAME                   AGE             POSITION(S) WITH THE COMPANY           
----                   ---             ----------------------------           
                                                                              
J. Harold Chandler      47 Chairman, President and Chief Executive Officer    
Thomas R. Watjen        42 Vice Chairman, Chief Financial Officer and Director
William L. Armstrong    59 Director                                           
William H. Bolinder     53 Director                                           
Steven M. Gluckstern    45 Director                                           
Charlotte M. Heffner    59 Director                                           
Hugh B. Jacks           62 Director                                           
William B. Johnson      59 Director                                           
Hugh O. Maclellan, Jr.  57 Director                                           
A.S. (Pat) MacMillan    52 Director                                           
C. William Pollard      58 Director                                           
Scott L. Probasco, Jr.  68 Director                                           
Steven S Reinemund      48 Director                                           
Burton E. Sorensen      67 Director                                           
                           Executive Vice President and Chief Information     
Robert O. Best          47 Officer                                            
Timothy C. Gartland     45 Executive Vice President, Human Resources          
Thomas B. Heys, Jr.     50 Executive Vice President, Risk Management          
Peter C. Madeja         38 Executive Vice President; President and Chief      
                            Executive Officer of Genex                        
Jeffrey F. Olingy       47 Executive Vice President, Sales Management         
Ralph A. Rogers, Jr.    48 Senior Vice President and Controller               

Mr. Chandler became Chairman of the Company on April 28, 1996, and President
and Chief Executive Officer and a Director effective November 8, 1993.          
Immediately prior to his employment with the Company, he served as President    
of NationsBank Mid-Atlantic Banking Group which includes the NationsBank        
Corporation ("NationsBank") and Maryland National Corporation entities in the   
District of Columbia, Maryland, and northern Virginia. He formerly served as    
President of The Citizens and Southern National Bank of South Carolina, a       
predecessor company of NationsBank. He is a director of AmSouth                 
Bancorporation, Herman Miller, Inc., and Healthsource. He is currently a        
member of the Board of Trustees of Wofford College.                             

Mr. Watjen became Vice Chairman and a Director of the Company on March 26,  
1997, and retains his position as Chief Financial Officer. He became Executive  
Vice President and Chief Financial Officer of the Company on July 1, 1994.      
Prior to that time, he served as a Managing Director of the insurance practice  
of the investment banking firm, Morgan Stanley & Co. Incorporated, which he     
joined in 1987.                                                                 

Senator Armstrong, a Director since 1991, served as a Senator from Colorado 
in the United States Senate from 1979 to 1991. He has been Chairman of          
Ambassador Media Corporation since 1984, Chairman of Cherry Creek Mortgage      
Company, Inc. since 1991, Chairman of El Paso Mortgage Company since 1993,      
Chairman of Centennial State Mortgage Company, Frontier Real Estate, Inc. and   
Frontier Title, LLC since 1994, and Chairman of Transland Financial Services,   
Inc. since 1996. He is also a director of Storage Technology Corporation,       
International Family Entertainment, Inc., and Helmerich and Payne, Inc.         

Mr. Bolinder, who became a Director on March 27, 1997, is a member of the   
Corporate Executive Board of Zurich, headquartered in Zurich, Switzerland. He   
is also U.S. Manager, Zurich, U.S. Branch, and a director of Zurich's           
affiliated companies in the U.S. Zurich, together with its affiliated           
companies, comprise a leading international insurance organization providing    
global coverage in all lines of insurance along with asset management           
services.                                                                       

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Mr. Gluckstern, who became a Director on March 27, 1997, is a member of the 
Corporate Executive Board of Zurich. He has been Chairman of Zurich             
Reinsurance Centre Holdings, Inc., since March 1993. He is President and a      
director of Zurich Centre Investments and serves as a director of its           
operating subsidiaries. Since 1987, he has served as an executive officer and   
a director of Centre Reinsurance, as well as a director of its operating        
subsidiaries.                                                                   

Ms. Heffner, a Director since 1995, is a trustee of the Maclellan           
Foundation. She is the sister of Hugh O. Maclellan, Jr.                         

Mr. Jacks, a Director since 1988, retired in December 1991 as President and 
Chief Executive Officer of BellSouth Services, Incorporated, a provider of      
lead staff, strategic planning and support for BellSouth Companies. He is       
President of Potential Enterprises, Inc.                                        

Mr. Johnson, a Director since 1986, is Chairman of the Board and Chief      
Executive Officer of The Ritz-Carlton Hotel Company, LLC. He is a director of   
SunTrust Bank, Atlanta and SunTrust Banks of Georgia, Inc. He also serves as a  
member of the Board of Trustees of Berry College.                               

Mr. Maclellan, a Director since 1975, is President of the Maclellan         
Foundation and a director of SunTrust Bank, Chattanooga, N.A., and Covenant     
Transport. Mr. Maclellan is the brother of Charlotte M. Heffner.                

Mr. MacMillan, a Director since 1995, has served since 1980 as the Chief    
Executive Officer of Team Resources, Inc., which specializes in the areas of    
team and organizational development, including management consulting,           
management training, organizational audits and surveys and executive search     
and selection. He is also a Trustee of the Maclellan Foundation.                

Mr. Pollard, a Director since 1992, has served as Chairman of the Board of  
Directors of The ServiceMaster Company since January 1994. From June 1990 to    
December 1993, he served as Chairman and Chief Executive Officer of The         
ServiceMaster Company, which provides professional cleaning, termite and pest   
control, maid service, lawn care, and appliance and other home equipment and    
maintenance, as well as management of plant operations, laundry and linen,      
clinical equipment maintenance, and food service for health care, educational   
and industrial facilities. He is a director of Herman Miller, Inc., and Coro,   
Inc.                                                                            

Mr. Probasco, a Director since 1962, has served as a director and Chairman  
of the Executive Committee of SunTrust Bank, Chattanooga, N.A. since 1989. He   
also serves as a director of Coca-Cola Enterprises, Inc., Chattem, Inc., and    
SunTrust Banks, Inc.                                                            

Mr. Reinemund, a Director since 1995, has served as Chairman and Chief      
Executive Officer of FritoLay, Inc. since June 1992. He served as President     
and Chief Executive Officer of Pizza Hut, Inc. from 1986 to 1992. He also       
serves as a director of PepsiCo, Inc.                                           

Mr. Sorensen, a Director since 1985, served as Chairman and Chief Executive 
Officer of Lord Securities Corp., an investment banking firm, from December     
1984 until December 1995. Prior to that time, Mr. Sorensen was a General        
Partner of Goldman, Sachs & Co., investment bankers. He is a director of The    
ServiceMaster Company.                                                          

Mr. Best became Senior Vice President and Chief Information Officer of the  
Company on July 11, 1994, and was elevated to Executive Vice President on       
March 26, 1997. He was previously Senior Vice President and Chief Information   
Officer at UNUM Corporation, which he joined in 1993 following UNUM's           
acquisition of Colonial Life and Accident Insurance Company. At Colonial, he    
served as Vice President, Operations and Information Systems until 1992, when   
he was named Executive Vice President.                                          

Mr. Gartland became Senior Vice President, Human Resources of the Company on
August 30, 1996, and was elevated to Executive Vice President on March 26,      
1997. Prior to joining the Company, he was President of Corporate Insights and  
Development, Inc., a management consulting firm which he co-founded in 1993.    
He served as Executive Vice President, Executive and Organizational             
Development, with NationsBank prior to that time.                               

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Mr. Heys became Senior Vice President, Risk Management of the Company in    
August 1994, and was elevated to Executive Vice President on March 26, 1997.    
He served as Vice President and Chief Officer of the Life Department of the     
Company from May 1992 until August 1994. He served as Vice President and Chief  
Officer, Select Group Benefits, of Accident from November 1990 until May 1992.  

Mr. Madeja became Senior Vice President of the Company in February 1997 when
the Company acquired Genex and was elevated to Executive Vice President on      
March 26, 1997. He continues to serve as President and Chief Executive Officer  
of Genex, which he joined in 1982.                                              

Mr. Olingy became Senior Vice President, Sales Management, of the Company on
April 3, 1996, and was elevated to Executive Vice President, Sales Management   
on March 26, 1997. Prior to joining the Company, he was a Retail Banking        
Director with Bank of Boston, which he joined in 1993. He served as Executive   
Vice President of NationsBank from 1991 to 1993.                                

Mr. Rogers became Vice President of the Company in August 1984, and was     
elevated to Senior Vice President on May 1, 1997. He has also served as         
Controller of the Company since 1984.                                           

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BENEFICIAL OWNERSHIP OF COMMON STOCK  

Detailed information about the security ownership of beneficial owners of   
more than 5% of the Common Stock, including beneficial ownership based on sole  
or shared voting or investment power, is incorporated by reference in the       
Company's Annual Report on Form 10-K, which is incorporated by reference        
herein. See "Available Information" and "Incorporation of Certain Documents by  
Reference." Due to the shared voting and investment power relating to a large   
portion of the Common Stock, there is significant duplication in the reported   
beneficial ownership. This results from ownership of certain members of the     
Maclellan family and trusts and foundations established by them or for their    
benefit. The following chart is provided to summarize the reported holdings of  
the various Maclellan family interests, without duplication of beneficial       
ownership resulting from overlapping or shared voting or disposition powers,    
as of March 10, 1997, and of beneficial ownership of other holders of more      
than 5% of the Common Stock, as of March 31, 1997.                              

                                                                [Download Table]

                                                      DIRECTLY OWNED PERCENT OF
NAME AND ADDRESS OF DIRECT OWNER                      (VOTING POWER)   TOTAL   
--------------------------------                      -------------- ----------
                                                                               
The Maclellan Foundation, Inc.                                                 
 Chattanooga, Tennessee..............................   8,027,156      12.00   
R. J. and Cora L. Maclellan Trusts for The Maclellan                           
 Foundation, Inc.                                                              
 Chattanooga, Tennessee..............................   3,475,134       5.20   
Charitable Trusts                                                              
 Chattanooga, Tennessee..............................   2,767,533       4.14   
Trusts U/A R. J. Maclellan and Trusts U/A Cora L.                              
 Maclellan                                                                     
 for Families of H.O. Maclellan, Sr. and R.L.                                  
 Maclellan                                                                     
 Chattanooga, Tennessee..............................   2,541,205       3.76   
Trusts U/A H. O. Maclellan, Sr. for Children and                               
 Grandchildren                                                                 
 Chattanooga, Tennessee..............................   2,234,317       3.34   
Kathrina H. Maclellan                                                          
 Lookout Mountain, Tennessee.........................   1,383,359       2.07   
Hugh O. Maclellan, Jr.                                                         
 Chattanooga, Tennessee..............................     805,594       1.20   
Charlotte M. Heffner                                                           
 Atlanta, Georgia....................................     457,602        .68   
Other (Trusts, Estates and Family Ownership)                                   
 Chattanooga, Tennessee..............................   1,552,355       2.32   
Textron Inc.                                                                   
 Providence, Rhode Island............................   5,917,500       8.85   
Zurich Insurance Company and affiliates                                        
 Zurich, Switzerland.................................   9,523,810      14.24   

The Company has granted certain registration rights to each of the persons  
in the foregoing table, including Zurich (see "The Paul Revere Merger--Zurich   
Relationship") and the Selling Stockholder (see "Selling Stockholder--          
Registration Rights Agreement").                                                

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SELLING STOCKHOLDER 

The shares of Common Stock offered hereby are owned by and offered for the  
account of Textron. Pursuant to the Textron Agreement, the Company will         
receive a portion of the proceeds from the sale of the shares by Textron.       
Textron acquired the shares of Common Stock offered hereby from the Company in  
connection with the Paul Revere Merger. See "The Paul Revere Merger--Textron    
Agreements." Following completion of the offering, Textron will not             
beneficially own any shares of Common Stock.                                    

STANDSTILL AGREEMENT                                                            

In connection with the execution of the Paul Revere Merger Agreement, the   
Company and Textron have entered into a Standstill Agreement, dated as of       
April 29, 1996 (the "Textron Standstill Agreement"), which sets forth certain   
standstill arrangements entered into by Textron and the Company, which are to   
be effective for a period of three years from March 27, 1997, the date the      
Paul Revere Merger was consummated. Textron has agreed that it and its          
subsidiaries will not acquire beneficial ownership of any Company voting        
securities, if the effect of such acquisition would be to cause Textron and     
its subsidiaries to beneficially own, collectively, more than 15% of the        
outstanding Company voting securities, except pursuant to: (i) dividends or     
distributions of Company voting securities made on or to such securities owned  
by Textron or (ii) offerings made available only to holders of Company voting   
securities generally; provided, that Textron and its subsidiaries may acquire   
Company voting securities from each other. In the event that Textron and its    
subsidiaries sell, transfer or otherwise dispose of (with or without full       
consideration) any Company voting securities (other than to Textron or a        
subsidiary of Textron), Textron and its subsidiaries may not thereafter         
reacquire such shares during the term of the Textron Standstill Agreement if    
the effect of such acquisition would be to cause Textron and its subsidiaries   
to beneficially own, collectively, more than 15% of the outstanding Company     
voting securities, subject to the exceptions set forth in clauses (i) and (ii)  
of the immediately preceding sentence.                                          

The Textron Standstill Agreement further provides that Textron and its      
subsidiaries may not: (i) participate in any way in the making of any public    
announcement with respect to, or submit or participate in the submission of a   
proposal for, or offer of, any change in control event; (ii) initiate the       
solicitation of or solicit proxies or consents or become a "participant" in a   
"solicitation" (as such terms are defined in Rule 14a-11 under the Exchange     
Act) with respect to any Company voting securities in opposition to the         
recommendation of the Board of Directors of the Company with respect to any     
matter; (iii) participate in any way in any stockholder vote with respect to    
any matter which is not required by the Company's Certificate of Incorporation  
or Bylaws, the rules of the NYSE or any other national securities exchange or   
automated quotations system on which Company voting securities are then         
traded, or by any similar laws or rules to be submitted to the Company's        
stockholders; (iv) participate in any way in any legal, regulatory or           
administrative action or proceeding in any court of competent jurisdiction or   
appropriate regulatory or administrative body or agency with respect to the     
Company or any of its directors, officers, employees, accountants, legal        
counsel or other advisors, which action or proceeding in any way contests, or   
otherwise seeks to void the validity of, or the enforceability of, any          
provision of the Textron Standstill Agreement; or (v) act in concert in any     
way with any other person, for the purpose of voting of Company voting          
securities, except as a member of a group consisting solely of Textron and its  
subsidiaries with respect to actions specifically required or permitted by the  
Textron Standstill Agreement.                                                   

Finally, Textron has agreed that neither it nor its subsidiaries will sell, 
transfer, assign or otherwise dispose of its beneficial interest in any         
Company voting securities to any person representing beneficial ownership of    
more than two percent of the Company voting securities, without first           
providing the Company the opportunity to purchase, or to designate an           
alternative purchaser of, such Company voting securities in the manner set      
forth in the Textron Standstill Agreement; provided, that Textron and its       
subsidiaries may make such a disposition without such an offer if the           
disposition is (a) to an underwriter or underwriters in connection with a bona  
fide public offering of Company voting securities, or (b) pursuant to a         
qualifying tender offer (as defined in the Textron Standstill Agreement).       

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REGISTRATION RIGHTS AGREEMENT                                                   

In connection with the execution of the Paul Revere Merger Agreement, the   
Company and Textron have entered into a Registration Rights Agreement, dated    
as of April 29, 1996, pursuant to which the Company has caused to be prepared   
and has filed with the Commission the Registration Statement of which this      
Prospectus forms a part, with respect to the sale by the Selling Stockholder    
of the shares of Common Stock offered hereby in accordance with the intended    
method of distribution described under "Underwriters." The Company has agreed   
to file such amendments and supplements to the Registration Statement and       
Prospectus as may be necessary to keep the Registration Statement continuously  
effective and to comply with the provisions of the Securities Act until the     
earlier of (i) such time as all of the shares of Common Stock included in the   
Registration Statement and offered by this Prospectus have been sold or (ii)    
the expiration of 180 days after the Registration Statement becomes effective,  
subject to customary suspension and extension periods, but in no event more     
than nine months after the Registration Statement becomes effective. The        
Company has also granted to the Selling Stockholder certain limited demand      
rights and unlimited "piggyback" registration rights with respect to the        
shares beneficially owned by the Selling Stockholder.                           

In addition, the Company has agreed to pay all expenses incurred by it and  
the Selling Stockholder in connection with the Securities Act registration of   
the shares of Common Stock received by Textron in the Paul Revere Merger,       
including, without limitation, registration and filing fees of the Commission,  
reasonable fees and disbursements of counsel to the Company and the Selling     
Stockholder, any applicable state securities and "blue sky" law registration    
and qualification fees, accountants' fees and expenses, transfer taxes, and     
fees of transfer agents and registrars (but excluding underwriting discounts    
and commissions). Moreover, the Company on the one hand, and the Selling        
Stockholder on the other hand, have agreed to indemnify each other and certain  
affiliated parties and "control persons" (within the meaning of Section 15 of   
the Securities Act and Section 20 of the Exchange Act) from and against         
certain liabilities, including liabilities under the Securities Act.            

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CERTAIN UNITED STATES TAX CONSEQUENCES  
TO NON-UNITED STATES HOLDERS  

The following is a general discussion of certain United States federal      
income and estate tax consequences of the ownership and disposition of Common   
Stock by a person that, for United States federal income tax purposes, is a     
nonresident alien individual, a foreign corporation, a foreign partnership, or  
a foreign estate or trust (a "non-U.S. holder"). This discussion is based on    
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),       
existing and proposed regulations thereunder and administrative and judicial    
interpretations thereof, as of the date hereof, all of which are subject to     
change (possibly with retroactive effect). The discussion does not consider     
specific facts and circumstances that may be relevant to a particular non-U.S.  
holder's tax position and does not purport to be a comprehensive discussion of  
all aspects of United States federal income and estate taxation. Accordingly,   
each non-U.S. holder is urged to consult its own tax advisor with respect to    
the United States tax consequences of the ownership and disposition of Common   
Stock, as well as any tax consequences that may arise under the laws of any     
state, municipality, foreign country or other taxing jurisdiction.              

DIVIDENDS                                                                       

Dividends paid to a non-U.S. holder of Common Stock ordinarily will be      
subject to withholding of United States federal income tax at a 30 percent      
rate, or at a lower rate under an applicable income tax treaty that provides    
for a reduced rate of withholding. However, if the dividends are effectively    
connected with the conduct by the holder of a trade or business within the      
United States or, where a tax treaty applies, attributable to a United States   
permanent establishment of the holder, then the dividends will be exempt from   
the withholding tax described above and instead will be subject to United       
States federal income tax on a net income basis provided the non-U.S. holder    
files appropriate documentation with the payor of the dividend. If such non-    
U.S. holder is a foreign corporation, it may also be subject to a United        
States branch profits tax at a 30 percent rate or such lower rate as may be     
specified by an applicable income tax treaty.                                   

Under such current law, dividends paid to an address outside the United     
States are presumed to be paid to a resident of such country (unless the payor  
has knowledge to the contrary) for purposes of the withholding discussed above  
and for purposes of determining the applicability of a tax treaty rate.         
However, under proposed Treasury regulations not currently in effect, in the    
case of dividends paid after December 31, 1997 (December 31, 1999 in the case   
of dividends paid to accounts in existence on or before the date that is 60     
days after the proposed regulations are published as final regulations), a      
non-U.S. holder of Common Stock who wishes to claim the benefit of an           
applicable treaty rate would be required to satisfy applicable certification    
and other requirements either directly or through an intermediary. In           
addition, backup withholding, as discussed below, may apply in certain          
circumstances if applicable certification and other requirements are not met.   

A non-U.S. holder of Common Stock eligible for a reduced rate of United     
States withholding tax pursuant to an income tax treaty may obtain a refund of  
any excess amounts withheld by filing an appropriate claim for refund with the  
Internal Revenue Service (the "IRS").                                           

GAIN ON DISPOSITION OF COMMON STOCK                                             

A non-U.S. holder generally will not be subject to United States federal    
income tax in respect of gain realized on a disposition of Common Stock,        
unless (a) the gain is effectively connected with a trade or business           
conducted by the non-U.S. holder in the United States and, where a tax treaty   
applies, is attributable to a U.S. permanent establishment of the non-U.S.      
holder, (b) in the case of a non-U.S. holder who is a non-resident alien        
individual and who holds the Common Stock as a capital asset, such holder is    
present in the United States for 183 or more days in the taxable year of the    
sale and certain other conditions are met, (c) the Company is or has been a     
"U.S. real property holding corporation" for United States federal income tax   
purposes (which the Company does not believe that it is or is likely to         
become) and, in the event that the Common Stock is considered "regularly        
traded," the non-U.S. holder held directly or indirectly at any time during     
the five-year period ending                                                     

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on the date of the disposition more than five percent of the Common Stock, or   
(d) the non-U.S. holder is subject to tax pursuant to the provisions of the     
United States federal tax law applicable to certain United States expatriates.  
In the case of a non-U.S. holder described in clause (a), (c) or (d) above,     
such gain will be subject to United States federal income tax on net income at  
regular rates on the same basis that applies to U.S. persons and, if such non-  
U.S. holders are foreign corporations, may be subject to the branch profits     
tax described above. A non-U.S. holder described in clause (b) above will be    
subject to a flat 30 percent tax on the gain derived from the sale, which may   
be offset by capital losses.                                                    

FEDERAL ESTATE TAXES                                                            

Common Stock owned or treated as being owned by a non-U.S. holder at the    
time of death will be included in such holder's gross estate for United States  
federal estate tax purposes, unless an applicable estate tax treaty provides    
otherwise.                                                                      

U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX              

The Company must report annually to the IRS and to each non-U.S. holder the 
amount of dividends paid to such holder and the tax withheld with respect to    
such dividends, regardless of whether withholding was required. Copies of the   
information returns reporting such dividends and withholding may, under the     
provisions of an applicable income tax treaty, also be made available to the    
tax authorities in the country in which the non-U.S. holder resides.            

A backup withholding tax is imposed at the rate of 31 percent on certain    
payments to persons that fail to furnish certain identifying information to     
the payor. Under current law, backup withholding generally will not apply to    
dividends paid to a non-U.S. holder at an address outside the United States     
(unless the payor has knowledge that the payee is a U.S. person), but           
generally will apply to dividends paid on Common Stock at addresses inside the  
United States to non-U.S. holders that fail to provide certain identifying      
information in the manner required. However, under proposed Treasury            
regulations not currently in effect, in the case of dividends paid after        
December 31, 1997 (December 31, 1999 in the case of dividends paid to accounts  
in existence on or before the date that is 60 days after the proposed           
regulations are published as final regulations), a non-U.S. holder generally    
would be subject to backup withholding at a 31 percent rate, unless certain     
certification procedures (or, in the case of payments made outside the United   
States with respect to an offshore account, certain documentary evidence        
procedures) are complied with, directly or through an intermediary or a non-    
U.S. holder otherwise establishes an exemption from backup withholding.         

As a general matter, information reporting and backup withholding also will 
not apply to a payment of the proceeds of a sale of Common Stock effected       
outside the United States by a foreign office of a foreign broker. However,     
information reporting requirements (but generally not backup withholding) will  
apply to a payment of the proceeds of a sale of Common Stock effected outside   
the United States by a foreign office of a broker if the broker is a U.S.       
person, derives 50 percent or more of its gross income for certain periods      
from the conduct of a trade or business in the United States, or is a           
"controlled foreign corporation" as to the United States, unless the broker     
has documentary evidence in its records that the holder is a non-U.S. holder    
and certain conditions are met, or the holder otherwise establishes an          
exemption. Payment by a United States office of a broker of the proceeds of a   
sale of Common Stock will be subject to both backup withholding and             
information reporting unless the holder certifies, among other things, its      
non-United States status under penalties of perjury or otherwise establishes    
an exemption.                                                                   

Any amounts withheld under the backup withholding rules generally will be   
allowed as a refund or a credit against such holder's United States federal     
income tax liability provided the required information is furnished in a        
timely manner to the IRS.                                                       

These backup withholding and information reporting rules are under review by
the United States Treasury, and their application to the Common Stock could be  
changed by future regulations.                                                  

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UNDERWRITERS  

Under the terms and subject to the conditions contained in an Underwriting  
Agreement dated the date hereof (the "Underwriting Agreement"), a syndicate of  
United States underwriters (the "U.S. Underwriters") named below has severally  
agreed to purchase, and the Selling Stockholder has agreed to sell to them,     
severally, the respective number of shares of Common Stock set forth opposite   
the names of such U.S. Underwriters below, and a syndicate of international     
underwriters (the "International Underwriters") named below has severally       
agreed to purchase, and the Selling Stockholder has agreed to sell to them,     
severally, the respective number of shares of Common Stock set forth opposite   
the names of such International Underwriters below:                             

                                                                [Download Table]

                                                                       NUMBER OF
 NAME                                                                   SHARES  
 ----                                                                  ---------
                                                                                
U.S. Underwriters:                                                              
 Morgan Stanley & Co. Incorporated.................................... 1,792,000
 Salomon Brothers Inc................................................. 1,792,000
 Advest, Inc. ........................................................   100,000
 Sanford C. Bernstein & Co., Inc. ....................................   150,000
 J.C. Bradford & Co. .................................................   100,000
 Donaldson, Lufkin & Jenrette Securities Corporation..................   150,000
 A.G. Edwards & Sons, Inc. ...........................................   150,000
 Fox-Pitt, Kelton Inc. ...............................................   150,000
 Moors & Cabot, Inc. .................................................   100,000
 The Robinson-Humphrey Company, Inc. .................................   100,000
 Wasserstein Perella Securities, Inc. ................................   150,000
                                                                       ---------
  Subtotal............................................................ 4,734,000
                                                                       ---------
International Underwriters:                                                     
 Morgan Stanley & Co. International Limited...........................   556,750
 Salomon Brothers International Limited...............................   556,750
 Donaldson, Lufkin & Jenrette Securities Corporation..................    35,000
 Fox-Pitt, Kelton N.V. ...............................................    35,000
                                                                       ---------
  Subtotal............................................................ 1,183,500
                                                                       ---------
   Total.............................................................. 5,917,500
                                                                       =========

The U.S. Underwriters and the International Underwriters are collectively   
referred to as the "Underwriters." The Underwriting Agreement provides that     
the obligations of the several Underwriters to pay for and accept delivery of   
the shares of Common Stock offered hereby are subject to the approval of        
certain legal matters by their counsel and to certain other conditions. The     
Underwriters are obligated to take and pay for all of the shares of Common      
Stock offered hereby (other than those covered by the over-allotment option     
described below) if any such shares are taken.                                  

Pursuant to the Agreement Between U.S. and International Underwriters, each 
U.S. Underwriter has represented and agreed that, with certain exceptions, (i)  
it is not purchasing any U.S. Shares (as defined below) for the account of      
anyone other than a United States or Canadian Person (as defined below) and     
(ii) it has not offered or sold, and will not offer or sell, directly or        
indirectly, any U.S. Shares or distribute any prospectus relating to the U.S.   
Shares outside the United States or Canada or to anyone other than a United     
States or Canadian Person. Pursuant to the Agreement Between U.S. and           
International Underwriters, each International Underwriter has represented and  
agreed that, with certain exceptions, (i) it is not purchasing any              
International Shares (as defined below) for the account of any United States    
or Canadian Person and (ii) it has not offered or sold, and will not offer or   
sell, directly or indirectly, any International Shares or distribute any        
prospectus relating                                                             

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to the International Shares within the United States or Canada or to any United 
States or Canadian Person. With respect to any Underwriter that is a U.S.       
Underwriter and an International Underwriter, the foregoing representations and 
agreements (i) made by it in its capacity as a U.S. Underwriter shall apply     
only to shares of Common Stock purchased by it in its capacity as a U.S.        
Underwriter, (ii) made by it in its capacity as an International Underwriter    
shall apply only to shares of Common Stock purchased by it in its capacity as   
an International Underwriter and (iii) shall not restrict its ability to        
distribute any prospectus relating to the shares of Common Stock to any person. 
The foregoing limitations do not apply to stabilization transactions or to      
certain other transactions specified in the Agreement Between U.S. and          
International Underwriters. As used herein, "United States or Canadian Person"  
means any national or resident of the United States or Canada, or any           
corporation, pension, profit-sharing or other trust or other entity organized   
under the laws of the United States or Canada or any political subdivision      
thereof (other than a branch located outside the United States and Canada of    
any United States or Canadian Person) and includes any United States or         
Canadian branch of a person who is otherwise not a United States or Canadian    
Person. All shares of Common Stock to be purchased by the U.S. Underwriters and 
the International Underwriters are referred to herein as the U.S. Shares and    
the International Shares, respectively.                                         

Pursuant to the Agreement Between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and the International Underwriters of 
any number of shares of Common Stock to be purchased pursuant to the            
Underwriting Agreement as may be mutually agreed. The per share price and       
currency of any shares sold shall be the public offering price set forth on the 
cover page hereof, in United States dollars, less an amount not greater than    
the per share amount of the concession to dealers set forth below.              

Pursuant to the Agreement Between U.S. and International Underwriters, each 
U.S. Underwriter has represented that it has not offered or sold, and has       
agreed not to offer or sell, any shares of Common Stock, directly or            
indirectly, in any province or territory of Canada or to, or for the benefit    
of, any resident of any province or territory of Canada in contravention of the 
securities laws thereof and has represented that any offer of shares of Common  
Stock in Canada will be made only pursuant to an exemption from the requirement 
to file a prospectus in the province or territory of Canada in which such offer 
is made. Each U.S. Underwriter has further agreed to send to any dealer who     
purchases from it any shares of Common Stock a notice stating in substance      
that, by purchasing such shares of Common Stock, such dealer represents and     
agrees that it has not offered or sold, and will not offer or sell, directly or 
indirectly, any of such shares of Common Stock in any province or territory of  
Canada or to, or for the benefit of, any resident of any province or territory  
of Canada in contravention of the securities laws thereof and that any offer of 
shares of Common Stock in Canada will be made only pursuant to an exemption     
from the requirement to file a prospectus in the province or territory of       
Canada in which such offer is made, and that such dealer will deliver to any    
other dealer to whom it sells any of such shares of Common Stock a notice to    
the foregoing effect.                                                           

Each International Underwriter has agreed that: (i) it has not offered or   
sold and will not offer or sell any shares of Common Stock to persons in the    
United Kingdom ("U.K.") except to persons whose ordinary activities involve     
them in acquiring, holding, managing or disposing of investments (as principal  
or agent) for the purposes of their businesses or otherwise in circumstances    
which have not resulted and will not result in an offer to the public in the    
U.K. within the meaning of the Public Offers of Securities Regulations 1995     
(the "Regulations"); (ii) it has complied and will comply with all applicable   
provisions of the Financial Services Act 1986 and the Regulations with respect  
to anything done by it in relation to the shares of Common Stock in, from or    
otherwise involving the U.K.; and (iii) it has only issued or passed on, and    
will only issue or pass on, to any person in the U.K. any document received by  
it in connection with the issue of the shares of Common Stock, if that person   
is of a kind described in Article 11(3) of the Financial Services Act 1986      
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom the  
document may otherwise lawfully be issued or passed on.                         

The Underwriters initially propose to offer part of the shares of Common    
Stock directly to the public at the public offering price set forth on the      
cover page hereof and part to certain dealers at a price that represents a      

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concession not in excess of $1.11 a share under the public offering price. The  
Underwriters may allow, and such dealers may reallow, a concession not in       
excess of $.10 a share to other Underwriters or to certain other dealers.       
After the initial offering of the shares of Common Stock, the offering price    
and other selling terms may from time to time be varied by the Underwriters.    

Pursuant to the Underwriting Agreement, the Company has granted to the U.S. 
Underwriters an option, exercisable for 30 days from the date of this           
Prospectus, to purchase up to an aggregate of 887,625 additional shares of      
Common Stock at the public offering price set forth on the cover page hereof,   
less underwriting discounts and commissions. The U.S. Underwriters may          
exercise such option solely for the purpose of covering over-allotments, if     
any, made in connection with the offering of the shares of Common Stock         
offered hereby. To the extent such option is exercised, each U.S. Underwriter   
will become obligated, subject to certain conditions, to purchase               
approximately the same percentage of such additional shares of Common Stock as  
the number set forth next to such U.S. Underwriter's name in the preceding      
table bears to the total number of U.S. Shares offered hereby.                  

The Company, the Selling Stockholder, certain other holders of Common Stock,
and the directors and officers of the Company have agreed, with certain         
exceptions, not to (i) offer, pledge, sell, contract to sell, sell any option   
or contract to purchase, purchase any option or contract to sell, grant any     
option, right or warrant to purchase or otherwise transfer or dispose of,       
directly or indirectly, any shares of Common Stock or any securities            
convertible into or exercisable or exchangeable for shares of Common Stock      
(provided that such shares or securities are either owned prior to the          
offering or are thereafter acquired in connection with the offering) or (ii)    
enter into any swap or other arrangement that transfers to another, in whole    
or in part, any of the economic consequences of ownership of the shares of      
Common Stock, whether any such transaction described in clause (i) or (ii)      
above is to be settled by delivery of shares of Common Stock or such other      
securities, in cash or otherwise, except for the shares to be sold in the       
offerings, for a period of at least 90 days from the date of this Prospectus    
without the prior written consent of Morgan Stanley & Co. Incorporated, on      
behalf of the several Underwriters; provided, that (x) the Company may issue,   
or grant options for, shares of Common Stock pursuant to any stock plan for     
employees or directors, or any qualified employee benefit plan, in effect on    
the date of this Prospectus, or pursuant to any stock options outstanding on    
the date of this Prospectus, and any defined contribution qualified employee    
benefit plan in effect on the date of this Prospectus may sell shares of        
Common Stock to satisfy plan liquidity need, and (y) such other holders,        
officers and directors may dispose of any shares of Common Stock or securities  
convertible into or exercisable or exchangeable for shares of Common Stock (A)  
pursuant to a bona fide gift between or among family members or the estate of   
any such person (including, without limitation, any transfer by any such        
person to or among any trust, foundation, custodial or other similar accounts   
or funds in which such person or other member of his family serves as trustee   
or custodian or in a similar fiduciary capacity or to a trust created by any    
such person which has a member of his immediate family as a beneficiary) and    
(B) pursuant to any transfer to any organization, which transfer qualifies for  
the federal income tax charitable deduction at the time of such transfer;       
provided, that in the case of this clause (y), the transferee is then bound by  
or agrees to be bound by the restrictions described in this paragraph. If any   
such consent is given it would not necessarily be preceded or followed by a     
public announcement thereof.                                                    

The Underwriters have agreed to reimburse the Company for certain expenses  
incurred by the Company in connection with the offering of the shares of        
Common Stock offered hereby.                                                    

In the ordinary course of their respective businesses, certain of the       
Underwriters and their respective affiliates have engaged in and may in the     
future engage in commercial and investment banking transactions with the        
Company.                                                                        

The Company, the Selling Stockholder and the Underwriters have agreed to    
indemnify each other against certain liabilities, including liabilities under   
the Securities Act.                                                             

In connection with the offering, the Underwriters may purchase and sell the 
Common Stock in the open market. These transactions may include over-allotment  
and stabilizing transactions and purchases to cover short                       

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positions created by the Underwriters in connection with the offering. The      
Underwriters also may impose a penalty bid, whereby selling commissions allowed 
to broker-dealers in respect of the securities sold in the offering may be      
reclaimed by the Underwriters if such shares of Common Stock are repurchased by 
the Underwriters in stabilizing or covering transactions. These activities may  
stabilize, maintain or otherwise affect the market price of the Common Stock,   
which may be higher than the price that would otherwise prevail in the open     
market; and these activities, if commenced, may be discontinued at any time.    
These transactions may be effected on the NYSE, in the over-the-counter market  
or otherwise.                                                                   

LEGAL MATTERS 

The legality of the shares of Common Stock offered hereby and certain other 
legal matters in connection with the sale of the Common Stock offered hereby    
will be passed upon for the Company by Alston & Bird LLP, Atlanta, Georgia.     
Certain other legal matters in connection with the sale of the Common Stock     
offered hereby will be passed upon for the Company by Susan N. Roth, Vice       
President, Secretary and Counsel of the Company. As of March 31, 1997, Ms. Roth 
beneficially owned approximately 2,403 shares of Common Stock and holds options 
to purchase 3,750 shares of Common Stock. Certain legal matters in connection   
with the sale of the Common Stock offered hereby will be passed upon for the    
Underwriters by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited liability     
partnership including professional corporations, New York, New York. LeBoeuf,   
Lamb, Greene & MacRae, L.L.P., provides certain legal services to the Company   
from time to time. Certain legal matters relating to the Selling Stockholder    
will be passed upon by Skadden, Arps, Slate, Meagher & Flom LLP, Boston,        
Massachusetts.                                                                  

EXPERTS 

The consolidated financial statements of Provident Companies, Inc.          
incorporated by reference in its Annual Report on Form 10-K for the year ended  
December 31, 1996, and the consolidated financial statements of The Paul Revere 
Corporation for the year ended December 31, 1996, included in Provident         
Companies, Inc.'s Current Report on Form 8-K, dated March 27, 1997, have been   
audited by Ernst & Young LLP, independent auditors, as set forth in their       
reports thereon incorporated by reference or set forth therein and incorporated 
herein by reference. Such consolidated financial statements are incorporated    
herein by reference in reliance upon such reports given upon the authority of   
such firm as experts in accounting and auditing.                                

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PROSPECTUS                                                                      
5,917,500 Shares  
Provident Companies, Inc. 
COMMON STOCK  

----------------  

OF THE 5,917,500 SHARES OF COMMON STOCK BEING OFFERED, 1,183,500 SHARES ARE     
BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE             
INTERNATIONAL UNDERWRITERS AND 4,734,000 SHARES ARE BEING OFFERED INITIALLY IN  
THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS. SEE "UNDERWRITERS." ALL  
OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY TEXTRON INC.     
("TEXTRON" OR THE "SELLING STOCKHOLDER"), OTHER THAN SHARES WHICH MAY BE SOLD   
BY THE COMPANY PURSUANT TO THE OVER-ALLOTMENT OPTION DESCRIBED HEREIN. SEE "THE 
PAUL REVERE MERGER." PURSUANT TO AN AGREEMENT BETWEEN THE COMPANY AND THE       
SELLING STOCKHOLDER, THE SELLING STOCKHOLDER WILL PAY TO THE COMPANY A PORTION  
OF THE NET PROCEEDS RECEIVED BY THE SELLING STOCKHOLDER FROM THE SALE OF THE    
SHARES OFFERED HEREBY. THE COMPANY'S COMMON STOCK IS TRADED ON THE NEW YORK     
STOCK EXCHANGE UNDER THE SYMBOL "PVT." ON MAY 5, 1997, THE CLOSING SALE PRICE   
FOR THE COMMON STOCK ON THE NEW YORK STOCK EXCHANGE WAS $54 1/4.                

----------------  

SEE "RISK FACTORS" ON PAGE 8 FOR INFORMATION THAT SHOULD BE CONSIDERED BY 
PROSPECTIVE INVESTORS.  

----------------  

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND    
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES  
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE      
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS  
A CRIMINAL OFFENSE.                                                             

----------------  

PRICE $53 A SHARE 

----------------  

                                                                [Download Table]

                                         UNDERWRITING                           
                             PRICE TO   DISCOUNTS AND         PROCEEDS TO       
                              PUBLIC    COMMISSIONS(1) SELLING STOCKHOLDER(2)(3)
                           ------------ -------------- -------------------------
                                                                                
Per Share.................   $53.000        $1.855              $51.145         
Total(4).................. $313,627,500  $10,976,963         $302,650,538       

--------                                                                        

(1) The Company and the Selling Stockholder have agreed to indemnify the    
 Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriters."         
(2) The Company will pay expenses in connection with the offering estimated 
at $350,000. See "Underwriters."                                    
(3) Pursuant to an agreement between the Company and the Selling            
    Stockholder, the Selling Stockholder will pay to the Company $57,785,537
    of the net proceeds received by the Selling Stockholder from the sale of
the shares offered hereby. See "The Paul Revere Merger--Textron     
Agreements."                                                        
(4) The Company has granted to the U.S. Underwriters an option, exercisable 
within 30 days of the date hereof, to purchase up to an aggregate of
 887,625 additional shares of Common Stock at the price to public less
underwriting discounts and commissions, for the purpose of covering 
  over-allotments, if any. If the U.S. Underwriters exercise such option
in full, the total price to public and underwriting discounts and   
   commissions will be $360,671,625 and $12,623,507, respectively, and the
proceeds to the Company will increase by $45,397,581. See           
"Underwriters."                                                     

----------------  

The shares of Common Stock are offered, subject to prior sale, when, as and 
if accepted by the Underwriters named herein and subject to approval of         
certain legal matters by LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for    
the Underwriters. It is expected that delivery of the shares of Common Stock    
will be made on or about May 9, 1997 through the book-entry facilities of The   
Depository Trust Company, against payment therefor in immediately available     
funds.                                                                          

----------------  

MORGAN STANLEY & CO.                                                            
International                                                     
SALOMON BROTHERS INTERNATIONAL LIMITED  

May 5, 1997                                                                     

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B4’ Filing		Date		First		Last			Other Filings
		12/31/99		44		45			10-K,  5/A,  NT 11-K
		2/27/98		12
		12/31/97		23		45			10-K
		5/9/97		1		50
Filed on:		5/6/97
		5/5/97		1		50			S-3/A
		5/2/97		10
		5/1/97		10		40
		3/31/97		6		49			10-Q
		3/27/97		4		49			8-K,  S-3/A
		3/26/97		38		40			10-K
		3/24/97		10
		3/10/97		41
		2/28/97		26
		2/18/97		25
		12/31/96		4		49			10-K
		11/6/96		25
		11/5/96		11
		9/30/96		9		11
		8/30/96		39
		4/29/96		10		43
		4/28/96		38
		4/3/96		40
		3/31/96		7
		1/1/96		6		16
		12/31/95		8		37
		4/30/95		22		23
		1/1/95		14
		12/31/94		8		37
		7/11/94		39
		7/1/94		38
		12/31/93		30
		11/8/93		38
		9/30/93		19
		2/4/92		37
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