NEW YORK – The stock of UnumProvident Corp., the nation’s largest disability insurer, plunged Monday after Moody’s Investors Service said it may lower the company’s credit ratings.

Moody’s cited the insurer’s continuing discussions with the Securities and Exchange Commission over how to account for unrealized losses in its junk bond portfolio for the possible downgrade.

The junk-bond losses totaled about $870 million as of Dec. 31.

UnumProvident said in a press release that it “will continue to work with Moody’s through the review process to attempt to address their issues and concerns.”

“Although the other organizations that rate UnumProvident also have the company’s rating under review, they all presently maintain higher ratings than Moody’s,” UnumProvident added.

Moody’s also said UnumProvident must raise “substantial” new equity to meet government-mandated financial-strength rules, also known as statutory capital. The ratings agency noted in particular the “substantial amount of intercompany loans from the operating life insurance companies to the holding company.”

The loans, which Moody’s said harm the quality of statutory capital, rose to nearly $700 million, or 20 percent of statutory capital, at the end of 2002.

In a note to clients, Credit Suisse First Boston stock analyst Caitlin Long called the level of intercompany loans during the fourth quarter “unusually high.” It jumped by about $250 million from the third-quarter tally.

In December, Moody’s cut UnumProvident’s senior-debt rating to Baa3 – its lowest investment-grade rating, meaning a further downgrade would put UnumProvident’s rating at junk.

On Feb. 5, Chattanooga, Tenn.-based UnumProvident said the SEC is reviewing how the company records and reports declines in the market value of bonds in its investment portfolio.

Two days later, the other major debt-rating agency, Standard & Poor’s Ratings Services, put the firm’s credit ratings on review for a possible downgrade, noting that the SEC review had delayed UnumProvident’s capital-raising plans.

UnumProvident said Monday that its cash flow remains strong and it “has ample dividend capacity within its insurance subsidiaries as well as other sources of cash to meet its external obligations.”

Shares of UnumProvident slumped 37 percent, falling $4.61, to close Monday at $8, on the New York Stock Exchange.