The beleaguered finance unit of Conseco, Inc., continues to whipsaw the insurance and finance holding company.
In a letter released on Jan. 7, Conseco said it would fall short of projected earnings of 72 cents a share for 2001.
The letter also responded to an ongoing disagreement between Conseco, based in Carmel, Ind., and Salomon Smith Barney Managing Director Colin Devine over Conseco’s financial condition.
In a report dated Jan. 3, Devine rated the company a “sell, speculative” and dropped earnings estimates to 70 cents a share for 2001 and 80 cents a share for 2002. The target price for the stock, according to his report, remains $1.
The downgrade was based on a deteriorating manufactured housing loan market, a major business focus for the finance unit.
The report also noted “ongoing weak operating ratios at the life insurance operations.” It continued, “as implied by our nominal $1 price target, we believe Conseco’s shares offer little, if any, value. On a liquidation basis, we do not believe Conseco’s common shareholders would realize any value, although policyholders should be reasonably well protected by various state guaranty funds.”
Devine declined to say whether the company’s insurance operations could be seized by insurance regulators, but noted the discount to face value at which Conseco’s debt is trading.
Greg Thomas, a chief deputy commissioner with the Indiana insurance department, says putting the life insurance companies in rehabilitation is “definitely not on the table at this time.”
Thomas says the department is regularly monitoring Conseco. Last month, management visited with regulators and presented a plan that he says “on paper seemed a doable thing.”
Mark Pufahl, chief examiner with the department, says the department has been focused on Conseco’s life operations and has not received fourth quarter 2001 information on manufactured housing delinquency rates for the finance unit. Any information received on company cash flows is confidential, he adds.
According to Pufahl, Conseco’s life insurance units are in excess of minimum risk-based capital requirements.