NU Online News Service, Jan. 17, 3:53 p.m. – Conseco Inc., Carmel, Ind., will discuss the actions it intends to take to strengthen its financial position within the next two weeks, according to Mark Lubbers, a Conseco spokesman.

“We are well down the path,” with steps already being implemented, according to Lubbers. However, he declined to describe those steps.

The Indiana Insurance Department says it has examined the Conseco plan and believes the plan is doable.

Lubbers says Conseco has considered options outlined in a report released Jan. 17 by Andrew Kligerman, an analyst with Bear Stearns, Inc., New York.

Kligerman predicts Conseco will be able to repay its $1.1 billion in debt obligations this year. He notes, however, that the finance unit may have trouble paying the expected $310 million to $340 million. If so, Conseco could have to make up for a $150 million cash shortfall, the analyst writes.

Kligerman says the extra cash the parent would have to generate would create a “cash hole” of $520 million, but that the company should be able to fill the hole using one of several options.

“Cash flow visibility in 2003 remains cloudy, however, and liquidity concerns could reappear,” Kligerman writes.

Lubbers says that what is clear is the reduction in the debt service that Conseco will realize in 2002 and 2003.

Of $1.1 billion due in 2002, Lubbers says that $598 million in public debt remains to be paid. That plus $150 million in bank debt that the company expects to pay will bring total debt to be paid in 2002 to $748 million, he says.

In comparison, Lubbers says, the sum of the $313 million in public debt due in 2003 plus the $150 million in bank debt Conseco hopes to repay in 2003 is $463 million. The difference in debt due in 2002 and 2003 plus an anticipated $80 million saved in interest payments is what is clear, Lubbers says.

Kligerman says the best option for Conseco would be reinsuring the insurance business. Reinsuring would cut after-tax operating income $135 million at the annuity business and $100 million at the life business, but the move would free $650 million in cash from the annuity business and $460 million from the life business, Kligerman writes.

Conseco could also sell part of its $3.8 billion in non-securitized loans. That would cut $60 million in annual cash flow but raise $180 million in net cash, Kligerman says.

Kligerman rates the company a “neutral” and assigns a value of $4 per share. Earnings per share should be 67 cents in 2001 and 72 cents this year, the report states.

On Jan. 3 Salomon Smith Barney analyst Colin Devine valued the stock at $1 a share.

Because of all the uncertainties, the stock has been tricky to value. At one point in mid-2001, Lubbers says, the range of values was $3 to $20 per share.