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Conseco Reports 1st Quarter Net Loss

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NU Online News Service, May 1, 9:15 p.m. – Conseco Inc., Carmel, Ind., is reporting a $96 million net loss for the first quarter on $1.9 billion in revenue, down from $80 million in net income on $2.1 billion in revenue for the first quarter of 2001.

Even when Carmel uses its preferred performance measure, “operating earnings from continuing operations before goodwill amortization,” earnings fell to $40 million, from $54 million.

But Gary Wendt, the chairman of the insurance and consumer finance committee, said today at the company’s first-quarter earnings conference that he believes the company is doing a good job of overcoming debt problems and other problems that piled up in past years.

“Whether you be a supporter or you be a detractor, you can find some good things to talk about in our earnings release,” Wendt said.

The consumer finance unit, which has been struggling to overcome bad loans, reported $33 million in operating earnings for the latest quarter, down from $64 million for the comparable quarter in 2001. But Conseco executives said they were happy the unit managed to turn a profit at all during such difficult economic times.

The insurance unit, which sells long-term care insurance, Medicare supplement insurance, dread disease insurance and annuities, generated $164 million in operating profits in the latest quarter on $824 million in premium revenue, down from $203 million on $830 million in revenue.

Revenue for Medicare supplement insurance was up 3%, and revenue for most other insurance products was down between 1% and 4%. Profits were down in part because of an increase in the long-term care insurance claims rate, Conseco says.

At the annuity operation, fixed annuity premium revenue increased 3%, to $203 million, while variable annuity premium revenue held steady at $113 million.

“The good news is that the market is very favorable right now to fixed annuities, which is our specialty,” said Liz Georgakopoulos, the head of Conseco’s insurance unit. “The bad news is that Conseco has obviously been pushing water uphill a bit in that market, with some of our internal challenges.”

But Conseco executives emphasized that the company has already pushed back or arranged to pay most of the debt payments that were originally due this year and in 2003; that the company’s core operations remain intact; and that the company can still raise far more cash, if necessary, by taking steps such as arranging reinsurance deals or selling unwanted operations.

When Conseco makes deals to raise cash, “we’re not incurring significant book losses,” noted Bill Shea, Conseco’s president. “These transactions are done at reasonable prices.”

When prices for a proposed variable annuity reinsurance deal proved to be poor, Conseco pulled the variable annuity block off the market, Shea said.


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