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Best Downgrades Conseco Insurance Subsidiaries

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NU Online News Service, July 12, 1:05 p.m. – A.M. Best Company, Oldwick, N.J., has reduced the financial strength ratings of the primary insurance subsidiaries of Conseco Inc., Carmel, Ind., to B++, or Very Good, from A-, or Excellent, and given the ratings a negative outlook.

“Further downgrade is possible should Conseco Inc.’s ongoing financial restructuring initiatives fall behind Best’s expectations for the continuation of secure financial strength ratings on the organization’s insurance subsidiaries,” the rating agency said today in an announcement of the rating moves.

Conseco, an insurance and consumer finance company, has succeed at improving liquidity by arranging reinsurance transactions, asset sells and restructuring of debt, and the capitalization of the insurance subsidiaries appears to be adequate, Best said.

But Best “remains concerned with the challenges that remain for the organization in satisfying its holding company obligations in 2003 and beyond,” the rating agency said. “Potential adverse events related to macro economic conditions or those specific to its core insurance and finance businesses pose an ongoing risk to the execution and timing of management’s restructuring initiatives.”

Conseco Chairman Gary Wendt responded with a statement welcoming Best’s “balanced and careful approach” but expressing disappointment about the downgrades.

“Obviously, the external environment has changed remarkably since mid-2000; capital markets are making it extremely difficult for all of the business community to move forward, even more so, a turnaround project like us,” Wendt says. But “as is noted in the Best comments, our Turnaround Plan has already reduced debt and trust preferred capital by $2.7 billion, actually ahead of the schedule we set for ourselves in September 2000. Also noted by Best, we have been able to execute our plan while maintaining the financial strength of our insurance subsidiaries.”

Conseco hopes to reclaim the insurance subsidiaries’ A- rating as soon as possible, Wendt adds.


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