Regulators Say Consecos Insurance Units Are Solid
Regulators say Conseco Inc. executives are telling them that the Carmel, Ind. financial services companys life insurance subsidiaries are “solid” despite the parent companys current financial distress.
Insurance regulators in California, Florida, Georgia, Illinois, Texas and Consecos home state, Indiana, say that for the time being they are confident the insurance operations are meeting state solvency standards.
Regulators also say they are telling a growing number of producers and consumers in their states the same thing as public concern over the strength of Consecos insurance units grows and calls continue to be logged at insurance departments.
On August 9, Conseco said it was exercising a 30-day grace period on upcoming bond payments and was engaging financial advisor Lazard Freres & Co. and the Kirkland & Ellis law firm for the purpose of beginning immediate discussions with debt holders with a goal of restructuring the capital of the parent company.
Regulators say Conseco management has tried to keep them abreast of the state of the insurance operations and second quarter results which were released on Aug. 14. (See story on facing page.)
They say, however, that the issue of ratings changes and the impact on producers willingness to place business with the insurance units has not been addressed.
Conseco has been hit with a slew of downgrades by the rating agencies.
A.M. Best downgraded the insurance financial strength ratings of the insurance units to B (Fair) from B++ (Very Good). Fitch Ratings, Chicago, lowered the insurance company ratings to B from BB, and Standard & Poors Corp., New York, has the insurance units ratings on B+-negative. Moodys Investors Service, New York, has left the ratings of Consecos insurance units unchanged at B2 and Ba3 for Conseco Variable Insurance Company.
“The insurance companies are solvent and profitable. It is the parent company that is really the problem,” says Greg Thomas, chief deputy commissioner of the Indiana insurance department. “Solvency and reserves are more than adequate.”
The Indiana department sought outside legal counsel to determine if the insurance companies could be used to satisfy the demands of the parents creditors in the event of a bankruptcy, Thomas says.