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Conseco, Out Of Bankruptcy, Unveils Recovery Roadmap

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Conseco, Out Of Bankruptcy, Unveils Recovery Roadmap


In its first earnings report since exiting from bankruptcy, Conseco Inc. vowed to reclaim stronger ratings going forward.

The top priority will be to get ratings raised with a second, related priority being to refinance current expensive debt with cheaper bank debt and preferred stock issues, according to CEO Bill Shea.

An aggressive fix of the long term care business in Consecos Insurance Group will be one of the ways post-bankruptcy Conseco becomes a stronger company, he promises.

Shea distinguishes between the Insurance Groups LTC business and the LTC business on the books at its Bankers Life and Casualty, which he says is healthy.

Indeed, in its 2003 earnings report for third quarter and nine months, Conseco says projected LTC loss ratios at Bankers are 65%-85% compared with 100%-120% at the Insurance Group over the next several years.

In its report, Conseco says a blended LTC loss ratio for the two units was 96.07% for September 2003, 167.18% for the two months ending at Aug. 31, 2003, and 144.82% for the three months ending at Sept. 30, 2002. The reason for the steep decline is that Conseco added $1.2 billion to reserves for the LTC business.

Net income using fresh-start accounting required under generally accepted accounting principles when a company emerges from bankruptcy, was $18.9 million for September 2003 for post-bankruptcy Conseco.

Total collected premiums for the quarter, both pre- and post-bankruptcy, were $1.003 billion compared with $1.101 billion in third-quarter 2002.

By product line, collected premiums in third-quarter 2003 vs. third-quarter 2002 were as follows: $231 million vs. $270 million in annuity products; $578 million vs. $588 million in supplemental health products; and, $194 million in life and all other products vs. $243 million.

Among the fixes seen for the Insurance Groups LTC business are “significant” rate increases, replacement policies and claims adjudication, says Shea.

Additionally, he says the goal is to improve Consecos risk-based capital ratio, currently 257%. The company wants the ratio to be closer to 300%, he continues. The RBC ratio has increased significantly from a year-end 2002 level of 166%, according to Shea, with the increase due to factors including the completion Consecos sale of the GM building in New York.

Reproduced from National Underwriter Life & Health/Financial Services Edition, November 21, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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