Conseco To Put Senior Health Sub In Trust

Conseco has contributed about $915 million in capital to Conseco Senior Health since it acquired the companies that make up that subsidiary 11 years ago, Prieuer says.

“Our efforts have produced significant improvements in performance and customer service over the past four quarters,” Prieur says.

that its board wants to stop making capital contributions to Conseco Senior Health, and Conseco shareholders are pressing it to improve its performance.

Moreover, weakness at Conseco Senior Health has contributed to Conseco having relatively weak financial strength ratings, and that limits the ability of Conseco and Conseco subsidiaries, other than Conseco Senior Health, to compete with higher-rated insurers, Conseco says.

If Conseco will be cutting ties to Conseco Senior Health by transferring it to a trust, “Conseco should be able to justify making the capital contribution to the domiciliary regulators of those [Conseco-owned] operating companies that may be called upon to fund the capital contribution,” Conseco says.

Once Conseco Senior Health splits from Conseco, Conseco Senior Health “will be solely focused on its LTC business and able to operate without regard to Conseco insurance holding company considerations,” Conseco says. “In addition, the separation better positions [Conseco Senior Health] to demonstrate its need for rate increases to relevant state insurance regulators, as [Conseco Senior Health] will not have returns to shareholders as part of its expectations.”

Conseco notes that the application it files in Pennsylvania will be subject to a comment period that could last until the end of September.

The Chicago office of Fitch Ratings says the proposed deal will have no immediate effect on the current ratings it has assigned to Conseco and its affiliates.

“Fitch believes that the proposed [Conseco Senior Health] spin-off will have a positive impact on Conseco’s risk profile,” Fitch says in a comment. “The impact on Conseco’s ratings and Outlook status will be based the company’s ability to complete the [Conseco Senior Health] spinoff, the final terms of the [Conseco Senior Health] spinoff, and progress towards improving operating performance in the company’s other business lines.”