A.M. Best Places Ratings of Conseco, Inc. and Its Subsidiaries Under Review With Developing Implications.OLDWICK, N.J. -- A.M. Best Co. has placed the financial strength ratings (FSR (Free System Resource) In Windows 3.x, the amount of unused memory in various 64K blocks reserved for managing current applications. Every open window takes some space in this area. See Windows memory limitation. ) of B+ (Good) and issuer credit ratings (ICR (Intelligent Character Recognition or Image Character Recognition) The machine recognition of hand-printed characters as well as machine printing that is difficult to recognize. ) of "bbb-" of Conseco, Inc.'s (Conseco) (Carmel, IN) (NYSE NYSE See: New York Stock Exchange : CNO CNO abbr. chief of naval operations ) core insurance subsidiaries under review with developing implications. Additionally, A.M. Best has placed the ICR and senior debt ratings of "bb-" of Conseco, as well as the FSR of C++ (Marginal) and ICR of "b" of Conseco Senior Health Insurance Company (CSHI) (Bensalem, PA) under review with developing implications. (See below for a detailed listing of the companies and ratings.) These rating actions follow Conseco's recent announcement of its intention to transfer ownership interest in CSHI to a newly-formed independent Pennsylvania business trust, Senior Health Care Oversight Trust (the Trust). CSHI houses the majority of Conseco's run-off long-term care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. (LTC LTC abbr. lieutenant colonel ) block. Over the last decade, Conseco has supported this underperforming block by contributing $915 million primarily to strengthen claim reserves and maintain the minimum level of regulatory capital. This transaction, in its current form, would effectively separate CSHI from Conseco; hence, Conseco would no longer be obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to fund future losses related to CSHI's run-off LTC block. CSHI will subsequently be renamed Senior Health Insurance Company of Pennsylvania (Senior Health). In addition to its current level of capital and surplus (roughly $125 million), Senior Health will receive a final contribution from Conseco of $175 million, comprising a five year 6% $125 million senior unsecured note and the balance in cash and cash equivalents. Senior Health will be run solely for the benefit of its LTC policyholders, governed by the Trust, which will operate as a non-profit entity. The Trust and CSHI will be overseen by five highly-qualified trustees and will remain under the jurisdictional oversight of the Pennsylvania Insurance Department (PID (1) (Process IDentifier) A temporary number assigned by the operating system to a process or service. (2) (Proportional-Integral-Derivative) The most common control methodology in process control. ). A.M. Best notes that the transaction remains subject to regulatory review and approval, including a public comment period; this process is expected to be concluded by year end. Due to the uniqueness of the transaction structure as well as the inherent execution risk involved, A.M. Best has placed the group's ratings under review. If the transaction closes with substantially similar terms and structure as proposed, A.M. Best will consider revising the rating outlook to stable. However, absent significantly improved operating results, failure to complete the transaction could result in a downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. to some, if not all, of Conseco's ratings. Post transaction, A.M. Best believes Conseco would likely benefit from some enhanced financial flexibility as well as the ability to focus management's time and efforts on developing strategies to improve the organization's business profile and operating performance of its core product lines. However, A.M. Best notes that the current projected debt-to-capital ratio at roughly 28%--incorporating a $1.2 billion accounting charge related to the transaction--approaches the maximum permitted leverage per the covenants in Conseco's existing credit facility. The FSR of B+ (Good) and ICRs of "bbb-" have been placed under review with developing implications for the following core insurance subsidiaries of Conseco, Inc.: * Bankers Life and Casualty Bankers Life and Casualty is primarily a health insurance company in the United States. It was founded in 1879 and was previously known as White Cross. It was formerly owned by millionaire investor John D. Company * Colonial Penn Colonial Penn Life Insurance Company is a Philadelphia, Pennsylvania based life insurance company. Colonial Penn's marketing campaign is aimed at senior citizens between the age of 50 and 85. They claim to offer insurance at a comparatively low rate without medical reviews. Life Insurance Company * Conseco Health Insurance Company * Conseco Insurance Company * Bankers Conseco Life Insurance Company * Conseco Life Insurance Company * Washington National Insurance Company The FSR of C++ (Marginal) and ICR of "b" have been placed under review with developing implications for Conseco Senior Health Insurance Company. The following debt rating has been placed under review with developing implications: [TABLE OMITTED] Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com. |
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