Conseco Inc. Ratings Raised and Off CreditWatch; Outlook Stable.Business Editors NEW YORK--(BUSINESS WIRE)--May 27, 2004 On May 27, 2004, Standard & Poor's Ratings Services raised its counterparty credit and senior debt ratings on Conseco Inc. to 'BB-' from 'B-' and its preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. rating to 'B-' from 'CCC-', and removed the ratings from CreditWatch where they were placed April 19, 2004. At the same time, Standard & Poor's raised its counterparty credit and financial strength (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. ) ratings on Bankers Life & Casualty Co., Colonial Penn Life Insurance Co., Conseco Insurance Co. (f.k.a. Conseco Annuity Assurance Co.), Conseco Health Insurance Co., Conseco Life Insurance Co., and Conseco Life Insurance Co. of NY to 'BB+' from 'BB-' and removed the ratings from CreditWatch where they were placed April 19, 2004. In addition, Standard & Poor's assigned its 'BB-' bank loan rating to Conseco Inc.'s planned $800 million of bank debt, and assigned its 'B-' rating to the company's $690 million mandatory convertible Mandatory Convertible A type of convertible bond that has a required conversion or redemption feature. Either on or before a contractual conversion date, the holder must convert the mandatory convertible into the underlying common stock. preferred stock issue. The outlook is stable. The upgrades reflect Conseco Inc.'s recapitalization, which utilizes proceeds from the bank loan and preferred stock issue, in conjunction with about $920 million of proceeds from a common equity issuance to replace $1.3 billion of existing bank debt and about $930 million of convertible exchangeable preferred stock Convertible exchangeable preferred stock Convertible preferred stock that may be exchanged, at the issuer's option, into convertible bonds that have the same conversion features as the convertible preferred stock. and enhance the capital of the insurance operations. With the recapitalization, Standard & Poor's calculates the pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma 2004 GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). fixed-charge coverage fixed-charge coverage The number of times that a firm's operating income exceeds its fixed payments. Fixed-charge coverage is a measure of a firm's ability to meet contractually fixed payments, with high coverage indicating significant flexibility for making to be about 4.3x, and the pro forma statutory fixed-charge coverage to be about 1.8x. Pro forma debt/capital as of March 31, 2004, is 19%, with pro forma debt plus preferred securities/capital at 36%. Standard & Poor's believes it is too early to consider Conseco Inc.'s insurance operations to be investment grade largely due to the uncertainty regarding the company's future competitive position. Before investment grade FSRs can be considered, management will need to demonstrate its ability to generate sustainable, profitable sales growth. Another uncertainty for Conseco Inc.'s insurance operations is to what extent the recent Florida Office of Insurance Regulation order concerning Conseco Senior Health Insurance Co. (CCC/Stable/--) provides a permanent solution for that entity's home health care line of business. Outlook The outlook reflects Standard & Poor's expectation that management will be challenged in its efforts to revitalize profitable sales growth, primarily through its independent agent distribution channel. Standard & Poor's expects pretax GAAP operating earnings for 2004 to be at least equivalent to the annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. run rate of earnings generated in the first quarter of 2004, and expects the consolidated NAIC NAIC See National Association of Investors Corporation (NAIC). company action level risk-based capital ratio Risk-based capital ratio Bank requirement that there be a minimum ratio of estimated total capital to estimated risk-weighted asset. for the insurance group to remain more than 250%.
Ratings List
To From
Conseco Inc.
Counterparty credit rating BB-/Stable/-- B-/WatchPos/--
Senior secured rating BB- B-/WatchPos
Preferred stock rating B- CCC-/WatchPos
Bankers Life & Casualty Co.
Colonial Penn Life Insurance Co.
Conseco Insurance Co.
Conseco Health Insurance Co.
Conseco Life Insurance Co.
Conseco Life Insurance Co. of NY
Counterparty credit rating BB+/Stable/-- BB-/WatchPos/--
Financial strength rating BB+/Stable BB-/WatchPos
Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find Ratings, then Credit Ratings Search. |
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