Conseco Reports 2003 Results.Business Editors CARMEL Car·mel also Car·mel-by-the-Sea A city of western California on Carmel Bay at the southern end of the Monterey Peninsula. It is an artists' and writers' colony and a popular tourist spot. Population: 4,130. , Ind IND Investigational new drug Therapeutics A status assigned by the FDA to a drug before allowing its use in humans, exempting it from premarketing approval requirements so that experimental clinical trials may be conducted. See Phase 1.2, 3 studies, Sponsorship. .--(BUSINESS WIRE)--March 11, 2004 Conseco Conseco (NYSE: CNO), originally Security Life of Indiana, is a financial services organization based in Carmel, Indiana. Conseco's insurance subsidiaries provide life insurance, annuity and supplemental health insurance products to more than 4 million customers in the , Inc. (NYSE NYSE See: New York Stock Exchange :CNO CNO abbr. chief of naval operations ) today reported financial results for the quarter and year ended December December: see month. 31, 2003. The company emerged from Chapter 11 bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most on September September: see month. 10, 2003. Results for periods following our emergence from Chapter 11 reflect fresh-start accounting adjustments as required by generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). Accordingly, our financial results for periods following our emergence from bankruptcy are not comparable to our results for prior periods. Our accounting and actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin systems and procedures are designed to produce financial information as of the end of a month. Accordingly, for accounting convenience purposes, we applied the effects of fresh start accounting on August 31, 2003. The activity of the company for the period September 1, 2003 through September 10, 2003 is therefore included in the post-bankruptcy, or "successor 1. SuccessoR - A language for distributed computing derived from SR. ["SuccessoR: Refinements to SR", R.A. Olsson et al, TR 84-3, U Arizona 1984]. 2. successor - daughter company", statement of operations See Income statement. and excluded from the pre-bankruptcy, or "predecessor predecessor - parent company" statement of operations. Operating results For the quarter ended December 31, 2003 Conseco reported net income (after dividends on 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. ) of $49.6 million, or 49 cents per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. common share. Results for the quarter included net after-tax gains Net after-tax gain Capital gain after income taxes have been paid. of $0.8 million from realized investment gains and venture capital losses. For the four months ended December 31, 2003 net income (after dividends on convertible exchangeable preferred stock) totaled $68.5 million, or 67 cents per diluted share. Results for the four-month period included net after-tax gains of $3.4 million from realized investment gains and venture capital losses. As previously reported, the predecessor company reported net income for the eight months ended August 31, 2003 of $2,201.7 million, which included a gain related to our emergence from bankruptcy of $2,130.5 million.
Results by segment were as follows ($ in millions):
Successor Predecessor
----------------- ---------------
Four Months Eight Months
Ended Ended
December 31, 2003 August 31, 2003
----------------- ---------------
Earnings (loss) before taxes:
Bankers Life $85.5 $159.6
Conseco Insurance Group 94.3 299.9
Other Business in Run-off 12.8 (171.3)
Corporate Operations (43.1) 1,884.0
----- -------
Earnings before taxes 149.5 2,172.2
Tax expense (benefit) 53.2 (13.5)
------ -------
Income before discontinued
operations 96.3 2,185.7
Discontinued operations, net of
income taxes - 16.0
---- -------
Net income 96.3 2,201.7
Preferred stock dividends 27.8 -
---- -------
Net income applicable to
common stock $68.5 $2,201.7
==== =======
Collected premiums
Collected premiums in each of our operating segments by product
line were as follows ($ in millions):
Successor Predecessor
----------------- ---------------------------------
Four Months Eight Months
Ended Ended Year Ended
December 31, 2003 August 31, 2003 December 31, 2002
----------------- --------------- -----------------
Bankers Life
segment:
Annuity products $253.8 $698.4 $740.9
Supplemental health
products 407.9 759.6 1,159.4
Life products 58.6 102.7 139.0
------ -------- -------
Total collected
premiums $720.3 $1,560.7 $2,039.3
===== ======= =======
Conseco Insurance
Group segment:
Annuity products $18.1 $74.0 $351.9
Supplemental health
products 272.0 525.3 830.3
Life products 131.5 280.7 498.0
----- ----- -------
Total collected
premiums $421.6 $880.0 $1,680.2
===== ===== =======
Other Business in
Run-off segment:
Long-term care
products $134.6 $268.0 $434.5
Major medical
products 39.3 156.4 409.5
Supplemental Health Product Loss Ratios
Loss ratios on major supplemental health lines of business in each
of our segments were as follows:
Successor Predecessor
----------------- ---------------------------------
Four Months Eight Months
Ended Ended Year Ended
December 31, 2003 August 31, 2003 December 31, 2002
----------------- --------------- -----------------
Bankers Life segment:
Medicare Supplement:
Earned premium $212 million $427 million $652 million
Loss ratio 62.79% 66.39% 67.15%
Long-Term Care:
Earned premium $172 million $334 million $471 million
Loss ratio 86.06% 86.08% 83.69%
Interest-adjusted
loss ratio(a) 60.04% 69.26% 67.95%
Conseco Insurance
Group segment:
Medicare Supplement:
Earned premium $130 million $255 million $355 million
Loss ratio 66.57% 65.49% 61.28%
Specified Disease:
Earned premium $121 million $244 million $373 million
Loss ratio 61.61% 75.77% 69.61%
Other Business in
Run-off segment:
Long-Term Care:
Earned premium $133 million $270 million $428 million
Loss ratio 103.32% 169.76% 139.11%
Interest-adjusted
loss ratio(a) 65.84% 134.58% 110.19%
Major Medical:
Earned premium $18 million $149 million $419 million
Loss ratio 77.29% 93.43% 64.15%
(a) Calculated as the product's: (i) insurance policy benefits less
interest income on the accumulated assets which back the insurance
liabilities; divided by (ii) earned premium.
Earnings Guidance and Outlook Conseco reaffirmed its previously reported guidance of expected net income applicable to common stock for the 12 months beginning October October: see month. 1, 2003 of $175 million to $200 million. Our earnings guidance assumes that market conditions for our investment portfolio do not differ significantly in future periods from current conditions. If investment market conditions change and we realize investment gains or losses, our actual earnings could differ materially from our estimates. Our earnings guidance is based on numerous other assumptions and factors. If they prove incorrect Incorrect means to not be correct and may also refer to:
A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. below). Our guidance excludes any impact from the proposed refinancing Refinancing An extension and/or increase in amount of existing debt. of our current capital structure described in our Form S-1 Registration Statement filed on January January: see month. 29, 2004. Comments from CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Bill Shea "We are continuing to build the foundation for sustainable growth by focusing on the factors that are most important in achieving our number one business objective - improved ratings for our insurance companies: -- Combined statutory earnings (loss) (a non-GAAP measure) totaled $286.1 million and $(465.0) million in 2003 and 2002, respectively. Included in such earnings (loss) are net realized capital gains (losses), net of income taxes, of $32.8 million and $(516.1) million in 2003 and 2002, respectively. The 2003 statutory results included several positive income items resulting from the sale of the General Motors Building in the third quarter, as well as expense reductions and other operating improvements. -- Combined statutory capital and surplus (a non-GAAP measure) at December 31, 2003, was $1.5 billion, up from $1.1 billion at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2002. -- Combined risk-based capital (RBC RBC red blood cell. RBC or rbc abbr. red blood cell RBC, n See red blood cell count. RBC red blood cells; red blood (cell) count (see blood count). ) ratio (a non-GAAP measure) was 287% at December 31, 2003, up from 166% at year-end 2002. "Our new 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. premium sales of supplemental health and life products for the fourth quarter were in line with our operating plan and totaled $43 million at Bankers Life and $29 million at Conseco Insurance Group. First year annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. deposits for the quarter were $190 million and $5 million at Bankers Life and Conseco Insurance Group, respectively. "Despite low ratings and our decisions to discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: or curtail cur·tail tr.v. cur·tailed, cur·tail·ing, cur·tails To cut short or reduce. See Synonyms at shorten. [Middle English curtailen, to restrict sales in certain products in order to conserve capital coming out of bankruptcy, collected premiums in our core products have been relatively stable. "Our other major goals for 2004 are to reduce our capital cost, strengthen our balance sheet and improve our execution on the basics of our business by: -- Further reducing operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. and improving the efficiency of our operations across all business functions. -- Continuing our focus on the acquired blocks of 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. business in the Other Business in Run-off run-off n (in contest, election) → desempate m (= extra race); carrera de desempate run-off n (in contest, election) → segment. This business performed within our expectations for the quarter, thanks to the work of the team we have dedicated to managing its runoff Runoff The procedure of printing the end-of-day prices for every stock on an exchange onto ticker tape. Notes: If the "tape is late" then it can take a long time to print off all the closing prices. . -- Consolidating and streamlining our back-office systems to reduce complexity, lower our costs and improve customer service. -- Expanding our career agent segment (Bankers Life) into new geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. markets. "Throughout Conseco, our 4,350 managers and associates are stepping forward to take part in these and other key initiatives designed to make Conseco leaner lean 1 v. leaned, lean·ing, leans v.intr. 1. To bend or slant away from the vertical. 2. , more focused, more competitive, and more responsive to the marketplace. In the process, we're we're Contraction of we are. we're we are also trying to make Conseco a great place to work. We are beginning to build the path that leads to greater employee engagement, then to greater customer engagement and then to better Conseco business outcomes. We have much to do, but I am proud of our people and our progress to date." About Conseco Conseco, Inc.'s insurance companies help protect working American families American Family is a photographic artwork exhibition by Renée Cox. See also
n. pl. ad·ver·si·ties 1. A state of hardship or affliction; misfortune. 2. A calamitous event. : Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. supplement, long-term care, cancer, heart/stroke and accident policies protect people against major unplanned expenses; annuities and life insurance products help people plan for their financial future. For more information, visit Conseco's web site at www.conseco.com. Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend analyses and other information contained in this press release relative to markets for Conseco's products and trends in Conseco's operations or financial results, as well as other statements contain forward-looking statements, within the meaning of the federal securities laws and the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Forward-looking statements typically are identified by the use of terms such as "anticipate," "believe," "plan," "estimate," "expect," "project," "intend," "may," "will," "would," "contemplate," "possible," "attempt," "seek," "should," "could," "goal," "target," "on track," "comfortable with," "optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op " and similar words, although some forward-looking statements are expressed differently. You should consider statements that contain these words carefully because they describe our expectations, plans, strategies and goals and our beliefs concerning future business conditions, our results of operations, financial position, and our business outlook or they state other "forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. " information based on currently available information. Assumptions and other important factors that could cause our actual results to differ materially from those anticipated in our forward-looking statements include, among other things: (i) the potential adverse impact of our predecessor's Chapter 11 petition petition Written instrument directed to an individual, government official, legislative body, or court in order to seek redress of grievances or to request a favour. on our business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets , and relationships with our customers, employees, regulators, distributors and agents; (ii) our ability to operate our business under the restrictions imposed by our senior bank credit facility or future credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities ; (iii) our ability to improve the financial strength ratings of our insurance company subsidiaries and the impact of rating downgrades on our business; (iv) our ability to obtain adequate and timely rate increases on our supplemental health products including our long-term care business; (v) general economic conditions and other factors, including prevailing interest rate levels, stock and credit market performance and health care inflation, which may affect (among other things) our ability to sell products and access capital on acceptable terms, the market value of our investments, and the lapse rate lapse rate n. The rate of decrease of atmospheric temperature with increase in altitude. lapse rate The rate of change of any meteorological phenomenon, especially atmospheric temperature with altitude. and profitability of policies; (vi) our ability to achieve anticipated synergies and levels of operational efficiencies; (vii) customer response to new products, distribution channels and marketing initiatives; (viii) mortality, morbidity morbidity /mor·bid·i·ty/ (mor-bid´it-e) 1. a diseased condition or state. 2. the incidence or prevalence of a disease or of all diseases in a population. mor·bid·i·ty n. , usage of health care services, persistency and other factors which may affect the profitability of our insurance products; (ix) performance of our investments; (x) changes in the Federal income tax laws and regulations which may affect or eliminate the relative tax advantages of some of our products; (xi) increasing competition in the sale of insurance and annuities; (xii) regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. changes or actions, including those relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc regulation of the financial affairs of our insurance companies, including the payment of dividends to us, regulation of financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. affecting (among other things) bank sales and underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. of insurance products, regulation of the sale, underwriting and pricing of products, and health care regulation affecting health insurance products; (xiii) the ultimate outcome of lawsuits filed against us and other legal and regulatory proceedings to which we are subject; and (xiv) the risk factors or uncertainties listed from time to time in our filings with the Securities and Exchange Commission. Other factors and assumptions not identified above are also relevant to the forward-looking statements, and if they prove incorrect, could also cause actual results to differ materially from those projected. All written or oral forward-looking statements attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to us are expressly qualified in their entirety The whole, in contradistinction to a moiety or part only. When land is conveyed to Husband and Wife, they do not take by moieties, but both are seised of the entirety. by the foregoing cautionary statement. Our forward-looking statements speak only as of the date made. We assume no obligation to update or to publicly announce the results of any revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. to any of the forward-looking statements to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements.
- Tables Follow -
CONSECO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(unaudited)
ASSETS
Successor
-----------------------------
December 31, September 30,
2003 2003
---- ----
Investments:
Actively managed fixed maturities at
fair value (amortized cost: December
31, 2003 - $19,470.7; September 30,
2003 - $18,885.5) $19,840.1 $19,352.7
Equity securities at fair value (cost:
December 31, 2003 - $71.8; September
30, 2003 - $104.6) 74.5 107.5
Mortgage loans 1,139.5 1,154.1
Policy loans 503.4 514.2
Trading securities 915.1 944.9
Venture capital investment in AT&T
Wireless Services, Inc. at fair value
(cost: December 31, 2003 - $ -;
September 30, 2003 - $36.4) - 33.7
Other invested assets 324.1 308.7
-------- --------
Total investments 22,796.7 22,415.8
Cash and cash equivalents:
Unrestricted 1,228.7 1,724.3
Restricted 31.9 22.1
Accrued investment income 315.5 316.0
Value of policies in force at the
Effective Date 2,949.7 2,770.4
Cost of policies produced 101.8 23.2
Reinsurance receivables 930.5 933.6
Income tax assets 11.1 86.7
Goodwill 967.7 935.4
Other intangible assets 155.2 173.8
Assets held in separate accounts 37.7 37.5
Other assets 395.8 421.1
-------- --------
Total assets $29,922.3 $29,859.9
========= =========
CONSECO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
(Dollars in millions)
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Successor
-----------------------------
December 31, September 30,
2003 2003
---- ----
Liabilities:
Liabilities for insurance and asset
accumulation products:
Interest-sensitive products $12,482.6 $12,381.5
Traditional products 11,431.8 11,197.5
Claims payable and other
policyholder funds 892.3 873.1
Liabilities related to separate
accounts 37.7 37.5
Other liabilities 573.0 748.5
Investment borrowings 387.3 524.4
Notes payable - direct corporate
obligations 1,300.0 1,300.0
-------- --------
Total liabilities 27,104.7 27,062.5
-------- --------
Commitments and Contingencies
Shareholders' equity:
Preferred stock 887.5 865.0
Common stock ($0.01 par value,
8,000,000,000 shares authorized,
shares issued and outstanding:
December 31, 2003 - 100,115,772;
September 30, 2003 - 100,098,119) 1.0 1.0
Additional paid-in-capital 1,641.9 1,639.3
Accumulated other comprehensive income 218.7 273.2
Retained earnings 68.5 18.9
-------- --------
Total shareholders' equity 2,817.6 2,797.4
-------- --------
Total liabilities and shareholders'
equity $29,922.3 $29,859.9
========= =========
CONSECO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in millions, except per share data)
(unaudited)
Successor Predecessor
------------ -------------------------
Four months Eight months
ended ended Year ended
December 31, August 31, December 31,
2003 2003 2002
---- ---- ----
Revenues:
Insurance policy income $1,005.8 $2,204.3 $3,602.3
Net investment income:
General account assets 427.0 933.3 1,534.1
Policyholder and reinsurer
accounts 55.1 25.2 (100.5)
Venture capital income (loss)
related to investment in
AT&T Wireless Services, Inc. (5.5) 10.5 (99.3)
Net realized investment gains
(losses) 11.8 (5.4) (556.3)
Fee revenue and other income 13.3 34.3 70.1
-------- -------- --------
Total revenues 1,507.5 3,202.2 4,450.4
-------- -------- --------
Benefits and expenses:
Insurance policy benefits 970.1 2,138.7 3,332.5
Provision for losses - 55.6 240.0
Interest expense (contractual
interest: $268.5 for the
eight months ended August 31,
2003; and $345.3 for 2002) 36.8 202.5 341.9
Amortization 132.7 341.4 822.9
Other operating costs and
expenses 218.4 422.3 736.2
Goodwill impairment - - 500.0
Special charges - - 96.5
Gain on extinguishment of debt - - (1.8)
Reorganization items - (2,130.5) 14.4
-------- -------- --------
Total benefits and expenses 1,358.0 1,030.0 6,082.6
-------- -------- --------
Income (loss) before income
taxes, minority interest,
discontinued operations and
cumulative effect of
accounting change 149.5 2,172.2 (1,632.2)
Income tax expense (benefit):
Tax expense (benefit) on
period income (loss) 53.2 (13.5) 53.1
Valuation allowance for
deferred tax assets - - 811.2
-------- -------- --------
Income (loss) before minority
interest, discontinued
operations and cumulative
effect of accounting
change 96.3 2,185.7 (2,496.5)
Minority interest:
Distributions on Company-obligated
mandatorily redeemable preferred
securities of subsidiary trusts,
net of income taxes - - 173.2
-------- -------- --------
Income (loss) before
discontinued operations and
cumulative effect of
accounting change 96.3 2,185.7 (2,669.7)
Discontinued operations, net of
income taxes - 16.0 (2,216.8)
Cumulative effect of accounting
change, net of income taxes - - (2,949.2)
-------- -------- --------
Net income (loss) 96.3 2,201.7 (7,835.7)
Preferred stock dividends
(contractual distributions for
2002 of $2.1) 27.8 - 2.1
-------- -------- --------
Net income (loss) applicable
to common stock $ 68.5 $2,201.7 $(7,837.8)
======== ======== ==========
CONSECO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (Continued)
(Dollars in millions, except per share data)
(unaudited)
Successor
------------
Four months
ended
December 31,
2003
----
Earnings per common share:
Basic:
Weighted average
shares outstanding 100,110,000
===========
Net income $.68
====
Diluted:
Weighted average
shares outstanding 143,486,000
===========
Net income $.67
====
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