Conseco Reports Record Third Quarter and Nine-Month Results.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)--Oct. 28, 1998-- -- 3Q98 operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before per share up 14 percent, to 90 cents -- Nine-month insurance premiums up 9 percent to $4.5 billion, on target with goal -- Finance receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed reach record $34.7 billion at quarter-end -- 3Q98 operating return on equity increases to 25 percent 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 :CNC (Computerized Numerical Control) See numerical control. CNC - Collaborative Networked Communication ) today reported record results for the third quarter and nine months ended Sept. 30, 1998. Operating earnings for the quarter were $297.8 million, or 90 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. share, up 10 percent and 14 percent, respectively, over 3Q97, and exceeding the 3Q98 consensus analyst estimate (as published by First Call) of 89 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. . For the first nine months of 1998, operating earnings were $767.2 million, or $2.33 per share, up 6 percent and 9 percent, respectively, over the first nine months of 1997. Operating return on equity improved to 25 percent for 3Q98, from 23 percent in 3Q97. Conseco Chairman Stephen Stephen, 1097?–1154, king of England (1135–54). The son of Stephen, count of Blois and Chartres, and Adela, daughter of William I of England, he was brought up by his uncle, Henry I of England, who presented him with estates in England and France and C. Hilbert Noun 1. Hilbert - German mathematician (1862-1943) David Hilbert said, "The key to 3Q98 performance was maintaining our proven operating disciplines, based on the solid loan origination 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. platforms and retail focus at our Green Tree finance operation, and our cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. customer focus in insurance. In the first nine months of 1998 we've we've Contraction of we have. we've have reinvented Conseco as a leading consumer 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. company, while continuing to generate steady earnings progress. I'm I'm Contraction of I am. Our Living Language Speakers of some scattered varieties of American English sometimes use I'm instead of I've or I have in present perfect constructions, as in enormously proud of our managers and employee associates. They demonstrated again in 3Q98, as they have throughout our history, that they can adapt and thrive in a changing and challenging business environment. "We continue to be bullish Bullish Word used to describe an investor's attitude. Bullish refers to an optimistic outlook, while bearish means a pessimistic outlook. bullish on the outlook for growth in our businesses," Hilbert said. "We are hitting our targets for internal growth, and we are doing so while maintaining our disciplined approach. We continue to build on the expertise and relationships of our large network of independent and career insurance agents and finance dealers. Conseco is well-positioned for the future, with balanced sources of earnings, $83 billion of balance sheet assets, managed investments and finance receivables, and one of the strongest middle-America consumer franchises in the financial services industry, serving 12 million customers with a superior array of products aimed at creating and protecting wealth." Insurance results. Pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta insurance operating earnings reached $338.7 million for the quarter and $1.0 billion for the first nine months of 1998, up 15 percent and 29 percent, respectively, over 1997. A portion of the increase relates to companies acquired in 1997. Investment income spread on insurance products (defined as investment income, net of interest credited on annuities and universal life products, as a percentage of average insurance liabilities) increased to 4.54 percent in the first nine months of 1998, from 4.32 percent in the same period of 1997. The increase is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to: (1) continued aggressive management of our investment portfolio; (2) our interest crediting strategy; and (3) to changes in the mix of our insurance liabilities. Loss ratios (defined as policy benefits and reserve changes as a percentage of earned premium Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. ) on health insurance increased by 63 basis points in the first nine months of 1998, compared to the same period of 1997, because of timing issues in achieving approval for rate increases and slower than expected growth in sales of certain new, more profitable products. Mortality margins on life and 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. products and insurance expenses did not fluctuate significantly between periods. Total collected insurance premiums rose by 5 percent for the quarter, to $1.5 billion, and by 9 percent for the first nine months of 1998, to a record $4.5 billion and on target with Conseco's previously stated full-year 1998 goal of 8 percent to 10 percent growth. (Premium numbers cited in this release include, in all periods, premiums collected by all insurance companies owned by Conseco at Sept. 30, 1998, and exclude, in all periods, premiums from discontinued 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: products.) Finance results. Pre-tax finance operating earnings increased by 7 percent, to $202.8 million, for the quarter, and decreased 20 percent, to $406.5 million, for the first nine months of 1998. These results reflect several significant changes in accounting assumptions Conseco made in 2Q98 which have the effect of decreasing the revenue recognized when loans are sold and increasing subsequent revenue. Strong portfolio growth drove higher income from interest, servicing and commissions in the quarter. New finance volume increased by 27 percent over 3Q97, to a record $5.7 billion, with strong growth across all business lines. Finance volume rose by 50 percent in mortgage/retail services, by 32 percent in commercial, and by 9 percent in manufactured housing/consumer finance. Total managed receivables at period-end rose by 34 percent over 3Q97, to a record $34.7 billion. Managed receivables rose by 83 percent in mortgage/retail services, by 51 percent in commercial, and by 20 percent in manufactured housing/consumer finance. Credit quality continued at a high level, with 60-day-and-over delinquencies at 1.10 percent at quarter-end, compared to 1.03 percent at June June: see month. 30, 1998, and 1.03 percent at the end of 3Q97. Trailing 12-month net credit losses improved to 1.06 percent at Sept. 30, 1998, from 1.09 percent at June 30, 1998, and compared to 0.99 percent at Sept. 30, 1997. Loan securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. volumes, as previously reported, rose by 36 percent over 3Q97, to $4.2 billion. The company completed all its planned securitizations in 3Q98. Credit market conditions, including those for asset-backed securities Asset-backed security A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate. asset-backed security A debt security collateralized by specific assets. , remain difficult in 4Q98. Gain-on-sale revenues as a percentage of securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. sales declined to 6.2 percent in 3Q98 from 7.5 percent in 3Q97. As reported, Conseco in 2Q98 made several significant changes in accounting assumptions at its finance operation; these changes have the effect of deferring a larger portion of gain-on-sale revenues and earnings. Gain-on-sale revenues represented just 13 percent of total Conseco revenues in 3Q98. Loan prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. for 3Q98 were consistent with the levels anticipated in Conseco's revised accounting assumptions. Finance 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. , at 1.9 percent of average managed receivables, were on target with management's expectations. Capital. As reported, Conseco late in 3Q98 completed a new $2.5 billion revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility through a group of 21 banks. The new facility consolidates and replaces the five bank lines previously in effect at Conseco and at its Green Tree Financial Corp. subsidiary, in the process expanding the company's borrowing capacity, extending the terms of its previous bank lines, and lowering its borrowing costs. At Sept. 30, 1998, Conseco's debt- to-capital ratio was 30 percent and book value per share was $15.66 (both values exclude the unrealized appreciation/depreciation of fixed maturity securities). Additionally, in 3Q98 and early 4Q98 the company issued a total of $730 million par value of company-obligated mandatorily Adv. 1. mandatorily - in a manner that cannot be evaded; "the ministry considers that contributions to such a fund should be met from voluntary donations rather than from rates compulsorily levied." compulsorily, obligatorily redeemable Redeemable Eligible for redemption under the terms of an indenture. preferred securities of subsidiary trusts. Proceeds from the offerings were used to repay indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. . Investments. At Sept. 30, 1998, Conseco's consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: $28.5 billion investment portfolio consisted primarily of investment- grade, publicly traded debt securities. There were no hedge-fund investments, no material losses on emerging market debt, and no significant nonperforming investments in the portfolio. Conseco Capital Management, Conseco's wholly owned investment adviser, had $38 billion of assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. at Sept. 30, 1998, of which $10 billion was from unaffiliated clients. Net Income. Third quarter 1998 net income of $270.5 million, or 81 cents per diluted share, included: (1) net investment losses of $15.0 million, or 5 cents per share; and (2) an extraordinary charge of $12.3 million, or 4 cents per share, related to early retirement of debt. Third quarter 1997 net income of $271.5 million, or 80 cents per share, included: (1) net investment gains of $42.8 million, or 13 cents per share; (2) nonrecurring charges Nonrecurring Charge An expense occurring only once on a company's financial statement. Notes: An extraordinary item is an example of a nonrecurring charge. Also known as "nonrecurring item". of $40.5 million, or 12 cents per share, related to premium deficiencies on our 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 business in the state of Massachusetts Massachusetts (măsəch  `sĭts), most populous of the New England states of the NE United States. ; and (3) an extraordinary charge
of $0.7 million, or nil per share, related to early retirement of debt.
For the first nine months of 1998, net income of $203.0 million, or 60 cents per diluted share, included: (1) net investment losses of $23.6 million, or 8 cents per share; (2) a 2Q98 nonrecurring charge of $498.0 million, or $1.52 per share, related to the Green Tree merger; and (3) an extraordinary charge of $42.6 million, or 13 cents per share, related to early retirement of debt. Nine-month 1997 net income of $712.3 million, or $2.06 per share, included: (1) net investment gains of $39.0 million, or 11 cents per share; (2) nonrecurring charges of $44.8 million, or 13 cents per share, related to the previously discussed charges related to our Massachusetts Medicare supplement business and the death of an officer; (3) a charge of 4 cents per share related to the induced induced /in·duced/ (in-dldbomacst´) 1. produced artificially. 2. produced by induction. induced, adj artificially caused to occur. induced induction. conversion of 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. ; and (4) an extraordinary charge of $6.2 million, or 2 cents per share, related to early retirement of debt. Headquartered in Carmel, Ind., Conseco is a financial services organization dedicated to providing its customers with solutions for both wealth protection and wealth creation. Through its subsidiaries, Conseco is one of the nation's leading providers of supplemental health insurance, retirement annuities, universal life insurance and consumer and commercial finance products and services. World Wide Web http://www.conseco.com Investor Hotline 1. (company) Hotline - Hotline Communications Ltd.. 2. (messaging) Hotline - Hotline Connect. 800.4.CONSECO Fax-on-Demand 800.344.6452 -0-
Conseco, Inc. (NYSE:CNC) Quarter Ended Nine Months Ended
Financial Highlights Sept. 30: Sept. 30:
1998 1997 1998 1997
In millions:
Operating earnings(1) $297.8 $269.9 $767.2 $724.3
Net investment gains (losses),
net of related costs,
amortization
and taxes (15.0) 42.8 (23.6) 39.0
Nonrecurring charges, net of tax 0.0 (40.5) (498.0) (44.8)
Extraordinary charge, net of tax (12.3) (0.7) (42.6) (6.2)
Net income $270.5 $271.5 $203.0 $712.3
Per common share-basic:
Weighted average shares
(in millions) 312.7 312.5 310.7 310.5
Operating earnings(1) $0.95 $0.85 $2.45 $2.31
Net investment gains (losses),
net of
related costs, amortization
and taxes (0.05) 0.14 (0.08) 0.13
Nonrecurring charges, net of tax 0.00 (0.13) (1.60) (0.15)
Charge related to induced conversion
of preferred stock 0.00 0.00 0.00 (0.04)
Extraordinary charge, net of tax (0.04) 0.00 (0.14) (0.02)
Net income $0.86 $0.86 $0.63 $2.23
Per common share-diluted:
Weighted average shares
(in millions) 332.3 339.7 327.1 338.6
Operating earnings(1) $0.90 $0.79 $2.33 $2.14
Net investment gains (losses), net of
related costs, amortization
and taxes (0.05) 0.13 (0.08) 0.11
Nonrecurring charges, net of tax 0.00 (0.12) (1.52) (0.13)
Charge related to induced conversion
of preferred stock 0.00 0.00 0.00 (0.04)
Extraordinary charge, net of tax (0.04) 0.00 (0.13) (0.02)
Net income $0.81 $0.80 $0.60 $2.06
Annualized operating return on
common equity(1)(2)(3) 25% 23% 23% 21%
Assets (in billions) (2) $42.4 $37.5
Shareholders' equity and minority
interest (in billions)(2) $6.9 $5.8
Book value per common share(2) $15.66 $15.28
Book value per common share, assuming
conversion of all
convertible securities
and purchase of shares under
stock purchase contracts(2) $16.97 $15.68
Assets under management and managed
receivables (in billions)(4) $82.6 $73.6
(1) Excludes investment gains (losses), nonrecurring items and
extraordinary charge.
(2) Before adjusting for the fair value of fixed maturity
investments.
(3) Ratio for the nine months ended Sept. 30, 1998, factors out
one-time items and gives effect to changes in accounting
assumptions and securitization practices related to the Green Tree
Merger.
(4) Represents: (i) the total market value of the investment
portfolios managed by Conseco Capital Management, Inc. including
assets of subsidiaries; and (ii) the total fixed and revolving
credit receivables that Green Tree manages, including receivables
on its balance sheet and receivables applicable to the holders of
asset-backed securities sold by Green Tree.
All share and per-share amounts have been adjusted to reflect the
two-for-one stock split distributed Feb. 11, 1997. All historical
financial statement amounts have been restated to reflect the
pooling-of-interests acquisition of Green Tree Financial
Corporation on June 30, 1998.
Note on forward-looking statements: All statements, trend analyses
and other information contained in this release and elsewhere (such
as in filings by Conseco with the Securities and Exchange Commission,
press releases, presentations by Conseco or its management or oral
statements) relative to markets for Conseco's products and trends in
Conseco's operations or financial results, as well as other
statements including words such as "anticipate," "believe," "plan,"
"estimate," "expect," "intend," and other similar expressions,
constitute forward-looking statements under the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are
subject to known and unknown risks, uncertainties and other factors
which may cause actual results to be materially different from those
contemplated by the forward- looking statements. Such factors
include, among other things: (1) 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) the ability of Conseco to sell its products, its
ability to make loans and access capital resources and the costs
associated therewith, the market value of Conseco's investments, the
lapse rate and profitability of policies, and the level of defaults
and prepayments of loans made by Conseco; (2) the ability to achieve
anticipated synergies and levels of operational efficiencies; (3)
customer response to new products, distribution channels and
marketing initiatives; (4) mortality, morbidity, usage of health care
services and other factors which may affect the profitability of
Conseco's insurance products, (5) changes in the Federal income tax
laws and regulations which may affect the relative tax advantages of
some of Conseco's products; (6) increasing competition in the sale of
insurance and annuities and in the finance business; (7) regulatory
changes or actions, including those relating to regulation of
financial services affecting (among other things) bank sales and
underwriting of insurance products, regulation of the sale,
underwriting and pricing of products, and health care regulation
affecting health insurance products; (8) the ability to achieve Year
2000 readiness for significant systems and operations on a timely
basis; (9) the availability and terms of future acquisitions; and
(10) the risk factors or uncertainties listed from time to time in
Conseco's filings with the Securities and Exchange Commission.
-0-
Conseco, Inc.
Consolidated Balance Sheet At At
(in millions) Sept. 30, 1998 Dec. 31, 1997
(Unaudited) (Audited)
Assets
Investments:
Actively managed fixed maturities
at fair value $22,441.5 $22,773.7
Interest-only securities 1,103.8 1,365.8
Equity securities at fair value 335.5 228.9
Mortgage loans 442.2 516.2
Credit-tenant loans 672.0 558.6
Policy loans 688.2 692.4
Other invested assets 1,058.5 530.7
Short-term investments 1,029.9 1,179.1
Assets held in separate accounts 704.6 682.8
Total investments 28,476.2 28,528.2
Accrued investment income 415.2 379.3
Finance receivables 3,302.8 1,971.0
Servicing rights 109.5 77.0
Cost of policies purchased 2,399.8 2,466.4
Cost of policies produced 1,295.8 915.2
Reinsurance receivables 736.2 795.8
Goodwill, net of accumulated amortization 3,988.4 3,693.4
Property and equipment, net of accumulated
depreciation 329.8 284.0
Cash held in segregated accounts for investors 723.8 552.8
Cash deposits, restricted under pooling and
servicing agreements 250.9 247.2
Other assets 602.7 775.7
Total assets $42,631.1 $40,686.0
Liabilities and shareholders' equity
Liabilities:
Liabilities for insurance and deposit products:
Interest-sensitive products $17,126.2 $17,357.6
Traditional products 6,441.5 5,784.8
Claims payable and other policyholder funds 1,576.0 1,615.5
Unearned premiums 414.1 406.1
Liabilities related to separate accounts 704.6 682.8
Liabilities related to deposit products 482.4 0.0
Investor payables 723.8 552.8
Other liabilities 2,019.0 1,544.4
Income tax liabilities 225.5 532.8
Investment borrowings 817.4 1,389.5
Notes payable and commercial paper:
Corporate 3,088.6 2,354.9
Consumer and commercial finance 1,957.3 1,866.3
Total liabilities 35,576.4 34,087.5
Minority interest in consolidated subsidiaries
Company-obligated mandatorily redeemable
preferred securities of
subsidiary trusts 1,872.9 1,383.9
Common stock 0.7 0.7
Total minority interest 1,873.6 1,384.6
Shareholders' equity
Preferred stock 105.6 115.8
Common stock and additional paid-in capital 2,681.0 2,619.8
Accumulated other comprehensive income:
Unrealized apprec. of fixed maturity secs.,
net of income taxes 172.4 177.2
Unrealized apprec. of other investments,
net of income taxes (16.6) 26.6
Minimum pension liability adjustment (3.2) (3.2)
Retained earnings 2,241.9 2,277.7
Total shareholders' equity 5,181.1 5,213.9
Total liabilities and shareholders' equity $42,631.1 $40,686.0
Conseco, Inc. Quarter Ended Nine Months Ended
Consolidated Statement of Sept. 30: Sept. 30:
Operations (millions) 1998 1997 1998 1997
Revenues
Insurance policy income
Traditional products $845.0 $778.8 $2,559.7 $2,121.4
Interest sensitive products 144.1 107.0 409.3 319.5
Net investment income:
Assets held by insurance
subsidiaries 469.1 460.6 1,556.6 1,314.7
Finance receivables 62.6 56.1 185.0 144.2
Interest-only securities 34.2 32.7 103.8 88.9
Gain on sale of receivables 257.9 211.6 543.8 568.7
Net investment gains 24.7 116.4 141.8 137.3
Fee revenue and other income 84.1 66.9 245.8 177.4
Total revenues 1,921.7 1,830.1 5,745.8 4,872.1
Benefits and expenses
Insurance policy benefits 694.1 618.4 2,055.9 1,686.9
Amounts added to annuities
and financial product
policyholder account balances:
Interest 183.3 180.3 553.9 524.6
Other amounts added to
variable and
equity-indexed annuity products (25.1) 28.5 83.5 64.0
Interest expense:
Corporate 45.3 24.7 120.6 76.0
Finance and investment borrowings 72.2 54.6 212.2 129.1
Amortization 164.2 140.4 515.4 390.9
Other operating costs and expenses 313.5 255.6 923.2 716.5
Nonrecurring charges 0.0 62.4 688.0 71.7
Total benefits and expenses 1,447.5 1,364.9 5,152.7 3,659.7
Income before income taxes,
minority interest and
extraordinary charge 474.2 465.2 593.1 1,212.4
Income tax expense 169.2 179.2 287.1 456.0
Income before minority
interest and
extraordinary charge 305.0 286.0 306.0 756.4
Minority interest:
Distributions on
company-obligated mandatorily
redeemable preferred securities
of subsidiary trusts 22.2 13.0 60.4 34.6
Dividends on preferred stock
of subsidiaries 0.0 0.8 0.0 3.3
Income before extraordinary charge 282.8 272.2 245.6 718.5
Extraordinary charge on
extinguishment of debt, net
of taxes and minority interest 12.3 0.7 42.6 6.2
Net income 270.5 271.5 203.0 712.3
Less amounts applicable to
preferred stock:
Charge related to induced
conversions 0.0 0.0 0.0 13.2
Preferred stock dividends 1.8 2.2 6.0 6.7
Earnings applicable to common
stock $268.7 $269.3 $197.0 $692.4
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