Conseco Reports Strong Results for Full Year 1999 and 4Q99.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)--Feb. 23, 2000 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 ) -- Operating earnings per share reach $3.23 for full year, 64 cents for 4Q99 -- Net cash from operations up 84 percent to $1.8 billion for 1999, or $5.40 per share -- Record collections on insurance and asset accumulation products of $7.0 billion in 1999, up 15 percent -- Record managed finance receivables of $45.8 billion at year-end 1999, up 23 percent Conseco, Inc. (NYSE:CNC) today reported results for the year and fourth quarter ended Dec. 31, 1999, highlighted by strong core growth in both insurance and lending. 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 for the full year 1999, were $1,074.5 million, or $3.23 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, both up 3 percent over 1998. Operating earnings in 4Q99 were $213.7 million, or 64 cents per diluted share, down 27 percent and 28 percent, respectively, from 4Q98. Operating earnings excluding gain-on-sale revenue in 1999 were $731 million, or $2.20 per diluted share, up 25 percent compared to $1.76 per diluted share in 1998. 4Q99 operating earnings on this basis were $205.0 million, or 61 cents per diluted share, up 29 percent and 27 percent, respectively, over 4Q98. As reported, Conseco's finance group 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: gain-on-sale securitizations during 3Q99. Net cash provided by operating activities was $1.8 billion in 1999, up 84 percent over 1998, and $597.0 million in 4Q99, up 40 percent over 4Q98. Total managed assets (balance sheet assets and 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 and investments managed for non-affiliates) reached a record $98.4 billion, up 13 percent over Dec. 31, 1998. 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, "Our 1999 results clearly show that Conseco's operating platforms are delivering the strong internal growth that we expect. We generated record levels of production in insurance and asset accumulation Accumulation 1) In the context of individual investing, it is the process of contributing cash to invest in securities over a period of time in order to build a portfolio of desired value. Dividends and capital gains are also reinvested during this process. products as well as managed finance receivables. The investment performance of Conseco Capital Management and our private capital group was also outstanding. I am particularly pleased that we were able to achieve these operating goals at the same time we were delivering $1.1 billion of operating earnings and hitting our earnings targets for the year. "Our confidence in the durability du·ra·ble adj. 1. Capable of withstanding wear and tear or decay: a durable fabric. 2. of our profitable growth is based on solid operating fundamentals and strong cash flow," Hilbert said. "Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses , net of tax and interest, was a record $1.8 billion in 1999, or $5.40 per share, and represented 187 percent of our net income for the year. We strengthened our capital base, achieved debt ratings upgrades, and significantly enhanced our funding flexibility. We also improved the quality of our finance earnings with the adoption of portfolio accounting for new loan activity. "Conseco's business plans for 2000 include an increase in total collections on insurance and asset accumulation products of 15 percent over our record 1999 levels," Hilbert added. "We also expect to double the level of our on-balance sheet finance receivables to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $20 billion by 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. . Finally, we remain comfortable with the current consensus estimates (according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. First Call) of operating earnings per diluted share of $2.80 for full year 2000." Insurance results. Insurance operating earnings (before taxes) reached $1,513.7 million in 1999, up 11 percent over 1998, and $417.0 million for 4Q99, up 21 percent over 4Q98. Total collections on insurance and asset accumulation products rose by 15 percent in 1999 to a record $7.0 billion. Collections in 4Q99 were $1.85 billion, up 20 percent versus 4Q98. 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 by 13 basis points to 4.55 percent in 1999 versus 4.42 percent in 1998. This spread was 4.29 percent in 4Q99 compared to 4.15 percent in 4Q98. These percentages exclude investment income of $355 million recorded in 4Q99 related to the appreciation of a venture capital investment. Net of related amortization, expenses, and taxes, this investment increased operating earnings in 4Q99 by approximately $115 million. 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 in 1999 by 358 basis points to 70.62 percent versus 67.04 percent in 1998. Loss ratios in 4Q99 were 79.26 percent compared to 63.24 percent in 4Q98. The 4Q99 spike A burst of extra voltage in a power line that lasts only a few nanoseconds. See power surge, power swell, sag and surge suppression. (jargon) spike - To defeat a selection mechanism by introducing a (sometimes temporary) device that forces a specific result. was principally due to the strengthening of long term care insurance reserves for certain acquired blocks and an increase in major medical claims incurred. Mortality margins on life products (defined as the excess of life premiums and fees over mortality losses and reserve changes as a percentage of life reserves) in 1999 improved by 67 basis points to 3.89 percent. Mortality margins decreased in 4Q99 to 2.56 percent compared to 3.01 percent in 4Q98. Finance results. Finance operating earnings (before taxes) were $596.6 million in 1999, up 2 percent over 1998, and $43.2 million in 4Q99 versus $199.6 million in 4Q98. Comparisons for both the full year 1999 and 4Q99 reflect the September September: see month. 1999 discontinuation dis·con·tin·u·a·tion n. A cessation; a discontinuance. Noun 1. discontinuation - the act of discontinuing or breaking off; an interruption (temporary or permanent) discontinuance of gain-on-sale securitizations. Finance receivables under management reached a record $45.8 billion at Dec. 31, 1999, up $8.6 billion, or 23 percent, from Dec. 31, 1998. Of these amounts, on-balance-sheet receivables accounted for $9.4 billion at Dec. 31, 1999, up 65 percent from Sept. 30, 1999. Finance net interest margins as a percentage of on-balance sheet receivables and bonds improved by 271 basis points to 5.70 percent in 1999 versus 2.99 percent in 1998. Net interest margins were 5.68 percent in 4Q99, a 101 basis point improvement over 4Q98 and 31 basis points higher than 3Q99. Finance credit quality remained solidly in-line In-line Used in the context of general equities. (1) An order or market in a specific security within the inside market; 2) any announcement (earnings) that adheres closely to Wall Street analysts' expectations. with pricing expectations and well below industry averages. 60-day-and-over delinquencies were 1.42 percent at Dec. 31, 1999, compared to 1.27 percent at Sept. 30, 1999, and 1.19 percent at Dec. 31, 1998. Trailing 12-month net credit losses were 1.31 percent at Dec. 31, 1999 versus 1.20 percent at Sept. 30, 1999 and 1.03 percent at Dec. 31, 1998. The increases are primarily due to the aging of the portfolio as well as product mix changes. Net income. 4Q99 net income of $174.6 million, or 52 cents per diluted share, included net investment losses of $39.1 million, or 12 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. . The 4Q98 net income of $283.6 million, or 86 cents per share, included net investment losses of $9.2 million, or 3 cents per share. Full year 1999 net income of $962.6 million, or $2.89 per diluted share, included net investment losses of $111.9 million, or 34 cents per share. Full year 1998 net income of $467.1 million, or $1.40 per share, included: (i) net investment losses of $32.8 million, or 10 cents per share; (ii) impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. and merger-related charges of $503.8 million, or $1.52 per share, related to the Conseco Finance merger; and (iii) an extraordinary charge of $42.6 million, or 13 cents per share, related to the early retirement of debt. Capital. At Dec. 31, 1999, Conseco's holding company leverage ratio (as calculated in a manner discussed with the rating agencies) was 44 percent. Financial leverage at the Conseco Finance level (adjusted debt-to-equity) was 23-to-1. Both ratios are consistent with the company's targeted ratios and its ongoing plan to increase financial strength and flexibility. Book value per share at Dec. 31, 1999, was $18.97; assuming purchase of shares under stock purchase contracts and conversion of convertible securities, book value per share was $19.72 (both book values exclude the unrealized appreciation/depreciation of securities). Investments. At Dec. 31, 1999, 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: $30.8 billion investment portfolio consisted primarily of investment-grade investment-grade Of, relating to, or being a bond suitable for purchase by institutions under the prudent man rule. Investment-grade is restricted to those bonds graded BBB and above by Standard & Poor's and graded Baa3 and above by Moody's. , publicly traded debt securities. Conseco Capital Management, Conseco's wholly owned investment adviser, had $42.2 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 Dec. 31, 1999. Headquartered in Carmel, Ind., Conseco is one of middle America's leading sources for insurance, investment and lending products. Through its subsidiaries and a nationwide network of distributors, Conseco helps 13 million customers step up to a better, more secure future. -- tables follow -- 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
Conseco, Inc. (NYSE:CNC) Quarter Ended Year Ended
Financial Highlights Dec. 31: Dec. 31:
1999 1998 1999 1998
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In millions:
Operating earnings(1) $213.7 $292.8 $1,074.5 $1,046.3
Net investment losses,
including related costs,
amortization and taxes (39.1) (9.2) (111.9) (32.8)
Impairment and merger-related
charges, net of taxes 0.0 0.0 0.0 (503.8)
Extraordinary charge,
net of tax 0.0 0.0 0.0 (42.6)
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Net income $174.6 $283.6 $ 962.6 $ 467.1
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Per common share-basic:
Weighted average shares
(in millions) 327.3 315.2 324.6 311.8
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Operating earnings(1) $ 0.65 $ 0.92 $ 3.31 $ 3.33
Net investment losses,
including related costs,
amortization and taxes (0.12) (0.03) (0.35) (0.10)
Impairment and merger-related
charges, net of taxes 0.00 0.00 0.00 (1.62)
Extraordinary charge,
net of tax 0.00 0.00 0.00 (0.14)
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Net income $ 0.53 $ 0.89 $ 2.96 $ 1.47
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Per common share-diluted:
Weighted average shares
(in millions) 336.4 330.8 332.9 332.7
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Operating earnings(1) $ 0.64 $ 0.89 $ 3.23 $ 3.15
Net investment losses,
including related costs,
amortization and taxes (0.12) (0.03) (0.34) (0.10)
Impairment and merger-related
charges, net of taxes 0.00 0.00 0.00 (1.52)
Extraordinary charge,
net of tax 0.00 0.00 0.00 (0.13)
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Net income $ 0.52 $ 0.86 $ 2.89 $ 1.40
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Annualized operating
return on common equity(1)(2) 14% 23% 18% 21%
Shareholders' equity and
minority interest
(in billions)(2) $ 9.3 $ 7.4
Book value per common share(2) $18.97 $16.46
Book value per common share,
assuming purchase of shares
under stock purchase contracts
and conversion of convertible
securities(2) $19.72 $17.63
Total managed assets (in billions)(3) $ 98.4 $ 87.2
(1) Excludes investment losses and impairment, merger-related and
extraordinary charges.
(2) Excludes accumulated other comprehensive income (loss).
(3) The total of balance sheet assets and finance receivables and
investments managed for nonaffiliates.
All historical financial statement amounts have been restated to
reflect the pooling-of-interests acquisition of Conseco Finance Corp.
on June 30, 1998.
Note on forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. : 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," "should," "could," "goal," "target," "on track," "comfortable with" and other similar expressions, constitute forward-looking statements under 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. 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) Conseco's ability to sell its products, its ability to make loans and access capital resources and the costs associated therewith there·with adv. 1. With that, this, or it. 2. In addition to that. 3. Archaic Immediately thereafter. Adv. 1. , the market value of Conseco's investments, 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, and the level of defaults and prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. of loans made by Conseco; (2) Conseco's ability to achieve anticipated synergies and levels of operational efficiencies; (3) customer response to new products, distribution channels and marketing initiatives; (4) 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 and other factors which may affect the profitability of Conseco's insurance products, (5) performance of our investments; (6) changes in the Federal income tax laws and regulations which may affect the relative tax advantages of some of Conseco's products; (7) increasing competition in the sale of insurance and annuities and in the finance business; (8) 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 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 and (9) the risk factors or uncertainties listed from time to time in Conseco's filings with the Securities and Exchange Commission.
Conseco, Inc.
Consolidated Balance Sheet (in millions) At At
Dec. 31, 1999 Dec. 31, 1998
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Assets
Investments:
Actively managed fixed
maturities at fair value $ 22,203.8 $ 21,827.3
Interest-only securities
at fair value 1,317.7 1,305.4
Equity securities at fair value 312.7 376.4
Mortgage loans 1,274.5 1,130.2
Policy loans 664.1 685.6
Venture capital investments 527.5 47.1
Other invested assets 544.0 701.0
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Total investments 26,844.3 26,073.0
Cash and cash equivalents 1,686.9 1,704.7
Accrued investment income 436.0 383.8
Finance receivables 5,100.9 3,299.5
Finance receivables - securitized 4,329.7 0.0
Cost of policies purchased 2,351.7 2,425.2
Cost of policies produced 1,994.2 1,453.9
Reinsurance receivables 728.6 734.8
Goodwill, net of
accumulated amortization 3,927.8 3,960.2
Income tax assets 48.7 0.0
Assets held in separate accounts
and investment trust 2,231.4 1,411.1
Cash held in segregated accounts
for investors 849.7 843.7
Other assets 1,524.0 1,310.0
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Total assets 52,053.9 43,599.9
---------------------------------------------------------------------
Liabilities and shareholders' equity
Liabilities:
Liabilities for insurance and
asset accumulation products:
Interest-sensitive products 17,322.4 17,229.4
Traditional products 7,100.9 6,768.2
Claims payable and other
policyholder funds 1,478.7 1,491.5
Liabilities related to separate
accounts and investment trust 2,231.4 1,411.1
Liabilities related to
deposit products 870.5 30.0
Investor payables 849.7 843.7
Other liabilities 1,495.1 1,980.7
Income tax liabilities 0.0 197.1
Investment borrowings 828.9 956.2
Notes payable and commercial paper:
Corporate 2,481.8 2,932.2
Finance 4,682.5 2,389.3
Related to securitized
finance receivables 4,242.2 0.0
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Total liabilities 43,584.1 36,229.4
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Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts 2,639.1 2,096.9
---------------------------------------------------------------------
Shareholders' equity:
Preferred stock 478.4 105.5
Common stock and additional paid-in capital 2,987.1 2,736.5
Accumulated other comprehensive loss (864.7) (28.4)
Retained earnings 3,229.9 2,460.0
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Total shareholders' equity 5,830.7 5,273.6
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Total liabilities and shareholders' equity $ 52,053.9 $ 43,599.9
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Conseco, Inc.
Consolidated Statement Quarter Ended Year Ended
of Operations (millions) Dec. 31: Dec. 31:
1999 1998 1999 1998
---------------------------------------------------------------------
Revenues
Insurance policy income $995.6 $979.8 $4,040.5 $3,948.8
Net investment income 1,337.0 652.1 3,411.4 2,506.5
Gain on sale of
finance receivables 14.0 215.8 554.0 745.0
Net investment gains (losses) (60.3) 66.4 (156.2) 208.2
Fee revenue and other income 135.2 96.7 489.4 351.7
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Total revenues 2,421.5 2,010.8 8,339.1 7,760.2
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Benefits and expenses
Insurance policy benefits 1,191.0 887.2 3,815.9 3,580.5
Provision for losses 51.9 18.5 128.7 44.2
Interest expense 190.4 107.7 561.7 440.5
Amortization 279.4 217.6 752.1 733.0
Other operating costs
and expenses 360.2 295.7 1,346.3 1,218.9
Impairment charge 0.0 0.0 0.0 549.4
Nonrecurring charges 0.0 0.0 0.0 148.0
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Total benefits and expenses 2,072.9 1,526.7 6,604.7 6,714.5
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Income before income taxes,
minority interest and
extraordinary charge 348.6 484.1 1,734.4 1,045.7
Income tax expense 135.1 170.5 639.0 445.6
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Income before minority
interest and extraordinary
charge 213.5 313.6 1,095.4 600.1
Minority interest -
distributions on
company-obligated
mandatorily redeemable
preferred securities
of subsidiary trusts 38.9 30.0 132.8 90.4
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Income before
extraordinary charge 174.6 283.6 962.6 509.7
Extraordinary charge on
extinguishment of debt,
net of taxes 0.0 0.0 0.0 42.6
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Net income 174.6 283.6 962.6 467.1
Less preferred
stock dividends 0.9 1.8 1.5 7.8
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Net income applicable
to common stock $173.7 $281.8 $961.1 $459.3
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