Fitch Assigns Debt Ratings to Conseco; Upgrs Insurance Subsidiaries.Business Editors CHICAGO--(BUSINESS WIRE)--June 1, 2004 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. assigned Conseco, Inc.'s ('Conseco') long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. a 'BB' rating, 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. a 'B+' rating, and upgraded the insurer financial strength (IFS) ratings of 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. Insurance Company to 'BBB' from 'B' and most of Conseco's other insurance subsidiaries to 'BBB-' from 'B'. Conseco Senior Health Insurance Company's IFS rating has been upgraded to 'B-' from 'CCC-'. The IFS rating of its subsidiary, Conseco Life Insurance Company of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , has been affirmed at 'B'. The Rating Outlook for all ratings is Stable. See below for a complete list of rating actions. The upgraded insurer financial strength ratings of Conseco's insurance subsidiaries reflects their strengthened statutory capital base, good market position in the medicare supplement market, the companies' high quality investment portfolios, and stable liability structure. Offsetting these positives is the uncertainty related to the organizations' ability to successfully rebuild their long term operating fundamentals following bankruptcy, thin annuity margins, and the profitability drag of the 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 ) business in the Run-Off segment. Fitch views the solid franchise value of the Bankers Life segment, which has provided a great deal of business stability to Conseco during its bankruptcy, as a differentiating factor that has earned the Bankers Life and Casualty Insurance Company a 'BBB' rating. In contrast, Fitch views the other insurance operations of Conseco as having less inherent stability and sustainable profitability. As a sign of capital health at Conseco's insurance companies, aggregate 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). has improved dramatically in the past year. Aggregate RBC moved from 166% on March 31, 2003 to 287% on December 31, 2003 to an estimated 297% on March 31, 2004. The quality of Conseco's fixed investment portfolio also improved during 2003. Below investment grade (BIG) bonds dropped from 6.5% to 3.9% of the fixed portfolio between December 31, 2002 and 2003 and to 3.5% on March 31, 2004. The 'BB' long-term debt rating reflects the progress Conseco has made in its capital structure and expense rationalization since its emergence from bankruptcy. Fitch expects continued progress in both areas throughout 2004 and expects Conseco to meet its leverage and expense savings goals. The upgrade of Conseco Senior Health's IFS rating to 'B-' reflects the recent resolution of Conseco's filing with the Florida Department Florida is a department (departamento) of Uruguay. Population and Demographics As of the census of 2004, there were 68,181 people and 21,938 households in the department. The average household size was 3.1. For every 100 females, there were 100.4 males. of Insurance (DOI (Digital Object Identifier) A method of applying a persistent name to documents, publications and other resources on the Internet rather than using a URL, which can change over time. ). The Florida DOI provided Conseco with a mechanism for profitability improvement in its run-off LTC business without allowing the company to unilaterally replace policies, which Fitch would have considered a policy default. Equally as important was the requirement for Conseco Senior Health to maintain adequate risk based capital (RBC) levels of 125% of the Company Action Level and seek rate increases in other states. However, Fitch still views the company as vulnerable and is maintaining a rating differential between it and Conseco's other companies. As a subsidiary of Conseco Senior Health, Conseco Life Insurance Company of New York is also rated lower than the broader group of companies. In May 2004, Conseco, Inc. completed an offering of 50.6 million shares of common stock and 27.6 million shares of mandatorily convertible preferred stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". . The net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of the offering are to be used to redeem all outstanding shares of existing preferred stock, repay a portion of bank debt, and enhance capital of Conseco, Inc.'s insurance subsidiaries. Conseco also intends to seek further financing improvements on its bank debt facility. The new securities and bank facility will be much better priced than the existing debt and provide dramatically lower financing costs and improved leverage. Fitch estimates 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 adjusted debt leverage to be 21.9% after the recapitalization. Conseco relies on insurance company dividends, surplus note payments, fees for services, tax-sharing payments, and non-insurance subsidiary dividends to fund holding company cash needs. Before Conseco, Inc. or its subsidiaries can be considered for further upgrades the company must demonstrate improved operating fundamentals, statutory and GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). profitability, and successful execution of its strategic plan. Conseco, Inc. is the holding company for a group of insurance companies selling supplemental health, life, and annuity insurance products, focused on the senior and middle income markets. As of March 31, 2004 it had an estimated $3.2 billion in shareholders equity and $30.5 billion in assets. Its aggregate adjusted statutory capital and surplus was $1.6 billion. Entity/Issue/Type Action Rating/Outlook Conseco, Inc. -- Senior debt rating Assign 'BB'/Stable; -- Long-term issuer rating Assign 'BB'/Stable; -- Preferred stock rating Assign 'B+'/Stable. Insurance Subsidiaries Bankers Life and Casualty Company -- Insurer financial strength rating Upgrade 'BBB'/Stable; -- Removed from Rating Watch Positive. 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, fka Conseco Annuity Assurance Company Conseco Life Insurance Company -- Insurer financial strength rating Upgrade 'BBB-'/Stable; -- Removed from Rating Watch Positive. Conseco Senior Health Insurance Company -- Insurer financial strength rating Upgrade 'B-'/Stable; -- Removed from Rating Watch Evolving. Conseco Life Insurance Company of New York -- Insurer financial strength rating Affirm 'B'/Stable; -- Remove from Rating Watch Positive. Washington National Insurance Company -- Insurer financial strength rating Assign 'BBB-'/Stable. |
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