The Carmel-based life and health insurer lost 38 cents per diluted common share, compared with a 21-cent per share loss in the second quarter last year. Six cents of the difference came from larger investment losses in 2007 versus 2006.
But the biggest part of the loss came as Conseco spent $110 million to further strengthen its reserves for older, long-term care policies it no longer sells but still supports. That payment more than doubles the total amount Conseco has spent in the last year to shore up reserves on the policies, which typically pay for nursing home and in-home care for seniors.
The rate of claims on long-term care policies has far exceeded initial projections, leading to losses. Even before the reserve adjustment, the red ink from long-term care led to a $23 million loss among all policies Conseco no longer sells.
"While this strengthening should reduce the volatility of the loss experience in future periods, progress in the turnaround of that block of business will take several quarters before improvements in claims management and our re-rate program show significant impact as we position Conseco for future growth," Conseco CEO C. James Prieur said in a written statement.
In the second quarter last year, Conseco took a $157 million charge to settle a lawsuit brought by scores of Conseco customers whose life insurance premiums skyrocketed after Conseco removed a mysterious "R" factor from its mortality calculations on the policies. To date, Conseco has paid more than $250 million to settle the lawsuit.
On the plus side, Conseco's sales of new policies rose 10 percent, with particularly strong growth at Conseco's Chicago-based Bankers Life unit and its Philadelphia-based Colonial Penn business.