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Shareholders clobber Conseco after report

November 1, 2007

CEO Jim Prieur is accentuating the positive after Conseco Inc.'s latest quarterly loss. But Wall Street investors concentrated on the negative this morning, punishing the Carmel-based company's shares yet again.

"We've been through some of the pain and now we're coming out the other side," Prieur said in an interview last night. "The gross number doesn't look attractive yet, but we've got everything moving in the right direction."

Everything except the company's stock price. Conseco shares fell more than 9 percent this morning, to $14.29. The stock is down about 24 percent in the last year.

Excluding investment gains and losses, the company reported a $25.6 million loss for the three months ended Sept. 30 compared with a gain of $52.8 million in the same quarter last year.

Conseco's loss was driven by a $76.5 million charge taken for transferring a block of older annuity products to Swiss Reinsurance Co. Conseco also announced yesterday that it reacquired $63 million in life insurance assets from Swiss Re, which it said would produce higher returns than the annuities.

On a per-share basis, Conseco lost 14 cents in the quarter, compared with a gain of 35 cents a year ago. Wall Street analysts polled by Thomson Financial expected net income of 26 cents per share.

Revenue increased 5 percent to $1.18 billion. Sales of new policies fell 7 percent, to $86.0 million.

Conseco narrowed its losses from long-term care policies it no longer sells, also called the LTC run-off block. That block recorded a $2.9 million charge versus a $13 million loss a year ago.

"The LTC run-off block, which has been a real challenge for the company, is rapidly approaching the break-even point," Prieur said. He predicted that business, which has cost Conseco more than $200 million in special charges in the last year, would be profitable in 2008.

This quarter, however, Conseco took $40 million in special charges at its Conseco Insurance Group subsidiary. The unit lost $400,000 in the quarter, compared with a gain of $58.5 million during the third quarter last year.
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