Conseco's Auditors May Raise Doubt About Survival (Update2)

By Rick Green and Linda Shen
Bloomberg News
March 2, 2009

March 2 (Bloomberg) -- Conseco Inc., the Indiana-based insurer, said its auditors may raise doubt about the company's ability to stay in business. The stock fell by almost 60 percent.

Concern about liquidity and debt covenant margins may prompt discussion in the company's annual report about Conseco's "ability to continue as a going concern," according to a statement today. Conseco also said it may delay the report until March 17, with the preliminary fourth-quarter loss widening to $406.8 million, or $2.20 a share, from $71.5 million, or 38 cents a share, a year earlier.

"The two issues are liquidity at the holding company and the potential losses in the investment portfolio," Chief Executive Officer Jim Prieur said in a conference call today. He said auditors were "somewhat reluctant" to include some dividends and payments pending regulatory approval into the company's liquidity. "Once we receive that approval I think that concern will be substantially diminished," he said.

Conseco declined by 49 percent to 62 cents at 11:17 a.m. in New York Stock Exchange composite trading today. The stock sold for more than $25 in 2006.

Prieur said he didn't think the Carmel, Indiana-based firm, which emerged from bankruptcy in 2003, would apply for the government's Troubled Asset Relief Program, and that "generally" insurance companies were unlikely to receive funds from the bailout.

Inclusion of a paragraph in the annual report questioning the company's viability, "unless waived by the lenders, would be a default under Conseco's senior credit facility," the statement said.

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