Conseco Rises on Quarterly Profit, Loan Compliance (Update3)

By Hugh Son
Bloomberg News
July 29, 2009

July 29 (Bloomberg) -- Conseco Inc., the Carmel, Indiana- based life insurer, gained 36 percent and led the gainers on the Russell 3000 Index after saying it had a second-quarter profit and results complied with credit agreement covenants.

The insurer rose 68 cents to $2.58 at 4:15 p.m. in New York Stock Exchange Composite trading. Conseco's net income was between $15.8 million and $27.8 million, compared with a net loss of $488.5 million a year earlier, the firm said late yesterday in a statement. Operating income was 22 cents a share, matching the average estimate of 5 analysts surveyed by Bloomberg.

Conseco's quarterly profit was its second straight after two years of losses. The company boosted its so-called risk- based capital ratio, a measure of insurer solvency, by generating income and using relaxed reserving rules issued by the National Association of Insurance Commissioners.

"The operating result was good overall with solid results" at the Bankers Life unit, said Randy Binner, an analyst with FBR Capital Markets, in a note late yesterday.

Financial statements complied "with all covenants," including those tied to insurance capital, risk-based capital of subsidiaries, and its debt-to-capital ratio, as of June 30, the insurer said. Conseco boosted its risk-based capital ratio, a metric used to measure an insurer's solvency, last month by entering an agreement in which Wilton Reinsurance Co. will accept risk on 104,000 life insurance policies.

Investment Losses

The insurer said net realized investment losses in the quarter were $13 million to $25 million. Conseco will report final second-quarter results on August 4.

Some of Conseco's previous losses were tied to long-term care policies that were transferred to an independent trust. Coverage sold by insurers in the 1990s has hurt profit because they underestimated the number of claims, the cost of care and the life expectancies of their customers. The insurer's stock has declined by half this year after plunging 59 percent in 2008.

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