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A.M. Best Downgrades Ratings of Conseco; Revises Outlook to Negative
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| Copyright: | Business Wire | | Source: | Business Wire | | Wordcount: | 466 |
OLDWICK, N.J.--(BUSINESS WIRE)--Aug. 7, 2007--A.M. Best Co. has downgraded the financial strength rating (FSR) to B+ (Good) from B++ (Good) and the issuer credit ratings (ICR) to "bbb-"from "bbb+" of Conseco, Inc.'s (Conseco) (Carmel, IN) (NYSE:CNO) core insurance subsidiaries. Concurrently, A.M. Best has downgraded the ICR and the senior debt rating to "bb-" from "bb+" of Conseco. Additionally, A.M. Best has downgraded the FSR to C++ (Marginal) from B- (Fair) and the ICR to "b" from "bb-" of Conseco Senior Health Insurance Company (CSH) (Pennsylvania). The outlook for all ratings has been revised to negative from stable. (See below for a detailed listing of the companies and ratings.)
CSH houses the majority of Conseco's run-off long-term care (LTC) block and continues to exhibit volatile operating results, exemplified by the second quarter 2007 claim reserve strengthening of $110 million. This was Conseco's second significant run-off LTC claim reserve strengthening in six months, following the fourth quarter 2006 charge of $54 million. CSH's ratings recognize that it is capitalized at regulatory minimums, incorporating substantial capital infusions from Conseco over the last two years.
The rating actions reflect the impact of these charges, which exceeded A.M. Best's expectations, on the overall financial strength of the organization. A.M. Best remains cautious regarding the future performance of the run-off LTC block given the significance of the most recent reserve strengthening. In addition, the recent reoccurrence of "one-time" charges related to cost of insurance litigation, data refinements, valuation error corrections and back office consolidation/reorganization has diminished A.M. Best's confidence with respect to Conseco's ability to generate consistent, sustainable earnings in the near to medium term. These factors, coupled with unfavorable operating trends at Conseco Insurance Group, reduced holding company flexibility and elevated regulatory risk erode Conseco's overall business profile, a key contributor to a company's long-term financial strength.
The FSR has been downgraded to B+ (Good) from B++ (Good) and ICRs to "bbb-" from "bbb+" for the following core insurance subsidiaries of Conseco, Inc.:
-- Bankers Life and Casualty Company
-- Colonial Penn Life Insurance Company
-- Conseco Health Insurance Company
-- Conseco Insurance Company
-- Bankers Conseco Life Insurance Company
-- Conseco Life Insurance Company
-- Washington National Insurance Company
The following debt rating has been downgraded:
Conseco, Inc. -
-- to "bb-" from "bb+" on $300 million 3.5% senior unsecured convertible debentures, due 2035
Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.
CONTACT: A.M. Best Co. Analysts Rosemarie Mirabella, 908-439-2200, ext. 5892 rosemarie.mirabella@ambest.com or Andrew Edelsberg, 908-439-2200, ext. 5182 andrew.edelsberg@ambest.com OR Public Relations Jim Peavy, 908-439-2200, ext. 5644 james.peavy@ambest.com or Rachelle Morrow, 908-439-2200, ext. 5378 rachelle.morrow@ambest.com
This is a news service of Thomson Business Intelligence Service ©2006. This content is for your personal use only, subject to Terms and Conditions. No redistribution allowed.
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