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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowConseco Inc. CEO Jim Prieur expressed faith today that his company can answer its auditor’s concerns and avoid receiving an opinion that could roil its debt financing.
“We’re very confident that we’ll be able to resolve the issue and provide more information,” Priuer told an investor during a conference call this morning. “[The auditors] are really asking for more information at this point, and that’s what we’re going to be working on the next few weeks.”
Conseco’s auditor, PricewaterhouseCoopers, said it might include a “going-concern” warning in the company’s annual report, suggesting Conseco may not be able to stay in business.
Conseco’s announcement this morning sent its shares tumbling to 62 cents apiece, a decline of 49 percent.
Investors also reacted to Conseco’s preliminary report of fourth quarter financial results, which improved over 2007 but fell short of analysts’ expectations.
Conseco lost $406.8 million in the quarter ended Dec. 31. However, 90 percent of those losses resulted from Conseco transferring its money-losing Senior Health policies to an independent trust.
The company lost another $88 million on investments in the fourth quarter, according to the preliminary results.
Excluding those two charges, Conseco would have earned nearly $49 million, or 26 cents per share. Those profits are 79-percent higher than in the same quarter a year ago.
However, even on that basis, Conseco’s results fell short of analysts’ expectations. They forecast profit of 29 cents per share, according to a survey by Thomson Financial.
For the year, Conseco lost $1 billion because of shedding its Senior Health policies. The losses pushed Conseco’s debt-to-total-capital ratio up to 28 percent at the end of December. The ratio was 21 percent a year earlier.
If that level hits 30 percent, Conseco would default on its $915 million senior-secured credit facility.
Because of that risk and other concerns about Conseco’s amount of cash, PricewaterhouseCoopers has threatened to insert the “going-concern” warning in Conseco’s annual report, which is due out by March 17.
If that happens, Conseco also will be in default on its senior-secured credit facility.
Conseco expects its cash balance to grow from $59 million at the end of 2008 to more than $75 million by the end of 2009. But a large chunk of those expectations depend on winning approval from state insurance regulators.
“So they’re somewhat reluctant to count them,” Prieur said of PricewaterhouseCoopers.
It’s the second bit of bad news for Conseco in the last week. Late on Thursday, Standard & Poor’s Ratings Service downgraded debt ratings on most major life insurers, including Conseco.
That announcement sent Conseco’s shares tumbling 22 percent on Friday.
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