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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. avoided a warning about its ability to stay in business from its auditor, the company reported today.
PricewaterhouseCoopers will not issue a “going concern” warning in Conseco’s annual report, Conseco CEO Jim Prieur said in a statement. The report will be filed later today.
Prieur’s statement came after the Carmel-based insurer announced this morning that it had won an amendment to its bank loans from its main creditors. Conseco moved perilously close to violating terms of its bank loans at the end of 2008 because of heavy investment losses and charges taken to shift its money-losing senior health policies to an independent trust.
Those charges ballooned Conseco’s fourth-quarter loss to $452 million, according to final 2008 financial results released today. On March 2, Conseco reported preliminary results, showing a quarterly loss of $407 million.
Not counting extraordinary charges, Conseco’s fourth-quarter income from operations hit $48.7 million, up 79 percent from the same quarter a year ago.
Conseco had to pay for the extra breathing room with its lenders. The cash interest rate Conseco is paying on the $912 million in loans will rise from 2.6 percent to at least 6.5 percent, with a payment equal to 1 percent of the principal balance tacked on when the loans mature.
The amendment makes the following changes in Conseco’s senior credit facility:
– An increase in the maximum debt-to-capital ratio to 32.5 percent until June 30, 2010, then returning to 30 percent;
– A decrease in the minimum risk-based capital ratio to 200 percent until June 30, 2010, then returning to 250 percent;
– A decrease in the minimum level of statutory capital to $1.1 billion through June 30, 2010, then returning to $1.27 billion;
The amendment also places additional restrictions on the company’s ability to add certain kinds of debt.
“Renegotiating our debt gives us greater financial flexibility during times of market volatility, as we focus on the continued growth of our core insurance businesses,” Prieur said in the statement.
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