Conseco could land upgrade by midyear: Analysts see positive signs for Carmel insurer

Conseco Inc. by mid-2006 may earn a coveted ratings upgrade from A.M. Best Co., an achievement likely to bolster the Carmel-based insurer’s sales, analysts said.

Best probably will dole out the financial-strength upgrade in the second quarter, after the New Jersey-based firm reviews Conseco’s final 2005 financial results, said Jukka Lipponen, a Connecticut-based analyst for Keefe Bruyette & Woods.

“We believe as management continues to deliver on its expectations and once Conseco receives the A.M. Best upgrade … investor patience will be rewarded,” Lipponen wrote in a November report on the company.

Conseco has been increasing profit and rebuilding financial strength since emerging from Chapter 11 bankruptcy in September 2003. So far, though, shareholders have yet to receive a big payoff. The stock was trading last week at $22.84, up from $20.29 in the first day of trading postbankruptcy.

Analysts say that if the companies in Conseco’s main insurance units-Carmel-based Conseco Insurance Group and Chicagobased Bankers Life and Casualty Group-receive a one-notch upgrade to A-, they’ll have an easier time recruiting agents and selling products.

Best now rates the financial strength of those companies at B++, or “very good.” In 2004, Best delivered a rare double upgrade to push Conseco to its present level.

Conseco’s subsidiaries sell supplemental health insurance, annuities and individual life insurance, among other products. Bankers Life does business through branch offices while Conseco Insurance operates mostly through independent channels.

Many analysts expected an upgrade last August, but instead Best opted to affirm the present rating and assign a positive outlook to it.

The ratings firm will monitor whether the company continues to increase sales and successfully execute other initiatives outlined by CEO William Kirsch, Best analyst Rosemary Mirabella said.

“Rather than it being a specific thing we’re looking for, we’re really looking for a seasoning of the trends,” Mirabella said.

Last month, the company announced a third-quarter profit of $68 million and said it was on track to exceed its goal of $30 million in expense reductions this year. In September, Conseco eliminated 104 full-time jobs and some contract positions in an effort to control costs. It now has 4,250 full-time employees, including 2,200 in Carmel.

The company in August launched an “Expect Big Things” road trip that took Conseco officials to 28 cities over two months in an effort to recruit independent agents to Conseco Insurance Group.

About 1,600 agents attended Conseco stops on this tour. The response was encouraging, but the insurer doesn’t have final numbers on how many decided to start selling Conseco products, company spokesman Jim Rosensteele said.

Rosensteele said Conseco will be reviewed again by Best after the annual ratings cycle begins in the spring. It concludes in the summer. A decision could come any time in that cycle.

“We’re pleased that analysts are encouraged that they feel the company will achieve an upgrade, but the timing of the process really hasn’t changed,” he said.