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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowAfter posting a $1 billion loss last year, Carmel-based Conseco Inc.’s future is in jeopardy.
The losses have caused the life insurer’s debt as a percentage of its total capital to rise sharply, nearly to a level that would violate an agreement with its lenders.
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.
In the fourth quarter alone, Conseco lost $406.8 million, according to preliminary results released today. 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.
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 early.
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 liquidity, 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.
The news sent Conseco’s shares tumbling this morning. The stock price dropped by as much as 60 percent and was hovering around 60 cents a share.
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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