<font color=red>A.M. Best Affirms B++ Rating of Conseco Life Subsidiaries
OLDWICK, N.J., Sep 25, 2000 (BUSINESS WIRE) -- A.M. Best Co. has affirmed the
"B++" (Very Good) financial strength rating of Conseco Inc.'s principal life
insurance subsidiaries and revised their under review status to positive from
developing.
The rating action follows Conseco's announcement that it has successfully
renegotiated the term structure of its bank debt. Under terms of the
refinancing, Conseco paid down $650 million of its bank loans and extended its
remaining September bank maturities to December, 31, 2001. The favorable rating
outlook reflects progress Conseco has made in substantially improving the
liquidity profile of the parent holding company and recognizes the initiatives
underway in repositioning its finance unit's operations to alleviate capital
strain on the organization. It also reflects steps taken by Conseco to improve
the underlying earnings performance of its insurance subsidiaries, as well as
review of a study completed by an independent third party actuarial firm on the
recoverability of intangible assets (cost of policies produced, cost of policies
purchased and goodwill) on Conseco's balance sheet, which had been requested by
A.M. Best.
Conseco Inc.'s liquidity position has improved dramatically over the past
several weeks. This is the result of the successful completion of the sale of
several non-strategic businesses within its finance unit and actions taken to
both downsize the scale and improve the efficiency of the finance unit's
remaining businesses, which has reduced its cash needs. The restructuring of the
finance unit's business model is designed to result in positive cash flow at
Conseco Finance over the near-term. In addition to the announced pay down of
outstanding bank borrowings, these actions have enabled the company to build a
significant amount of cash within the organization.
The company anticipates that the continuation of its restoration program over
the next twelve months will result in total cash proceeds of over $2 billion
since the program's inception. While the company's asset sales to date have been
completed at or above anticipated pricing levels, A.M. Best believes that some
of the remaining assets to be sold as part of Conseco's capital restructuring
program are subject to valuation volatility, particularly its investment in
Tritel, Inc. However, A.M. Best believes the company has conservatively
estimated the total value of these investments relative to its cash needs and
has built in a sizable cushion to meet its financial commitments through the
second half of 2001. Under terms of the agreement, Conseco also has the option
of extending its bank loans through 2005. Conseco maintains other ancillary
businesses or assets not presently targeted in its restructuring program that
further enhance the company's financial flexibility.
A.M. Best will continue to monitor Conseco's overall operations over the
near-term with respect to its rating outlook.
The "B++" financial strength ratings of the following insurance subsidiaries of
Conseco, Inc. have been affirmed and their under review status changed to
positive from developing. A.M. Best has also affirmed the B+ rating of
Continental Life Insurance Co., and changed its rating status to positive. |
