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Non-Tech : Conseco Insurance (CNO) -- Ignore unavailable to you. Want to Upgrade?

To: David T. Groves who wrote (1093)	4/9/2000 1:48:00 PM
From: Robert T. Quasius	Respond to of 4155

Note that FPFX had "NM" free cash flow, which means negative. CNC is selling at 3X free cash flow, which to me means they have a lot of free cash that can be applied to paying down debt, share repurchases, etc. The GT mess is creating a cloud over the stock, and also probably impacting their ability to borrow, etc. FPFX's and CTYS's main lines of business before the BK was 125% loans, and when some hedge funds, who were buying packages of 125% loans, went belly up and the Asian crisis hit, suddenly no one would give credit to the 125% LTV loan companies, or buy their loan securitizations. CNC's main line of business is still insurance, which is as healthy as ever. To give some perspective, CNC management is talking about a $300 million write-off for the IO strips, but their net income last year was $900 million. I contend that though the write-offs are discouraging, the liquidity is good enough to weather this storm. FPFX and CTYS were both cash flow negative going into the crises that did them in. FPFX has been selling a lot of assets and paying down debt while under BK protection, and this is probably why their cash flow is positive, but their free cash flow negative (i.e. all going to pay debt).

To: David T. Groves who wrote (1093)	4/9/2000 3:52:00 PM
From: StaggerLee	Read Replies (2) \| Respond to of 4155

David, these analyses that suggest negative "tangible net worth" are meaningless and very misleading. Goodwill arises from purchase accounting when the transactions are not accounted for as a pooling of interests. After a purchase, the acquired entity must be reviewed continuously to assess whether its future cash flows support the recorded goodwill balances. If future cash flows don't support the recorded goodwill, CNC would need to record an impairment charge. Until that happens, it makes no more sense to propose such "pro forma" eliminations of goodwill than it would to suggest, for example, that none of CNC's receivables are collectible. If the transactions that gave rise to goodwill had instead been structured as poolings, there would be no goodwill and the company would have a lot more cash on the balance sheet. In such a case, tangible book value would be nowhere near negative $9/share and Alan Abelson would need to find a new angle for his smear efforts. Can you imagine what Coca-Cola's tangible net worth would be if they acquired Pepsi using purchase accounting? How meaningless would that number be?