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

To: Cogito who wrote (3340)	10/3/2000 3:46:16 PM
From: Mr. Pink	Read Replies (2) \| Respond to of 4155

Merrill trashes cnc (ML)CONSECO INC.:Less Risk, but No Earnings Visibility 10/3/0 10:12 (New York) Merrill Lynch (E.Spehar (1) 212 449-4245) CNC ML++ML++ML Merrill Lynch Global Securities Research ML++ML++ML CONSECO INC. (CNC/NYSE) Less Risk, but No Earnings Visibility Edward Spehar (1) 212 449-4245 NEUTRAL* Long Term: NEUTRAL Reason for Report: Company Update Investment Highlights: o We remain cautious about the prospects for Conseco, as it is difficult to assess normalized earnings power. o However, recent developments suggest that financial stability is less of an issue. o We are maintaining our Neutral (3) rating. Fundamental Highlights: o Conseco successfully renegotiated its bank credit agreement, averting a potential liquidity crisis. o The company has established a detailed plan for meeting both bank and public debt obligations over the next two years. o To improve cash flow, the company will slow the growth of the finance operation. o The discontinuation of the company's major medical business is not a surprise given the lack of strategic fit and unacceptable loss ratios. Earnings Outlook Still Unclear Despite the incremental information, earnings continue to be a source of substantial risk, in our view. Therefore, we have limited confidence in our 2001 estimate of $1.00 per share. Perhaps the greatest risk in the core insurance business relates to the company's financial strength ratings. Conseco acknowledges some negative impact from ratings downgrades, but suggests that business activity has bottomed. We are not willing to make this assumption. It is clear, however, that a sense of urgency surrounds the initiatives to improve ratings and some components of the newly negotiated bank agreement depend on a rating upgrade by 3/31/01. For the finance company, impairment charges have almost completely eliminated earnings for the past two and a half years, so determining a normalized return on assets is a challenge