Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: zyx1996 who wrote (3994)	2/20/2001 8:20:35 PM
From: zyx1996	Read Replies (1) \| Respond to of 4155

NEW Conseco Memo # 9 - 2000 Earnings To: Conseco Shareholders From: Gary Wendt, Chairman & CEO Date: February 20, 2001 Re: 2000 Earnings GOODBYE 2000 !!! Today is the day Conseco officially says goodbye to the year 2000. Goodbye and good riddance! The situation we found here had enough business challenges to fill a decade of normal years. You all know the story – the list of problems we inherited and the solutions we implemented. If you were to boil it all down to its essence: We did battle; we survived; we’re positioned to thrive; and we like what we have to work with! Chart 1 Today, we announce the now historical financial scorecard for 2000 and our outlook for the future. We’ll do this in three parts: 1. Reporting positive 4th quarter operating results; 2. Reporting charges taken in the 4th quarter principally relating to legacy items; and 3. Providing additional guidance for 2001 earnings. 4th Quarter Operating Results. At our investor briefing in December 2000, we estimated that we would earn 13 cents per common share from operations (21 cents per share before goodwill amortization). We hit that number. And we met the projection by meeting financial objectives in both business groups -- Insurance and Finance. Table 1 2000 Conseco Operating Earnings (Dollars in millions, except per share amounts) Q4 '99 Q1 '00 Q2 '00 Q3 '00 Q4 '00 Full Year 2000 Insurance and fee based $178.1 $185.3 $186.1 $220.1 $226.6 $818.1 Finance 35.3 35.8 28.0 40.0 53.0 156.8 Subtotal 213.4 221.1 214.1 260.1 279.6 974.9 Corporate (113.0) (132.0) (136.3) (151.6) (172.5) (592.4) Pre-tax 100.4 89.1 77.8 108.5 107.1 382.5 Taxes @ 36.00% 36.5 33.6 28.8 39.9 39.3 141.6 Total after-tax pre-goodwill 63.9 55.5 49.0 68.6 67.8 240.9 Goodwill (24.6) (24.8) (26.4) (27.8) (26.7) (105.7) Operating earnings $39.3 $30.7 $22.6 $40.8 $41.1 $135.2 Per share Pre-goodwill $0.20 $0.17 $0.15 $0.21 $0.21 $0.74 Post-goodwill $0.12 $0.10 $0.07 $0.12 $0.13 $0.42 Fourth quarter operating income (pre taxes and goodwill amortization) from the insurance segment was $227 million, up 27% over 4Q99 and up 3% over the 3rd quarter, despite the effects of the ratings downgrade that was still in place through the first half of the quarter. Fourth quarter operating income (pre taxes and goodwill amortization) from the Finance segment was $53 million, showing growth of more than 30% over the 3rd quarter, and more than 50% over the 4th quarter of 1999, the first quarter that “on-book receivables” accounting was used. The 4th quarter of 2000 saw the 60+ days delinquency rate in the manufactured housing (MH) segment peak at 2.20%. From a low of 1.41% at the end of the 1Q00, MH 60+ days delinquencies began to increase markedly after two actions by the company disrupted the Conseco Finance collections process: (1) In the 1st quarter, management began to implement the centralization of the collections function, creating organizational problems; (2) Shortly thereafter, the company announced its intention to sell Conseco Finance, further unsettling the employees and adding to the confusion. Of course, industry trends for delinquencies were also rising during this period as evidenced by public data from other MH finance companies (see NEW Conseco Memo #8). However, during the fourth quarter of 2000, we put in place a number of remedial actions which are already bearing fruit. The 60+ days delinquency rate peaked in November at 2.20% and held there throughout December and January. We have begun to see a decline in February. As the largest and most experienced lender in the MH sector, we expect to have the best credit quality in the industry – even more so after slowing the growth in our MH portfolio earlier in the year. Therefore, our target for 60+ delinquencies remains at 1.65% before year-end 2001. Chart 2 Non operating charges. As in the 3rd quarter of 2000, we have again taken large charges to income, chiefly for what we call “legacy practices” and for items related to the restructuring of Conseco Finance. We have continued to be conservative on reserve issues and to be aggressive about cleaning up any financial issues that might cause future surprises. 2000 was our turnaround year. And to the extent that we can, we are attempting to put the costs from the legacy practices of the old “merchant bank” Conseco into the financial results for this year. We can’t promise that these legacy issues are 100% resolved, but as should be obvious, we have gone a long way toward that objective. And even taken together, these legacy items can’t change our conclusion that we have survived! The following chart indicates these charges by quarter and for the full year and their impact on earnings. Table 2 Income Summary Q4 '99 Q1 '00 Q2 '00 Q3 '00 Q4 '00 Full Year 2000 Operating income after-tax, pre-goodwill 63.9 55.5 49.0 68.6 67.8 240.9 Goodwill (24.6) (24.8) (26.4) (27.8) (26.7) (105.7) Operating income after-tax 39.3 30.7 22.6 40.8 41.1 135.2 Special Charges (102.0) 42.5 (429.8) (530.3) (419.9) (1,337.5) Net income (62.7) 73.2 (407.2) (489.5) (378.8) (1,202.3) Per share Pre goodwill $0.20 $0.17 $0.15 $0.21 $0.21 $0.74 Post goodwill $0.12 $0.10 $0.07 $0.12 $0.13 $0.42 Post Special Charges ($0.19) $0.22 ($1.25) ($1.50) ($1.16) ($3.69) The details of the 4th quarter charges are as follows: (In millions) After-Tax Charge Legacy practices: Provision for D&O loan guarantees $78 Interest-only impairment 188 Venture capital mark-to-market (including Telecorp.) (8) Conseco Finance restructuring: