NEW YORK, May 3 /PRNewswire/ -- Standard & Poor's today lowered various
ratings on Conseco Inc. (Conseco) and its related insurance subsidiaries (see
list). The ratings remain on CreditWatch with negative implications, where
they were placed on April 7, 2000.
At the same time, Standard and Poor's lowered various ratings (see list)
and affirmed its single-'B' short-term counterparty credit rating on Conseco
Finance Corp. (Conseco Finance). The ratings remain on CreditWatch with
developing implications, where they were placed on April 7, 2000.
The ratings downgrade on Conseco reflects its poor first quarter earnings
performance, which suggests an earnings potential below Standard & Poor's
original expectations, as well as the future direction of the company
following the April 28 resignation of Conseco's CEO and CFO and the naming of
an interim CEO.
Standard & Poor's is particularly concerned by the sharply lower than
expected first quarter reported earnings at Conseco's insurance operations.
Standard & Poor's had maintained its senior debt rating on Conseco in the
investment grade category because of the perceived earnings strength of the
insurance operations. The recently reported first quarter earnings suggest an
earnings potential far below original expectations. The significant increases
in loss ratios on health products call into question whether the ongoing
earnings from the insurance operations are supportive of financial strength
ratings in the 'A' category.
The financial strength ratings on Conseco's insurance subsidiaries reflect
the expectation that dividend payments to the parent by these subsidiaries
will not be made until a definitive agreement is reached with a prospective
buyer for Conseco Finance.
The ratings downgrade on Conseco Finance reflects the deteriorating
financial condition of its parent, Conseco, the support of which is critical
to the finance subsidiary's ability to continue to fund itself. Conseco
Finance's heavy reliance on securitization for permanent financing of the bulk
of assets it originates poses a significant risk. Should Conseco Finance find
its access to securitization reduced or made prohibitively expensive, a
conceivable scenario given investor concerns in general toward the unit and
its parent company, liquidity pressures would quickly mount. The company's
flexibility in holding assets on its books for an extended period is limited
by the fact that a large percentage of the company's warehouse facilities are
in the form of repurchase agreements, which must be renegotiated annually.
Alternatively, the company could fall back on whole loan sales, but such a
strategy would only increase the volatility of its earnings, making it even
more difficult to reestablish stable long-term funding.
Some degree of support remains incorporated into the rating as it is in
Conseco's interest to provide Conseco Finance the resources it needs to
continue in business until the unit is sold. If, however, Conseco's financial
flexibility continues to deteriorate or its incentive to provide financial
support to Conseco Finance diminishes, the rating could be lowered further. On
the other hand, the ratings could be raised or affirmed if a buyer rated
consistent with either upgrade or affirmation steps forward soon.
Standard & Poor's anticipates all ratings will remain on CreditWatch until
the ultimate disposition of Conseco's consumer finance operations is resolved.
-- CreditWire
OUTSTANDING RATINGS LOWERED AND ON CREDITWATCH WITH NEGATIVE IMPLICATIONS
TO FROM
Conseco Inc.
Counterparty credit rating BB- BBB-
Senior debt BB- BBB-
Preferred stock B- BB
Commercial Paper B A-3
Bankers Life & Casualty Co.
Conseco Annuity Assurance Co.
Conseco Direct Life Insurance Co.
Conseco Health Insurance Co.
Conseco Life Insurance Co.
Conseco Life Insurance Co. of NY
Conseco Medical Insurance Co.
Conseco Senior Health Insurance Co.
Conseco Variable Insurance Co.
Manhattan National Life Insurance Co.
Pioneer Life Insurance Co.
Counterparty credit rating BBB A-
Financial strength rating BBB A-
OUTSTANDING RATINGS LOWERED AND ON CREDITWATCH WITH DEVELOPING IMPLICATIONS
TO FROM
Conseco Finance Corp.
Long-term counterparty credit rating B- BB-
Senior unsecured debt B- BB-
Subordinated debt CCC B
SOURCE Standard & Poor's CreditWire
 back to top
Related links:
http://www.standardandpoors.com/ratings
CONTACT:
Jon Reichert, 212-438-7234, or Daniel Martin,
212-438-7390, or Timothy W Clark, 212-438-7182, all of Standard &
Poor's CreditWire
|
