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Conseco Posts Wider Loss, Could Face Chapter 11

November 20, 2002|From Bloomberg News

Insurance firm Conseco Inc. on Tuesday reported a larger-than-expected third-quarter loss and reiterated that its talks with creditors to restructure more than $6 billion in debt may lead to a bankruptcy filing.

Carmel, Ind.-based Conseco also named William Shea as chief executive, a role he assumed on an acting basis after Chairman Gary Wendt stepped down as CEO last month.

Conseco, whose purchase of mobile-home lender Green Tree Financial Corp. in 1998 left it saddled with debt and bigger-than-expected loan losses, has proposed converting some of its debt to equity, which would give bondholders control of the firm.

The company's losses climbed as a rising number of customers of its finance unit were unable to pay back loans during the recession. Conseco's insurance units also were hurt by the long bear market in stocks and by low interest rates.

The company posted a net loss of $1.8 billion, or $5.11 a share, for the third quarter, significantly wider than the loss of $410.6 million, or $1.13 a share, a year earlier.

Conseco has until Nov. 27 to reach an agreement with its creditors, or waivers on its debt will expire. If an agreement with creditors can be reached, "the company would present the plan for judicial approval under Chapter 11" of U.S. bankruptcy laws, Conseco said in a filing with the Securities and Exchange Commission.

Shares of Conseco, which traded at $4.25 at the start of the year, now change hands at about 5 cents in over-the-counter Bulletin Board trading.

The company has hired financial advisors to help sell its Green Tree unit, now called Conseco Finance, which Conseco said had a book value of $1.2 billion as of Sept. 30. Conseco paid $6 billion for the business four years ago.

If Conseco is able to sell its finance unit, "there is potential interest in its insurance operations," said Timothy Clark, an analyst at Standard & Poor's.

The latest loss included $1.2 billion in costs to write down the value of securities and goodwill -- the difference between the price paid for an acquisition and its book value.

Conseco had investment losses of $277.8 million in the quarter and absorbed a $140-million cost related to the sale of its variable annuity business.

Conseco's main insurance units -- Bankers National Life Insurance Co. and Conseco Life Insurance Co. of Texas -- entered into a consent agreement with Texas regulators that prevents the firm from taking any money from its insurance units.

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