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| Conseco Reports Third Quarter 2009 Results; Third Consecutive Profitable Quarter |
"We have continued to make progress and after the quarter ended we undertook a series of transactions to enhance In addition, Third Quarter 2009 Results
--
Nine Month 2009 Results
--
Financial Strength at
-- Book value per common share, excluding accumulated other comprehensive
income (loss) (5), was
Operating Results
Results by segment for the quarter were as follows
($ in millions, except per share data):
Three Months Ended
September 30,
-------------
2009 2008
---- ----
EBIT (2):
Bankers Life $85.4 $67.8
Colonial Penn 7.4 6.5
Conseco Insurance Group 21.6 34.2
Corporate Operations, excluding corporate
interest expense (7.4) (3.7)
---- ----
EBIT 107.0 104.8
Corporate interest expense (24.0) (15.8)
----- -----
Income before net realized investment
losses, taxes and discontinued
operations 83.0 89.0
Tax expense on period income 28.7 30.7
---- ----
Net income before net realized investment
losses, valuation allowance for deferred
tax assets and discontinued operations 54.3 58.3
Net realized investment losses (excluding
the increase in unrealized losses on those
investments transferred to an independent
trust and net of related amortization and
taxes and the establishment of a valuation
allowance for deferred tax assets related
to such losses) (18.9)(6) (84.2)
----- -----
Net operating income (loss) before
valuation allowance for deferred tax
assets and discontinued operations 35.4 (25.9)
Valuation allowance for deferred tax assets
(excluding the establishment of a valuation
allowance for realized investment losses
and discontinued operations) (20.0) -
Discontinued operations - (157.4)
--- -------
Net income (loss) applicable to common
stock $15.4 $(183.3)
===== =======
Per diluted share:
Net income before net realized investment
losses, valuation allowance for deferred
tax assets and discontinued operations $.29 $.31
Net realized investment losses, net of
related amortization and taxes (.10) (.45)
Valuation allowance for deferred tax
assets (.11) -
Discontinued operations - (.85)
--- ----
Net income (loss) $.08 $(.99)
==== =====
Segment Results In our Bankers Life segment, pre-tax operating earnings were
-- an increase in earnings of approximately
In our Colonial Penn segment, the pre-tax operating earnings were In our
-- a reduction in earnings of approximately
Corporate interest expense reflects both the higher interest rate paid on debt following the amendment to our credit facility in the first quarter of 2009, and The results for the third quarter of 2009 also reflect the previously disclosed increase to the deferred tax valuation allowance of The results from the third quarter of 2008 included a Investments During the third quarter of 2009, accumulated other comprehensive loss improved by Net realized investment losses in the third quarter of 2009 were Sales Results At Bankers Life (career distribution), total NAP in 3Q09 was In addition to the sales of proprietary products, Bankers Life, through a partnership with Coventry, distributes Medicare PDP and PFFS plans through Bankers career agents. Coventry has decided to cease selling PFFS plans effective At Colonial Penn (direct distribution), total NAP was At Accounting Matters Results for the third quarter of 2008 have been restated to reflect the operations of Effective Conference Call The company will host a conference call to discuss results at About (1) Management believes that an analysis of earnings or loss before net realized investment gains (losses), discontinued operations, corporate interest and taxes ("EBIT," a non-GAAP financial measure) provides a clearer comparison of the operating results of the company quarter-over-quarter because it excludes: (i) corporate interest expense; and (ii) net realized investment gains (losses) that are unrelated to the company's underlying fundamentals. In addition, 2Q08 earnings exclude the discontinued operations resulting from the transfer of (2) Management believes that an analysis of Net income (loss) applicable to common stock before net realized investment gains or losses, discontinued operations, net of related amortization and income taxes, ("Net Operating Income," a non-GAAP financial measure) is important to evaluate the financial performance of the company, and is a key measure commonly used in the life insurance industry. Management uses this measure to evaluate performance because realized investment gains or losses can be affected by events that are unrelated to the company's underlying fundamentals. A reconciliation of Net Operating Income to Net Income applicable to common stock is provided in the tables on pages 3 and 10. Additional information concerning this non-GAAP measure is included in our periodic filings with the (3) Measured by new annualized premium, which includes 6% of annuity and 10% of single premium whole life deposits and 100% of all other premiums, PDP sales equal (4) PFFS NAP in 3Q08 reflected significant charge backs of prior period premiums for sales that were ultimately canceled. In 2009, we implemented a more conservative sales recognition policy in an effort to avoid these effects in the future. Effective (5) The calculation of this non-GAAP measure differs from the corresponding GAAP measure because accumulated other comprehensive income (loss) has been excluded from the value of capital used to determine this measure. Management believes this non-GAAP measure is useful because it removes the volatility that arises from changes in the unrealized appreciation (depreciation) of our investments. The corresponding GAAP measures for debt-to-total capital and book value per common share were 27.5% and (6) Reflects a deferred tax valuation allowance of Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend analyses and other information contained in this press release relative to markets for - Tables Follow -
CONSECO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in millions, except per share data)
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
(as (as
adjusted) adjusted)
Revenues:
Insurance policy income $772.0 $821.8 $2,346.1 $2,436.9
Net investment income (loss):
General account assets 306.8 312.8 923.4 934.7
Policyholder and reinsurer
accounts and other
special-purpose portfolios 56.0 (24.3) 47.5 (71.9)
Realized investment gains
(losses):
Net realized investment
gains (losses), excluding
impairment losses 15.4 (43.2) 120.8 (52.0)
Other-than-temporary
impairment losses:
Total other-than-temporary
impairment losses (162.4) (50.1) (324.2) (117.4)
Other-than-temporary
impairment losses
recognized in other
comprehensive loss 126.7 - 159.9 -
----- --- ----- ---
Net impairment losses
recognized (35.7) (50.1) (164.3) (117.4)
----- ----- ------ ------
Total realized gains
(losses) (20.3) (93.3) (43.5) (169.4)
----- ----- ----- ------
Fee revenue and other income 4.1 4.9 10.2 13.8
--- --- ---- ----
Total revenues 1,118.6 1,021.9 3,283.7 3,144.1
------- ------- ------- -------
Benefits and expenses:
Insurance policy benefits 782.7 797.0 2,317.3 2,380.6
Interest expense 31.9 24.6 87.8 80.5
Amortization 113.3 77.6 335.9 288.9
Expenses related to debt
modification - - 9.5 -
Other operating costs and
expenses 126.6 117.0 377.3 384.2
----- ----- ----- -----
Total benefits and expenses 1,054.5 1,016.2 3,127.8 3,134.2
------- ------- ------- -------
Income before income taxes
and discontinued operations 64.1 5.7 155.9 9.9
Income tax expense (benefit):
Tax expense (benefit) on
period income 22.0 1.6 54.7 5.7
Valuation allowance for
deferred tax assets 26.7 30.0 33.7 328.0
---- ---- ---- -----
Income (loss) before
discontinued operations 15.4 (25.9) 67.5 (323.8)
Discontinued operations, net
of income taxes - (157.4) - (355.2)
--- ------ --- ------
Net income (loss) $15.4 $(183.3) $67.5 $(679.0)
===== ======== ===== ========
Earning (loss) per common share:
Basic:
Weighted average shares
outstanding (in thousands) 184,886 184,726 184,820 184,688
======= ======= ======= =======
Income (loss) before
discontinued operations $.08 $(.14) $.37 $(1.76)
Discontinued operations - (.85) - (1.92)
--- ---- --- -----
Net income (loss) $.08 $(.99) $.37 $(3.68)
==== ===== ==== ======
Diluted:
Weighted average shares
outstanding (in thousands) 185,846 184,726 185,277 184,688
======= ======= ======= =======
Income (loss) before
discontinued operations $.08 $(.14) $.36 $(1.76)
Discontinued operations - (.85) - (1.92)
--- ---- --- -----
Net income (loss) $.08 $(.99) $.36 $(3.68)
==== ===== ==== ======
Operating Results Results by segment for the nine months ended
Nine Months Ended
September 30,
-------------
2009 2008
---- ----
EBIT (1):
Bankers Life $193.4 $131.5
Colonial Penn 23.5 18.5
Conseco Insurance Group 74.0 89.8
Corporate Operations, excluding corporate interest
expense (24.9) (26.6)
----- -----
EBIT 266.0 213.2
Corporate interest expense (61.6) (50.4)
Expenses related to debt modification (9.5) -
---- ---
Income before net realized investment losses, taxes
and discontinued operations 194.9 162.8
Tax expense on period income 68.4 59.2
---- ----
Net income before net realized investment losses,
valuation allowance for deferred tax assets
and discontinued operations 126.5 103.6
Net realized investment losses (excluding the
increase in unrealized losses on those investments
transferred to an independent trust and net of
related amortization and taxes and the establishment
of a valuation allowance for deferred tax assets
related to such losses) (39.0) (129.4)
----- -------
Net operating income (loss) before valuation
allowance for deferred tax assets and
discontinued operations 87.5 (25.8)
Valuation allowance for deferred tax assets
(excluding the establishment of a valuation
allowance for realized investment losses and
discontinued operations) (20.0) (298.0)
Discontinued operations - (355.2)
--- -------
Net income (loss) applicable to common stock $67.5 $(679.0)
===== =======
Per diluted share:
Net income before net realized investment losses,
valuation allowance for deferred tax assets
and discontinued operations $.68 $.56
Net realized investment losses, net of related
amortization and taxes (.21) (.70)
Valuation allowance for deferred tax assets (.11) (1.62)
Discontinued operations - (1.92)
--- -----
Net income (loss) $.36 $(3.68)
==== =======
CONSECO, INC. AND SUBSIDIARIES
COLLECTED PREMIUMS
(Dollars in millions)
Three months ended
September 30,
-------------
2009 2008
---- ----
Bankers Life segment:
Annuity $284.7 $323.1
Supplemental health 440.7 478.7
Life 63.2 51.9
---- ----
Total collected premiums $788.6 $853.7
====== ======
Colonial Penn segment:
Life $45.6 $43.6
Supplemental health 1.8 2.2
--- ---
Total collected premiums $47.4 $45.8
===== =====
BENEFIT RATIOS ON MAJOR SUPPLEMENTAL HEALTH LINES OF BUSINESS
Three Months Ended
September 30,
-------------
2009 2008
---- ----
Bankers Life segment:
Medicare Supplement:
Earned premium $166 million $160 million
Benefit ratio(a) 72.4% 72.5%
PDP and PFFS:
Earned premium $108 million $166 million
Benefit ratio(a) 74.2% 95.1%
Long-Term Care:
Earned premium $150 million $156 million
Benefit ratio(a) 108.3% 102.1%
Interest-adjusted benefit ratio (a non-GAAP
measure)(b) 70.4% 68.1%
(a) The benefit ratio is calculated by dividing the related product's insurance policy benefits by insurance policy income. (b) The interest-adjusted benefit ratio (a non-GAAP measure) is calculated by dividing the product's insurance policy benefits less interest income on the accumulated assets backing the insurance liabilities by insurance policy income. Interest income is an important factor in measuring the performance of longer duration health products. The net cash flows generally cause an accumulation of amounts in the early years of a policy (accounted for as reserve increases), which will be paid out as benefits in later policy years (accounted for as reserve decreases). Accordingly, as the policies age, the benefit ratio will typically increase, but the increase in the change in reserve will be partially offset by interest income earned on the accumulated assets. The interest-adjusted benefit ratio reflects the interest income offset. Since interest income is an important factor in measuring the performance of these products, management believes a benefit ratio, which includes the effect of interest income, is useful in analyzing product performance. Additional information concerning this non-GAAP measure is included in our periodic filings with the SOURCE News Media; Tony Zehnder, Corporate Communications, +1-312-396-7086, or Investors; Scott Galovic, Investor Relations; +1-317-817-3228 |
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