bye bye CNC

[Ms. Re]

Salomon Smith Barney downgrades Conseco (CNC:NYSE) to SELL with a $1.00 price target.

Analyst Colin Devine concludes, "As implied by our nominal $1 price target, we believe Conseco's shares offer little, if any, value. On a liquidation basis, we do not believe Conseco shareholders would realize any value, although policyholders would be reasonably well protected by various state guaranty funds."

[aNoNo]

Why the down grade now? Anything new with Conseco other than the soft economy?

Any call options outstanding on Conseco? What happens to the Pacers arena in Indy?

[Ms. Re]

<<What happens to the Pacers arena in Indy?>>

probably the same thing that'll happen to Enron Field in Houston!

[aNoNo]

Hey - maybe there is a new leading indicator of a large company soon to be heading down the tubes after putting up big bucks for having their moniker on a big sports facility.

Enron - Houston
Conseco - Indianapolis
UAL (losing big bucks every day) - Chicago

You heard it hear first!

It all most makes sense - could be a sign of management being more focused on ego than shareholder value.

<font size=-1>[ This Message was edited by: aNoNo on 2002-01-04 11:44 ]</font>

[nbd]

Removed

[American Psycho]

You gotta include 3COM (Candlestick) Park

[Dr T Non-Fan]

The stadium in Baltimore (I forget its name -- that isn't the idea, is it?)
TWA Dome (bought by a rival -- now it's called something else).

Does this mean that Coors will go out of business? that would be a (non-)shame.

[Anonymous]

PSINet, is the Baltimore Ravens stadium...or it was....

If things keep going this way it's going to "Al's Wrecker Service Stadium".

Maybe, "Shekky Tree Park"...hee hee... :smile:

[Dr T Non-Fan]

Does Al have that big an ego?
Or is that abbrev for our, um, thing, A.L.?

[Vermont's Finest]

No-No: yes, something new has happened with Conseco. Their major competitor in the mobile-home lending arena just announced higher than expected losses and expected default rates on outstanding loans. Conseco Finance still fails to admit that the same thing could happen to them. A writer for thestreet.com estimated the impact could be up to $3.5 Billion using conservative methodology. Conseco is done, killed by its purchase a few years ago of Green Tree Financial, famous because in the mid-90's Green Tree had the highest paid CEO in America. Go figure that the guy was a scam artist.....he used to be a car salesman.

[Steve Grondin]

I have been following CNC with a moderate interest level for a while, as well as Enron. Probably for the same reason folks want to see a train wreck (after it wrecks, I mean). Someone (I don't know who first) said "It takes someone of great intelligence to make a great mistake; those of normal intelligence are constrained to making normal mistakes."

One thing that makes the CNC thing easier to follow is that CNC puts out PR that attempts to answer critics' charges. Check out the latest release on Business Wire. I'm not saying that you can trust it entirely, of course, but hearing the other side of the story makes it more interesting to an otherwise dispassionate observer.

I think it is clear that the performance of the Manufactured Housing area will make or break the parent company. Right now, the actual currrent performance is a little cloudy, not to mention what will happen in the near future. Some companies in the sub-prime lending market are keeping delinquencies down through "restructuring" the loan, essentially by tacking the missed payments on the end (with extra fees, of course).

From an actuarial standpoint, I can see that using past run-off trends while changing the measurement rules (which CNC might be doing) makes for low certitude of results. I can also see the fallacy of using another company's experience on one's own credible(?) exposure, as the analyst did. Who's right? I suppose time will tell.

However, another very interesting (from an actuarial standpoint) conclusion the analyst made is that the insurance companies will fail if the parent fails. Unless the insurance subs are growing quickly and need capital infusions from the parent, they should not fail. Of course, give the policyholders the impression that they might and you could create a liquidity-induced failure. Assuming that the Appointed Actuary gave an unqualified opinion, the insurance subs should be "safe" in moderately adverse circumstances, right? I am interested in your opinions on this.

<font size=-1>[ This Message was edited by: Steve Grondin on 2002-01-11 09:02 ]</font>

[aNoNo]

Hey, I got it - maybe Conseco and Enron should merge and EnronOnLine could sell Mortgage Backed Securities using Conseco/Greentree Mobile Home mortgages as the underlying collateral.

Yeah, that's the ticket!

Actually, Conseco's relatively new CEO from GE Capital just might be guy to pull the chestnuts out of the fire. That would be a great turn around, right up there with what Lee Iacocca did for Chrysler.

I would like to the see the "fair value" opinions written by Conseco's auditors and/or investment bankers pending the acquisition of Greentree Financial. Whoooeee - that must be look pretty ridiculous with the benefit of 20/20 hindsight.

Any shareholder litigation against Conseco from the Greentree merger debacle?

[Ms. Re]

Steve:

that Press Release was quite bizarre

first, since when does a corporate affairs VP, not the CEO, give an earnings warning? CEO Wendt has been churning out memos for months, so where was he? Or where was the CFO or any of the other bigwigs?

second, the earnings warning says that CNC won't make it's already revised down 2001 estimate of 72 cents, largely because of additions to the loan loss reserve...it was only 2 months ago, in November, that the CFO of Conseco Finance gave a detailed explanation of why the reserve was already at an appropriate level...he was obviously wrong

lastly, CNC doesn't seem to have bought back any more debt since they last mentioned the subject --$2.2 billion is still the amount that has been bought back...did they run out of cash? Inquiring minds want to know!

[Vermont's Finest]

Steve - while I agree in principle with your assertion that using a competitor's default rates to project Conseco's losses isn't necessarily accurate, in this case it is a good basis for comparison. Especially since Conseco isn't as strong of an underwriter of loans. (this was mentioned by the analyst I read) That makes using the competitor's default rates a decent conservative estimate of Conseco's potential losses.

Regardless, they are in trouble.

[Steve Grondin]

Let me first say I haven't done enough research to form a valid opinion about whether CNC-finance will survive. I don't even pretend to be able to consider all the things an analyst should be able to in this area. I am sure that Ms. Re and VF are far more knowledgeble than me in this.

I have no idea why this particular EVP wrote this memo.

Ms. Re's second point about increasing loss reserves when two months ago they thought they wouldn't is the type of thing any actuary might face. Most loss development methods are predicated on the future losses developing in the same way past losses did. They could have been using a method properly and got this type of result.

Thirdly, I have no idea how their debts are structured, which could make a difference on how/when they spend their cash.

VF- the analyst took issue with the quality of the underwriting verbally. CNC countered that the 1999 and later securitizations had better loss rates than GPT, using numbers. It would be intersting to me to find out what portion of CNC projected profits come from these issues. Why didn't they go back further? Why didn't the analyst use numbers? Why does CNC get higher resale on repos than GPT? The biggie: Will it continue this way?

To me, it's just a financial soap opera. I feel bad for those who depend on CNC for their livelihood.

[Oscar]

Memo 18
Wendt says Conseco will sell their Variable Annuity Company
That along with reinsuring the Sup Health will take care of the debt issue

[aNoNo]

Bump!

Conseco Reports $56.8 Million Loss
But Gives Indication of Turnaround

Conseco Inc. turned in a dismal fourth quarter, taking big charges that again left it in the red. But the struggling finance and insurance ompany gave some indication that the turnaround plan of its chief executive officer, Gary Wendt, is progressing.

Conseco, based in Carmel, Ind., had a loss of $56.8 million, or 17 cents a share, far narrower than its loss of $376.6 million, or $1.16 a share, a year earlier. Revenue was $2.04 billion, down 5.9% from $2.17 billion. For the year, Conseco reported a loss of $405.9 million, or $1.24 a share, compared with a loss of $1.19 billion, or $3.69 a
share, in 2000. Revenue fell 2.3% to $8.11 billion from $8.3 billion.

The company continues to be dogged by bad mobile-home loans. Delinquency and default rates continue to climb. Loans 60 days or
more overdue grew to 2.45% of managed loans, up from 2.2% a year earlier, and net credit losses hit 2.14% of managed loans, up from
1.61% a year earlier. The company's inventory of repossessed mobile homes swelled nearly 26%, to 15,057 homes from 11,967 a year earlier.

Conseco continues to be hobbled by "legacy charges," which it is taking now to clean up problems left by Mr. Wendt's predecessor,
Stephen C. Hilbert.

Although getting smaller, these charges, which totaled $91.8 million in the fourth quarter, more than wiped out the company's $33.8 million in operating earnings. Chief among them was a $71.5 million charge for a now-defunct loan program that the company's directors and officers used to buy Conseco's
stock. Officials are still responsible for paying the loans.

There are also nettlesome problems in its insurance division. Sales of variable-rate annuities plunged 42% in the fourth quarter, and the company is still plagued by an unanticipated number of deaths among
holders of its life-insurance policies. This "adverse mortality experience" cost Conseco three cents a share in the quarter.

On the brighter side, Conseco announced it was making a tender offer for all remaining publicly held debt of its finance unit, totaling $171 million.

The company also said it expects to announce in March that it has struck deals to raise cash to pay off even more debt. In addition, Conseco said it has reached a conditional agreement to settle for $120 million a lawsuit brought by shareholders angry over the decline in the company's stock price.

The stock, which rose 10 cents to $3.68 as of 4 p.m. in New York Stock Exchange composite trading Thursday, was as high as $58 in 1998. Conseco said it expects insurance proceeds to provide $100 million of the settlement.

Mr. Wendt said he was "very reluctant" to predict 2002 operating earnings, but gave as a "baseline" an estimate of between 60 cents and 70 cents a share. Analysts had predicted $1 a share, according to Thomson Financial/First Call.

[aNoNo]

Bump -

Conseco CEO Says Finance Chief Departed After Being Dismissed

Amid a two-day stock pounding, Conseco Inc. Chairman and Chief Executive Gary C. Wendt took the unusual step of clarifying why his
chief financial officer departed, saying he didn't quit -- he was fired.

In a prepared statement, Mr. Wendt said he fired Charles B. Chokel, a man he hired less than a year ago, because "I did not believe that he was up to the job." Mr. Chokel declined to comment.

Mr. Wendt made that disclosure Thursday afternoon after a sharp dive in the company's share price. The plunge began after Mr. Chokel's departure was announced Wednesday, with shares closing at $3.75, down 15%. The plunge continued Thursday, with shares opening near $2.50.

Following Mr. Wendt's statement, Conseco's stock bounced back. As of 4 p.m. in New York Stock Exchange composite trading, shares fell 16 cents to $3.59 each.

The stock of the Carmel, Ind., insurance and finance company, which is in the midst of a turnaround effort, is highly sensitive to any news bearing on its financial condition. Word of Mr. Chokel's departure followed by a few hours a report from Moody's Investors Service cautioning investors that "there remains little room for error" for Conseco should its turnaround plans not proceed according to
schedule. Taken together, the two pieces of news created a snowball effect regarding the company's stock, wiping out about $590 million of Conseco's market value in the stock's heaviest day of trading this year.

In a release issued Wednesday afternoon, Conseco said simply that Mr. Chokel "is leaving the company to pursue other interests." Thursday, Mr. Wendt said he "assumed" the meaning of that phrase "would be clear." But after watching his company's market value plunge, Mr. Wendt decided to
be more blunt. In his statement, he described himself as "somewhat old-fashioned" about personnel matters and said he saw no need to be "hurtful" to Mr. Chokel by publicly stating that he had been fired.

Mr. Chokel, 48 years old, previously served as co-chief executive of Progressive Corp., an auto insurer in Mayfield Village, Ohio. Upon hiring Mr. Chokel, Mr. Wendt praised him as a man who had "done it all, and done it all well." But upon closer inspection, Mr. Wendt said Thursday, "that skill set was not well-suited to our situation."

Mr. Wendt also announced progress in the company's efforts to raise between $300 million and $410 million to make debt and other payments in 2002. As of Thursday, Mr. Wendt said, the company had completed transactions totaling $300 million, but he didn't identify the transactions.

Conseco has been engaged in a struggle for its survival for two years now, working with its creditors to restructure its debt. Its stock is among the most heavily shorted issues on the New York Stock Exchange, and some prominent analysts have issued "sell" ratings on the stock.

According to a person familiar with Mr. Wendt's thinking, the CEO had been unhappy with Mr. Chokel's performance for some time. The final straw came a few weeks ago, during Conseco's conference call with analysts. During the call, analysts repeatedly asked about an increase in Conseco's investment borrowings. Mr. Chokel was unable to provide an answer that satisfied either Mr. Wendt
or the analysts.

Having to fire a member of his management team was difficult for Mr. Wendt. In an e-mail to Conseco employees, he sought to explain why he had done so.

"Chuck Chokel is a very bright and decent fellow, and I like him a great deal," Mr. Wendt wrote. "But none of us has the luxury of letting our affection for colleagues inhibit our performance."

[Anonymous]

So would you consider taking a job at Conseco or a company owned by Conseco? Or is that just plain dumb given the current condition of Conseco???

[Oscar]

there's gonna be openings!

[Andy Lang]

Conseco was a disaster waiting to happen--much like Enron.

Wendt's GE Capital is under a great deal of fire as a result of it being used as a means to smooth GE's earnings and to bury some bad deals and assets--call it mini-me-Enron). How else do you think Jack Welch was able to show earnings improvements year after year that always exceeded expections? (Speaking of Welch, he is now in deep doo-doo from cheating on his wife, as just reported to the press by a gal who got a very nasty phone call from said wife.--ohh, Jack me boy, what would mommie think?)

If Conseco is looking to sell it's Variable Annuity operation, good luck.

Variable annuities are the insurance industries response to Wall Street--and usually a complete ripoff.

Typically what they do is project the immediate stock market past and tell prospects that 'the past is no guarantee of the future'(an SEC requirement) and then proceeed to show them the huge numbers they will get when the market is hot--as it was during the runnup--before the crash--always keeping a huge chunk for themselves, and reserving the right to change the forecasts, naturally.

After the market is hot, they sell tons of the stuff and when it goes cold, sales go cold and many of the former suckers cancel, or simply say--duhh--wha hoppen?

Check the sales of variable annuities related to the market and see what you get.

One more example of a very corrupt industry.

I own some funds in Vanguard. The worst by far has been one that was managed by Lincoln National's Capital Management. They were just fired by Vanguard. This industry was very late in getting into stocks and they still havn't figured out how to invest in them.

That's a pity because the combination of providing insurance and backing the reserves with stocks, provided you lobby and get appropriate prevention of policyholder turnover is winner--also provided yo ugive the vast bulk of the returns to the policyholder of course. The trouble is that the industry is so used to lobbyin gand getting what it wants from those underpaid and understaffed state insurance departments that they no longer underatnd that if you give the customer a good deal and are honest and upfront about it you and they wil both make money.

***

[Does Al have that big an ego?
Or is that abbrev for our, um, thing, A.L.?]

Big egos for big things.

Show me a book with great persons in history who did a great thing when the vast majority of people were all for it, and I will show you an empty book.

All great people did great things when the majority of people either didn't have a clue or were opposed.

Another saying I like is that you cant make an omlette without breaking some eggs--and these eggs I deal with are ostrich like and have nearly turned to stone--thanks to your elders and the right-wing.

So I skip making the omlette--who wants a stone omlette?--but use a sledgehammer on the eggs cause it makes a lot of noise, attracks a lot of attention and it is so much fun to watch the pieces fly around.

Besides, I actualy know how to make great real omlettes, or as I like to say, making a large pitcher of lemonade from a lot of large lemons.

Who is that masked man smashing the bad guys they all want to know?

And how does he know so much?

And, how does he know that I'm the b****** doing all this junk? I thought nobody knew! I thought we were too smart and people were too dumb!

You can run but you can't hide--not any more--all you b******s out there. You know who you are.

Better leave the ship while you can still swim.

The rest of you keep rowing, or maybe consider mutiny.

Hey--that's what you are doing!

Hint: Try Tahiti--the babes and the weather are great. Get rid of Captain Bligh and his first mates and second ones too, though.

Do you know who they all are?

Make sure there are no Trojan Horses and Moles in your ranks. And keep your identities secret of course.

If ever there was a great case of being potentially blackballed from work forever if you blow the whistle, it is the actuary--after he has worked his little butt off for ten years or so studing exams that are so hard that he could have become a CPA ten times over--and then finds out the truth, it is pretty tough to remain a human being.

There are some of us though that have.

And we are mad as hell and are not going to take it any more!

We not only know where the skeletons in the closet are, and also where the bodies are buried and who put them there, but also which ones were not cremated.

And we are coming to get---YOU.

[nbd]

Removed

[anon3]

I like the VA feature that allows tax free redistributions of investments. That's a nice feature.

I dislike the high fees and loads of VAs.

[Ms. Re]

There is a lot of truth to what you say Andy...I know that I make my living basically putting together deals and structures that enable companies to wiggle around accounting rules in order to deceive regulators and investors...sounds somewhat Enronesque doesn't it?