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Insurance industry

Conseco's Acquisition of CCP Insurance, Inc. Expected to Impact Ratings

Strategic Insights

— 2 min read

Conseco's plan to acquire all outstanding shares of CCP Insurance, Inc. and 80% of Bankers Life Holding Corporation is set to alter the company's financial structure, leading to several rating actions. This move will increase Conseco's debt-to-total capital ratio from 21% to 49% and result in the lowering of its senior debt rating from BBB to BB+. CCP's senior debt rating will also be lowered from BBB to BB+. Additionally, the claims paying ability ratings of Beneficial Standard Life Insurance Company and Great American Reserve Insurance Company will be reassessed in light of the expected changes in Conseco's capital structure.

Key Takeaways:

  • Conseco's senior debt rating is expected to be lowered from BBB to BB+ due to increased financial leverage and narrow cash interest coverage.
  • The debt-to-total capital ratio of Conseco is projected to increase from 21% to 49% after the acquisition.
  • CCP's senior debt rating will also be lowered from BBB to BB+ as a result of the transaction.
  • The claims paying ability ratings of Beneficial Standard Life Insurance Company and Great American Reserve Insurance Company will be reassessed in light of the expected changes in Conseco's capital structure.
  • BSLIC and GARCO are expected to send a significant majority of their statutory operating income to Conseco to fund holding company cash needs.
  • Conseco has a target debt-to-total capital ratio of 35% and is not expected to incur additional debt until the ratio is at targeted levels.

Statistics:

  • Conseco's total assets: $11.7 billion
  • Conseco's shareholders' equity (excluding FAS 115 mark-to-market adjustment): $814 million
  • CCP's total assets: $5.5 billion
  • CCP's shareholders' equity (excluding FAS 115 mark-to-market adjustment): $459 million
  • Expected debt-to-total capital ratio of Conseco at yearend 1995: 49%
  • Projected cash interest coverage ratio in 1996: 2.01 times
  • Projected cash interest coverage ratio including preferred dividend obligations in 1996: 1.72 times
  • BSLIC's total admitted assets: $2.4 billion
  • BSLIC's adjusted surplus: $190 million
  • GARCO's total admitted assets: $2.6 billion
  • GARCO's adjusted surplus: $208 million

Sources:

  • "Duff & Phelps Credit Rating Co. Announces Rating Actions Related to Conseco's Acquisition of CCP Insurance, Inc.," Duff & Phelps Credit Rating Co., July 20, 1995
  • "Conseco, Inc. to Acquire CCP Insurance, Inc. and 80% of Bankers Life Holding Corporation," Conseco, Inc., June 1994
  • "Kemper Corporation," Kemper Corporation, 1994
  • "Beneficial Standard Life Insurance Company," Beneficial Standard Life Insurance Company, 1995
  • "Great American Reserve Insurance Company," Great American Reserve Insurance Company, 1995

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