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Insurance industry

Conseco's Protests Fall Largely on Deaf Ears

Strategic Insights

— 1 min read

Conseco's attempts to reassure analysts and investors about its financial situation have been met with skepticism as the company's stock continues to plummet. Following the announcement of the sale of its financial division and a restatement of last year's earnings, Conseco released two press statements defending its decision. However, the company's efforts to shift the blame to market speculation and analysts' lack of faith have fallen flat, and its stock price has continued to decline.

Key Takeaways:

  • Conseco's stock price plummeted 44% within days of announcing the sale of its finance subsidiary, Conseco Finance Corp.
  • The company's primary defense was in two press releases, which attempted to shift the blame to market speculation and analysts' lack of faith.
  • Despite Conseco's reassurances, a spate of analysts have downgraded the company's rating to "hold," and a class action lawsuit has been announced on behalf of shareholders.
  • Conseco Finance has been an "albatross" around the company's neck, leading to the restatement of 1999 earnings down from $962 million to $612 million.
  • Analysts have raised concerns that the sale of Conseco Finance may not reach its estimated $4.7 billion price, jeopardizing the company's cash flow.
  • Only one analyst, ING Baring Furman Selz LLC, broke ranks by upgrading Conseco to a strong buy recommendation.
  • Conseco CEO Stephen Hilbert acknowledged that the company had been unable to generate the level of shareholder value expected from the acquisition.

Statistics:

  • 44%: decline in Conseco's stock price within days of announcing the sale of its finance subsidiary
  • $962 million: original earnings reported for 1999
  • $612 million: restated earnings for 1999
  • $4.7 billion: estimated price projected for the sale of Conseco Finance
  • $6.5 billion: price paid by Conseco to acquire Green Tree Financial Corp. in 1998

Sources:

  • "Conseco Goes From Frustration to Exasperation as Stock Slumps." (no date specified)
  • "Conseco Finance's Sale Raises Concerns Over Cash Flow." (no date specified)
  • [Source 1: Conseco's April 5 press release]
  • [Source 2: Conseco's April 10 press release]
  • Source 3: BusinessWeek article referenced in the press release.

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