INSURANCE giant Conseco reports earnings this Tuesday, but the real highlight of the week will surely be “NEW Conseco Memo #14.” That would be the latest installment in a series of memos from Conseco Chairman and CEO Gary Wendt, whose folksy notes to shareholders have included descriptions of an Indiana snowstorm, the use of multiple explanation points to usher in the new year, casual phrases such as “Let me just say to you” and periodic references to the “old” Conseco.
(The “NEW” in the memo title is meant to indicate a turnaround now under way -as was explained in Memo #6.)
The memos went on hiatus for a few months this year, but recent Memo #13 explained both the reasons behind Conseco’s back-breaking debt and why this earnings report comes a bit later than usual: Wendt had to take his wife’s grandchildren to Africa.
The market has high hopes for #14, assumed to be on the subject of earnings, even as it recognizes that it’s not a great year for Conseco.
“Conseco’s target market is Middle America. To the extent that Middle America is feeling pinched, Conseco is going to feel pinched,” said Standard & Poor’s Cathy Seifert.
Other analysts said Conseco’s manufactured housing business is something to watch for, and Conseco has already conceded that delinquency rates are rising.
“The life insurance business will probably be okay,” said Seifert, though there’s bound to be slowing related to the economic slump.
But “whether or not they meet First Call estimates is not going to be indicative of the company going forward,” said Morningstar’s Travis Pascavis.
The long-term issue is massive debt repayment, a constant cloud that resulted from Conseco’s devastating 1998 buy of Green Tree Financial, now Conseco Financial Corp, which cost Stephen Hilbert his job as CEO. As a result Conseco has been selling assets and cutting costs, and there’s interest as to when it will unload TeleCorp, which Conseco wants to sell on its own terms, not in a fire sale.
As Hilbert’s replacement, Wendt gets good marks overall.
He arranged a public debt issue and bought himself $10 million of junk bonds to refinance debt -a strong statement. He also keeps shareholders up to date. The announcement that he recovered from a urinary tract infection was, incidentally, not a memo but a press release.
The really good news is that Conseco is “still four quarters away from where you could really say if the turnaround is successful,” according to Pascavis. Why is that good news? It means we have lots more memos to look forward to.