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Under the agreement, Wilton Re would pay a ceding commission of about $57.5 million and 100% coinsure and administer the policies, Conseco said. The insurance companies, part of its Conseco Insurance Group unit, would transfer to Wilton Re about $409 million in cash and policy loans and $466 million in statutory policy and other reserves.
Most of the policies were issued by companies that it later acquired, Conseco said. About 70% are from Washington National Insurance Co., while the remainder are from Conseco Insurance Co. According to an AMB Credit Report, Washington National is the parent of Conseco Insurance and Conseco Life Insurance Co.
The effective date of the transaction would be Jan. 1, 2009, Conseco said. The company expects it to be finalized in the third quarter.
"Completing this step is expected to increase Conseco's consolidated risk-based capital ratio by eight percentage points, along with increasing statutory capital," said Jim Prieur, chief executive officer of Conseco, in a statement.
As a result of the deal, Conseco expects to record a roughly $18 million increase to its deferred tax valuation allowance in the third quarter.
Conseco's main products include life insurance and Medicare supplement insurance, and long-term care insurance sold through Bankers Life & Casualty Co., according to an AMB Credit Report. Bankers Life employs a career agency force, Colonial Penn Life Insurance Co. uses direct-to-consumer marketing and Conseco Insurance Group focuses on independent distribution. All target middle-income seniors.
In the first quarter, despite investment losses, Conseco swung to a profit, boosted in part by higher operating earnings in all three of its insurance businesses. Net income for the Carmel, Ind.-based insurer was $24.5 million, compared with a $7.2 million net loss the same period a year ago (BestWire, May 11, 2009).
Conseco Insurance Co. currently has a Best's Financial Strength Rating of B (Fair).
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
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