Conseco Inc.’s (CNO) first-quarter operating earnings of 14 cents per share were in line with the Zacks Consensus Estimate but declined from operating earnings of 20 cents per share in the year-ago quarter. Earnings in the reported quarter reflect dilution from the issuance of 65.9 million shares of common stock and $240.5 million of convertible debentures.
Net operating income came in at $38.2 million, up 2% from $37.5 million in the prior-year quarter. Results excluded $4.3 million (1 cent per share) of net realized investment losses in the reported quarter versus $13 million (7 cents per share) of net realized investment losses and loss on modification of debt in the year-ago period. Including these, GAAP net income came in at $33.9 million, up 38% from $24.5 million in the year-ago quarter.
Results reflected a 10% year-over-year growth in EBIT (income before net realized investment gains, interest and taxes) to $79.2 million, which was offset by a 42.3% increase in corporate interest expense. However, a modest EBIT growth was witnessed across Bankers Life and Colonial Penn segments, partially offset by a decline in Conseco Insurance Group. Though collected premiums showed a slight improvement across segments, overall revenues were down 6.3% from the prior-year quarter due to a decline in insurance policy income and net realized investment gains.
In the Bankers Life segment, EBIT increased to $53.2 million from $44.7 million in the prior-year quarter. The results were aided by improved earnings in the long-term care block, from life products as well as the company-owned life insurance policies.
The Conseco Insurance Group’s EBIT was $25.7 million, compared with $31.3 million in the prior-year quarter. Results for the quarter were affected by decreased earnings from Conseco’s specified disease block and life insurance products, partially offset by earnings from the equity-indexed products.
Colonial Penn’s EBIT increased to $5.3 million from $5.1 million in the year-ago quarter. Results for the reported quarter were primarily affected by favorable mortality and growth in the block of life insurance policies.
Net realized investment losses for the quarter were $3.1 million, compared with $6.9 million in the year-ago quarter. Conseco recognized a total of $17.7 million in the form of other-than-temporary impairment losses, compared with $92.0 million in the year-ago quarter.
The debt-to-total capital ratio (excluding AOCI) was 21.3% as of March 31, 2010, compared with 21.5% as of December 31, 2009. Book value (excluding AOCI) as of March 31, 2010, was $15.24 per share, compared with $15.14 per share, as of December 31, 2009.
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