Conseco Chief Executive Jim Prieur said the insurer opted to take $110 million to strengthen its "runoff" block, which are policies that are no longer being sold but on which claims must still be paid. The additional reserves would reduce the volatility of the payoffs on those policies, according to Prieur.
The company also set aside another $35 million during the quarter to pay for a class-action settlement that already cost the company $135 million a year ago. Said Prieur, the settlement gave policyholders the right to choose different options to settle their claims, but “their choices cost more than we thought."
Meanwhile, the embattled insurer is also under investigation by a U.S. Congressional Committee regarding allegations of deceptive business practices in connection with denied claims for long-term care services. Still, writedowns notwithstanding, Prier said Conseco's basic businesses did well, with sales growing 10 percent overall in the second quarter. In fact, Jukka Lipponen, an analyst with Keefe, Bruyette & Woods, rates the insurer as a “buy,” saying earnings would be volatile as Conseco cleans up its balance sheet, "but they are seeing strong sales growth. . . charges aren’t surprising to me," said Lipponen.