Conseco settles suit
Company to pay $120 million to settle suit alleging misleading financial statements.
February 21, 2002: 7:05 p.m. ET
|
NEW YORK (CNN/Money) - Insurer Conseco Inc. will pay $120 million to settle a shareholder lawsuit alleging the company included misleading or false financial information in its statements, lawyers for the plaintiffs said Thursday.
Also Thursday, Conseco (CNC: up $0.10 to $3.68, Research, Estimates) missed Wall Street's fourth-quarter earnings expectations.
Conseco, which has struggled with a heavy debt load and the performance of its loans group, said its net loss narrowed to $58 million, or 17 cents a share, from $379 million, or $1.16 a share, a year earlier.
Excluding charges and other items, the company reported operating earnings of $33.8 million, or 10 cents a share, after goodwill, down from $41.1 million, or 13 cents a share, a year earlier.
On that basis, analysts had been expecting earnings of 14 cents, according to research firm First Call.
The Anchorage Police & Fire Retirement System and the State of Louisiana Firefighters' Retirement System, both pension funds and lead plaintiffs in the litigation, said Conseco agreed to pay $120 million, but did not admit any wrongdoing.
The company is paying to compensate investors who bought shares between April 1999 and April 2000. During those 12 months the value of Conseco's shares fell to about $6 from around $30, as investors fled the company on concerns that it was inflating its earnings with "gain on sale" accounting practices, booking profits on loan sales before they were earned.
Conseco restated its 1999 results in April of the following year, abandoning "gain on sale" accounting.
Who will actually pay for the settlement is the subject of another legal battle. Conseco is suing its liability insurance carriers in a county court in Indiana, seeking to force them to pay up.
The insurers include: Royal Insurance Co. of America, a unit of British insurer Royal & Sun Alliance; Westchester Fire Insurance Co., a unit of Bermuda insurer ACE Ltd. (ACE: down $0.68 to $41.82, Research, Estimates); and RLI Insurance, part of XL Capital Ltd. (XL: up $0.13 to $94.27, Research, Estimates). Greenwich Insurance Co. and HSBC Insurance Brokers Limited, a unit of bank HSBC, are also named in the suit.
According to Conseco, National Union Fire Insurance Co., a unit of American International Group Inc. (AIG: down $2.68 to $71.04, Research, Estimates) -- the leading insurer on the policy -- has been left out of legal proceedings as it has already paid its full $10 million contribution to the claim.
Royal Insurance has placed its full $15 million payment on the policy into an escrow account, but has reserved its rights litigate the case, Conseco said.
The other insurers -- which Conseco says owe $75 million on the claim -- are still investigating the case, Conseco said. Insurers can void directors' liability policies if they can show they were misled themselves by directors, or there was fraud in the company's accounting. 
-- from staff and wire reports
|
| SPECIAL: |
|
|
|
|
|
|
