Conseco Inc. (NYSE: CNO) plans to stick to its guns after being pressured to give up two board seats to Steel Partners. The activist hedge fund demanded two board seats in order to effect a review of strategic alternatives for the troubled insurance company. However, Conseco revealed today that it has been reviewing such alternatives for several months and has engaged Morgan Stanley as its strategic advisor through the process.
Conseco CEO Jim Prieur said, "We share with Steel Partners, as well as our other shareholders, a common interest in taking actions that will increase the value of the company for shareholders. In that regard, we have been working with a major investment bank for several months regarding strategic alternatives and plans to maximize shareholder value for Conseco. We believe, and hope Steel Partners would concur, that we already are exploring courses of action suggested by them."
Conseco also revealed fourth quarter numbers yesterday that many viewed as highly disappointing. The insurance company posted a net loss of $72.2 million, or 39 cents per share, including a $23 million net realized investment loss and a $68 million valuation allowance for deferred tax assets. Conseco faces a considerable amount of work ahead as it stabilizes its fundamentals while working with the SEC to correct any past errors.
In the end, shares are up today after yesterday's drop because Conseco appears to be dedicated to conducting a review of its strategic alternatives. Typically, this means that managmenet would be open to a sale that could unlock substantial value for shareholders. Since the stock is artificially depressed for non-material reasons, the likelihood of a strategic or financial buyer is significantly enhanced. This makes CNO a stock worth watching!
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