CNO Financial to Record $20 Million Charge for Class-Action Settlement by Conseco Life
April 24, 2012 by Fran Matso Lysiak
Best’s News Service – April 23, 2012 02:13 PM
CARMEL, Ind. – CNO Financial Group Inc. expects to record a roughly $20 million pretax charge in the first quarter on a tentative settlement of a class-action lawsuit by its Conseco Life Insurance Co. subsidiary. The litigation involves cost increases late last year on some universal life policies Conseco Life sold.
If the federal district court in Chicago approves the designation of the nationwide class, final approval of the settlement would need a hearing after notice was given to in-force and former policyholders covered by the settlement.
The judge took Conseco Life’s requests for the designation of the class and an injunction to stop any other litigation involving the cost of the insurance increase Conseco Life enacted in November 2011 to some “non-guaranteed elements” on its Valulife and Valuterm policies at issue in this litigation, CNO Financial said.
A spokesman for the Carmel, Ind.-based CNO Financial declined to comment beyond the company’s press release.
The tentative settlement is expected to reduce CNO Financial’s consolidated risk-based capital ratio by about six percentage points, the company said.
The main insurance subsidiaries of CNO Financial, which focuses on the senior and middle-income markets, are Bankers Life and Casualty Co., Washington National Insurance Co. and Colonial Penn Life Insurance Co., which sell Medicare supplement, long-term care insurance, life insurance and annuities and supplemental health insurance.
Conseco Life primarily marketed ordinary life products—universal life being the main product, and specified disease—before being placed in run-off. Conseco Life no longer actively markets its products but the company reported more than $270 million in direct premiums in 2010, according to BestLink.
In early 2011, a California federal district court judge had prohibited Conseco Life Insurance from raising rates on some UL insurance policies that would have impacted 50,000 mostly elderly policyholders (Best’s News Service, Jan. 21, 2011). U.S. Judge A. Howard Matz granted summary judgment in favor of the policyholder plaintiffs in the certified class-action suit involving its Valuelife and Valuterm UL policies.
In the summer of 2010, Conseco Life Insurance finalized a multistate settlement agreement concerning its administration of Lifetrend, another UL product. The agreement required the establishment of a $10 million fund for some Lifetrend product owners and payment of a $1 million assessment to participating jurisdictions (Best’s News Service, July 2, 2010).
About two years ago, shareholders of the company formerly known as Conseco Inc. approved a change in the company’s name to CNO Financial Group ((Best’s News Service, May 11, 2010).
Conseco Life Insurance Co. currently has a Best’s Financial Strength Rating of B- (Fair).
Bankers Life & Casualty, Washington National and Colonial Penn each currently have Best’s Financial Strength Ratings of B+ (Good).
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com) BN-NJ-04-23-2012 1412 ET #